What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-05-30 compared with 2022-05-31 · 543 added, 680 removed, 1037 unchanged (54% of the section changed)

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Lakewood, Colorado

Opinions on the Financial Statements and Internal Control over Financial Reporting

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Mesa Laboratories, Inc.

(the “Company”) as of March 31, 2023 and 2022, the related consolidated statements of income, comprehensive (loss) income, stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 2023, 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, 2022, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2023, 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, 2022, 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 31, 2023 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated May 30, 2023 expressed an adverse opinion thereon.

Basis for Opinion

The Company's management is responsible for these financial statements.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the 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.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits 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.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded an acquired entity from its assessment of internal control over financial reporting as of March 31, 2022 because it was acquired by the Company in a purchase business combination during the year ended March 31, 2022.

We have also excluded this entity from our audit of internal control over financial reporting.

The acquired entity represents approximately 32% and 18% of assets (exclusive of intangible assets and goodwill) and revenues, respectively, for the year ended March 31, 2022.

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.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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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 matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combination –

Refer to Notes 1 and 4

Valuation of Goodwill –

Clinical Genomics Reporting Unit - Refer to Notes 1 and 6

Critical Audit Matter Description

As disclosed in Note 4 to the consolidated financial statements, the Company completed an acquisition of Agena Bioscience, Inc.

for total cash consideration of approximately $300.8 million, net of cash acquired, on October 20, 2021.

The Company accounted for the transaction as a business combination using the acquisition method of accounting. 

Accordingly, the assets acquired and liabilities assumed were recognized at their respective acquisition date fair values.

We identified the allocation of the purchase price related to the Agena Bioscience, Inc.

acquisition as a critical audit matter.

The principal considerations for our determination include the inherent judgment involved in selecting market-based assumptions used in the estimated cash flow projections, including forecasts of future revenue growth rates, customer attrition rates, royalty rates and discount rates.

As discussed in Note 1 of the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level.

This requires management to estimate the fair value of the reporting units with goodwill allocated to them.

The Company estimates the fair value based on a discounted cash flow method.

As of the annual impairment testing date, the Clinical Genomics reporting unit goodwill balance totaled $135.8 million.

Auditing management's goodwill impairment test of the Clinical Genomics reporting unit involved especially subjective judgments due to the significant estimation required in determining the fair value of the reporting unit.

In particular, the estimate of the fair value for the reporting unit is sensitive to changes in assumptions such as the discount rate, the long-term growth rate and expected future net cash flows, including projected revenues and operating expenses, which are affected by expectations about future market and economic conditions.

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 business combinations

Tested management’s process for estimating the fair value of intangible assets.

This included evaluating, with the assistance of our fair value specialists, the appropriateness of the valuation methods, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of key assumptions with respect to the expected future net discounted cash flows including the future revenue growth rates, customer attrition rates, royalty rates, and discount rates. 

Evaluated the reasonableness of the expected future net discounted cash flows including the future revenue growth rates, the customer attrition rates, the royalty rates, and the discount rates involved considering the past performance of the acquired business and the Company, as well as economic and industry forecasts, and considering whether they were consistent with evidence obtained in other areas of the audit.

Additionally, evaluated the reconciliation of the weighted average cost of capital to the internal rate of return for reasonableness and consistency.

We performed sensitivity analyses of the significant assumptions around the future revenue growth rate, the customer attrition rate, the royalty rates, and discount rates within the valuation models.

We evaluated the Company’s disclosures related to the business combinations.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's goodwill impairment review process.

For example, we tested controls over the estimation of the fair value of the reporting unit, including the Company's controls over the valuation model, the mathematical accuracy of the valuation model and development of underlying assumptions used to estimate the fair value of the reporting unit.

To test the estimated fair value of the Company's Clinical Genomics reporting unit, our audit procedures included, among others,

Assessing the valuation methodology and the underlying data used by the Company in its analysis, including testing the significant assumptions discussed above.

We compared the significant assumptions discussed above used by management to current industry and economic trends, changes to the Company's business model and other relevant factors, including considering contradictory evidence.

We performed sensitivity analyses of these significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in these assumptions.

We involved valuation specialists to assist in our evaluation of the valuation methodology and the significant assumptions used in determining the fair value of the reporting unit.

Evaluating the Company’s disclosures related to the goodwill impairment testing.

Income Taxes –

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We identified management’s calculation of the provision for income taxes 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.

Performing audit procedures to evaluate the reasonableness of management’s interpretation of tax law in various domestic and 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

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We have served as the Company’s auditor since 1986.

Denver, Colorado

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Mesa Laboratories, Inc.

Adverse Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting as of March 31, 2023 of Mesa Laboratories, Inc.

(the “Company”), 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, because of the effect of the material weaknesses described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of March 31, 2023, based on criteria established in the COSO framework.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment:

Management failed to utilize resources with an appropriate level of knowledge and expertise in performing and reviewing the preliminary valuation of the Belyntic acquisition.  As a result, we identified errors in the preliminary valuation as part of our audit procedures after the preliminary valuation had been reviewed internally by management.  Accordingly, we concluded that management’s review controls in this area were not properly designed or operating effectively to achieve the control objective.

Management’s review controls over the qualitative assessment of goodwill impairment were insufficient to identify potential impairment triggers.  As a result, we identified potential impairment triggers that required management to further evaluate whether an impairment had occurred.  Accordingly, we concluded that management’s review controls in this area were not properly designed or operating effectively to achieve the control objective.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2023 financial statements, and this report does not affect our report dated May 30, 2023, on those financial statements.

We also have audited the accompanying consolidated balance sheets of the Company as of March 31, 2023 and 2022, the related consolidated statements of income, comprehensive (loss) income, stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 2023, and the related notes (collectively referred to as the “financial statements”), in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Our report dated May 30, 2023, expresses an unqualified opinion.

Basis for Opinion

The Company's management is responsible 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 internal control over financial reporting based on our audit.

We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ Plante & Moran, PLLC

We have served as the Company’s auditor since 1986.

Denver, Colorado  

Mesa Laboratories, Inc.

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124,318  

Noncurrent assets

Property, plant and equipment, net

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10,373  

11,830  

Customer relationships, net

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$ 661,832  

$ 707,369  

LIABILITIES AND STOCKHOLDERS’

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14,407  

13,830  

Other accrued expenses

13,385  

11,611  

Total current liabilities

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48,055  

Noncurrent liabilities

Deferred tax liability

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13,000  

49,000  

Convertible senior notes, net of discounts and debt issuance costs

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76,675  

Accumulated other comprehensive income

Accumulated other comprehensive (loss) income

( 12,795 )  

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Operating income

Nonoperating (income) expenses

Nonoperating expenses

Interest expense and amortization of debt discount

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Total nonoperating expense

Earnings before income taxes

Income tax expense (benefit)

(Loss) earnings before income taxes

Income tax (benefit) expense

Earnings per share

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145,935  

Proceeds from conversion feature of convertible senior notes, due 2025, net of allocated costs and deferred taxes of $ 8,338

Exercise of stock options and vesting of restricted stock units

65,532  

Tax withholding on restricted stock units

( 2,104 )  

Exercise of stock options and vesting of restricted stock units, net of shares withheld for taxes

( 517 )  

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Stock-based compensation expense

Currency translation recognized in earnings from the exit of Cold Chain Packaging Division

( 187 )  

Foreign currency translation

26,485  

March 31, 2020

26,485  

Adoption of accounting standards, net

March 31, 2021

5,140,568  

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16,116  

Proceeds from the issuance of common stock, net of issuance costs of $ 9,315

406,227  

Exercise of stock options and vesting of restricted stock units

128,337  

Tax withholding on restricted stock units

( 3,278 )  

Exercise of stock options and vesting of restricted stock units, net of shares withheld for taxes

( 875 )  

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Stock-based compensation expense

11,391  

Foreign currency translation

( 12,450 )  

Cumulative adjustment due to adoption of ASU 2020-06

( 22,735 )  

Adoption of accounting standards, net

March 31, 2022

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393,801  

Exercise of stock options and vesting of restricted stock units

108,737  

Exercise of stock options and vesting of restricted stock units, net of shares withheld for taxes

Tax withholding on restricted stock units

( 4,898 )  

( 919 )  

Dividends paid, $ 0.64 per share

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( 16,461 )  

Cumulative adjustment due to adoption of ASU 2020-06

( 22,735 )  

March 31, 2023

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$ 393,480  

*Accumulated Other Comprehensive Income (Loss).

*Accumulated Other Comprehensive (Loss) Income.

See accompanying notes to consolidated financial statements.

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Non-cash interest and debt amortization

Amortization of step-up in inventory basis

Deferred taxes

Cash provided by changes in operating assets and liabilities:

Amortization of step-up in inventory basis

Changes in operating assets and liabilities:

Accounts receivable, net

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Accounts payable

Accrued liabilities and taxes payable

Other accrued expenses

Unearned revenues

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Purchases of property, plant and equipment

Proceeds from the sale of assets

Net cash (used in) investing activities

Cash flows from financing activities:

Proceeds from the issuance of common stock, net

Proceeds from the issuance of debt

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Proceeds from the exercise of stock options

Payment of tax withholding obligation on vesting of restricted stock

Payments of contingent consideration

Proceeds from the issuance of common stock, net

Proceeds from the issuance of convertible senior notes, net

Payment of debt issuance costs

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

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Cash paid for:

Income taxes paid

Interest paid

Supplemental non-cash activity:

Contingent consideration from acquisitions

See accompanying notes to consolidated financial statements.

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We are a multinational manufacturer, developer, and seller of life sciences tools and critical quality control products and services, many of which are sold into niche markets driven by regulatory requirements.

We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe, and Asia Pacific, 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 described in Note 14 .

 "Segment Data," following the acquisition of Agena Bioscience, Inc. on 

October 20, 2021 ,  we changed our financial reporting segments to align with strategic shifts in the way we manage our business units.

We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe, and Asia Pacific, as well as by independent distributors in these areas and throughout the rest of the world.

We prefer markets in which we can establish a strong presence and achieve high gross profit margins.

March 31, 2023, 

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four  reportable segments, or divisions:

Sterilization and Disinfection Control  - 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.

Clinical Genomics  - develops, manufactures and sells highly sensitive, low-cost, high-throughput genetic analysis tools and related consumables and services that enable clinical labs to perform genomic testing for a broad range of diagnostic and research applications in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics, and oncology related applications. 

Sterilization and Disinfection Control  - manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes, including steam, gas, hydrogen peroxide, ethylene oxide, radiation, and other processes in the hospital, dental, medical device and pharmaceutical industries.

The division also provides testing and laboratory services, mainly to the dental industry.

Biopharmaceutical Development  - develops, manufactures and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions.

Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic drugs.

Customers include biopharmaceutical research, development, and manufacturing teams at biopharmaceutical companies and academic research and development laboratories. 

Calibration Solutions  - develops, manufactures, and sells quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other such parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and various laboratory environments.

This division represents a combination of the historical Instruments and Continuous Monitoring reportable segments.

Clinical Genomics  - develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by labs to perform clinical genomic testing in several therapeutic areas such as newborn screenings, pharmacogenetics, and oncology.

This division is a new reportable segment comprised entirely of Agena’s operations.

For more information on Mesa’s acquisition of Agena, see Note 4.

“Significant Transactions.”

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.

Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic therapies, among other applications.

Calibration Solutions  - develops, manufactures and sells quality control products using principles of advanced metrology to measure or calibrate critical chemical or physical parameters in various dialysis, process monitoring, instrument monitoring, environmental monitoring, gas flow, environmental air quality, and torque applications, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and laboratory environments.

Unallocated corporate expenses and other business activities are reported within Corporate and Other.

Principles 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.

Agena results are consolidated with Mesa's financial statements beginning October 20, 2021, the day of the acquisition.

Prior period results have not been recast and are therefore not comparable with the year ending March 31, 2022 , except all prior year segment data presented has been reclassified to conform to current year presentation, as described in Note 14.

"Segment Data." Our change in financial reporting segments has not  resulted in any change to previously reported consolidated amounts.

Our Consolidated Financial Statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“GAAP”), and include our accounts and those of our wholly owned subsidiaries after elimination of all intercompany accounts and transactions. 

Prior Period Reclassification

During fiscal year 2022 we combined our historical Instruments and Continuous Monitoring reportable segments to create the Calibration Solutions reportable segment.

Prior year amounts from fiscal year 2021 have been recast to conform to current year presentation, consistent with our Annual Report on Form 10 -K for the year ended March 31, 2022.

Our change in financial reporting segments has not resulted in any change to consolidated amounts reported in the Consolidated Financial Statements for any periods presented in this Annual Report on Form 10 -K.

Certain amounts presented in Note 2.

"Revenue Recognition" in prior periods of fiscal year 2022 have been reclassified out of revenues from consumables and into revenues from hardware and services. These reclassifications have not  resulted in any change to consolidated financial statements for the year ended March 31, 2022.

"Revenue" in prior periods of fiscal year 2022 and 2023  have been reclassified.

Specifically, we reclassified a portion of the Biopharmaceutical Development division's revenues from consumables into revenues from hardware and services.

Certain revenues related to Clinical Genomics division have been reclassified out of revenues from hardware and into revenues from consumables. These reclassifications allow for consistency of presentation across divisions and have not  resulted in any change to consolidated or segment amounts reported in the Consolidated Financial Statements for any periods presented in this Annual Report on Form 10 -K.

Management Estimates

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dollars at period end exchange rates, and revenue and expense accounts are translated at weighted average period rates. 

Fair Value of Financial Instruments

Fair Value Measurements

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.

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Quoted prices for identical assets or liabilities in active markets.

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.

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.

Assets recognized or disclosed at fair value in the Consolidated Financial Statements on a nonrecurring basis are measured at fair value if determined to be impaired or if purchased pursuant to our acquisition of a business, including items such as inventory, property and equipment, operating lease assets, goodwill, and other intangible assets.

Fair values assigned to assets acquired and liabilities assumed in acquisitions, except deferred revenues, are measured using Level 

3  inputs.

Revenue Recognition

Our revenues come from product sales, which include consumables and hardware;

as well as services, which include discrete and ongoing calibration, testing, and maintenance services and contracts.

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).

as well as services, which include discrete and ongoing maintenance, calibration, and testing services.

Revenues are recognized when or as 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 the amount of consideration we expect to receive in exchange for transferring products or services to our customers (the transaction price) as revenue.

For all revenue contracts, prices are fixed at the time of purchase and no price protections or variables are offered.

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Product sales:

Our performance obligations related to product sales generally consist of the promise to sell tangible goods and integrated software 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 Mesa's personnel to complete 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 discrete or contracted calibration, testing, and maintenance services performed on our hardware products.

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 completion of the specified work.

Alternately, performance obligations arising from ongoing 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. For ongoing service contracts, 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.

We generate service revenues from discrete and ongoing maintenance, calibration, and testing services performed on our physical products.

For discrete services, our performance obligation to complete specified work is satisfied and revenue is recognized upon performance of the service.

Performance obligations arising from ongoing service contracts in which we promise to stand ready to provide maintenance or other services on an as-needed basis are satisfied by completing any services that are contractually required during the contract period, if requested by the customer, or simply by the passage of time if no services are requested. For ongoing service contracts, 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 606, we elected the practical expedient to expense commission costs as incurred.

The substantial majority of our contracts have original durations of one year or less, and 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, 2022  or March 31, 2021. 

Upon adoption of Accounting Standards Codification 606, we elected the practical expedients to expense commission costs (typically our only significant incremental cost to obtain a contract) as incurred and to account for shipping and handling costs as fulfillment costs.

Additionally, we have elected 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 significant financing components as of or for the fiscal years ended 

March 31, 2023  or 

Contracts with customers may contain multiple performance obligations.

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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.

Discounts may be approved at the time of purchase and are included within a contract’s fixed transaction price.

In limited circumstances, for obligations with highly variable or unobservable standalone selling prices, we may assign standalone prices to obligations based on the residual transaction price after all observable standalone selling prices have been determined. Discounts may be approved at the time of purchase and are included within a contract’s fixed transaction price.

Discounts are typically allocated to the performance obligations included in the contract based on the standalone values of such obligations.

All expected and actual consideration from customers is included in the transaction price.

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 expensed to cost of revenues when products are sold

We account for shipping and handling costs arising from contracts with customers as fulfillment costs.

Shipping and handling for inventory and materials we purchase is included as a component of inventory on the Consolidated Balance Sheets, and expensed to cost of revenues when products are sold. 

Unearned Revenues

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In the event these contracts are paid in advance by the customer, the associated amounts are recorded as an unearned revenue liability and recognized as revenue ratably over the term of the service period, generally one year.

Prepayments from customers with respect to other products and services are likewise recorded as unearned revenue liabilities and are recognized to revenue when earned. 

Accrued Warranty Expense

We typically provide assurance-type limited product warranties on our products and, accordingly, accrue for estimates of related warranty expenses.

Cash and Cash 

We classify any highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents.

All cash equivalents are carried at cost, approximating fair value. 

Accounts Receivable and Allowance for Doubtful Accounts

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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.

trade accounts receivable. 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 $ 304 , $ 100 , and $ 1  of expense associated with doubtful accounts for the years ended March 31, 2022, 2021, and 2020, respectively. 

Inventories are stated at the lower of cost or net realizable value using a weighted average costing methodology.

“Fair Value Measurements”

for further discussion and for information on how we manage credit risk. 

Differences may arise between estimated and actual losses, which could materially affect the provision for credit losses and, therefore, net earnings. We recorded $ 736 , $ 304 , and $ 100  of expense associated with doubtful accounts for the years ended March 31, 2023, 2022, and 2021, respectively.

The increase in bad debt expense reflects the uncertainty in market and macro-economic conditions. 

Inventories are stated at the lower of cost or net realizable value and are relieved to cost of products upon sale using a weighted average costing methodology.

Inventories acquired in an acquisition are recorded at fair market value.

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We estimate and maintain an inventory reserve as needed for such matters as excess or obsolete inventory, shrinkage, and scrap. This reserve may fluctuate as our assumptions change due to new information, discrete events, or changes in our business, such as entering new markets or discontinuing a specific product;

however, once inventory is written down, a new cost basis is established that is not subsequently written back up in future periods.

however, once inventory is written down, a new cost basis is established that is not subsequently written back up in future fiscal years.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, except for assets acquired in acquisitions, which are recorded at fair value.

Property, plant and equipment are recorded at cost, less allowances for depreciation, 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.

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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.

In some cases, particularly with respect to business consolidation or closure activities, accelerated depreciation may be required for the revised remaining useful lives of assets designated to be abandoned in the future.

At least annually, we evaluate and adjust as necessary the estimated lives of property, plant and equipment.

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Estimated useful lives of significant classes of depreciable assets are as follows:

Buildings / Building improvements 40 (years or less)

Office equipment 7 (years or less)

Manufacturing equipment 

7 (years or less)

Useful Lives in Years

Buildings and building improvements 40 (or less)

Manufacturing equipment 7 (or less)

Office, lab and other equipment

Computer equipment 

3 (years or less)

Leasehold improvements 

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Our goodwill and other intangible assets result from acquisitions of existing businesses.

Upon acquisition, we record the fair values of identifiable indefinite and definite lived intangible assets using, among other sources of relevant information, independent appraisals, or actuarial or other valuations.

Upon acquisition, we record the fair values of separately 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.

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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 fifteen years (See Note 6.

Intangible assets deemed to have finite lives are amortized on a straight-line basis over their useful lives, generally ranging from five to fifteen years (See Note 6.

“Goodwill and Intangible Assets”).

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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.

Finite-lived intangible assets are tested for impairment 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 measurements used in testing intangible asset impairments are typically based on discounted cash flow projection models, using Level 3 inputs.

See “Fair Value of Financial Instruments” for a description of input levels.

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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, but we may from time to time, purchase in-process research and development with the intention of developing a saleable product.

Research and development costs are expensed as incurred.

Research and development expense is predominantly comprised of labor costs and third -party consultants, but we may from time to time purchase in-process research and development with the intention of developing a saleable product.

Convertible Debt

Convertible debt instruments without embedded derivatives such as our

Our convertible

1.375 % Convertible Senior Notes due

2025  are recorded as long-term liabilities in our Consolidated Balance Sheets and will remain thus classified until the criteria necessary for conversion as described in Note

"2025 Notes") do

not have embedded derivatives and are recorded as long-term liabilities in our Consolidated Balance Sheets.

2025 Notes are within

one year of maturity, or when 

criteria necessary for conversion as described in Note

“Indebtedness”

have been met.

When the Notes can be converted at the option of the noteholders, depending on the expected timing and likelihood of conversion, the Notes 

may be reclassified as short-term liabilities.

We apply the if-converted method to calculate the potentially dilutive impact of the Notes on earnings per share.

For further information, including a discussion of changes to our accounting for convertible debt, see “Recently Adopted Accounting Pronouncements.”

have been met, the

2025  Notes will be reclassified as short-term liabilities, depending on the expected timing and likelihood of optional conversions.

At our option, we

may settle the

2025 Notes in shares of common stock or in cash.

We apply the if-converted method to calculate the potentially dilutive impact of the

2025 Notes on earnings per share.

The short-term portion of unamortized fees is recorded within prepaid expenses and other, and the long-term portion is recorded in other assets on our Consolidated Balance Sheets.

The fees are being expensed on a straight line basis over the life of the indenture governing the

2025 Notes. 

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") and Mesa Laboratories, Inc.

We issue shares in the form of stock options and full-value awards as part of employee and non-employee director compensation pursuant to the Mesa Laboratories, Inc.

2014  Equity Plan (the "2014  Equity Plan") and the Mesa Laboratories, Inc.

2021 Equity Incentive Plan (the "2021 Equity Plan" or together, "the Equity Plans"). 

Stock options and service-based stock awards generally vest equally over a three to 

five year term and stock options generally expire after six to 

ten years. Awards granted to non-employee directors generally vest one year from the grant date.

The Equity Plans are administered by the Compensation Committee of the Board of Directors, which has the authority to grant equity awards, or to delegate its authority under the plan to make grants (subject to certain legal and regulatory restrictions), including the authority to determine the individuals to whom awards will be granted, the type of awards and when the awards are to be granted, the number of shares to be covered by each award, the vesting schedule, and all other terms and conditions of the awards.

For purposes of counting the shares remaining under the 

2021  Equity Plan, each share underlying a stock option or a full value award counts as 

one  share used.

For purposes of counting the shares remaining available under the 2014 Equity Plan, each share issuable pursuant to outstanding full value awards counts as five shares issued, whereas each share underlying a stock option counts as one share issued. We issue new shares of common stock upon the exercise of stock options and the vesting of time-based restricted stock units ("RSUs") and performance-based RSUs ("PSUs"). 

Stock options and service-based stock awards generally vest equally over a

three to 

five year term and stock options generally expire after

ten 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.

The 2021 Equity plan includes retiree provisions, which result in the acceleration of stock-based compensation for expense for retiree-eligible participants.

2021 Equity plan includes retiree provisions, which result in the acceleration of stock-based compensation for expense for retiree-eligible participants.

Compensation expense related to employees eligible to retire and retain full rights to the awards is recognized over the calculated service period required to earn the award according to the plan provisions.

Expense for PSUs is recognized when it is probable that performance goals 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.

The fair value of RSUs is based on the closing price of Mesa's common stock on the award date, less the present value of expected dividends

not received during the vesting period.

RSUs we issue are equivalent to nonvested shares under the applicable accounting guidance.

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's 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.

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.

We estimate expected forfeitures using a dynamic forfeiture model based on company specific historical data when determining the amount of stock-based compensation costs to recognize each period.

The expected life of options represents the estimated period of time until exercise and is based on historical experience of similar awards for similar subsets of our employee population, giving consideration to the contractual terms, vesting schedules, and expectations of future employee behavior.

Expected stock price volatility is based on the 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.

We allocate stock-based compensation expense to cost of revenues, selling, research and development, and general and administrative expense in the Consolidated Statements of

Earnings  

Basic earnings per share (“EPS”) 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.

Diluted earnings per share (“diluted EPS”) is computed similarly to basic earnings per share, except it includes the effects of potential dilution that could occur if dilutive securities were exercised.

Potentially dilutive securities include stock options, RSUs and PSUs (collectively “stock awards”), as well as common shares underlying the 2025 Notes.

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 or if they would otherwise be antidilutive.

Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss;

in such cases the inclusion of the potential common shares would have an antidilutive effect.

“Earnings per Share”

for EPS calculations for the years ended March 31, 2023, 2022 and 2021 .

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.

Income tax expense includes U.S., state, local and international income taxes.

Deferred tax assets and liabilities are recognized and reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of existing assets and liabilities used for income tax purposes.

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 12.

From time to time, we engage in transactions in which the tax consequences may be subject to uncertainty, such as acquisitions.

Significant judgment is required in assessing and estimating the tax consequences of these transactions.

We prepare and file tax returns based on interpretation of tax laws and regulations.

In the normal course of business, our tax returns are subject to examination by various taxing authorities.

Such examinations may result in future tax, interest and penalty assessments by these taxing authorities.

In determining our income tax provision for financial reporting purposes, we establish a reserve for uncertain tax income positions unless we determine it is not more likely than not that such positions would be sustained upon examination, based on their technical merits..

That is, for financial reporting purposes, we only recognize tax benefits taken on the tax return that we believe are more likely than not of being sustained.

There is considerable judgment involved in determining whether positions taken on the tax return are more likely than not of being sustained.

We adjust our tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations.

The consolidated income tax provision of any given year includes adjustments to prior year income tax accruals that are considered appropriate and any related estimated interest.

Our policy is to recognize, when applicable, interest and penalties on uncertain income tax positions as part of general administrative expense.

(See Note 12.

“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.

As of March 31, 2022, there are no outstanding contingent consideration liabilities.

Acquisition related contingent consideration liabilities consist of estimated amounts due under various acquisition agreements and may be based on revenues growth, specified profitability growth metrics, or the attainment of milestones such as patent approvals.

At each reporting period, we evaluate the expected future payments and any associated discount rate to determine the fair value of the contingent consideration.

We re-evaluate the fair value of contingent liabilities at each reporting period and record any necessary adjustments in other expense, net on the Consolidated Statements of Income. See Note 13.

“Commitments and Contingencies”

for information regarding existing contingent consideration liabilities as of 

March 31, 2023 .

Legal Contingencies

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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.

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 any applicable contingent consideration, but excluding deferred revenue, which is measured at book value) to be recorded at fair value at the date of acquisition.

The excess of the purchase price over the fair value of acquired assets less liabilities is recognized as goodwill.

We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses, which rely heavily on Level 3 inputs. 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 acquisition 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.

Results of operations of acquired companies 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, 2022, 2021 and 2020 , our acquisitions of businesses (net of cash acquired) totaled $ 300,793 , $ 0 , and $ 184,102  respectively.

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. 

For the years ended March 31, 2023, 2022 and 2021 , our acquisitions of businesses (net of cash acquired and including contingent consideration) totaled $ 6,140 , $ 300,793 , and $ 0 , respectively.

Business Consolidation Costs

We estimate 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.

Any subsequent changes to the original estimates are recorded in current earnings. 

Risks and Uncertainties

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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 quarter ended March 31, 2022 concluded that goodwill is not impaired;

however, our impairment tests conducted during the quarter ended March 31, 2023 

concluded that goodwill is not impaired;

Estimates regarding the recoverability of deferred tax assets and estimates regarding cash needs and associated indefinite reinvestment assertions;

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Recently Adopted Accounting Pronouncements

2020,  the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 

2020 - 06,  

Debt with Conversion and Other Options and Derivatives and Hedging Accounting for Convertible Instruments and Contracts in an Entity's Own Equity  ("ASU 

2020 - 06" ), which simplifies the accounting for certain financial instruments with characteristics of both liabilities and equity, such as the Notes due 

2020 - 06  also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance.

It is effective for annual reporting periods beginning after 

December 15, 2021, 

including interim periods within those fiscal years.

Early adoption is permitted at the beginning of any fiscal year after 

December 15, 2020. 

The update permits the use of either the modified retrospective or full retrospective method of transition.

We early adopted ASU 

2020 - 06  effective 

April 1, 2021 

on a modified retrospective basis, and our adoption of this standard had a material effect on our consolidated financial statements.

Upon adoption, we derecognized the $ 22,735  equity conversion feature, net of taxes, that was recorded to common stock, and we derecognized the deferred tax liability of $ 5,747 .

We recorded an increase of $ 22,799  in aggregate to the Notes balance as a result of the reversal of the separation of the debt and equity components of the convertible debt.

The net effect of these adjustments, which represents 

$5,683  of historical non-cash interest expense, net of taxes, was recorded as an increase in the balance of beginning retained earnings as of 

April 1, 2021. 

The adoption of this standard has significantly decreased the amount of non-cash interest expense recognized in our Consolidated Statement of Income as a result of eliminating the discount associated with the equity component.

Our statements of cash flows reflect the lower non-cash interest expense in effect after the adoption of ASU 

In each period in which the Notes have been outstanding, we have always intended to settle the Notes in shares of common stock rather than in cash, and therefore, we have applied the if-converted method to calculate the potentially dilutive impact of the Notes on earnings per share.

In each reporting period, we have determined that the Notes were antidilutive.

Due to decreases in non-cash interest expense that will result from the adoption of ASU 

2020 - 06,  it is likely the Notes will have a dilutive effect in future periods, which would decrease our diluted earnings per share. 

October 28, 2021, 

the FASB issued Accounting Standard Update 

2021 - 08  ("ASU 

2021 - 08" ), 

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which amends ASC 805  to require acquiring entities to apply ASC 

606  to recognize and measure contract assets and contract liabilities acquired in a business combination.

Prior to adoption, an acquirer generally recognized such items at fair value on acquisition date. 

We early adopted ASU 

2021 - 08  upon its issuance effective 

October 28, 2021 

and applied the amendments retrospectively to the Agena Acquisition.

As a result of adopting ASU 

2021 - 08,  we recognized Agena's deferred revenue at its recorded book value rather than at fair value, after determining that Agena's application of ASC 

606  was appropriate and the underlying accounting for deferred revenue included 

no  material errors. 

Revenue Recognition

We develop, manufacture, market, sell, and maintain life sciences tools and quality control instruments and related software, consumables, and services.

Sales of hardware and software, such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers, are generally driven by our acquisition of new customers, growth of existing customers, or customers replacing existing equipment.

Hardware sales may 

be offered with accompanying software licenses, which in some cases are required for the hardware to function.

We also offer discrete and ongoing service and maintenance contracts on our instruments.

There have been no accounting pronouncements applicable to us that we were required to adopt or that we have elected to adopt during fiscal year 2023.

We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related software, consumables, and services.

Hardware sales include physical products such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers.

Hardware sales 

be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function.

Consumables are typically used on a one -time basis and require frequent replacement in our customers' operating cycles.

Some of our consumables, such as biological indicator test strips, are used on a standalone basis.

Others, including reagents used for molecular and genetic analysis and solutions used for protein synthesis and instrument calibrations, are critical to the ongoing use of our instruments. 

Revenues from our new Clinical Genomics segment are derived from our recently acquired Agena business (See Note 4 .

 "Significant Transactions").

These revenues consist of sales of instruments and consumables used in molecular and genetic analysis, as well as sales of discrete and contracted instrument maintenance agreements.

We evaluate our revenues internally based on operating segment, the timing of revenue generation, and the nature of goods and services provided.

Typically, discrete revenues are recognized at shipping point or upon completion of a service, while contracted revenues are recognized over time based on the performance obligation period in the applicable contract.

The significant majority 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, 2022, 2021 and 2020 :

Consumables such as reagents used for molecular and genetic analysis or solutions used for protein synthesis are critical to the ongoing use of our instruments.

Consumables such as biological indicator test strips are used on a standalone basis.

We also offer maintenance, calibration, and testing service contracts.

These contracts result in revenues recognized over time, for example, when we are obligated to perform labor and replace parts on an as-needed basis over a contractually specified period of time, or at a point in time, upon completion of a specific, discrete service.

In many cases, our contracts contain both revenues recognized over time and revenues recognized at a point in time. 

We evaluate our revenues internally based on operating segment, the nature of goods and services provided, and the timing of revenue generation.

The following tables present disaggregated revenues from contracts with customers for the years ended March 31, 2023, 2022 and 2021 :

Year Ended March 31, 2023

Clinical Genomics (1)

Sterilization and Disinfection Control

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Calibration Solutions

Clinical Genomics (1)

Corporate and Other

Discrete Revenues

$ 43,374  

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15,184  

Contracted Revenues

38,560  

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Year Ended March 31, 2022

Clinical Genomics (1)

Sterilization and Disinfection Control

1 unchanged sentence

Calibration Solutions

Clinical Genomics (1)

Corporate and Other

Discrete Revenues

$ 22,271  

2 unchanged sentences

$ 3,675  

Hardware and Software

$ 91,808  

Hardware and Software

21,651  

2 unchanged sentences

14,660  

Contracted Revenues

34,913  

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$ 46,872  

$ 184,335  

Year Ended March 31, 2021

Clinical Genomics (1)

Sterilization and Disinfection Control

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Calibration Solutions

Clinical Genomics (1)

Corporate and Other

Discrete Revenues

$ 45,869  

2 unchanged sentences

$ 63,009  

$ 53,311  

Hardware and Software

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13,759  

Contracted Revenues

Total Revenues

26,909  

Total Revenues

$ 53,119  

2 unchanged sentences

$ 133,937  

( 1 ) Revenues in the Clinical Genomics division represent transactions subsequent to the Agena Acquisition on October 20, 2021 .

( 2 ) Revenues in the Biopharmaceutical Development division represent transactions subsequent to the acquisition of Gyros Protein Technologies Holding AB on October 31, 2019 .

( 1 ) Revenues in the Clinical Genomics division represent transactions subsequent to the acquisition of Agena Bioscience, Inc.

on October 20, 2021 .

Contract Balances

Our contracts have varying payment terms and conditions.

Some customers prepay for products and services, resulting in either unearned revenues or customer deposits, called contract liabilities, which are included within unearned revenues, other accrued expenses, and other long-term liabilities 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.

Some customers prepay for products and services, resulting in either unearned revenues or customer deposits, called contract liabilities.

Short-term contract liabilities are included within other accrued expenses and unearned revenues in the accompanying Consolidated Balance Sheets, and long-term contract liabilities are included within other long-term liabilities in the accompanying Consolidated Balance Sheets.

The significant majority of our revenues and related receivables and contract liabilities are generated from contracts with customers with original expected durations of 12 months or less.

Contract liabilities will be recognized to revenue as we satisfy our obligations under the terms of the contracts. 

A summary of contract liabilities is as follows:

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Contract liabilities added during the year ended March 31, 2023, net of revenues recognized

11,866  

Contract liabilities balance as of March 31, 2023

$ 16,098  

Contract liabilities primarily relate to service contracts with original expected durations of 12 months or less and will be recognized to revenue as time passes.

Contract liabilities of $3,478 added during the year ended 

March 31, 2022  are attributable to the acquisition of Agena.

"Significant Transactions."  

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 for cash and cash equivalents, trade accounts receivable, and trade accounts payable approximate fair value. Cash equivalents on our Consolidated Balance Sheets consisted of $0  held in a money market account as of March 

31, 2022,  compared to $ 230,822  held in a money market account as of 

March 31, 2021. 

We used the money market funds for the Agena Acquisition, see Note 4.

 "Significant Transactions." We measure our cash equivalents at fair value using quoted market prices in an active market, and we classify them within Level 

1  of the fair value hierarchy.

Historically, 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 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.

Our financial instruments generally consist 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.

The financial instruments that subject us to the highest concentration of credit risk are cash and accounts receivable. We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to diversify and reduce risk of loss. Concentration of credit risk with respect to accounts receivable is limited to customers to whom we make significant sales.

Unusually, one of our distributors accounted for approximately 18 % of total trade receivables as of March 31, 2023.

Some of this balance was attributable to orders placed in the last months of fiscal year 2023, but a substantial portion was aged from earlier months;

we have since collected payments for all aged balances and have continued to collect currently due amounts. 

To manage credit risk, we consider the creditworthiness of new and existing customers, establish credit limits, 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 have outstanding $ 172,500 aggregate principal of 1.375 % convertible senior notes due August 15, 2025, which we refer to as our 2025 Notes. We estimate the fair value of the 2025  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 2025 Notes were as follows:

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$ 185,438  

The carrying value of the Notes increased as a result of the adoption of ASU 

2020 - 06,  discussed further in Note 

 "Description of Business and Summary of Significant Accounting Policies" and Note 8 .

 "Indebtedness." 

Assets recognized or disclosed at fair value in the Consolidated Financial Statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets, including those that were part of the Agena Acquisition.

These assets are measured at fair value if determined to be impaired.

Preliminary fair values assigned to assets acquired and liabilities assumed in the Agena Acquisition, except deferred revenues, were measured using Level 

3  inputs, as discussed further in Note 4.

 "Significant Transactions." There were 

no  transfers between the levels of the fair value hierarchy during the fiscal years ended March 31, 2022 

March 31, 2021.

There were 

no  transfers between the levels of the fair value hierarchy during the fiscal years ended March 31, 2023 and 2022 .

Our financial liabilities based upon Level 3 inputs include a contingent consideration arrangement relating to our acquisition of substantially all the assets and certain liabilities of Belyntic GmbH’s peptide purification business (the "Belyntic acquisition," see Note 4.

"Significant Transactions").

Acquisition of Agena Bioscience, Inc.

October 20, 2021 ,  we completed the acquisition of Agena Bioscience, Inc., which aligned with our overall acquisition strategy, moved our business towards the life sciences tools sector, and expanded our market opportunities, particularly in Asia. Agena is a leading clinical genomics tools company that develops, manufactures, markets, and supports proprietary instruments and related consumables and services that enable genetic analysis for a broad range of diagnostic and research applications.

Using Agena's MassARRAY® instruments and chemical reagent solutions, customers can analyze DNA samples for a variety of high volume clinical testing applications, such as inherited genetic disease testing, pharmacogenetics, various oncology tests, infectious disease testing, and other highly-differentiated applications. Agena sells its products primarily to clinical labs, including large specialty, reference and pathology labs, as well as a variety of academic, hospital, and government facilities.

Agena’s products are marketed directly to laboratories as well as to in vitro diagnostic development partners globally.

Agena's products are differentiated in the market because they combine the throughput and analytical capabilities of mass spectrometry with the flexibility, ease-of-use and cost advantages of PCR methods.

We funded the acquisition and transactions relating thereto with cash on hand and borrowings under the Credit Facility.

 "Indebtedness" for additional details regarding the Credit Facility.

At the completion of the Agena Acquisition on 

October 20, 2021 ,  each Agena common share issued and outstanding was converted into the right to receive $ 5.96  per share in cash, subject to adjustment, without interest. We paid $ 300,793 , net of cash acquired, but inclusive of working capital adjustments, to complete the Agena Acquisition.

Of the cash consideration we paid, approximately $ 267,000  represented cash consideration to holders of Agena’s preferred and common stock, approximately $ 2,000  represented cash consideration paid for the settlement of Agena’s warrants, and approximately $ 31,800  represented cash consideration for the settlement of Agena's vested stock options as of the closing date.

Preliminary Allocation of Purchase Price

We accounted for the Agena Acquisition as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the acquiree's identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values, except contract assets and liabilities recorded at book value in accordance with ASU 

2021 - 08,  and are consolidated with those of Mesa.

Significant judgments and estimates are required when performing valuations.

We are obligated to pay contingent consideration of $ 1,500 cash upon approval of pending patent applications, expected within 36 months of the acquisition date.

The fair value of the contingent consideration was $ 1,190  as of March 31, 2023, and was recorded in other long-term liabilities on the accompanying Consolidated Balance Sheets.

We estimated the fair value of the contingent consideration at inception using a probability-weighted outcome analysis based on our expectations of patent approval, leveraging our historical experience and expert input.

The amount ultimately paid for the contingency could range from $ 0 to $ 1,500 .

Significant Transactions

Belyntic, GmbH

On November 17, 2022, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business.

We paid $ 4,950 on the date of acquisition, and we expect to pay an additional $ 1,500 based on the probable approval of pending patent applications expected within 36 months of the acquisition date.

The business complements our existing peptide synthesis business, part of the Biopharmaceutical Development segment, by adding a new consumables line.

We have prepared a preliminary analysis of the valuation of net assets acquired in the Belyntic acquisition, which is subject to revision as more detailed analyses are completed.

Agena Bioscience, Inc.

October 20, 2021, 

we completed the acquisition of Agena Bioscience, Inc.

for $ 300,793 , net of cash acquired but inclusive of working capital adjustments.

The Agena Acquisition aligned with our overall acquisition strategy, moved our business towards the life sciences tools sector, and expanded our market opportunities, particularly in Asia. 

We funded the acquisition and transactions relating thereto with cash on hand and borrowings under the Credit Facility (as defined below). Of the cash consideration we paid, approximately $ 267,000  represented cash consideration to holders of Agena’s preferred and common stock, approximately $ 2,000  represented cash consideration paid for the settlement of Agena’s warrants, and approximately $ 31,800  represented cash consideration for the settlement of Agena's vested stock options as of the closing date.

Allocation of Purchase Price

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed, except deferred revenue recorded at book value, as of the acquisition date, based on the final valuation of Agena.

The relief from royalty method was used to value our trade names and developed technology, while the multi-period excess earnings method, a form of the income approach, was used to value our customer relationships.

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3  inputs.

We obtained the information used to prepare the preliminary valuation during due diligence and from other sources.

We obtained the information used to prepare the valuation during due diligence and from other sources.

These estimates were based on assumptions that we believe to be reasonable; however, actual results 

differ from these estimates.

Some of these estimates, especially customer attrition and internal rate of return are highly sensitive and a small change in estimate could materially change the calculated value of intangibles.

During the quarter ended 

March 31, 2022, we continued refining the valuation of net assets acquired in the Agena Acquisition. The significant purchase price allocation changes during quarter ended 

March 31, 2022 

a net decrease of $ 4,300  in the value of intangible assets; an increase of $ 1,400  in the value of the inventory step-up;

and a decrease of $ 1,144  in the value of property, plant and equipment, net.

We also made adjustments to deferred tax assets and deferred tax liabilities primarily due to the tax effect of these changes to the purchase price allocation. In addition to changes to valuation of intangible assets, we reassessed our estimate of the remaining useful lives of intangible assets and property, plant and equipment acquired. The net effect of the changes to the expected remaining useful life and the intangible asset valuation was a cumulative net increase to amortization expense amounting to $ 1,932 , of which $ 472  of expense was recorded to cost of revenues and $1,460  was recorded in general and administrative costs during the quarter ended March 31, 2022.

The following table summarizes the allocation of the preliminary purchase price as of 

We have made appropriate adjustments to deferred taxes and tax-related balances within the measurement period during the year ended 

March 31, 2023.

The following table summarizes the allocation of the purchase price as of 

October 20, 2021:

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$ 7,544  

Accounts receivable (a)

Accounts receivable

11,100  

Other current assets (b)

Other current assets

25,480  

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135,728  

Customer relationships (d)

Customer relationships

103,800  

Intellectual property (d)

Intellectual property

45,400  

Tradenames (d)

15,700  

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$ 300,793  

(a) Trade receivables, which is expected to be collected. 

(b) Includes $ 7,462  of inventory step-up, which was amortized entirely within fiscal year 

 Our evaluation of the valuation of inventory was complete as of March 31, 2022.

(c) Acquired goodwill of $ 135,880 , all of which is allocated to the Clinical Genomics reportable segment, represents the value expected to arise from the value of expanded market opportunities, expected synergies, and assembled workforce, 

Acquired Goodwill

Acquired goodwill of $ 135,728 as of the acquisition date, all of which is allocated to the Clinical Genomics reportable segment, represents the value expected to arise from expanded market opportunities, expected synergies, and assembled workforce, 

none  of which qualify as amortizable intangible assets.

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not  deductible for income tax purposes.

(d) Customer relationships, intellectual property, and tradenames are currently expected to be amortized on a straight line basis over a weighted average 10.9  year period.

The identified intangible assets will be amortized on a straight line basis over their useful lives, which approximates the pattern over which the assets' economic benefits are expected to be consumed over time.

Amortization expense for customer relationships and tradenames will be amortized to general and administrative expenses;

amortization expense for intellectual property will be recorded to cost of revenues.

During the period from 

October 20, 2021 

March 31, 2022, 

$ 4,454  of amortization expense was recorded to general and administrative costs and $ 2,538  of amortization expense was recorded to cost of revenues in the Clinical Genomics Division, including the cumulative effect catch up.

Our valuation of intangible assets is considered to be complete as of March 31, 2022.

Going forward, we expect to record amortization expense of $ 2,490  and $ 1,419 to general and administrative costs and costs of revenues, respectively, each quarter.

This preliminary purchase price allocation is subject to revision as more detailed analyses are completed with respect to prepaid taxes, tax accruals, and deferred tax positions.

If additional information about the fair value of assets acquired and liabilities assumed becomes available, we 

further revise the preliminary purchase price allocation as soon as is practical, but will 

not  do so more than 

one  year from the acquisition date.

Only items identified as of the acquisition date are considered for subsequent adjustment.

Any such revisions or changes 

Acquisition-related costs, such as legal and advisory fees of $ 1,244  for the year ended March 31, 2022, 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.

Unaudited Pro Forma Information

Agena's operations contributed $ 32,840  to revenues and ( $7,779 ) of net loss to our consolidated results during fiscal year 

2022,  including the inventory-step up amounting to $ 7,462  that was fully amortized in fiscal year 

2022 and $1,949  of additional intangible assets amortization related to the application of purchase accounting. We included the operating results of Agena in our Consolidated Statements of Income beginning on 

October 20, 2021, 

the acquisition date.

The following pro forma financial information presents the combined results of operations of Mesa and Agena as if the acquisition had occurred on 

April 1, 2020 

after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected only include those adjustments that are directly attributable to the Agena Acquisition, are factually supportable and 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, 2020 

or of future results.

Year Ended March 31,

Pro forma total revenues (1)

$ 222,612  

$ 214,206  

Pro forma net income (2)

( 1 ) Net revenues were adjusted to include net revenues of Agena. 

( 2 ) Pro forma adjustments to net earnings attributable to Mesa include the following:

Excludes acquisition-related transaction costs incurred in the year ended March 

Excludes interest expense attributable to Agena external debt that was paid off as part of the acquisition.

Amortization expense of $ 15,636 for the years ended March 31, 2022 and 2021, respectively, based on the fair value of amortizable intangible assets acquired.

$ 7,462 was excluded from the year ended 

March 31, 2022 

based on the step up value of inventory which would have been fully amortized within the 

first six  months of the acquisition.

Additional charge to cost of revenues of $7,462  was included in the year ended March 

31 , 2021  based on the step up value of inventory.

Additional stock based compensation expense representing expense for performance share units awarded to certain key Agena employees.

Income tax effect of applicable adjustments made at a blended federal and state statutory rate (approximately 

GPT Acquisition

October 31, 2019, 

we completed the acquisition of 

100 % of the outstanding shares of GPT, which comprises our Biopharmaceutical Development segment.

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. 

IBP Acquisition

On April 1, 2019, we completed a business combination 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.

Restructuring

Butler, New Jersey

We completed the previously announced closure of our Butler, New Jersey facility during the year ended 

March 31, 2022. 

The facility was primarily used in the production of our gas flow calibration and air sampling equipment, which is part of our Calibration Solutions division.

Our manufacturing facility in Lakewood, Colorado is currently undergoing renovations that will allow it to better 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 $ 77  of severance costs during the year ended 

March 31, 2022, 

which were recorded to cost of revenues, selling, and general and administrative expense on the Consolidated Statement of Income.

March 31, 2022, 

there were 

no  outstanding accrued costs, and we do 

not  expect to incur any material expenses related to the Butler, New Jersey facility closure in future periods.

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:

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Other long-term liabilities

Operating lease right of use assets and liabilities increased significantly during the year ended March 31, 2022 

due to the Agena Acquisition.

See Note 4.

"Significant Transactions" for details.

We accounted for the five  property leases acquired as part of our acquisition of Agena by measuring the lease liability at the present value of the remaining lease payments as if the acquired lease were a new lease for Mesa.

These properties are used for office, laboratory, and manufacturing space.

The components of lease costs, the weighted average remaining lease term and the weighted average discount rate were as follows:

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Weighted average discount rate

The weighted average discount rate on operating leases declined significantly as a result of the new leases acquired in the Agena Acquisition.

These new lease ROU assets and liabilities were calculated using lower discount rates than leases commenced prior to fiscal year 2022.

Supplemental cash flow information related to leases was as follows:

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$ 1,896  

Operating lease assets obtained in exchange for operating lease obligations 

10,577  

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Future value of lease liabilities

10,543  

imputed interest

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Goodwill and Intangible Assets

Goodwill arises from the excess purchase price of acquired businesses over the fair value of acquired tangible and intangible assets, less assumed liabilities.  

The change in the carrying amount of goodwill was as follows:

Goodwill arises from the excess purchase price of acquired businesses over the fair value of acquired tangible and intangible assets, less assumed liabilities. 

Changes in the carrying amount of goodwill were as follows:

Clinical Genomics

Sterilization and Disinfection Control

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Calibration Solutions

Clinical Genomics

March 31, 2021

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( 5,134 )  

Goodwill related to GPT acquisition

( 52 )  

Goodwill related to Agena Acquisition

135,880  

March 31, 2022

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$ 37,237  

Effect of foreign currency translation

291,166  

Effect of foreign currency translation

( 191 )  

( 7,381 )  

Goodwill related to Agena acquisition

( 20 )  

Goodwill related to Belyntic Acquisition

Measurement period adjustment - Agena Acquisition

( 152 )  

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$ 335,400  

The increase in the goodwill and intangible assets balance from 

March 31, 2021 

March 31, 2022 

is related to the Agena Acquisition, partially offset by changes in foreign currency rates.

 "Significant Transactions" for more information.

$ ( 85,283 )  

$ 250,117  

The range of useful lives and weighted-average remaining useful lives of amortizable intangible assets as of March 31, 2023 were as follows: 

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25,275  

Amortization expense of intangibles acquired in a business combination for the years ended 

March 31, 2022, 2021 and 2020 was $ 21,806 , $ 14,513 , and $ 10,637 respectively.

Supplemental Balance Sheets Information

Accrued payroll and benefits consisted of the following:

March 31, 2022

March 31, 2021

Bonus payable

Amortization expense for finite-lived intangible assets acquired in a business combination was as follows:

Year Ended March 31,

Amortization in Cost of revenues

$ 6,796  

$ 3,806  

Wages and paid-time-off payable

Payroll related taxes

Other benefits payable

Total accrued payroll and benefits

$ 1,430  

Amortization in General and administrative

22,025  

Other accrued expenses consisted of the following:

March 31, 2022

March 31, 2021

Accrued business taxes

18,000  

13,083  

Current operating lease liabilities

Customer deposits

Income taxes payable

Total other accrued expenses

$ 28,821  

$ 21,806  

$ 14,513  

Supplemental Balance Sheets Information

Property, plant and equipment consisted of the following:

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March 31, 2022

Buildings and building improvements

22,005  

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$ 28,620  

Depreciation expense for the years ended 

March 31, 2022, 2021 and 2020 was $ 3,262 , $ 2,959 , and $ 2,234 , respectively. 

Depreciation expense was as follows:

Year Ended March 31,

Depreciation expense in Cost of revenues

$ 3,163  

$ 2,243  

$ 1,859  

Depreciation expense in Operating expense

Total depreciation expense

$ 4,313  

$ 3,262  

$ 2,959  

Inventories consisted of the following:

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Finished goods

13,961  

Inventories, net

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$ 24,606  

As of March 31, 2022, $ 11,802  of total inventory on hand is attributable to the new Clinical Genomics division.

Accrued payroll and benefits consisted of the following:

March 31, 2023

March 31, 2022

Bonus payable

$ 4,461  

$ 7,468  

Wages and paid-time-off payable

Payroll related taxes

Other benefits payable

Total accrued payroll and benefits

$ 9,433  

$ 14,717  

Other accrued expenses consisted of the following:

March 31, 2023

March 31, 2022

Accrued business taxes

$ 5,941  

$ 4,967  

Current operating lease liabilities

Customer deposits

Income taxes payable

Total other accrued expenses

$ 13,385  

$ 11,611  

Credit Facility

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3 ) letters of credit in an aggregate stated amount 

not  exceeding $ 2,500  at any time. The agreement 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.

Amounts borrowed under the Credit Facility bear interest at either a base rate or a Eurodollar rate, plus an applicable spread.

The weighted average interest rate on borrowing under our line of credit during the year ended March 31, 2022 

We borrowed $ 70,000  under the Credit Facility during fiscal year 2022 to provide a portion of the cash needed to complete the Agena Acquisition. We repaid $ 36,000  against our outstanding balance during the year ended March 31, 

 As of 

March 31, 2023, 

the outstanding balance under our Credit Facility was $ 13,000 .

In April 2023 we repaid $ 3,000 on our line of credit. 

December 22, 2022, 

Mesa and the lenders amended the Credit Facility to replace references to the Eurodollar Rate with references to the Secured Overnight Financing Rate ("SOFR").

Amounts borrowed under the Credit Facility bear interest at either a base rate or a SOFR rate, plus an applicable spread.

The interest rate on borrowings under our line of credit as of March 31, 2023 

We are obligated to pay quarterly unused commitment fees of between 

0.15 % and 

0.35 % of the Credit Facility’s aggregate principal amount, based on our leverage ratio.

Since the Credit Facility's inception, the rate applied to our unused commitment fees has been 

We incurred unused commitment fees of $ 78  for the year ended March 31, 2022, 

and the balance of unamortized customary lender fees was $ 484  and $ 650  as of 

March 31, 2022 

March 31, 2021, respectively.

On our Consolidated Balance Sheets, the short term portion of unamortized fees is recorded within prepaid expenses and other, and the long term portion is recorded in other assets.

The fees are being expensed on a straight line basis over the life of the agreement.

0.35 % of the Credit Facility’s aggregate principal amount, based on our leverage ratio. We incurred unused commitment fees of $ 107 and $ 78 for the years ended March 31, 2023, and March 31, 2022, respectively.

The balance of unamortized customary lender fees was $ 312  and $ 484  as of March 31, 2023 and 2022 , respectively.

The financial covenants in the Credit Facility include a maximum leverage ratio of 

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we were in compliance with all required covenants.

October 18, 2021, 

we borrowed $ 70,000  under the Credit Facility to provide a portion of the cash needed to complete the Agena Acquisition as further discussed in Note 4.

 "Significant Transactions." Subsequent to the Agena Acquisition, we repaid $ 21,000  against our outstanding balance during the year ended March 31, 

 As of 

March 31, 2022, 

the outstanding balance under our Credit Facility was $49,000.

Convertible Notes

August 12, 2019, 

we issued an aggregate principal amount of $ 172,500  of convertible senior notes.

The Notes mature on 

we issued an aggregate principal amount of $ 172,500  of 2025 Notes.

The 2025  Notes mature on 

August 15, 2025, 

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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;

(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 2025 Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets;

(iv) at any time from, and including, 

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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 note holders.

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March 31, 2023.

Debt issuance costs related to the Notes are comprised of discounts and commissions payable to the initial purchasers of $ 5,175  and 

Debt issuance costs related to the 2025 Notes are comprised of discounts and commissions payable to the initial purchasers of $ 5,175  and 

third  party offering costs of $ 255 .

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six -year contractual term of the 2025 Notes.

Due to our adoption of ASU 

2020 - 06  on 

April 1, 2021, 

no  longer bifurcate the Notes into a liability and an equity component in our Consolidated Balance Sheets (see Note 

 "Description of Business and Summary of Significant Accounting Policies").

The Notes are accounted for entirely as a liability, and the issuance costs of the Notes are accounted for wholly as debt issuance costs.

The equity conversion feature that was recorded to common stock, as well as the unamortized debt discount and amortization expense attributable to equity, have been derecognized.

The net carrying amount of the 2025 Notes was as follows:

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$ 172,500  

Unamortized debt discount attributable to equity

Unamortized debt issuance costs

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$ 2,372  

Amortization of debt discounts and issuance costs

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$ 3,262  

The effective interest rate of the liability component of the note is approximately 1.9 %.

Prior to the adoption of ASU 

2020 - 06 ,  the effective interest rate was approximately 

$ 7,769  

The effective interest rate of the liability component of the 2025 Notes is approximately 1.9 %. Interest expense and amortization of debt discount was lower for the year ended March 31, 2022 compared to the year ended March 31, 2021 due to our adoption of ASU 2020 - 06.

Stock Transactions and Stock-Based Compensation

(dollars and shares in thousands, except per share values)

In November 2005, our Board of Directors approved a program to repurchase up to 300,000 shares of our outstanding common stock.

In November 2005, our Board of Directors approved a program to repurchase up to 300  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.

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There were no repurchases of our shares of common stock under this plan during the years ended March 31, 2023, 2022 and 2021 .

As of March 31, 2022 , we have purchased 162  shares under this plan.

As of March 31, 2023 , we have repurchased 162  shares under this plan.

Under applicable law, Colorado corporations are not permitted to retain treasury stock.

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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  shares of our common stock, which includes our underwriters' exercise in full of an option to purchase up to 

56  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

During fiscal year 

2022,  our shareholders approved the Mesa Laboratories, Inc. 

2021  Equity Incentive Plan (the 

"2021  Equity Plan"), which authorizes the issuance of 

We issue shares in the form of stock options, RSUs and PSUs to employees and non-employee directors pursuant to the 2014 and 2021  Equity Plans. Our shareholders approved the 2021  Equity Plan during fiscal year 2022.

The plan authorizes the issuance of 

330  shares of common stock to eligible participants.

2021  Equity Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to grant equity awards, or to delegate its authority under the plan to make grants (subject to certain legal and regulatory restrictions), including the authority to determine the individuals to whom awards will be granted, the type of awards and when the awards are to be granted, the number of shares to be covered by each award, the vesting schedule, and all other terms and conditions of the awards.

203  shares were available for future grants as of March 31, 2022.

2021  Equity Plan includes retiree provisions, which result in the acceleration of stock-based compensation expense for retiree-eligible participants.

Pursuant to the Mesa Laboratories, Inc.

2014 Equity Plan and the 2021 Equity Plan (together referred to as "the 2014 and 2021 Equity Plans"), we grant stock options, RSUs and PSUs to employees and non-employee directors.

For purposes of counting the shares remaining 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.

For purposes of counting the shares remaining under the 

2021  Equity Plan, each share underlying a stock option or a full value award counts as 

one  share used.

We issue new shares of common stock upon the exercise of stock options and the vesting of RSUs and PSUs. 

Under the 2014 Plan, 1,100 shares of common stock have been authorized and reserved for eligible participants, all of which have been issued as of March 31, 2022. 

Shares issued pursuant to awards granted prior to the 2014 Equity Plan were issued subject to previous stock plans, and 3  vested awards are still outstanding under previous plans.

145  shares were available for future grants as of March 31, 2023. 

Under the 2014 Equity Plan, 1,100 shares of common stock have been authorized and reserved for eligible participants, all of which have been issued and 95 of which remain outstanding as of March 31, 2023.

Stock-based compensation expense recognized in the Consolidated Financial Statements was as follows: 

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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: 

We use the Black-Scholes option-pricing model to estimate the fair value of stock option awards granted.

The weighted average assumptions utilized in the model were as follows: 

Risk-free interest rate

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$ 67.66  

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 substantial majority of options granted during the years ended March 31, 2022 and March 31, 2021 

vest equally on the first, second, and third  anniversary of the grant date. Expected stock price volatility is based on the 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 2021 Equity Plan and legacy plans as of March 31, 2022 , and changes for the year then ended are presented below:

Stock option activity under the 2021 Equity Plan and legacy plans as of March 31, 2023 , and changes for the year then ended are presented below (shares and dollars in thousands, except per-share data):

Stock Options

23 unchanged sentences

March 31, 2023, 2022 and 2021 was $ 6,902 , $ 15,209 , and $ 9,559 , respectively.

Unrecognized stock-based compensation expense for stock options as of 

Unrecognized stock-based compensation expense for stock options expected to vest as of 

March 31, 2023 was $ 2,835  and is expected to be recognized over a weighted average period of 1.7  years.

The total fair value of options vested was $ 2,763 , $ 2,856 , and $ 2,005  during the years ended March 31, 2023, 2022 and 2021 , respectively.

The weighted-average grant price of awards granted during the years ended March 31, 2021 and 2020 was $ 226.72  and $ 206.35 , respectively.

The weighted-average grant price of awards granted during the years ended March 31, 2022 

and 2021  was $ 268.81  and $ 226.72 , respectively.

Time-Based Restricted Stock Units (RSUs)

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( 10 )  

229.52  

Awards distributed

4 unchanged sentences

$ 9,993  

There were 48 time-based RSUs with a weighted average grant date fair value per share of $ 251.94 that are expected to vest as of March 31, 2022 .

For the years ended March 31, 2021 and 2020, the weighted average fair value per RSU granted was $ 231.61  and $ 213.31 , respectively.

Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was $ 7,942  as of March 31, 2022 .

The total fair value of RSUs vested was $ 5,320 , $ 1,819 , $ 959  during the years ended March 31, 2022, 2021 and 2020 .

Expected to vest

$ 209.43  

$ 9,254  

For the years ended March 31, 2022 

and 2021, the weighted average fair value per RSU granted was $ 274.55  and $ 231.61 , respectively.

Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was $ 6,893  as of March 31, 2023  and is expected to be recognized over a weighted average period of 1.8  years.

The total fair value of RSUs vested was $ 6,751 , $ 5,320 , $ 1,819  during the years ended March 31, 2023, 2022 and 2021 , respectively.

The total intrinsic value of time-based RSUs distributed during the years ended 

March 31, 2023, 2022 and 2021 was $ 5,004 , $ 5,320 , and $ 2,429 , respectively.

Performance-Based Restricted Stock Units (PSUs)

PSU activity under the 2014 and 2021 Equity Plans was as follows:

Performance-based RSUs vest upon completion of the service period described in the award agreement and based on achievement of the financial targets described in the award agreements.

We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the financial targets on a straight-line basis over the service period. 

PSU activity under the 2014 and 2021 Equity Plans was as follows (shares and dollars in thousands, except per-share data):

Performance-Based Restricted Stock Units

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Performance adjustment

( 20 )  

Awards distributed

6 unchanged sentences

$ 287.48  

13,531  

(A) During the quarter ended 

June 30, 2021, 

the fiscal year 

2019  PSUs vested and were paid at 

280% of target, based on actual performance results and completion of service conditions.

In addition, the PSUs granted to employees of Gyros Protein Technologies Holding AB vested at 

60% of target, following a modification of the performance targets by the Compensation Committee of the Board of Directors during fiscal year 

There were no PSUs granted during the year ended March 31, 2021.

For the year ended March 31, 

2022, the average fair value per PSU granted was $ 302.15 .

Unrecognized stock-based compensation expense for PSUs that we have determined probable of vesting was $ 11,651 as of March 31, 2022 

Unrecognized stock-based compensation expense for PSUs that we have determined probable of vesting was $ 7,642  as of March 31, 2023 

and is expected to be recognized over a weighted average period of 3.4  years.

No PSUs were distributed during the years ended March 31, 2021 and 2020.

During the 

third  quarter of fiscal year 

2022,  we awarded 

7  PSUs to key employees of Agena that are subject to both service and performance conditions ("Agena PSUs").

The Agena PSUs had a grant date fair value of $ 305.79  per share and vest based on continued service, completion of certain compliance requirements, and achievement of specific financial performance targets for the period from 

October 20, 2021 

through 

Total fair value of PSUs vested was $ 1,926 and $ 5,671  during the years ended March 31, 2023 and 2022 , respectively.

The total intrinsic value of PSUs distributed during the years ended 

March 31, 2023, 2022 and 2021 was $ 1,776 , $ 7,549 , and $ 0 , respectively.

There were no PSUs granted or distributed during the year ended March 31, 2021.

During the year ended March 31, 2023, the Compensation Committee of the Board of Directors created a plan to award 

19  PSUs at target (the 

"FY23  PSUs") that are subject to both service and performance conditions to eligible employees.

The performance period for the 

FY23  PSUs is from 

April 1, 2022 

March 31, 2023 

The quantity of shares that will be issued upon vesting will range from 

50 % to 

 if financial performance is less than 

50%  of targets, then 

no  shares will vest. Based on actual and projected performance through the year ended March 

31, 2022,  we decreased our estimate of Agena PSUs expected to vest from 8 to 4 shares, resulting in a release of $ 295 of expense recorded to selling and administrative expense during the year ended March 31, 2022.

and the service period is from 

April 1, 2022 

March 31, 2025. 

Of the total 

FY23  PSUs granted, 

13  vest based on our achievement of specific performance criteria during fiscal year 

2023  and they have a grant date fair value of $ 185.57 .

Based on actual performance during the performance period, we reduced the number of awards expected to vest to 0 . The remaining awards will be settled in shares of our common stock, but they are subject to performance criteria that are subjective and as such their grant date was assigned as of March 31, 2023 when the criteria were defined and the number of awards was decided.

Five shares are expected to be issued upon vesting based on determinations made by the Board of Directors. 

During fiscal year 

2022 ,  we awarded 

7  PSUs to key employees of Agena subject to both service and performance conditions.

Based on actual performance through the period ended March 31, 2023, 

the awards did not  vest. 

October 28, 2021, 

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March 31, 2024 

and the service period commences on 

and the service periods commence on 

October 28, 2021 

and ends on 

and ends on 

October 27, 2024, 

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not  met, then 

no  shares will vest. 

During the year ended March 31, 2022, 

the Compensation Committee of the Board of Directors modified a time-based restricted stock award granted to our Chief Executive Officer during fiscal year 

2017,  distributing 

3  remaining outstanding shares effective 

June 8, 2021. 

The original award required vesting of 

1  award on each of 

March 20, 2022, 

2023,  and 

 As a result of the modification, we recognized the previously unrecognized compensation cost of $ 351  during the year ended March 31, 2022 .

Performance-based RSUs vest upon completion of the service period described in the award agreement and based on achievement of the financial targets described in the award agreements.

We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the financial targets on a straight-line basis over the service period. During fiscal year 

2020,  we awarded 

8  PSUs (the "FY 

20  PSUs") that are subject to both service and performance conditions to eligible employees.

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 

200 % of the targeted number of shares;

if the defined minimum targets are 

not  met, then 

no  shares will vest.

Based on actual performance through the year ended March 

31, 2022,  we increased our estimate of FY 

20  PSUs expected to vest from 

6  to 

9  shares, resulting in a cumulative effect true up of $ 650  recorded during the year ended March 31 

 We expect to record $ 129  of expense related to the FY 

20  PSUs in the first  quarter of fiscal year 

Earnings 

Based on actual performance through the period ended March 31, 2023 , the award is estimated to vest at 

During the year ended March 31, 2023 ,  we adjusted our estimate of PSUs expected to vest under all outstanding plans based on actual results achieved through the performance period.

We recorded a cumulative effect release of ($ 1,787 ) during the period ($ 1,322 , net of tax as well as $ 0.25  per basic and diluted share) ,  which is recorded in general and administrative and selling expense on our Condensed Consolidated Statements of Income.

In the future, we expect non-cash stock-based compensation expense to decrease approximately $ 402  per quarter as a result of our new estimate of performance share units expected to vest. 

Earnings Per Share

(dollars and shares in thousands, except per share values)

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. 

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 years ended March 31, 2022 . 

The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share:

Year Ended March 31,

Net income available for shareholders

$ 1,871  

Net earnings available for shareholders

$ 1,871  

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Dilutive effect of stock options

Dilutive effect of RSUs

Dilutive effect of PSUs

Dilutive effect of unvested stock awards

Fully diluted shares

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$ 0.64  

 The following stock awards were excluded from the calculation of diluted EPS:

The impact of the assumed conversion of the 2025 Notes calculated under the if-converted method was anti-dilutive, and as such shares underlying the 2025 Notes were excluded from the diluted EPS calculation for the fiscal years ended March 31, 2023, 2022, and 2021.

The following stock awards were excluded from the calculation of diluted EPS:

Year Ended March 31,

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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.

This plan also became effective for Agena employees upon completion of the Agena Acquisition on October 20, 2021.

Prior to the year ended March 31, 2022, certain employees of our Biopharmaceutical Development division were subject to the terms of a 401 (K) plan in effect when we originally acquired the businesses comprising the division.

Under the pre-existing plan, we matched 100 % of the first 6 % of pay contributed by each eligible employee, and contributions vested over three years.

In July 2022, all employees under the pre-existing plan became subject to the terms of the Mesa Laboratories, Inc.

401 (K) Retirement Plan. 

During the years ended March 31, 2023, 2022 and 2021 , respectively, we contributed $ 1,768 , $ 1,185 , and $ 935  to Mesa Laboratories, Inc.

401 (K) retirement plans on behalf of employees.

Earnings before income taxes are as follows:

Our employer match has increased over the years as employees from acquired companies have joined our 401 (K) Retirement Plan. 

Provision for Income Taxes

Earnings before income taxes were as follows:

Year Ended March 31,

4 unchanged sentences

( 1,005 )  

Total earnings before income taxes

Total (loss) earnings before income taxes

$ ( 389 )  

1 unchanged sentence

$ 2,303  

The components of our provision for income taxes are as follows:

The components of our provision for income taxes were as follows:

Year Ended March 31,

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$ 1,500  

$ 2,348  

Total current tax expense

4 unchanged sentences

( 1,916 )  

Total deferred tax expense

Total deferred tax (benefit) expense

( 3,520 )  

Total income tax expense (benefit)

Total income tax (benefit) expense

$ ( 1,319 )  

$ 1,703  

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to earnings before income taxes was as follows: 

Year Ended March 31,

Federal income taxes at statutory rates

$ ( 82 )  

The components of net deferred tax assets and liabilities are as follows:

State income taxes, net of federal benefit

( 1,075 )  

Tax benefit of stock option exercises

( 1,169 )  

( 4,055 )  

Research and development credit

( 1,010 )  

( 495 )  

Limitation for 162(m)

Return to provision adjustment

( 125 )  

( 68 )  

Subpart F, GILTI, & FDII

( 127 )  

Foreign rate differential

( 439 )  

Permanent Difference

Interest reserve adjustment

Total income tax (benefit) expense

$ ( 1,319 )  

$ 1,703  

The Company has elected to recognize U.S.

taxes on global intangible low-taxed income ("GILTI") as a period expense in the year the tax is incurred. 

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets (liabilities) were as follows:

March 31, 2023

4 unchanged sentences

$ 11,274  

Stock compensation deductible differences

Allowances and reserves

Accrued employee-related expenses

Capitalized research expenditures(1)

Stock compensation deductible differences

Total deferred tax assets

6 unchanged sentences

( 2,502 )  

Currency translation adjustment

(221 )  

5 unchanged sentences

$ ( 32,952 )  

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:

( 1 ) Under the Tax Cut and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S tax purposes effective January 1, 2022.

The mandatory capitalization requirement increases our deferred tax assets and cash tax liabilities.

Valuation Allowance

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

In evaluating the need for a valuation allowance, management takes into account various factors, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations.

Based on this evaluation, the Company has concluded that its U.S.

operations and the majority of foreign operations have a sufficient source of income to realize our existing deferred tax assets as of March 31, 2023.

The Company’s valuation allowance movement during fiscal year 2023 is mainly related to a change of judgement regarding the realizability of deferred tax assets in Canada and Germany.

The following table summarizes the changes in our valuation allowance for deferred tax assets: 

Year Ended March 31,

Federal income taxes at statutory rates

State income taxes, net of federal benefit

( 221 )  

Tax benefit of stock option exercises

( 4,055 )  

( 1,816 )  

Foreign-derived intangible income deduction

( 999 )  

Research and development credit

( 495 )  

( 165 )  

Interest reserve adjustment

Limitation for 162(m)

Foreign rate differential

( 176 )  

Total income tax expense (benefit)

Beginning balance

Additions charged to income tax expense and other accounts

Deductions from reserves

( 693 )  

Ending balance

Net Operating Loss Credit and Carryforwards

As of March 31, 2023, the Company had U.S.

and Foreign net operating loss (“NOL”) carryforwards consisting of the following: 

March 31, 2023

Expiration Date

Pre-2018 federal NOL carryforwards

Post-2018 federal NOL carryforwards

State NOL carryforwards

March 31, 2037

Foreign NOL carryforwards

22,262  

As of March 31, 2023, the Company had U.S.

tax credit carryforwards consisting of the following:

March 31, 2023

Expiration Date

Federal research tax credit carryforwards

$ 2,428  

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 2018, state tax returns after 2017  and foreign tax returns after 2017  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, 2023.

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 , $ 0  and $ 19  as of March 31, 2022, 2021 and 2020 , respectively.

A reconciliation of the changes in the balance of unrecognized tax benefit amounts is as follows:

March 31, 2038

State research tax credits carryforwards

March 31, 2034

Federal foreign tax credit carryforwards

March 31, 2036  

As a result of the Agena acquisition in fiscal year 2022, an ownership change as defined in Section 382 of the Internal Revenue Code occurred resulting in limitations on the Company’s use of acquired federal and state net operating losses, as well as certain tax credits.

As of March 31, 2023, $ 1,513 of the Company’s federal tax loss carryforwards, and $ 1,360 of the Company’s federal research and development credit carryforwards are subject to Section 382 and other restrictions.

Undistributed earnings in foreign subsidiaries

For the year ended March 31, 2023, provisions have not been made for income taxes on $65,028 of undistributed earnings that were deemed permanently reinvested in foreign subsidiaries at March 31, 2023. 

Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing if and when remittance occurs.

A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings.

Uncertain Tax Positions

Uncertain tax positions, if ever recognized in the financial statements, would be recorded in the consolidated statements of operations as part of the income tax provision.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of interest and penalties, included in the deferred tax liability on the accompanying Consolidated Balance Sheets of the Company is as follows:

Year Ended March 31,

1 unchanged sentence

$ 1,329  

Increase (decreases) related to prior period tax positions

(Decrease) increase related to prior period tax positions

(1,272 )  

2 unchanged sentences

$ 1,329  

During the year ended March 31, 2022, we recorded an income tax expense of approximately $ 1,179  related to our reserve associated with the acquired Agena Federal and California Research and Development credits, which increased the effective tax rate by 33.0%.

 The remaining amount of tax benefits that, if recognized, would affect the effective tax rate was $ 1,329  as of March 31, 2022, 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 income or consolidated balance sheets.

At this time, we expect resolution of the uncertain tax position within 12 months.

As of March 31, 2022 , and March 31, 2021, undistributed earnings of our foreign subsidiaries amounted to $ 11,580  and $ 9,951 , 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 Jobs 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, 2022 , we had $26,137  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 losses of $ 7,870  and $ 3,941 , for federal and state tax purposes, respectively, of which the federal net operating losses do not expire, while the state net operating losses began to expire in the 2022 tax year.

Agena Bioscience had domestic gross net operating losses of $ 11,667 and $ 6,744 , 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 2034 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 $ 212 and $ 105 , for federal and state purposes, respectively, of Research and Development credit carryforward which will begin to expire in the 2030 tax year for federal purposes and begin to expire in the 2037 tax year for state purposes.

Agena Bioscience had $ 3,718 and $ 3,244 , for federal and state tax purposes, respectively, of Research and Development credit carryforward, which will begin to expire in the 2034 tax year for federal purposes, and do not expire for state purposes.

As of March 31, 2023, the Company recorded gross unrecognized tax benefits of $ 92 , all of which, if recognized, would affect the Company’s effective tax rate.

The Company recognizes interest and penalties accrued on uncertain income tax positions in other expense and general and administrative expense, respectively.

Interest and penalties included in other long-term liabilities on the accompanying Consolidated Balance Sheets of the Company were $ 0 for each of the years ended March 31, 2023, 2022 and 2021.

The Company does not expect a material change in unrecognized tax benefits or interest reversal in the next 12 months.

The Company files income tax returns in the U.S.

various states and foreign jurisdictions.

In the normal course of business, the Company is subject to examination by taxing authorities throughout the world.

The following tax years remain subject to examination:

Significant Jurisdictions  

Open Years  

Federal  

2019 - 2021  

States  

2018 - 2021  

Foreign  

2016 - 2021  

In various jurisdictions, years prior to those listed above remain open solely for the purposes of examination of the Company’s NOL and credit carryforwards.

 Commitments and Contingencies

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As of March 31, 2023, 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.

The estimated accrued liability for this matter is included in other accrued expenses on the Consolidated Balance Sheets.

The balance was $ 2,080  and $ 2,714  as of March 31, 2022 and 2021, respectively. Approximately $ 1,899  of the liability is considered a preacquisition contingency and was included in purchase accounting.

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, 2023.

As part of the Belyntic acquisition, we have agreed to pay up to an additional $ 1,500 to the sellers upon approval of contractually specified pending patents.

We believe it is probable the patents will be issued and that we will pay the sellers in full within 36 months from the date of acquisition. The liability is recorded at an estimated fair value of $ 1,190 in other long-term liabilities on the accompanying Consolidated Balance Sheets.

 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.

The acquisition of Agena discussed in Note 4 .

 "Significant Transactions," expanded our presence further into the life sciences tools market and provided an impetus for the creation of our new Clinical Genomics reportable segment.

This strategic shift in our business also resulted in a change to the way we manage other business units, and as a result, our historical Instruments and Continuous Monitoring reportable segments have been combined to create Calibration Solutions.

Prior year amounts have been recast to conform to current year presentation.

Our change in financial reporting segments has not  resulted in any change to previously reported consolidated amounts.

We have four reportable segments organized primarily by product type:

Sterilization and Disinfection Control, Biopharmaceutical Development, Calibration Solutions, and Clinical Genomics.

Segment information is prepared on the same basis that our CEO and chief operating decision maker uses to manage our segments, evaluate financial results, and make key operating decisions. Our four reportable segments are organized primarily by the nature of the goods and services they sell.

When determining our reportable segments, we aggregated operating segments based on their similar economic and operating characteristics.

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Revenues (a):

Clinical Genomics

$ 62,299  

$ 32,840  

Sterilization and Disinfection Control

10 unchanged sentences

46,926  

Clinical Genomics

32,840  

Reportable segment revenues

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Gross profit:

Clinical Genomics

$ 32,485  

$ 11,941  

Sterilization and Disinfection Control

5 unchanged sentences

28,605  

Calibration Solutions

21,035  

Calibration Solutions

24,388  

24,989  

Clinical Genomics

26,112  

8 unchanged sentences

$ 109,090  

$ 87,014  

Reconciling items:

12 unchanged sentences

Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

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. 

Unallocated corporate expenses and other business activities are reported within 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.

Sterilization and Disinfection Control

Clinical Genomics

$ 13,985  

$ 11,802  

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Clinical Genomics

11,802  

Reportable segment inventory

21 unchanged sentences

76,002  

68,749  

55,938  

Total revenues

2 unchanged sentences

$ 133,937  

No customer accounts for 10% or more of our revenues.

No foreign country exceeds 10%  of total revenues.

No customer accounts for 10% or more of our consolidated revenues.

No foreign country other than China exceeds 10%  of total revenues.

Subsequent Events

On April 5, 2022, we entered into an Open Market Sale Agreement SM  with Jefferies LLC as sales agent, pursuant to which we may issue and sell, from time to time, through Jefferies, shares of our common stock with an aggregate value of up to $ 150 million.

In April 2022, we announced a corporate restructuring that, among other things, resulted in the elimination of the Senior Vice President of Commercial Operations role.

As a result, we are formally aligning each of our business units under general managers who will oversee sales, customer service, research and development, as well as financial operations of the business unit for which they are responsible.

We incurred $557 of general and administrative expenses associated with the corporate restructuring in the fourth quarter of fiscal year 2022.

These changes, among others, are expected to result in a total of $ 195  of severance in the first quarter of fiscal year 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data