MESA LABORATORIES INC /CO/ 10-K

Item 8. Financial Statements and Supplementary Data   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM       Stockholders and Board of Directors Mesa Laboratories, Inc. Lakewood, Colorado   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”). 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.   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 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. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.   Page 36 Table of Contents   Valuation of Goodwill – Clinical Genomics Reporting Unit - Refer to Notes 1 and 6   Critical Audit Matter Description   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 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 – Refer to Notes 1 and 12   Critical Audit Matter Description   The Company’s income tax expense includes U.S., state, local and international income taxes. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities. The tax rate used to determine the deferred tax assets and liabilities is based on the enacted tax rate for the year and the manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.   We identified management’s calculation of 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 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   Our audit procedures performed to address this critical audit matter included the following, among others:     ● We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over income tax balances and disclosures, including the provision for income taxes.   ● We assessed the Company’s income tax provision by:   ● Testing the provision for income taxes, including the effective tax rate reconciliation, permanent and temporary differences and uncertain tax positions, by evaluating communications with tax advisors, and testing the underlying data for completeness and accuracy.   ● Utilizing personnel with specialized knowledge and skill in domestic and international tax to assist in (i) evaluating management’s application of domestic and foreign tax laws and (ii) evaluating the calculation of the deferred tax attributes.   ● Evaluating the significant assumptions used by management in establishing and measuring tax-related assets and liabilities, including the application of recent tax laws and regulations.   ● Evaluating the Company’s disclosures related to the provision for income taxes.   /s/ Plante & Moran, PLLC   We have served as the Company’s auditor since 1986.   Denver, Colorado   May 30, 2023     Page 37 Table of Contents     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:     1. 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.   2. 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 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 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   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.   /s/ Plante & Moran, PLLC   We have served as the Company’s auditor since 1986.   Denver, Colorado     May 30, 2023     Page 38 Table of Contents     Mesa Laboratories, Inc. Consolidated Balance Sheets (In thousands, except share amounts)       March 31,     March 31,       2023     2022   ASSETS                 Current assets                 Cash and cash equivalents   $ 32,910     $ 49,346   Accounts receivable, less allowances of $ 849 and $ 630 , respectively     42,551       41,224   Inventories, net     34,642       24,606   Prepaid expenses and other     8,872       9,142   Total current assets     118,975       124,318   Noncurrent assets                 Property, plant and equipment, net     28,149       28,620   Deferred tax asset     1,076       1,318   Other assets     10,373       11,830   Customer relationships, net     152,189       176,688   Intellectual property, net     46,400       53,273   Other intangibles, net     18,226       20,156   Goodwill     286,444       291,166   Total assets   $ 661,832     $ 707,369                     LIABILITIES AND STOCKHOLDERS’ EQUITY                 Current liabilities                 Accounts payable   $ 6,134     $ 7,897   Accrued payroll and benefits     9,433       14,717   Unearned revenues     14,407       13,830   Other accrued expenses     13,385       11,611   Total current liabilities     43,359       48,055   Noncurrent liabilities                 Deferred tax liability     34,028       39,224   Other long-term liabilities     7,693       7,924   Credit facility     13,000       49,000   Convertible senior notes, net of discounts and debt issuance costs     170,272       169,365   Total liabilities     268,352       313,568   Stockholders’ equity                 Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,369,466 and 5,265,627 shares, respectively     332,076       313,460   Retained earnings     74,199       76,675   Accumulated other comprehensive (loss) income     ( 12,795 )     3,666   Total stockholders’ equity     393,480       393,801   Total liabilities and stockholders’ equity   $ 661,832     $ 707,369     See accompanying notes to consolidated financial statements.   Page 39 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Income (In thousands, except per share data)       Year Ended March 31,       2023     2022     2021                             Revenues                         Product   $ 180,520     $ 149,422     $ 107,028   Service     38,560       34,913       26,909   Total revenues     219,080       184,335       133,937   Cost of revenues                         Cost of products     60,937       54,747       33,120   Cost of services     24,450       20,498       13,803   Total cost of revenues     85,387       75,245       46,923   Gross profit     133,693       109,090       87,014   Operating expenses                         Selling     37,439       28,310       18,480   General and administrative     72,444       60,311       45,788   Research and development     20,490       15,767       10,388   Total operating expenses     130,373       104,388       74,656   Operating income     3,320       4,702       12,358   Nonoperating expenses                         Interest expense and amortization of debt discount     4,770       3,885       8,024   Other (income) expense, net     ( 1,061 )     ( 2,757 )     2,031   Total nonoperating expense     3,709       1,128       10,055   (Loss) earnings before income taxes     ( 389 )     3,574       2,303   Income tax (benefit) expense     ( 1,319 )     1,703       ( 971 ) Net income   $ 930     $ 1,871     $ 3,274                             Earnings per share                         Basic   $ 0.17     $ 0.36     $ 0.66   Diluted   $ 0.17     $ 0.35     $ 0.64                             Weighted-average common shares outstanding                         Basic     5,321       5,212       4,975   Diluted     5,361       5,335       5,124     See accompanying notes to consolidated financial statements.   Page 40 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Comprehensive (Loss) Income (In thousands except per share data)       Year Ended March 31,       2023     2022     2021                             Net income   $ 930     $ 1,871     $ 3,274   Other comprehensive (loss) income                         Foreign currency translation adjustments     ( 16,461 )     ( 12,450 )     26,485   Comprehensive (loss) income   $ ( 15,531 )   $ ( 10,579 )   $ 29,759     See accompanying notes to consolidated financial statements.   Page 41 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Stockholders’ Equity (In thousands, except share amounts)       Common Stock                               Number of Shares     Amount     Retained Earnings     AOCI*     Total   March 31, 2020     4,387,140     $ 158,023     $ 72,359     $ ( 10,369 )   $ 220,013   Proceeds from issuance of common stock, net of issuance costs of $ 9,315     690,000       145,935       -       -       145,935   Exercise of stock options and vesting of restricted stock units     65,532       4,943       -       -       4,943   Tax withholding on restricted stock units     ( 2,104 )     ( 517 )     -       -       ( 517 ) Dividends paid, $ 0.64 per share     -       -       ( 3,165 )     -       ( 3,165 ) Stock-based compensation expense     -       9,268       -       -       9,268   Foreign currency translation     -       -       -       26,485       26,485   Adoption of accounting standards, net     -       -       ( 9 )     -       ( 9 ) Net income     -       -       3,274       -       3,274   March 31, 2021     5,140,568       317,652       72,459       16,116       406,227   Exercise of stock options and vesting of restricted stock units     128,337       8,027       -       -       8,027   Tax withholding on restricted stock units     ( 3,278 )     ( 875 )     -       -       ( 875 ) Dividends paid, $ 0.64 per share     -       -       ( 3,339 )     -       ( 3,339 ) Stock-based compensation expense     -       11,391       -       -       11,391   Foreign currency translation     -       -       -       ( 12,450 )     ( 12,450 ) Cumulative adjustment due to adoption of ASU 2020-06     -       ( 22,735 )     5,684       -       ( 17,051 ) Net income     -       -       1,871       -       1,871   March 31, 2022     5,265,627       313,460       76,675       3,666       393,801   Exercise of stock options and vesting of restricted stock units     108,737       6,997       -       -       6,997   Tax withholding on restricted stock units     ( 4,898 )     ( 919 )     -       -       ( 919 ) Dividends paid, $ 0.64 per share     -       -       ( 3,406 )     -       ( 3,406 ) Stock-based compensation expense     -       12,538       -       -       12,538   Foreign currency translation     -       -       -       ( 16,461 )     ( 16,461 ) Net income     -       -       930       -       930   March 31, 2023     5,369,466     $ 332,076     $ 74,199     $ ( 12,795 )   $ 393,480     *Accumulated Other Comprehensive (Loss) Income.   See accompanying notes to consolidated financial statements.   Page 42 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Cash Flows (In thousands)         Year Ended March 31,       2023     2022     2021   Cash flows from operating activities:                         Net income   $ 930     $ 1,871     $ 3,274   Adjustments to reconcile net income to net cash provided by operating activities:                         Depreciation and amortization     33,824       25,068       17,660   Stock-based compensation     12,538       11,391       9,268   Non-cash interest and debt amortization     907       1,029       5,397   Deferred taxes     ( 3,494 )     128       ( 3,503 ) Amortization of step-up in inventory basis     -       7,462       ( 436 ) Other     390       ( 534 )     161   Changes in operating assets and liabilities:                         Accounts receivable, net     ( 2,121 )     ( 6,752 )     ( 647 ) Inventories     ( 10,182 )     ( 1,045 )     929   Prepaid expenses and other assets     ( 510 )     ( 3,606 )     2,878   Accounts payable     ( 1,545 )     1,370       967   Other accrued expenses     ( 3,360 )     255       ( 317 ) Unearned revenues     606       2,586       1,442   Net cash provided by operating activities     27,983       39,223       37,073   Cash flows from investing activities:                         Acquisitions, net of cash acquired     ( 4,950 )     ( 300,793 )     -   Purchases of property, plant and equipment     ( 4,544 )     ( 4,432 )     ( 1,992 ) Net cash (used in) investing activities     ( 9,494 )     ( 305,225 )     ( 1,992 ) Cash flows from financing activities:                         Proceeds from the issuance of common stock, net     -       -       145,935   Proceeds from the issuance of debt     -       70,000       -   Payments of debt     ( 36,000 )     ( 21,000 )     -   Dividends     ( 3,406 )     ( 3,339 )     ( 3,165 ) Proceeds from the exercise of stock options     6,997       8,027       4,943   Payment of tax withholding obligation on vesting of restricted stock     ( 919 )     ( 875 )     ( 517 ) Payments of contingent consideration     -       ( 237 )     ( 304 ) Payment of debt issuance costs     -       -       ( 664 ) Net cash (used in) provided by financing activities     ( 33,328 )     52,576       146,228   Effect of exchange rate changes on cash and cash equivalents     ( 1,597 )     ( 1,093 )     1,176   Net (decrease) increase in cash and cash equivalents     ( 16,436 )     ( 214,519 )     182,485   Cash and cash equivalents at beginning of period     49,346       263,865       81,380   Cash and cash equivalents at end of period   $ 32,910     $ 49,346     $ 263,865     Cash paid for:                         Income taxes   $ 1,356     $ 3,048     $ 1,367   Interest   $ 3,485     $ 2,762     $ 2,372     Supplemental non-cash activity:                         Contingent consideration from acquisitions   $ 1,190     $ -     $ 490       See accompanying notes to consolidated financial statements.   Page 43 Table of Contents   Mesa Laboratories, Inc. Notes to Consolidated Financial Statements (dollar and share amounts in thousands, unless otherwise specified)     Note 1. Description of Business and Summary of Significant Accounting Policies   Description of Business   In this Annual Report on Form 10 -K, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company,” or "Mesa."   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, 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.   As of  March 31, 2023,  we managed our operations in  four  reportable segments, or divisions:     ●   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 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 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.   Page 44 Table of Contents   Certain amounts presented in Note 2. "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   The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our Consolidated Financial Statements and accompanying notes. Actual results could differ from our estimates under different assumptions or conditions.   Summary of Significant Accounting Policies   Foreign Currency Exchange rate adjustments resulting from foreign currency transactions are recognized in net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive income within stockholders’ equity. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than the U.S. dollar are translated into U.S. dollars at period end exchange rates, and revenue and expense accounts are translated at weighted average period rates.    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. We determine fair value based on the following input hierarchy:   Level 1: Quoted prices for identical assets or liabilities in active markets.   Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or that can be corroborated with observable market data.   Level 3: Unobservable inputs supported by little or no market activity. Pricing models, discounted cash flow methodologies, and other similar techniques involving significant management judgment or estimation typically require unobservable inputs.   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 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. The significant majority of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration.   We generally recognize revenues as follows:   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. 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.    Page 45 Table of Contents   Services:  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 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. 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 such as obligations to perform maintenance and repair services. 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  2022 .   Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. Standalone selling prices are based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price considering available information such as market conditions and internally approved pricing guidelines. 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. 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 Certain of our products may be sold with associated time-based service contracts whereby we provide repairs, technical support, parts, and various analytical or maintenance services. 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.   Accounts Receivable and Allowance for Doubtful Accounts All trade accounts receivable are reported at net realizable value on the accompanying Consolidated Balance Sheets, adjusted for any write-offs and net of allowances for doubtful accounts. Allowances for doubtful accounts represent our best estimate and current expectation of future credit losses from trade accounts. We estimate credit losses based on historical information, current and expected future economic and market conditions, and reviews of the current status of customers’ trade accounts receivable. 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. See Note 3. “Fair Value Measurements” for further discussion and for information on how we manage credit risk.    Page 46 Table of Contents   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 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. Our work in process and finished goods inventories include the costs of raw materials, labor and overhead, which are estimated based on trailing twelve months of expense and standard labor hours for each product. We evaluate labor and overhead costs annually unless specific circumstances necessitate a mid-year evaluation for specific items.   We monitor inventory costs relative to selling prices and perform physical cycle count procedures on inventories throughout the year to determine if a lower of cost or net realizable value reserve is necessary. We estimate and maintain an inventory reserve as needed for such matters as excess or obsolete inventory, shrinkage, and scrap. 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 fiscal years.   Property, Plant and Equipment 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.   Depreciation is calculated using the straight-line method over the assets’ estimated useful lives. Upon asset retirement or disposal, accounts are relieved of cost and accumulated depreciation, and any related gain or loss is reflected in our results of operations. 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. Any changes in estimated useful lives are recorded prospectively. Estimated useful lives of significant classes of depreciable assets are as follows:   Category Useful Lives in Years Buildings and building improvements 40 (or less) Manufacturing equipment 7 (or less) Office, lab and other equipment 7 (or less) Computer equipment  3 (or less) Leasehold improvements  Lesser of the economic life or the remaining term in the respective lease   Land is not depreciated and construction in progress is not depreciated until placed in service, at which time it is assigned a useful life consistent with the nature of the asset.    Leases Under ASC 842, we determine whether contractual arrangements contain a lease at the inception of the arrangement. If a lease is identified in an arrangement, we recognize a right-of-use asset ("ROU") and liability on our Consolidated Balance Sheets and determine whether the lease should be classified as a finance or operating lease. We do not have any finance leases. We do  not recognize assets or liabilities for leases with terms of less than 12 months, and our short-term leases are not material.   A contract is a lease or contains one when ( 1 ) the contract contains an explicitly or implicitly identified asset and ( 2 ) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments. Adjustments would also be made for accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets, none of which are present in any of our current lease contracts. When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease, otherwise we use our incremental borrowing rate based on the information available at lease commencement. When we acquire a business, we retain the acquiree's classification of its leases. We evaluate the ROU assets and liabilities in accordance with ASC 842.   Page 47 Table of Contents   Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Lease expense is recorded in cost of products, selling, general and administrative, or research and development on our Consolidated Statements of Income, depending on the nature of use of the underlying asset. Many of our leases include one or more renewal or termination options exercisable at our discretion, which are included in the determination of the lease term if we are reasonably certain to exercise the option. We have also entered into lease agreements that have variable payments related to certain indexes. Variable lease payments are recognized in the period in which those payments are incurred. All non-lease components are readily identifiable in our lease contract. We account for non-lease components separately from the lease component to which it is related.    Acquired Intangible Assets Our goodwill and other intangible assets result from acquisitions of existing businesses. Upon acquisition, we record the fair 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.   Goodwill and indefinite lived intangible assets (certain tradenames we intend to renew and continue using indefinitely) are not subject to amortization and are tested for impairment qualitatively, and if necessary, quantitatively, at least annually during the fourth quarter of our fiscal year, or when events or changes in circumstances indicate it may be more likely than not that carrying value exceeds fair value. We perform impairment tests of goodwill at the reporting unit level and tests for other indefinite lived intangible assets at the asset level.   Intangible assets deemed to have 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”). We determine the useful lives of finite intangible assets based on the specific facts and circumstances related to each asset, and we evaluate the appropriateness of assigned useful lives at least annually. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and economic factors such as competition or specific market conditions. 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. Significant assumptions include, among others, the weighted average cost of capital, net sales growth, and terminal growth rates. In certain cases, management uses other market information when available to estimate fair value. Impairment charges represent the excess carrying amount over estimated fair value. We do not believe our goodwill and other intangible assets are impaired as of March 31, 2023 .   Research & Development Costs We conduct research and development activities for the purpose of developing new products and enhancing the functionality, effectiveness, reliability, and accuracy of existing products. Research and development 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 Our convertible 1.375 % Convertible Senior Notes due 2025 (the "2025 Notes") do not have embedded derivatives and are recorded as long-term liabilities in our Consolidated Balance Sheets. When the 2025 Notes are within one year of maturity, or when  criteria necessary for conversion as described in Note 8. “Indebtedness” 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 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").    Page 48 Table of Contents   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 six to  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. 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 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 Income.   Earnings   Per Share 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 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. See Note 10. “Earnings per Share” for EPS calculations for the years ended March 31, 2023, 2022 and 2021 .   Income Taxes 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.   Page 49 Table of Contents   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 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 We are party to various claims and legal proceedings that arise in the normal course of business. We record an accrual for legal contingencies when we determine it is probable we have incurred a liability and can reasonably estimate the amount of the loss (See Note 13. “Commitments and Contingencies”).   Purchase Accounting for Acquisitions We account for all business combinations in which we obtain control over another entity using the acquisition method of accounting, which requires most assets (both tangible and intangible) and liabilities (including 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 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, 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. 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. Any subsequent changes to the original estimates are recorded in current earnings.    Page 50 Table of Contents   Risks and Uncertainties The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods. These estimates represent management's judgement about the outcome of future events. The current global business environment continues to be impacted directly and indirectly by the effects of the novel coronavirus ("COVID- 19" ), the conflict in Ukraine, and other factors. It is not possible to accurately predict the future impact of such events and circumstances. However, we have reviewed the estimates used in preparing the financial statements and have identified the following factors that have a reasonable possibility of being materially affected in the near term:      ● Estimates regarding the future financial performance of the business used in the impairment tests for goodwill and long-lived assets acquired in a business combination; however, our impairment 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;     ● Estimates regarding recoverability for customer receivables;     ● Estimates of the net realizable value of inventory.   Recently Issued Accounting Pronouncements We have reviewed all recently issued accounting pronouncements and have concluded that they are either  not  applicable to us or are  not  expected to have a significant impact on our consolidated financial statements.   Recently Adopted Accounting Pronouncements 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.   Note 2 . Revenue   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  may  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. 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.   Page 51 Table of Contents   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     Biopharmaceutical Development     Calibration Solutions     Total   Consumables   $ 43,374     $ 55,605     $ 15,800     $ 3,062     $ 117,841   Hardware and Software     13,347       692       22,079       26,561       62,679   Services     5,578       8,312       9,486       15,184       38,560   Total Revenues   $ 62,299     $ 64,609     $ 47,365     $ 44,807     $ 219,080         Year Ended March 31, 2022       Clinical Genomics (1)     Sterilization and Disinfection Control     Biopharmaceutical Development     Calibration Solutions     Total   Consumables   $ 22,271     $ 50,311     $ 15,551     $ 3,675     $ 91,808   Hardware and Software     6,726       700       21,651       28,537       57,614   Services     3,843       8,033       8,377       14,660       34,913   Total Revenues   $ 32,840     $ 59,044     $ 45,579     $ 46,872     $ 184,335         Year Ended March 31, 2021       Clinical Genomics (1)     Sterilization and Disinfection Control     Biopharmaceutical Development     Calibration Solutions     Total   Consumables   $ -     $ 45,869     $ 13,942     $ 3,198     $ 63,009   Hardware and Software     -       505       13,545       29,969       44,019   Services     -       6,745       6,405       13,759       26,909   Total Revenues   $ -     $ 53,119     $ 33,892     $ 46,926     $ 133,937     ( 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. 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:   Contract liabilities as of March 31, 2022   $ 15,069   Prior year liabilities recognized in revenues during the year ended March 31, 2023     ( 8,643 ) Contract liabilities added during the year ended March 31, 2023, net of revenues recognized     9,672   Contract liabilities balance as of March 31, 2023   $ 16,098     Page 52 Table of Contents     Note 3. Fair Value Measurements   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:       March 31, 2023     March 31, 2022       Carrying Value     Fair Value (Level 2)     Carrying Value     Fair Value (Level 2)   2025 Notes   $ 170,272     $ 161,072     $ 169,365     $ 185,438     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"). 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 .     Note 4. Significant Transactions   Acquisitions 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. On  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.    Page 53 Table of Contents   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. These methods involve the use of significant estimates and assumptions depending on the underlying asset being valued, but may include internal rate of return, revenue growth rates, customer attrition rate, and royalty rates, all of which are considered Level  3  inputs. 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  may  differ from these estimates. 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:       Life (in years)     Amount   Cash and cash equivalents           $ 7,544   Accounts receivable             11,100   Other current assets             25,480   Total current assets             44,124   Property, plant and equipment/noncurrent assets             15,832   Deferred tax asset             811   Intangible assets:                 Goodwill     N/A       135,728   Customer relationships     12       103,800   Intellectual property     8       45,400   Tradenames     12       15,700   Total assets acquired           $ 361,395   Accounts payable             2,174   Unearned revenues             2,713   Other current liabilities             11,052   Total current liabilities             15,939   Deferred tax liability             28,856   Other noncurrent liabilities             8,263   Total liabilities assumed           $ 53,058   Total purchase price, net of cash acquired           $ 300,793     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. The goodwill acquired is  not  deductible for income tax purposes.   Page 54 Table of Contents       Note 5. Leases   We have operating leases for buildings and office equipment. The following table presents the lease balances within the Consolidated Balance Sheets related to our operating leases:   Lease Assets and Liabilities Balance Sheet Location   March 31, 2023     March 31, 2022   Operating lease ROU asset Other assets   $ 8,693     $ 10,201   Current operating lease liabilities Other accrued expenses     2,868       2,768   Noncurrent operating lease liabilities Other long-term liabilities     5,752       7,436     The components of lease costs, the weighted average remaining lease term and the weighted average discount rate were as follows:       Year Ended March 31,       2023     2022   Operating lease expense   $ 3,064     $ 1,973   Variable lease expense     704       419   Total lease expense   $ 3,768     $ 2,392   Weighted average remaining lease term in years     3.3       4.3   Weighted average discount rate     2.0 %     1.7 %   Supplemental cash flow information related to leases was as follows:       Year Ended March 31,       2023     2022   Cash paid for amounts included in the measurements of lease liabilities   $ 3,017     $ 1,896   Operating lease assets obtained in exchange for operating lease obligations     1,426       10,577     Maturities of lease liabilities are as follows as for the years ending March 31:   2024   $ 3,018   2025     2,384   2026     1,984   2027     1,490   Future value of lease liabilities     8,876   Less: imputed interest     256   Present value of lease liabilities   $ 8,620         Note 6 . 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.    Page 55 Table of Contents   Changes in the carrying amount of goodwill were as follows:       Clinical Genomics     Sterilization and Disinfection Control     Biopharmaceutical Development     Calibration Solutions     Total   March 31, 2021   $ -     $ 30,153       93,399     $ 37,289     $ 160,841   Effect of foreign currency translation     34       ( 403 )     ( 5,134 )     ( 52 )     ( 5,555 ) Goodwill related to Agena Acquisition     135,880       -       -       -       135,880   March 31, 2022   $ 135,914     $ 29,750     $ 88,265     $ 37,237       291,166   Effect of foreign currency translation     49       ( 191 )     ( 7,381 )     ( 20 )     ( 7,543 ) Goodwill related to Belyntic Acquisition     -       -       2,973       -       2,973   Measurement period adjustment - Agena Acquisition     ( 152 )     -       -       -       ( 152 ) March 31, 2023   $ 135,811     $ 29,559     $ 83,857     $ 37,217     $ 286,444     Other intangible assets were as follows:       March 31, 2023     March 31, 2022       Gross Carrying Amount     Accumulated Amortization     Net Carrying Amount     Gross Carrying Amount     Accumulated Amortization     Net Carrying Amount   Customer relationships   $ 238,247     $ ( 86,058 )   $ 152,189     $ 244,157     $ ( 67,469 )   $ 176,688   Intellectual property     65,950       ( 19,550 )     46,400       65,893       ( 12,620 )     53,273   Other intangibles     24,793       ( 6,567 )     18,226       25,350       ( 5,194 )     20,156   Total   $ 328,990     $ ( 112,175 )   $ 216,815     $ 335,400     $ ( 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:                  Est. Useful Weighted Avg.               Life Remaining Life Description             (Years) (Years) Customer relationships             10 - 14 8.8 Intellectual property             8 - 14 6.5 Other intangibles             3 - 12 10.4   The following is estimated amortization expense for the years ending March 31:   2024   $ 28,580   2025     26,999   2026     26,233   2027     25,733   2028     25,275     Amortization expense for finite-lived intangible assets acquired in a business combination was as follows:       Year Ended March 31,       2023     2022     2021   Amortization in Cost of revenues   $ 6,796     $ 3,806     $ 1,430   Amortization in General and administrative     22,025       18,000       13,083   Total   $ 28,821     $ 21,806     $ 14,513     Page 56 Table of Contents     Note 7. Supplemental Balance Sheets Information   Property, plant and equipment consisted of the following:       March 31, 2023     March 31, 2022   Land   $ 889     $ 889   Buildings and building improvements     22,005       21,537   Manufacturing equipment     14,481       17,336   Computer equipment     4,413       4,519   Other     4,394       1,578   Construction in progress     1,735       487   Gross total     47,917       46,346   Accumulated depreciation     ( 19,768 )     ( 17,726 ) Property, plant and equipment, net   $ 28,149     $ 28,620     Depreciation expense was as follows:       Year Ended March 31,       2023     2022     2021   Depreciation expense in Cost of revenues   $ 3,163     $ 2,243     $ 1,859   Depreciation expense in Operating expense     1,150       1,019       1,100   Total depreciation expense   $ 4,313     $ 3,262     $ 2,959     Inventories consisted of the following:       March 31, 2023     March 31, 2022   Raw materials   $ 20,064     $ 14,172   Work in process     617       4,419   Finished goods     13,961       6,015   Inventories, net   $ 34,642     $ 24,606     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     2,329       3,677   Payroll related taxes     1,982       2,069   Other benefits payable     661       1,503   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     2,868       2,768   Customer deposits     1,287       751   Income taxes payable     992       928   Other     2,297       2,197   Total other accrued expenses   $ 13,385     $ 11,611     Page 57 Table of Contents     Note 8 . Indebtedness   Credit Facility On  March 5, 2021,  we entered into a  four -year senior secured credit agreement that includes  1 ) a revolving credit facility in an aggregate principal amount of up to $ 75,000 ,  2 ) a swingline loan in an aggregate principal amount  not  exceeding $ 5,000 , and  3 ) letters of credit in an aggregate stated amount  not  exceeding $ 2,500  at any time. The 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. We refer to the facility and related agreement as the “Credit Facility”.    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,  2023.  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.    On  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  was 6.7 %. 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. 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  5.50  to  1.00  for the  first   four  testing dates on which the line of credit is outstanding;  5.0  to  1.0  on each of the fifth, sixth, seventh, and  eighth  testing dates; and  4.5  to  1.0  on each testing date following the  eighth  testing date, except that we  may  have a leverage ratio of  5.75  to  1.0  for a period of  four  consecutive quarters following a permitted acquisition. The Credit Facility also stipulates a minimum fixed charge coverage ratio of  1.25  to  1.0.  Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales. As of  March 31, 2023,  we were in compliance with all required covenants.   Convertible Notes On  August 12, 2019,  we issued an aggregate principal amount of $ 172,500  of 2025 Notes. The 2025  Notes mature on  August 15, 2025,  unless earlier repurchased or converted, and bear interest at a rate of  1.375 % payable semi-annually in arrears on  February 15  and  August 15  each year beginning on  February 15, 2020.  The 2025 Notes are initially convertible at a conversion rate of  3.5273  shares of common stock per  $1,000  principal amount of Notes, which is equivalent to an initial conversion price of approximately $ 283.50  per share of common stock. Noteholders  may  convert their 2025 Notes at their option only in the following circumstances:   (i)  during any calendar quarter commencing after the calendar quarter ended on December 31, 2019 ( and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the  five  consecutive business days immediately after any  10  consecutive trading day period (such  10  consecutive trading day period, the “measurement period”) in which the trading price per  $1,000  principal amount of Notes for each trading day of the measurement period was less than  98%  of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the 2025 Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets; and (iv) at any time from, and including,  April  15,   2025  until the close of business on the  second  scheduled trading day immediately before the maturity date.    Upon conversion, we will pay or deliver, as the case  may  be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. We will reevaluate this policy from time to time as we receive conversion notices from note holders. The circumstances necessary for conversion were  not  met during the year ended March 31, 2023. As of  March 31, 2023, the 2025 Notes are classified as a long-term liability on our Consolidated Balance Sheets as the circumstances necessary for conversion were  not  satisfied as of the end of the period. The if-converted value of the 2025 Notes did  not  exceed the principal balance as of  March 31, 2023.   Page 58 Table of Contents   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 . The debt issuance costs are being amortized to interest expense using the effective interest method over the  six -year contractual term of the 2025 Notes.   The net carrying amount of the 2025 Notes was as follows:       March 31, 2023     March 31, 2022   Principal outstanding   $ 172,500     $ 172,500   Unamortized debt issuance costs     ( 2,228 )     ( 3,135 ) Net carrying value   $ 170,272     $ 169,365     We recognized interest expense on the 2025 Notes as follows:       Year Ended March 31,       2023     2022     2021   Coupon interest expense at 1.375%   $ 2,372     $ 2,372     $ 2,372   Amortization of debt discounts and issuance costs     907       890       5,397   Total   $ 3,279     $ 3,262     $ 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.       Note 9 . 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  shares of our outstanding common stock. Under the program, shares of common stock may be purchased from time to time in the open market at prevailing prices or in negotiated transactions off the market. Shares of common stock repurchased will be cancelled and repurchases of shares of common stock will be funded through existing cash reserves. There were no repurchases of our shares of common stock under this plan during the years ended March 31, 2023, 2022 and 2021 . 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. The price paid for repurchased shares is allocated between common stock and retained earnings based on management’s estimate of the original sales price of the underlying shares.   Public Offerings of Common Stock  On June 12, 2020, we completed the sale and issuance of a total of 600  shares of our common stock, and on June 19, 2020, our underwriters exercised in full their option to purchase an additional 90  shares of our common stock. The offering price to the public was $ 225.00 per share. The total proceeds we received from the offering, net of underwriting discounts and commissions and other offering expenses we paid, was $ 145,935 .   Stock-Based Compensation 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. 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:        Year Ended March 31,       2023     2022     2021   Stock-based compensation expense   $ 12,538     $ 11,391     $ 9,268   Amount of income tax (benefit) recognized in earnings     ( 1,169 )     ( 4,055 )     ( 1,816 ) Stock-based compensation expense, net of tax   $ 11,369     $ 7,336     $ 7,452     Page 59 Table of Contents   Stock Options 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:        2023     2022     2021   Risk-free interest rate     3.55 %     0.46 %     0.27 % Expected life (years)     3.52       3.52       3.86   Expected dividend yield     0.07 %     0.06 %     0.10 % Volatility     37.29 %     38.82 %     38.83 % Weighted-average Black-Scholes fair value per share at date of grant   $ 58.94     $ 76.02     $ 67.66     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.    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       Shares Subject to Options     Weighted- Average Exercise Price per Share     Weighted-Average Remaining Contractual Life (Years)     Aggregate Intrinsic Value   Outstanding as of March 31, 2022     202     $ 167.14       2.9     $ 18,261   Awards granted     43       185.60                   Awards forfeited or expired     ( 9 )     218.13                   Awards exercised or distributed     ( 73 )     97.34                   Outstanding as of March 31, 2023     163     $ 200.62       3.3     $ 1,643   Exercisable as of March, 31, 2023     83     $ 193.05       2.3     $ 1,405   Exercisable and expected to vest, March 31, 2023     160     $ 200.62       3.2     $ 1,641     The total intrinsic value of stock options exercised during the years ended  March 31, 2023, 2022 and 2021 was $ 6,902 , $ 15,209 , and $ 9,559 , respectively. 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, 2022  and 2021  was $ 268.81  and $ 226.72 , respectively.   Time-Based Restricted Stock Units (RSUs) RSU activity under the 2014 and 2021 Equity Plans was as follows (shares and dollars in thousands, except per-share data):       Time-Based Restricted Stock Units       Number of Shares     Weighted- Average Grant Date Fair Value per Share     Weighted- Average Remaining Contractual Life (Years)     Aggregate Intrinsic Value   Nonvested at March 31, 2022     51     $ 252.86       1.0     $ 13,019   Awards granted     43       187.21                   Awards forfeited or expired     ( 10 )     229.52                   Awards distributed     ( 27 )     250.85                   Nonvested as of March 31, 2023     57     $ 209.27       1.0     $ 9,993   Expected to vest     53     $ 209.43       1.8     $ 9,254     Page 60 Table of Contents   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) 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       Number of Shares     Weighted- Average Grant Date Fair Value per Share     Weighted- average Remaining Contractual Life (Years)     Aggregate Intrinsic Value   Nonvested at March 31, 2022 at target     55     $ 288.45       4.3     $ 14,093   Awards granted     19       182.14                   Performance adjustment     ( 20 )                         Awards distributed     ( 10 )     202.00                   Nonvested as of March 31, 2023 at target     44     $ 286.02       3.5     $ 7,958   Expected to vest     42     $ 287.48       3.4       7,306     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 $ 7,642  as of March 31, 2023  and is expected to be recognized over a weighted average period of 3.4  years. 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  until  March 31, 2023  and the service period is from  April 1, 2022  until  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.    On  October 28, 2021,  the Compensation Committee of the Board of Directors granted a special long-term equity award consisting of performance stock units covering a target of  40  shares (“PSUs”) that is subject to both performance and service conditions to our Chief Executive Officer. The performance period of the award is the  three -year period from  April 1, 2021  through  March 31, 2024  and the service periods commence on  October 28, 2021  and ends on  October 27, 2024,  October 27, 2025,  and  October 27, 2026, on which dates eligible PSUs will vest and be distributed. The performance metrics are cumulative GAAP revenues over the performance period and cumulative adjusted operating income over the performance period. The quantity of shares that will be issued upon vesting will range from  0  to  40;  if financial performance targets are  not  met, then  no  shares will vest. Based on actual performance through the period ended March 31, 2023 , the award is estimated to vest at  93 %.    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.   Page 61 Table of Contents   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.      Note 10 . Earnings Per Share (dollars and shares in thousands, except per share values)   The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share:       Year Ended March 31,       2023     2022     2021   Net earnings available for shareholders   $ 930     $ 1,871     $ 3,274   Weighted average outstanding shares of common stock     5,321       5,212       4,975   Dilutive effect of stock options     26       100       125   Dilutive effect of unvested stock awards     14       23       24   Fully diluted shares     5,361       5,335       5,124                             Basic earnings per share   $ 0.17     $ 0.36     $ 0.66   Diluted earnings per share   $ 0.17     $ 0.35     $ 0.64     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,       2023     2022     2021   Assumed conversion of convertible debt     608       608       608   Stock awards that were anti-dilutive     154       40       44   Stock awards subject to performance conditions     48       26       14   Total stock awards excluded from diluted EPS     810       674       666       Note 11 . Employee Benefit Plan s   We adopted the Mesa Laboratories, Inc. 401 (K) Retirement Plan effective January 1, 2000. Under this plan, we match 100 % of the first 4 % of pay contributed by each eligible employee, and contributions vest immediately. Participation is voluntary, and employees are eligible on the first day of the month following their start date.   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. Our employer match has increased over the years as employees from acquired companies have joined our 401 (K) Retirement Plan.      Note 12 . Income Taxes   Provision for Income Taxes   Earnings before income taxes were as follows:       Year Ended March 31,       2023     2022     2021   Domestic   $ 1,887     $ 4,579     $ 6,297   Foreign     ( 2,276 )     ( 1,005 )     ( 3,994 ) Total (loss) earnings before income taxes   $ ( 389 )   $ 3,574     $ 2,303     Page 62 Table of Contents   The components of our provision for income taxes were as follows:       Year Ended March 31,       2023     2022     2021   Current tax provision:                         U.S. Federal   $ 593     $ ( 83 )   $ 1,500   U.S. State     538       286       628   Foreign     1,070       1,372       404   Total current tax expense     2,201       1,575       2,532   Deferred tax provision:                         U.S. Federal     ( 1,432 )     1,707       ( 2,410 ) U.S. State     ( 210 )     337       ( 619 ) Foreign     ( 1,878 )     ( 1,916 )     ( 474 ) Total deferred tax (benefit) expense     ( 3,520 )     128       ( 3,503 ) Total income tax (benefit) expense   $ ( 1,319 )   $ 1,703     $ ( 971 )   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,       2023     2022     2021   Federal income taxes at statutory rates   $ ( 82 )   $ 751     $ 483   State income taxes, net of federal benefit     ( 1,075 )     628       ( 221 ) Tax benefit of stock option exercises     ( 1,169 )     ( 4,055 )     ( 1,816 ) Research and development credit     ( 1,010 )     ( 495 )     ( 165 ) Limitation for 162(m)     2,675       4,039       1,113   Return to provision adjustment     ( 125 )     ( 68 )     ( 172 ) Subpart F, GILTI, & FDII     ( 127 )     6       ( 999 ) Foreign rate differential     ( 439 )     152       810   Permanent Difference     33       64       15   Interest reserve adjustment     -       668       -   Other     -       13       ( 19 ) Total income tax (benefit) expense   $ ( 1,319 )   $ 1,703     $ ( 971 )   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.    Page 63 Table of Contents   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     March 31, 2022   Deferred tax assets:                 Net operating loss   $ 6,945     $ 11,274   Credits     4,769       5,321   Allowances and reserves     2,376       1,977   Capitalized research expenditures(1)     3,124       -   Stock compensation deductible differences     1,384       2,137   Inventories     1,348       1,316   Other     188       394   Total deferred tax assets     20,134       22,419   Deferred tax liabilities:                 Goodwill and intangible assets     ( 49,781 )     ( 56,145 ) Property, plant and equipment     ( 2,502 )     ( 3,284 ) Other     (221 )     (188 ) Total deferred tax liabilities     ( 52,504 )     ( 59,617 ) Valuation allowance     ( 582 )     ( 708 ) Net deferred tax (liability)   $ ( 32,952 )   $ ( 37,906 )   ( 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,       2023     2022     2021   Beginning balance   $ 708     $ 404     $ 391   Additions charged to income tax expense and other accounts     567       304       13   Deductions from reserves     ( 693 )     -       -   Ending balance   $ 582     $ 708     $ 404     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   $ -       N/A   Post-2018 federal NOL carryforwards     2,819     Indefinite   State NOL carryforwards     7,210     March 31, 2037   Foreign NOL carryforwards     22,262     Indefinite     Page 64 Table of Contents   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     March 31, 2038   State research tax credits carryforwards     2,944     March 31, 2034   Federal foreign tax credit carryforwards     15     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,       2023     2022     2021   Beginning balance   $ 1,329     $ 64     $ 653   (Decrease) increase related to prior period tax positions     (1,272 )     1,179       ( 629 ) Increases related to current period tax positions     35       86       40   Ending balance   $ 92     $ 1,329     $ 64     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   U.S. Federal     2019 - 2021   U.S. 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.   Page 65 Table of Contents     Note 13.  Commitments and Contingencies   We are party to various legal proceedings arising in the ordinary course of business. 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.    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.     Note 14.  Segment Data   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. We evaluate the performance of our operating segments based on revenues, organic revenues growth, and gross profit. The accounting policies of the operating segments are the same as those described in Note  1 .  "Description of Business and Summary of Significant Accounting Policies."   The following tables set forth our segment information:       Year Ended March 31,       2023     2022     2021   Revenues (a):                         Clinical Genomics   $ 62,299     $ 32,840     $ -   Sterilization and Disinfection Control     64,609       59,044       53,119   Biopharmaceutical Development     47,365       45,579       33,892   Calibration Solutions     44,807       46,872       46,926   Reportable segment revenues     219,080       184,335       133,937   Corporate and Other (b)     -       -       -   Total revenues   $ 219,080     $ 184,335     $ 133,937                             Gross profit:                         Clinical Genomics   $ 32,485     $ 11,941     $ -   Sterilization and Disinfection Control     46,520       43,720       39,870   Biopharmaceutical Development     30,340       28,605       21,035   Calibration Solutions     24,388       24,989       26,112   Reportable segment gross profit     133,733       109,255       87,017   Corporate and Other (b)     ( 40 )     ( 165 )     ( 3 ) Gross profit   $ 133,693     $ 109,090     $ 87,014                             Reconciling items:                         Operating expenses     130,373       104,388       74,656   Operating income     3,320       4,702       12,358   Nonoperating expense     3,709       1,128       10,055   Earnings before income taxes   $ ( 389 )   $ 3,574     $ 2,303       (a) Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.   (b) Unallocated corporate expenses and other business activities are reported within Corporate and Other.    Page 66 Table of Contents   The following table sets forth net inventories by reportable segment. Our chief operating decision maker is not provided with any other segment asset information.       March 31,     March 31,       2023     2022   Clinical Genomics   $ 13,985     $ 11,802   Sterilization and Disinfection Control     3,492       2,176   Biopharmaceutical Development     8,384       4,495   Calibration Solutions     8,781       6,133   Reportable segment inventory     34,642       24,606   Corporate and Other     -       -   Total inventories, net   $ 34,642     $ 24,606     The following table sets forth a summary of long-lived assets by geographic area. Long-lived assets exclude goodwill and intangible assets acquired in a business combination and deferred tax assets.        As of March 31,       2023     2022   United States   $ 34,729     $ 36,475   Foreign     3,793       3,975   Total   $ 38,522     $ 40,450     Revenues from external customers are attributed to individual countries based upon locations to which the product is shipped or exported, as follows:       Year Ended March 31,       2023     2022     2021   United States   $ 117,281     $ 99,068     $ 71,387   China     25,797       16,518       6,612   Other     76,002       68,749       55,938   Total revenues   $ 219,080     $ 184,335     $ 133,937     No customer accounts for 10% or more of our consolidated revenues. No foreign country other than China exceeds 10%  of total revenues.     Note 15 . Subsequent Events   None.     Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   None.   Page 67 Table of Contents