SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~December~~March 31, ~~2017~~

2022

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

For the transition period from
to

Commission file number0-14902

MERIDIAN BIOSCIENCE, INC.

Incorporated under the laws of Ohio

31-0888197

(I.R.S. Employer Identification No.)

3471 River Hills Drive

Cincinnati, Ohio 45244

(513)

271-3700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	VIVO	NASDAQ Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

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


Class		Outstanding ~~January 31, 2018~~ April 30, 2022
Common Stock, no par value		~~42,307,742~~43,575,133

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM

10-Q


		Page(s)

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations Three and Six Months Ended ~~December~~March 31, ~~2017~~2022 and ~~2016~~2021		1

	Condensed Consolidated Statements of Comprehensive Income Three and Six Months Ended ~~December~~March 31, ~~2017~~2022 and ~~2016~~2021		2

	Condensed Consolidated Statements of Cash Flows ~~Three~~ Six Months Ended ~~December~~March 31, ~~2017~~2022 and ~~2016~~2021		3

	Condensed Consolidated Balance Sheets ~~December~~ March 31, ~~2017~~2022 and September 30, ~~2017~~2021		4-5

	Condensed Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity Three and Six Months Ended ~~December~~March 31, ~~2017~~2022 and 2021		6

	Notes to Condensed Consolidated Financial Statements		~~7-12~~ 7-18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~12-20~~ 18-26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2126

Item 4.	Controls and Procedures		2126

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		2227

Item 1A.	Risk Factors		2227

Item 6.	Exhibits		2228

~~Signature~~Signatures			2228

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form
10-Q
contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements accompanied by meaningful cautionary statements. Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which may be identified by words such as “continues”, “estimates”, “anticipates”, “projects”, “plans”, “seeks”, “may”, “will”, “expects”, “intends”, “believes”, “signals”, “should”, “can” and similar expressions or the negative versions thereof and which also may be identified by their context. All statements that address operating performance or events or developments that Meridian Bioscience, Inc. (“Meridian” or “the Company”) expects or anticipates will occur in the future, including, but not limited to, statements relating to per share diluted net earnings, sales, product demand, net revenues, operating margin, other guidance and ~~revenue,~~the impact of
COVID-19
on its business and prospects, are forward-looking statements. Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made. Specifically, Meridian’s forward-looking statements are, and will be, based on management’s then-current views and assumptions regarding future events and operating performance. Meridian assumes no obligation to publicly update or revise any forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially, including, without limitation, the following:

Meridian’s operating results, financial condition and continued growth depends, in part, on its ability to introduce into the marketplace enhancements of existing products or new products that incorporate technological advances, meet customer requirements and respond to products developed by Meridian’s competition, its ability to effectively sell such products and its ability to successfully expand and effectively manage increased sales and marketing operations. While Meridian has introduced a number of internally developed products and acquired products, there can be no assurance that it will be successful in the future in introducing such products on a timely basis or in protecting its intellectual property, and unexpected or costly manufacturing costs associated with ~~the ramp up~~its introduction of new products or acquired products could cause actual results to differ from expectations. Meridian relies on proprietary, patented and licensed technologies. As such, the Company’s ability to protect its intellectual property rights, as well as the potential for intellectual property litigation, would impact its results. Ongoing consolidations of reference laboratories and formation of multi-hospital alliances may cause adverse changes to pricing and distribution. Recessionary pressures on the economy and the markets in which ~~our~~the Company’s customers operate, as well as adverse trends in buying patterns from customers, can change expected results. Costs and difficulties in complying with laws and regulations, including those administered by the United States Food and Drug Administration, and in

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complying with the ongoing investigation of the Department of Justice described in Meridian’s reports filed with the SEC, can result in unanticipated expenses and delays and interruptions to the sale of new and existing products, as can the uncertainty of regulatory approvals and the regulatory process. The international scope of Meridian’s operations, including changes in the relative strength or weakness of the U.S. dollar and general economic conditions in foreign countries, can impact results and make them difficult to predict. One of Meridian’s growth strategies is the acquisition of companies and product lines. There can be no assurance that additional acquisitions will be consummated or that, if consummated, will be successful and that the acquired businesses will be successfully integrated into Meridian’s operations. There may be risks that acquisitions may disrupt operations and may pose potential difficulties in employee retention, and there may be additional risks with respect to Meridian’s ability to recognize the benefits of acquisitions, including potential synergies and cost savings or the failure of acquisitions to achieve their plans and objectives. Meridian cannot predict the outcome of future goodwill impairment testing and the impact of possible goodwill impairments on Meridian’s earnings and financial results. Meridian cannot predict the possible impact of ~~U.S. health care legislation enacted in 2010 – the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act – and~~ any modification or repeal of any of the provisions ~~thereof initiated by Congress or the presidential administration,~~of current U.S. health care legislation, and any similar initiatives in other countries on ~~its~~Meridian’s results of operations. Efforts to reduce the U.S. federal deficit, breaches of Meridian’s information technology systems, trade wars, increased tariffs, and natural disasters and other events could have a materially adverse effect on Meridian’s results of operations and net revenues. ~~We have identified~~The Company can make no assurances that a material weakness in ~~our~~its internal control over financial reporting ~~that,~~will not be identified in the future, which if identified and not properly corrected, could materially
and
adversely affect ~~our~~its operations and result in material misstatements in ~~our~~its consolidated financial statements. Meridian also is subject to risks and uncertainties related to disruptions to or reductions in business operations or prospects due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases such as
COVID-19
including, without limitation, related supply chain interruptions

.
In addition to the factors described in this paragraph, as well as those factors identified from time to time in ~~our~~the Company’s filings with the Securities and Exchange Commission, Part I, Item 1A Risk Factors of ~~our~~the Company’s most recent Annual Report on Form
10-K
contains a list and description of uncertainties, risks and other matters that may affect the Company. Readers should carefully review these forward-looking statements and risk factors, and not place undue reliance on ~~our~~the Company’s forward-looking statements.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(dollar and share amounts in thousands, except per share data)

   Three Months Ended
   December 31,
   2017 2016
NET REVENUES
   $ 52,283 $ 46,809
COST OF SALES
   20,497 17,770


GROSS PROFIT
   31,786 29,039


OPERATING EXPENSES

Research and development
   4,496 3,597
Selling and marketing
   8,842 7,618
General and administrative
   8,904 7,739
CEO transition and litigation costs
   1,483 —


Total operating expenses
   23,725 18,954


OPERATING INCOME
   8,061 10,085
OTHER INCOME (EXPENSE)

Interest income
   72 22
Interest expense
   (395 ) (423 )
Other, net
   (80 ) (25 )


Total other expense
   (403 ) (426 )


EARNINGS BEFORE INCOME TAXES
   7,658 9,659
INCOME TAX PROVISION
   1,356 3,380


NET EARNINGS
   $ 6,302 $ 6,279


BASIC EARNINGS PER COMMON SHARE
   $ 0.15 $ 0.15
DILUTED EARNINGS PER COMMON SHARE
   $ 0.15 $ 0.15
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
   42,263 42,159
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS
   399 376


WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
   42,662 42,535


ANTI-DILUTIVE SECURITIES:

Common share options and restricted share units
   1,034 715


DIVIDENDS DECLARED PER COMMON SHARE
   $ 0.125 $ 0.20


	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
NET REVENUES	$	111,231		$	85,264		$	199,572		$	178,181
COST OF SALES		42,754			27,492			81,936			58,861

GROSS PROFIT		68,477			57,772			117,636			119,320

OPERATING EXPENSES
Research and development		5,691			6,065			11,885			11,716
Selling and marketing		7,514			6,540			15,255			13,561
General and administrative		18,555			12,925			33,215			24,863
Acquisition-related costs		68			0			68			0
Selected legal costs		508			1,030			789			2,257
Change in fair value of acquisition consideration		0			(2,989	)		0			(1,942	)

Total operating expenses		32,336			23,571			61,212			50,455

OPERATING INCOME		36,141			34,201			56,424			68,865
OTHER INCOME (EXPENSE)
Interest income		2			6			3			15
Interest expense		(341	)		(472	)		(713	)		(1,006	)
RADx grant income		0			200			0			1,000
Other, net		733			(883	)		572			(1,574	)

Total other income (expense ), net		394			(1,149	)		(138	)		(1,565	)

EARNINGS BEFORE INCOME TAXES		36,535			33,052			56,286			67,300

INCOME TAX PROVISION		7,783			6,750			12,194			14,219

NET EARNINGS	$	28,752		$	26,302		$	44,092		$	53,081

BASIC EARNINGS PER COMMON SHARE	$	0.66		$	0.61		$	1.01		$	1.23
DILUTED EARNINGS PER COMMON SHARE	$	0.65		$	0.60		$	1.00		$	1.21
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		43,549			43,244			43,495			43,171
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS		713			878			617			789

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		44,262			44,122			44,112			43,960

ANTI-DILUTIVE SECURITIES:
Common share options and restricted share units		186			166			480			169

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

Page 1

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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(dollar amounts in thousands)

Three Months Ended
December 31,

   2017 2016
NET EARNINGS
   $ 6,302 $ 6,279
Other comprehensive income (loss):

Foreign currency translation adjustment
   291 (1,423 )
Unrealized gain on cash flow hedge
   341 1,560
Income taxes related to items of other comprehensive income
   (112 ) (589 )


Other comprehensive income (loss), net of tax
   520 (452 )


COMPREHENSIVE INCOME
   $ 6,822 $ 5,827


	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
NET EARNINGS	$	28,752		$	26,302		$	44,092		$	53,081
Other comprehensive income (loss):
Foreign currency translation adjustment		(1,820	)		79			(1,878	)		3,380
Reclassification of realized gain on cash flow hedge		(935	)		0			(935	)		0
Unrealized gain on cash flow hedge		1,435			439			1,985			460
Reclassification of amortization of gain on cash flow hedge		0			(77	)		0			(154	)
Income taxes related to items of other comprehensive income (loss)		(122	)		(80	)		(257	)		(66	)

Other comprehensive (loss) income, net of tax		(1,442	)		361			(1,085	)		3,620

COMPREHENSIVE INCOME	$	27,310		$	26,663		$	43,007		$	56,701

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

Page 2

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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollar amounts in thousands)

Three Months Ended December 31,
   2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings
   $ 6,302 $ 6,279
Non-cash items included in net earnings:

Depreciation of property, plant and equipment
   1,146 1,078
Amortization of intangible assets
   938 968
Amortization of deferred instrument costs
   201 257
Stock-based compensation
   1,759 1,884
Deferred income taxes
   (1,624 ) 2,091
Change in:

Accounts receivable
   (2,989 ) 2,191
Inventories
   (2,353 ) (169 )
Prepaid expenses and other current assets
   87 (406 )
Accounts payable and accrued expenses
   1,315 (913 )
Income taxes payable
   497 44
Other, net
   (108 ) (311 )


Net cash provided by operating activities
   5,171 12,993


CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment
   (1,234 ) (1,392 )


Net cash used for investing activities
   (1,234 ) (1,392 )


CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid
   (5,288 ) (8,440 )
Payments on term loan
   (1,125 ) (750 )
Proceeds and tax benefits from exercises of stock options
   —   301


Net cash used for financing activities
   (6,413 ) (8,889 )


Effect of Exchange Rate Changes on Cash and Equivalents
   115 (662 )


Net (Decrease) Increase in Cash and Equivalents
   (2,361 ) 2,050
Cash and Equivalents at Beginning of Period
   57,072 47,226


Cash and Equivalents at End of Period
   $ 54,711 $ 49,276


	Six Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	44,092		$	53,081
Non-cash items included in net earnings:
Depreciation of property, plant and equipment		3,369			3,072
Amortization of intangible assets		4,966			4,363
Stock-based compensation		3,389			2,291
Deferred income taxes		1,446			(777	)
Change in fair value of acquisition consideration		0			(1,942	)
Change in the following:
Accounts receivable		(5,918	)		(5,267	)
Inventories		4,913			(12,185	)
Prepaid expenses and other current assets		1,685			1,440
Accounts payable and accrued expenses		5,273			77
Income taxes payable		3,332			(2,698	)
Other, net		(575	)		36

Net cash provided by operating activities		65,972			41,491

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(3,179	)		(11,955	)
Payment of acquisition consideration holdback		0			(5,000	)

Net cash used in investing activities		(3,179	)		(16,955	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payment on revolving credit facility		(35,000	)		(18,824	)
Payment of deferred financing costs		(404	)		0
Proceeds from exercise of stock options		735			2,852
Employee taxes paid upon stock swap option exercises and net share settlement of restricted share units		(801	)		0

Net cash used in financing activities		(35,470	)		(15,972	)

Effect of Exchange Rate Changes on Cash and Cash Equivalents		(607	)		1,296

Net Increase in Cash and Cash Equivalents		26,716			9,860
Cash and Cash Equivalents at Beginning of Period		49,771			53,514

Cash and Cash Equivalents at End of Period	$	76,487		$	63,374

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

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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

ASSETS

   December 31,
2017
(Unaudited)    September 30,
2017
CURRENT ASSETS

Cash and equivalents
   $ 54,711    $ 57,072
Accounts receivable, less allowances of $306 and $307
   32,136    29,106
Inventories
   43,644    41,493
Prepaid expenses and other current assets
   6,126    6,204




Total current assets
   136,617    133,875




PROPERTY, PLANT AND EQUIPMENT, at Cost

Land
   1,164    1,162
Buildings and improvements
   32,244    32,207
Machinery, equipment and furniture
   49,367    48,836
Construction in progress
   2,374    1,895




Subtotal
   85,149    84,100
Less: accumulated depreciation and amortization
   54,749    53,590




Net property, plant and equipment
   30,400    30,510




OTHER ASSETS

Goodwill
   54,997    54,926
Other intangible assets, net
   25,777    26,704
Restricted cash
   1,000    1,000
Deferred instrument costs, net
   1,415    1,368
Fair value of interest rate swap
   1,156    815
Deferred income taxes
   146    158
Other assets
   443    421




Total other assets
   84,934    85,392




TOTAL ASSETS
   $ 251,951    $ 249,777


	March 31, 2022 (Unaudited)		September 30, 2021
CURRENT ASSETS
Cash and cash equivalents	$	76,487	$	49,771
Accounts receivable, less allowances of $1,122 and $1,078, respectively		59,218		53,568
Inventories, net		70,926		76,842
Prepaid expenses and other current assets		10,929		12,626

Total current assets		217,560		192,807

PROPERTY, PLANT AND EQUIPMENT, at Cost
Land		983		989
Buildings and improvements		33,043		32,765
Machinery, equipment and furniture		82,095		78,410
Construction in progress		8,100		9,991

Subtotal		124,221		122,155
Less: accumulated depreciation and amortization		80,848		78,941

Property, plant and equipment, net		43,373		43,214

OTHER ASSETS
Goodwill		114,039		114,668
Other intangible assets, net		79,058		84,151
Right-of-use assets, net		7,517		5,786
Deferred income taxes		8,677		8,731
Other assets		1,586		365

Total other assets		210,877		213,701

TOTAL ASSETS	$	471,810	$	449,722

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

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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(~~dollars~~dollar amounts in thousands)

LIABILITIES AND SHAREHOLDERS’ EQUITY

   December 31,
2017
(Unaudited) September 30,
2017
CURRENT LIABILITIES

Accounts payable
   $ 8,507 $ 7,719
Accrued employee compensation costs
   4,801 4,536
Current portion of acquisition consideration
   2,095 2,095
Other accrued expenses
   2,795 2,789
Current portion of long-term debt
   4,500 4,500
Income taxes payable
   776 1,248


Total current liabilities
   23,474 22,887


NON-CURRENT LIABILITIES

Acquisition consideration
   235 235
Post-employment benefits
   2,551 2,468
Long-term debt
   49,030 50,147
Long-term income taxes payable
   854 —
Deferred income taxes
   2,929 4,455


Totalnon-current liabilities
   55,599 57,305


COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY

Preferred stock, no par value; 1,000,000 shares authorized; none issued
   —   —
Common shares, no par value; 71,000,000 shares authorized, 42,307,542 and 42,207,317 shares issued, respectively
   —   —
Additionalpaid-in capital
   127,367 125,608
Retained earnings
   47,937 46,923
Accumulated other comprehensive loss
   (2,426 ) (2,946 )


Total shareholders’ equity
   172,878 169,585


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 251,951 $ 249,777


		March 31, 2022 (Unaudited)			September 30, 2021
CURRENT LIABILITIES
Accounts payable		$	15,682		$	11,701
Accrued employee compensation costs			18,131			16,853
Accrued product recall costs			3,375			5,100
Acquisition consideration			1,000			0
Current operating lease obligations			2,134			1,990
Current government grant obligations			675			638
Other accrued expenses			8,533			7,027
Income taxes payable			6,935			3,848

Total current liabilities			56,465			47,157
NON-CURRENT LIABILITIES
Acquisition consideration			0			1,000
Post-employment benefits			2,125			2,253
Long-term operating lease obligations			5,579			3,932
Long-term debt			25,000			60,000
Government grant obligations			4,913			5,176
Long-term income taxes payable			469			469
Deferred income taxes			2,444			1,055
Other non-current liabilities			183			378
Total non-current liabilities			40,713			74,263

COMMITMENTS AND CONTINGENCIES	0				0
SHAREHOLDERS’ EQUITY
Preferred stock, 0par value; 1,000,000 shares authorized; NaN issued			0—			0—
Common shares, 0par value; 71,000,000 shares authorized, 43,570,530 and 43,361,898 shares issued and outstanding, respectively			0—			0—
Additional paid-in capital			150,985			147,403
Treasury stock, at cost; 9,655 shares			(259	)		0
Retained earnings			224,793			180,701
Accumulated other comprehensive income (loss)			(887	)		198

Total shareholders’ equity			374,632			328,302

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	471,810		$	449,722

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

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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity (Unaudited)

(~~dollars~~dollar and ~~shares~~share amounts in thousands)

   Common
Shares
Issued    Additional
Paid-In
Capital    Retained
Earnings Accumulated Other
Comprehensive
Income (Loss) Total
Shareholders’
Equity
Balance at September 30, 2017
   42,207    $ 125,608    $ 46,923 $ (2,946 ) $ 169,585
Cash dividends paid
   —      —      (5,288 ) —   (5,288 )
Conversion of restricted share units
   100    —      —   —   —
Stock compensation expense
   —      1,759    —   —   1,759
Net earnings
   —      —      6,302 —   6,302
Foreign currency translation adjustment
   —      —      —   291 291
Hedging activity, net of tax
   —      —      —   229 229






Balance at December 31, 2017
   42,307    $ 127,367    $ 47,937 $ (2,426 ) $ 172,878


	Common Shares		Additional Paid-In Capital		Treasury Stock						Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
	Common Shares		Additional Paid-In Capital		Sh.			Amt.			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
THREE MONTHS ENDED MARCH 31, 2022
Balance at December 31, 2021		43,514	$	148,623		0		$	0		$	196,041	$	555		$	345,219
Conversion of restricted share units and exercise of stock options		56		876		(10	)		(259	)		—		—			617
Stock compensation expense		—		1,486		—			—			—		—			1,486
Net earnings		—		—		—			—			28,752		—			28,752
Foreign currency translation adjustment		—		—		—			—			—		(1,820	)		(1,820	)
Hedging activity, net of tax		—		—		—			—			—		378			378

Balance at March 31, 2022		43,570	$	150,985		(10	)	$	(259	)	$	224,793	$	(887	)	$	374,632

THREE MONTHS ENDED MARCH 31, 2021
Balance at December 31, 2020		43,124	$	141,395		0		$	0		$	136,073	$	1,399		$	278,867
Conversion of restricted share units and exercise of stock options		205		2,893		—			—			—		—			2,893
Stock compensation expense		—		1,050		—			—			—		—			1,050
Net earnings		—		—		—			—			26,302		—			26,302
Foreign currency translation adjustment		—		—		—			—			—		79			79
Hedging activity, net of tax		—		—		—			—			—		282			282

Balance at March 31, 2021		43,329	$	145,338		0		$	0		$	162,375	$	1,760		$	309,473


	Common Shares Issued		Additional Paid-In Capital		Treasury Stock						Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
	Common Shares Issued		Additional Paid-In Capital		Sh.			Amt.			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
SIX MONTHS ENDED MARCH 31, 2022

Balance at September 30, 2021		43,362	$	147,403		0		$	0		$	180,701	$	198		$	328,302
Conversion of restricted share units and exercise of stock options		208		193		(10	)		(259	)		—		—			(66	)
Stock compensation expense		—		3,389		—			—			—		—			3,389
Net earnings		—		—		—			—			44,092		—			44,092
Foreign currency translation adjustment		—		—		—			—			—		(1,878	)		(1,878	)
Hedging activity, net of tax		—		—		—			—			—		793			793

Balance at March 31, 2022		43,570	$	150,985		(10	)	$	(259	)	$	224,793	$	(887	)	$	374,632

SIX MONTHS ENDED MARCH 31, 2021
Balance at September 30, 2020		43,069	$	140,195		0		$	0		$	109,294	$	(1,860	)	$	247,629
Conversion of restricted share units and exercise of stock options		260		2,852		—			—			—		—			2,852
Stock compensation expense		—		2,291		—			—			—		—			2,291
Net earnings		—		—		—			—			53,081		—			53,081
Foreign currency translation adjustment		—		—		—			—			—		3,380			3,380
Hedging activity, net of tax		—		—		—			—			—		240			240

Balance at March 31, 2021		43,329	$	145,338		0		$	0		$	162,375	$	1,760		$	309,473

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

Page 6

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Dollars in Thousands, Except Per Share Amounts

(Unaudited)

1.	~~Basis~~ Nature of ~~Presentation~~Business

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed

Meridian Bioscience, Inc. (“Meridian” or omitted pursuant to such rules and regulations. In the opinion of Management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of December 31, 2017, the results of its operations for the three month periods ended December 31, 2017 and 2016, and its cash flows for the three month periods ended December 31, 2017 and 2016. These statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s fiscal 2017 Annual Report on Form 10-K. Financial information as of September 30, 2017 has been derived from the Company’s audited consolidated financial statements. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year.

2.	~~Significant Accounting Policies~~

~~A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2017 Annual Report on Form10-K.~~

~~Recent Accounting Pronouncements –~~

~~In May 2014, the FASB issued ASUNo. 2014-09,~~~~Revenue from Contracts with Customers~~, which supersedes and replaces nearly all currently-existing U.S. GAAP revenue recognition guidance including related disclosure requirements. This guidance, including any clarification guidance thereon, will be effective for the Company beginning October 1, 2018 (fiscal 2019). The Company has prepared an inventory of its existing revenue streams and a preliminary analysis of the revenue recognition criteria applying ASU~~2014-09.~~ This analysis is preliminary and our overall assessment is not yet complete. However, based on the analysis completed to date, aside from certain expanded disclosure requirements, the Company does not currently anticipate that its planned adoption of ASU~~2014-09~~ ~~on a modified retrospective basis will have a material impact on its reported revenues.~~

~~In February 2016, the FASB issued ASU2016-02,~~~~Leases~~, which amends the accounting guidance related to leases. These changes, which are designed to increase transparency and comparability among organizations for both lessees and lessors, include, among other things, requiring recognition of lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Adoption and implementation of the guidance is not required by the Company until the beginning of fiscal 2020, although early adoption is permitted. The Company expects to begin its assessment of the impact that adoption of this guidance will have on its financial statements later in fiscal 2018.

~~In March 2016, the FASB issued ASU2016-09,~~~~Improvements to Employee Share-Based Payment Accounting~~, which amends the accounting for share-based payment transactions. These changes, which are designed for simplification, involve several aspects of the accounting for share-based transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this guidance in the first quarter of fiscal 2018, and as a result recorded $160 to the income tax provision, which under the previous guidance would have been recorded within additional~~paid-in~~ capital. While the future effect of the guidance is dependent upon numerous factors (e.g., the market price of the Company’s common stock on the equity award grant date, the exercise/lapse dates of equity awards, and the market price of the Company’s common stock on such exercise/lapse dates), the effect is not expected to be material.

~~Page 7~~

~~Reclassifications –~~

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Such reclassifications had no impact on net earnings or shareholders’ equity.

3.	~~Cash and Equivalents~~

~~Cash and equivalents include the following components:~~

   December 31, 2017    September 30, 2017
   Cash and
Equivalents    Other
Assets    Cash and
Equivalents    Other
Assets
Institutional money market funds
   $ 20,155    $ —      $ 20,104    $ —
Cash on hand -

Restricted
   —      1,000    —      1,000
Unrestricted
   34,556    —      36,968    —








Total
   $ 54,711    $ 1,000    $ 57,072    $ 1,000

4.	~~Inventories~~

~~Inventories are comprised of the following:~~

   December 31,
2017    September 30,
2017

Raw materials
   $ 7,989    $ 6,575
Work-in-process
   12,110    11,559
Finished goods - instruments
   1,271    1,460
Finished goods - kits and reagents
   22,274    21,899




Total
   $ 43,644    $ 41,493

5.	~~Intangible Assets~~

~~A summary of our acquired intangible assets subject to amortization, as of December 31, 2017 and September 30, 2017, is as follows:~~

   December 31, 2017    September 30, 2017
   Gross
Carrying
Value    Accumulated
Amortization    Gross
Carrying
Value    Accumulated
Amortization
Manufacturing technologies, core products and cell lines
   $ 22,341    $ 13,117    $ 22,332    $ 12,807
Trade names, licenses and patents
   8,699    4,632    8,689    4,398
Customer lists, customer relationships and supply agreements
   24,586    12,190    24,562    11,854
Non-compete agreements
   720    630    720    540








   $ 56,346    $ 30,569    $ 56,303    $ 29,599

~~Page 8~~

The actual aggregate amortization expense for these intangible assets was $938 and $968 for the three months ended December 31, 2017 and 2016, respectively. The estimated aggregate amortization expense for these intangible assets for each of the fiscal years through fiscal 2023 is as follows: remainder of fiscal 2018 – $2,628, fiscal 2019 – $3,343, fiscal 2020 – $3,178, fiscal 2021 – $2,561, fiscal 2022 – $2,182, and fiscal 2023 – $2,170.

On May 17, 2017, the FDA issued a field safety notice advising customers to discontinue use of Magellan’s lead testing systems with venous blood samples. This field safety notice was followed by product recall notices on May 25^th ~~and June 5~~^th.Magellan’s lead testing systems are capable of processing both capillary and venous blood samples. Magellan’s LeadCare Plus and LeadCare Ultra systems, which account for approximately 10% of Magellan’s annual revenues, are used predominantly with venous blood samples. Magellan’s LeadCare and LeadCare II systems are predominantly used with capillary blood samples.

Subsequent to the issuances of these field safety and product recall notices, the FDA completed an inspection of Magellan’s Quality System, and issued its Form 483, Inspectional Observations, on June 29, 2017, which was expectedly followed by a Warning Letter issued on October 23, 2017. The Warning Letter requires periodic reporting on our remediation progress. To date, we have satisfied our post-Warning Letter reporting requirements with the FDA. During the first quarter of fiscal 2018, we incurred approximately $500 in Quality System remediation costs, primarily related to regulatory consultants.

As a result of these matters, we expect to experience delays in reinstating venous blood sample testing on our LeadCare products, as well as in obtaining 510(k) clearance for new Magellan products. We also expect delays in obtaining export certifications for Magellan products during the remediation period. In light of these factors and their impacts, during our 2017 third fiscal quarter, it was determined that a potential impairment of goodwill recorded in connection with the acquisition of Magellan had occurred (i.e., a “triggering event”“the Company”). With the assistance of an independent valuation firm, Magellan’s fair value was calculated via both market (comparable company) and income (discounted cash flows) approaches. Based upon these approaches, it was determined that the carrying value of the Magellan reporting unit did, in fact, exceed its fair value. As a result, an impairment charge of $6,628, on both a~~pre-tax~~ ~~andafter-tax~~ ~~basis, was recorded during the fiscal 2017 third quarter. Given all of the factors considered, we do not anticipate, at this time, any further goodwill impairment charge from the Magellan acquisition.~~

6.	~~Income Taxes~~

On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “tax reform act”). In applying the tax reform act, we followed the guidance in SEC Staff Accounting Bulletin 118 (“SAB 118”), regarding the application of ASC Topic 740 in situations where a company does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the tax reform act for the reporting period in which the tax reform act was enacted. SAB 118 provides for a measurement period beginning in the reporting period that includes the tax reform act’s enactment date and ending when a company has obtained, prepared and analyzed the information needed in order to complete the accounting requirements, but in no circumstances should the measurement period extend beyond one year from the enactment date.

~~We completed the accounting for the effects of the tax reform act during the quarter ended December 31, 2017, except for the effects related to theone-time~~ deemed repatriation transition tax on unrepatriated foreign earnings (the “repatriation transition tax”). As a result, our financial statements for the quarter ended December 31, 2017 reflect these effects of the tax reform act as provisional based on a reasonable estimate of the income tax effects. We have included a provisional non-current income tax payable in the amount of $854 related to the repatriation transition tax. The provisional amount is based on tax attribute information currently available from foreign investments. We continue to gather and analyze information, including historical adjustments to earnings and profits of foreign subsidiaries, in order to complete the accounting for the effects of the estimated repatriation transition tax.

Accounting for the remaining income tax effects of the tax reform act which impact our tax provision has been substantially completed and are included in the accompanying Condensed Consolidated Financial Statements as of December 31, 2017. We recorded a~~one-time~~ ~~tax benefit of $1,695 resulting from the tax reform act, including an adjustment from there-measurement~~ ~~of deferred tax assets and liabilities. Thisre-measurement~~ ~~includes an estimate of the temporary differences expected to be realized during fiscal 2018 at a transitional blended rate of 24.5%. The remaining temporary differences werere-measured~~ ~~at 21%.~~

~~Page 9~~

7.	~~Bank Credit Arrangements~~

In connection with the acquisition of Magellan Biosciences, Inc., and its wholly-owned subsidiary Magellan Diagnostics, Inc. (collectively, “Magellan”), on March 22, 2016 the Company entered into a $60,000 five-year term loan with a commercial bank. The term loan requires quarterly principal and interest payments, with interest at a variable rate tied to LIBOR, and a balloon principal payment due March 31, 2021. The required principal payments on the term loan for each of the remaining fiscal years are as follows: remainder of fiscal 2018 - $3,375, fiscal 2019 - $5,250, fiscal 2020 - $6,000, and fiscal 2021 - $39,000. In light of the term loan’s interest being determined on a variable rate basis, the fair value of the term loan at December 31, 2017 approximates the current carrying value reflected in the accompanying Condensed Consolidated Balance Sheet.

In order to limit exposure to volatility in the LIBOR interest rate, the Company and the commercial bank also entered into an interest rate swap that effectively converts the variable interest rate on the term loan to a fixed rate of 2.76%. With an initial notional balance of $60,000, the interest rate swap was established with critical terms identical to those of the term loan, including (i) notional reduction amounts and dates; (ii) LIBOR settlement rates; (iii) rate reset dates; and (iv) term/maturity. Due to this, the interest rate swap has been designated as an effective cash flow hedge, with changes in fair value reflected as a separate component of other comprehensive income in the accompanying Condensed Consolidated Statements of Comprehensive Income. At December 31, 2017 and September 30, 2017, the fair value of the interest rate swap was $1,156 and $815, respectively, and is reflected as a~~non-current~~ asset in the accompanying Condensed Consolidated Balance Sheets. This fair value was determined by reference to a third party valuation, and is considered a Level 2 input within the fair value hierarchy of valuation techniques.

In addition, the Company maintains a $30,000 revolving credit facility with a commercial bank, which expires March 31, 2021. There were no borrowings outstanding on this credit facility at December 31, 2017 or September 30, 2017.

The term loan and the revolving credit facility are collateralized by the business assets of the Company’s U.S. subsidiaries and require compliance with financial covenants that limit the amount of debt obligations and require a minimum level of coverage of fixed charges, as defined in the borrowing agreement. As of December 31, 2017, the Company is in compliance with all covenants. The Company is also required to maintain a compensating cash balance with the bank in the amount of $1,000, and is in compliance with this requirement.

8.	~~Reportable Segment and Major Customers Information~~

~~Meridian~~ was formed in 1976 and functions as a fully-integrated life science company with principal businesses inin: (i) the development, manufacture, sale and distribution of diagnostic ~~test~~testing systems and kits, primarily for certain gastrointestinal ~~viral,~~and respiratory ~~and parasitic~~ infectious diseases, and elevated blood lead levels; and (ii) the manufacture and distribution of bulk antigens, antibodies, ~~PCR/qPCR~~immunoassay blocking reagents, ~~nucleotides, competent cells,~~various Polymerase Chain Reaction (“PCR”) and isothermal amplification master mixes, and bioresearch reagents used by ~~researchers and~~ other diagnostic ~~manufacturers.~~

manufacturers and researchers.

Our reportable segments are Diagnostics and Life Science. The Diagnostics segment consists ofof: (i) manufacturing operations for infectious disease products in Cincinnati, Ohio; ~~Magellan’s~~Quebec City, Canada; and Modi’in, Israel; (ii) manufacturing operations for blood chemistry products ~~detecting elevated lead levels in blood~~ in Billerica, ~~Massachusetts (near Boston);~~Massachusetts; and (iii) the sale and distribution of diagnostics products domestically and abroad. This segment’s products are used by hospitals, reference labs and physician offices to detect infectious diseases and elevated lead ~~levels.~~

levels in blood.

The Life Science segment consists ofof: (i) manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany;

and ~~Sydney, Australia; and~~(ii) the sale and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, ~~competent cells,~~ and bioresearch reagents domestically and abroad, including a sales and business development ~~and~~facility, with outsourced distribution ~~facilities~~capabilities, in ~~Singapore and~~ Beijing, China to ~~further~~ pursue ~~growing~~ revenue opportunities in Asia. This segment’s products are used by manufacturers and researchers in a variety of applications (e.g.,~~in-vitro~~ in vitro medical device manufacturing, microRNA detection, ~~next-gen~~next-generation sequencing, plant genotyping, and mutation detection, among others).

2.	Basis of Presentation

The Condensed Consolidated Financial Statements are unaudited and are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information, and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of Management, the Condensed Consolidated Financial Statements include all normal adjustments and disclosures necessary to present fairly the Company’s consolidated financial position as of March 31, 2022, and the results of its operations and shareholders’ equity for the three and six months ended March 31, 2022 and 2021, and cash flows for the six months ended March 31, 2022 and 2021. These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s fiscal 2021 Annual Report on Form

10-K,

filed with the SEC on November 23, 2021.

It should be noted that the terms revenue and/or revenues are utilized throughout these notes to the Condensed Consolidated Financial Statements to indicate net revenue and/or net revenues.

The consolidated results of operations for interim periods are not necessarily indicative of the results to be expected for the full fiscal year. The preparation of these Condensed Consolidated Financial Statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the period. Included within these estimates are those related to the ongoing impacts of the

COVID-19

pandemic, which has had both positive and negative effects on our business; generally positive effects on our Life Science segment and negative effects on our Diagnostics segment. Actual results could differ from the estimates made by management.

Page 10

~~Amounts due~~

Table of Contents

3.	Significant Accounting Policies

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2021 Annual Report on Form

10-K,

filed with the SEC on November 23, 2021, and should be referred to for a description of the Company’s significant accounting policies.

(a)	Recent Accounting Pronouncements –

Pronouncements Adopted

On October 1, 2021, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)

2019-12,

Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

(“ASU

2019-12”),

which clarified and simplified accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. Adoption of ASU

2019-12

did not have a material impact on the Condensed Consolidated Financial Statements.

Pronouncements Issued but Not Yet Adopted as of March 31, 2022

In March 2020, the FASB issued ASU

2020-04,

Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

, to provide temporary optional guidance relating to reference rate reform, particularly as it relates to easing the potential burden resulting from ~~two Diagnostics distributor customers accounted~~the expected discontinuation of the London Interbank Offered Rate (“LIBOR”). The guidance provides practical expedients and exceptions for ~~25%~~applying GAAP to contracts, hedging relationships and ~~11% of consolidated accounts receivable at~~other transactions affected by reference rate reform if certain criteria are met, which may be applied through December 31, ~~2017~~2022. The Company continues to evaluate the impacts of this guidance but does not expect its application to have a material impact on the Condensed Consolidated Financial Statements.

No other new accounting pronouncements recently adopted or issued had or are expected to have a material impact on the Condensed Consolidated Financial Statements.

(b)	Reclassifications –

Certain reclassifications have been made to the prior year Condensed Consolidated Financial Statements to conform to the current year presentation. Such reclassifications had no impact on net earnings or shareholders’ equity.

Page 8

Table of Contents

4.	Revenue Recognition

Revenue Disaggregation

The following tables present our net revenues disaggregated by major geographic region, major product platform and disease state (Diagnostics segment only):

Net Revenues by Reportable Segment & Geographic Region


	Three Months Ended March 31,							Six Months Ended March 31,
	2022		2021		Inc (Dec)			2022		2021		Inc (Dec)
Diagnostics-
Americas	$	33,551	$	25,290		33	%	$	60,164	$	48,824		23	%
EMEA		7,113		6,071		17	%		13,206		12,101		9	%
ROW		439		588		(25	)%		937		1,345		(30	) %

Total Diagnostics		41,103		31,949		29	%		74,307		62,270		19	%
Life Science-
Americas		10,377		13,550		(23	)%		18,514		32,296		(43	) %
EMEA		33,246		21,773		53	%		61,894		54,066		14	%
ROW		26,505		17,992		47	%		44,857		29,549		52	%

Total Life Science		70,128		53,315		32	%		125,265		115,911		8	%

Consolidated	$	111,231	$	85,264		30	%	$	199,572	$	178,181		12	%

Net Revenues by Product Platform/Type


	Three Months Ended March 31,							Six Months Ended March 31,
	2022		2021		Inc (Dec)			2022		2021		Inc (Dec)
Diagnostics-
Molecular assays	$	4,385	$	4,395		0	%	$	9,137	$	8,985		2	%
Non-molecular assays		36,718		27,554		33	%		65,170		53,285		22	%

Total Diagnostics		41,103		31,949		29	%		74,307		62,270		19	%
Life Science-
Molecular reagents		40,334		37,752		7	%		71,822		83,776		(14	) %
Immunological reagents		29,794		15,563		91	%		53,443		32,135		66	%

Total Life Science		70,128		53,315		32	%		125,265		115,911		8	%

Consolidated	$	111,231	$	85,264		30	%	$	199,572	$	178,181		12	%

Net Revenues by Disease State (Diagnostics segment only)


	Three Months Ended March 31,							Six Months Ended March 31,
	2022		2021		Inc (Dec)			2022		2021		Inc (Dec)
Diagnostics-
Gastrointestinal assays	$	20,281	$	15,666		29	%	$	41,900	$	31,118		35	%
Respiratory illness assays		9,491		3,686		157	%		15,871		8,492		87	%
Blood chemistry assays		3,425		4,358		(21	) %		3,503		8,753		(60	) %
Other		7,906		8,239		(4	) %		13,033		13,907		(6	) %

Total Diagnostics	$	41,103	$	31,949		29	%	$	74,307	$	62,270		19	%

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Table of Contents

Royalty Income

Royalty income received from a third party related to sales of

H. pylori

products, totaled approximately $2,580 and $2,850

in the three months ended March 31, 2022 and 2021, respectively, and $3,550 and $3,710 in the six months ended March 31, 2022 and 2021, respectively.

Royalty income

is included as part of Non-molecular assays and Other within the Net Revenues by Product Platform/Type and Net Revenues by Disease State tables, respectively, above.

Reagent Rental Arrangements

Revenue allocated to the lease elements of Reagent Rental arrangements totaled approximately $970 and $900

in the three months ended March 31, 2022 and 2021, respectively, and $1,725 and $1,780 in the six months ended March 31, 2022 and 2021, respectively. Such revenue is included as part of net revenues in our Condensed Consolidated Statements of Operations.

5.	Fair Value Measurements

To limit exposure to volatility in the LIBOR interest rate, the Company has entered into interest rate swap agreements, which effectively convert the variable interest rate on the outstanding revolving credit facility discussed in Note 12 to a fixed rate. The fair values of the interest rate swap agreements were determined by reference to a third-party valuation, which is considered a Level 2 input within the fair value hierarchy of valuation techniques, and totaled a

$846 asset and a $203

liability, as of March 31, 2022 and September 30, ~~2017, respectively. Revenues from these two distributor customers accounted for 38%~~2021, respectively

. In

conjunction with the paydown of $25,000 on the revolving credit facility

, a $25,000 interest rate swap agreement was terminated during March 2022, resulting

in a gain of $935, which is

recorded in

other income

(expense), net

in our Condensed Consolidated Statements of Operations

during the three and ~~23%~~six months ended March 31, 2022

As indicated in Note 6, we acquired the BreathTek business on July 31, 2021. The fair values of inventories acquired were valued using Level 2 inputs, which included data points that were observable, such as established values of comparable assets and historical sales information (market approach). Identifiable intangible assets, specifically the acquired customer relationships, were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows and attrition rates (income approach). Significant increases (decreases) in any of those unobservable inputs, as of the ~~Diagnostics segment third-party revenues~~date of the acquisition, in isolation would result in a significantly lower (higher) fair value measurement.

6.	Business Combinations

On July 31, 2021, we acquired the BreathTek business, a urea breath test for the detection of

H. pylori

, from Otsuka America Pharmaceutical, Inc. Cash consideration totaled $19,585, subject to a $1,000

holdback, which is recorded in acquisition consideration on the Condensed Consolidated Balance Sheets, to secure the selling party’s performance of certain post-closing obligations that is payable 15 months following the BreathTek acquisition date. As part of the acquisition, we acquired BreathTek inventories and assumed the customer relationships to supply the BreathTek product in North America. Giving effect to purchase adjustments made during the three months ended ~~December~~March 31, ~~2017~~2022 to increase the value of acquired inventories by approximately $100, the acquired inventories and ~~2016,~~customer relationships were valued on July 31, 2021

on a preliminary basis,

9,955

and $

9,630

respectively, with the useful life of the customer relationships estimated at

five years

The Company’s consolidated results for the three and six

months

ended March 31, 2022 include approximately

$5,500

and $11,100, respectively, of net

revenues from BreathTek product sales, which contributed approximate

$1,600

and $3,200, respectively, of net earnings. These results, which are reported as part of the Diagnostics segment, include amortization expense related to the customer relationships recorded in the purchase price allocation totaling

$474

and $960, during the three and six months ended March 31, 2022, respectively.

Page 10

Table of Contents

The following table provides the unaudited consolidated pro forma results for the periods presented as if the BreathTek business had been acquired as of the beginning of fiscal 2021:


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Net revenues	$	111,231	$	91,033	$	199,572	$	188,857
Net earnings		28,752		28,099		44,092		56,052

7.	Lead Testing Matters

On September 1, 2021, the Company’s wholly owned subsidiary Magellan announced the expansion of a Class I voluntary recall of its LeadCare test kits for the detection of lead in blood, which it had initiated in May 2021. Customers generally run controls when they receive a new lot of product and report to us when the control results are outside of specified ranges. This process identified certain impacted test kit lots that could potentially underestimate blood lead levels when processing patient blood samples. Although it was initially believed that the root cause of the issue related to the plastic containers used for the treatment reagent, additional studies have indicated that the root cause relates to the third-party-sourced cardboard trays that hold the treatment reagent containers. Upon correction of the identified supplier issue, shipment of product resumed during February 2022. The Company continues to work closely with the FDA in its execution of the recall activities, which include notifications to customers and distributors, and providing instructions for the return of impacted test kits. The evaluation of the recall and the related notification process are ongoing. Of the approxima

$5,100

estimated and accrued as of September 30, 2021 to cover the estimated costs of the recall, approxim

ely $3,375

remains accrued and is reflected in the Condensed Consolidated Balance Sheet as of March 31, 2022. Anticipated recall-related costs, which primarily include product replacement and/or refund costs, mailing/shipping costs, attorneys’ fees, and other miscellaneous costs are estimated based upon the most recent information available. Information utilized in the accrual estimation process includes observable inputs such as customer

on-hand

inventory data, product sales data, average sales price, and product inventory turns, among other things. Available information is subject to change as the recall period extends, and such changes will be recorded in the period known. There have been no material changes in estimates related to the LeadCare recall reserve during the three or six months ended March 31, 2022.

As previously disclosed, on April 17, 2018,

the Company’s wholly owned subsidiary Magellan received a subpoena from the U.S. Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlined documents to be produced, and the Company is cooperating with the DOJ in this matter. The Company maintains rigorous policies and procedures to promote compliance with applicable regulatory requirements and is working with the DOJ to promptly respond to the subpoena, including responding to additional information requests that have followed receipt of the subpoena in April 2018. The Company has executed tolling agreements to extend the statute of limitations. In March and April 2021, the DOJ issued two subpoenas calling for witnesses to testify before a federal grand jury related to this matter. The March 2021 subpoena was issued to a former employee of Magellan, and the April 2021 subpoena was issued to a current employee of Magellan. In September and October 2021, the DOJ issued additional subpoenas to individuals seeking testimony and documents in connection with its ongoing investigation. It is the Company’s understanding that multiple witnesses have testified before the federal grand jury and the DOJ’s investigation is ongoing. Discussions continue with the DOJ to explore resolution of the matter.

The Company cannot predict when the investigation will be resolved, the outcome of the investigation, or its potential impact on the Company. Approximately

$508 and $1,030 of expense for attorneys’ fees related to this matter is included within the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021, respectively, and ~~represented 27%~~$789 and ~~17% of consolidated revenues~~$2,257, for the ~~fiscal 2018~~six months ended March 31, 2022 and ~~2017 first quarters,~~2021, respectively.

~~Within our~~

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8.	Cash and Cash Equivalents

Cash and cash equivalents include the following:


	March 31, 2022		September 30, 2021
	March 31, 2022		September 30, 2021
Institutional money market funds	$	1,020	$	1,020
Cash on hand, unrestricted		75,467		48,751

Total	$	76,487	$	49,771

Cash equivalents, institutional money market funds, are classified within Level 1 of the fair value hierarchy. Financial instruments classified as Level 1 are based on quoted market prices in active markets. The Company does not adjust the quoted market price for such financial instruments.

9.	Inventories, Net

Inventories, net, are comprised of the following:


	March 31, 2022		September 30, 2021
	March 31, 2022		September 30, 2021
Raw materials	$	15,140	$	14,843
Work-in-process		22,296		25,072
Finished goods - instruments		2,596		2,260
Finished goods - kits and reagents		30,894		34,667

Total	$	70,926	$	76,842

10.	Goodwill and Other Intangible Assets, Net

Goodwill is not amortized but is subject to an annual impairment test. Goodwill has been assigned to reporting units within the reportable segments. The Company assesses the carrying value of goodwill annually, or more often if events or changes in circumstances indicate there may be impairment.

Impairment testing is performed at a reporting unit level. During the six months ended March 31, 2022, goodwill decrease

d $629, reflecting: (i) a $376 decrease in Diagnostics segment

goodwill

; and (ii) a $253 decrease in Life Science segment ~~two diagnostic manufacturing customers accounted~~

goodwill, primarily due to foreign currency translation

. During the six months ended March 31, 2022, the Company did not observe any triggering events or substantive changes in circumstances requiring the need for ~~15%~~an interim impairment assessment.

A summary of other intangible assets, net, subject to amortization is as follows:


	March 31, 2022				September 30, 2021
	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Manufacturing technologies, core products and cell lines	$	62,385	$	24,510	$	62,416	$	22,633
Trade names, licenses and patents		18,451		10,070		18,489		9,492
Customer lists, customer relationships and supply agreements		54,755		22,021		54,941		19,649
Non-compete agreements		110		42		110		31

Total	$	135,701	$	56,643	$	135,956	$	51,805

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The aggregate amortization expense for these other intangible assets was $2,483 and ~~19%~~$2,142 for the three months ended March 31, 2022 and 2021, respectively, and $4,966 and $4,363 for the six months ended March 31, 2022 and 2021, respectively. The estimated aggregate amortization expense for these other intangible assets for each of the ~~segment’s third-party revenues~~fiscal years through fiscal 2027 is as follows: remainder of fiscal 2022 – $4,960, fiscal 2023 – $9,905, fiscal 2024 – $9,900, fiscal 2025 – $9,895, fiscal 2026 – $8,900, and fiscal 2027 – $6,645.

11.	Leasing Arrangements

The Company is party to several operating leases, the majority of which are related to office, warehouse and manufacturing space. The related operating lease assets and obligations are reflected within

right-of-use

assets, net, current operating lease obligations, and long-term operating lease obligations on the Condensed Consolidated Balance Sheets. Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.

The lease costs for these operating leases reflected in our Condensed Consolidated Statements of Operations, as well as the

right-of-use

assets, net obtained during these periods in exchange for operating lease liabilities, are as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Lease costs within cost of sales	$	228	$	198	$	453	$	356
Lease costs within operating expenses		358		387		746		761
Right-of-use assets, net obtained in exchange for operating lease liabilities		2,803		612		3,021		692

In addition, the Company periodically enters into other short-term operating leases, generally with an initial term of twelve months or less. These leases are not recorded on the Condensed Consolidated Balance Sheets and the related lease expense is immaterial for the three and six months ended March 31, 2022 and 2021.

The Company often has options to renew lease terms, with the exercise of lease renewal options generally at the Company’s sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at our discretion. We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The discount rate implicit within our leases is generally not determinable and, therefore, the Company uses its incremental borrowing rate as the basis for its discount rate.

The weighted average remaining lease term for our operating leases and the weighted average discount rate used to measure our operating leases were as follows:


	March 31, 2022			September 30, 2021
	March 31, 2022			September 30, 2021
Weighted average remaining lease term		4.3 years			3.6 years
Average discount rate		3.4	%		3.2	%

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Maturities of lease liabilities by fiscal year for the Company’s operating leases were as follows as of March 31, 2022:


2022 (represents remainder of fiscal year)	$	1,173
2023		2,183
2024		1,775
2025		1,474
2026		890
Thereafter		792

Total lease payments		8,287
Less amount of lease payments representing interest		(574	)

Total present value of lease payments	$	7,713

Supplemental cash flow information related to the Company’s operating leases is as follows:


Six Months Ended March 31,	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,216	$	1,072

12.	Bank Credit Arrangements

The Company maintains a revolving credit facility with a commercial bank in an aggregate principal amount not to exceed $200,000, which expires in October 2026. Outstanding principal amounts bear interest at a fluctuating rate tied to, at the Company’s option, either the federal funds rate or LIBOR, resulting in an effective interest rate of 2.47% and 2.60% on the revolving credit facility during the three months ended March 31, 2022 and 2021, respectively, and 2.33% and 2.57% during the six months ended March 31, 2022 and 2021, respectively. In light of the interest being determined on a variable rate basis, the fair value of the borrowings under the revolving credit facility at both March 31, 2022 and September 30, 2021, approximates the current carrying value reflected in the Condensed Consolidated Balance Sheets of $25,000 and $60,000, respectively, which is consistent with a level 2 fair value measurement.

The revolving credit facility is collateralized by the business assets of the Company’s U.S. subsidiaries and requires compliance with financial covenants that limit the amount of debt obligations and require a minimum level of coverage of fixed charges, as defined in the revolving credit facility agreement. As of March 31, 2022, the Company was in compliance with all covenants.

13.	Contingent Obligations and Non-Current Liabilities

In connection with the acquisition of Exalenz Bioscience Ltd. (“Exalenz”) in fiscal 2020, the Company assumed several Israeli government grant obligations. The repayment of the grants, along with interest incurred at varying stated fixed rates based on LIBOR at the time each grant was received, is not dictated by an established repayment schedule. Rather, the grants and related interest are required to be repaid using 3% of the net revenues generated from the sales of BreathID products, with the timing of repayment contingent upon the level and timing of such revenues. In addition, the grants have no collateral or financial covenant provisions generally associated with traditional borrowing instruments. These obligation amounts total $5,588 and $5,814 as of March 31, 2022 and September 30, 2021, respectively, bearing interest at rates ranging from 0.58% to 2.02%.

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The grant obligations are reflected in the Condensed Consolidated Balance Sheets as follows:


	March 31, 2022		September 30, 2021
Current liabilities	$	675	$	638
Non-current liabilities	$	4,913	$	5,176

Additionally, the Company has provided certain post-employment benefits to its former Chief Executive Officer, and these obligations total $1,589 and $1,676 at March 31, 2022 and September 30, 2021, respectively. In addition, the Company is required by the governments of certain foreign countries in which we operate to maintain a level of accruals for potential future severance indemnity. These accruals total $713 and $754 at March 31, 2022 and September 30, 2021, respectively.

14.	National Institutes of Health Contracts

In December 2020, the Company entered into a

sub-award

grant contract with the University of Massachusetts Medical School as part of the National Institutes of Health Rapid Acceleration of Diagnostics (“RADx”) initiative to support the Company’s research and development of its diagnostic test for the

SARS-CoV-2

antigen. During fiscal 2021, the Company received $1,000 under the grant contract for reimbursement of eligible research and development expenditures, $200

and $1,000 of which was received during the three and six months ended March 31, ~~2017~~2021, respectively, and ~~2016, respectively.~~

is included within other income (expense

), net

in the Condensed Consolidated Statement of Operations for

those periods

On January 25, 2022, the Company entered into a contract to amend the Company’s second grant contract under the RADx initiative, which was originally effective February 1, 2021. The purpose of the grant is to support the Company’s manufacturing production

scale-up

and expansion to meet the demand for

COVID-19

testing, as well as the Company’s Revogene respiratory

panel

. The amended contract is a

-month

service contract through January 2023, with payment of up to $8,000 being made based on the Company achieving key milestones related to increasing its capacity to produce

COVID-19

tests and the Revogene respiratory

panel

. As of March 31, 2022, $1,500 has been received related to this contract and is reflected as a reduction in the cost of building and improvements on the Condensed Consolidated Balance Sheet

, in accordance with applicable accounting guidance.

15.	Reportable Segment and Major Customers Information

The Company’s reportable segments maintain separate financial information for which results of operations are evaluated on a regular basis by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company records the direct costs of business operations to the reportable segments, including allocations for certain corporate-wide costs such as treasury management, human resources and technology, among others. Corporate provides certain executive management and administrative services to each reportable segment. These services primarily include executive oversight by

non-segment-specific

executives, including the Board of Directors, along with certain other corporate-wide support functions such as insurance, legal and business development. The Company generally does not allocate these types of corporate expenses to the reportable segments.

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Reportable segment and corporate information for the interim periods is as follows:

   Diagnostics    Life
Science    Eliminations(1)    Total
Three Months Ended December 31, 2017

Net revenues -

Third-party
   $ 37,490    $ 14,793    $ —      $ 52,283
Inter-segment
   121    192    (313 )    —
Operating income
   5,291    2,784    (14 )    8,061
Goodwill (December 31, 2017)
   35,213    19,784    —      54,997
Other intangible assets, net (December 31, 2017)
   24,202    1,575    —      25,777
Total assets (December 31, 2017)
   179,943    72,480    (472 )    251,951
Three Months Ended December 31, 2016

Net revenues -

Third-party
   $ 33,808    $ 13,001    $ —      $ 46,809
Inter-segment
   79    125    (204 )    —
Operating income
   6,643    3,267    175    10,085
Goodwill (September 30, 2017)
   35,213    19,713    —      54,926
Other intangible assets, net (September 30, 2017)
   24,973    1,731    —      26,704
Total assets (September 30, 2017)
   180,226    69,938    (387 )    249,777


	Diagnostics			Life Science		Corporate (1)			Eliminations (2)			Total
Three Months Ended March 31, 2022
Net revenues -
Third-party	$	41,103		$	70,128	$	—		$	—		$	111,231
Inter-segment		113			32		—			(145	)		—
Operating income (loss)		1,589			40,286		(5,752	)		18			36,141
Goodwill (March 31, 2022)		94,528			19,511		—			—			114,039
Other intangible assets, net (March 31, 2022)		79,056			2		—			—			79,058
Total assets ( March 31, 2022)		355,754			116,090		—			(34	)		471,810

Three Months Ended March 31, 2021
Net revenues -
Third-party	$	31,949		$	53,315	$	—		$	—		$	85,264
Inter-segment		116			91		—			(207	)		—
Operating income (loss)		2,641			36,025		(4,481	)		16			34,201
Goodwill (September 30, 2021)		94,904			19,764		—			—			114,668
Other intangible assets, net (September 30, 2021)		84,149			2		—			—			84,151
Total assets (September 30, 2021)		339,208			110,536		—			(22	)		449,722

Six Months Ended March 31, 2022
Net revenues -
Third-party	$	74,307		$	125,265	$	—		$	—		$	199,572
Inter-segment		147			87		—			(234	)		—
Operating (loss) income		(174	)		66,888		(10,323	)		33			56,424

Six Months Ended March 31, 2021
Net revenues -
Third-party	$	62,270		$	115,911	$	—		$	—		$	178,181
Inter-segment		185			109		—			(294	)		—
Operating income (loss)		1,683			75,754		(8,600	)		28			68,865

(1)	Includes selected legal costs of $508 and $789 in the three and six months ended March 31, 2022, respectively, and $1,030 and $2,257 in the three and six months ended March 31, 2021, respectively.

(2)	Eliminations consist of inter-segment transactions.

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A reconciliation of reportable segment operating income (loss) to consolidated earnings before income taxes is as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
Operating income (loss):
Diagnostics segment	$	1,589		$	2,641		$	(174	)	$	1,683
Life Science segment		40,286			36,025			66,888			75,754
Eliminations		18			16			33			28

Total segment operating income		41,893			38,682			66,747			77,465
Corporate operating expenses		(5,752	)		(4,481	)		(10,323	)		(8,600	)
Interest income		2			6			3			15
Interest expense		(341	)		(472	)		(713	)		(1,006	)
RADx initiative grant income		0			200			0			1,000
Other, net		733			(883	)		572			(1,574	)

Consolidated earnings before income taxes	$	36,535		$	33,052		$	56,286		$	67,300

Transactions between reportable segments are accounted for at established intercompany prices for internal and management purposes, with all intercompany amounts eliminated in consolidation.

Net revenues generated by the Company’s three major Diagnostics segment product families – gastrointestinal, respiratory illnesses and blood chemistry – accounted for 30% and 28% of consolidated net revenues during the three months ended March 31, 2022 and 2021, respectively,

and

31% and 27% during the six months ended March 31, 2022 and 2021, respectively.

Individual Diagnostics or Life Science segment customers, including their affiliates, comprising

10% or more of reportable segment net revenues were as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
Diagnostics
Customer A		6	%		10	%		9	%		11	%
Customer B		9	%		10	%		10	%		10	%
Customer C		9	%		11	%		10	%		11	%

Life Science
Customer D		13	%		9	%		13	%		14	%
Customer E		22	%		2	%		22	%		2	%

During the three and six months ended March 31, 2022 and 2021, 0 individual Diagnostics segment customer accounted for 10% or more of consolidated net revenues, while one Life Science segment customer (Customer E above) comprised 14% of consolidated net revenues during

both

the three and six months ended March 31, 2022, and 1% of consolidated net revenues during the corresponding fiscal 2021 interim periods.

In addition, during both the three and six months ended March 31, 2022, the Life Science segment’s ten largest customers, including their affiliates, accounted for approximately 62% of Life Science segment net revenues and 39% of consolidated net revenues. During the three and six months ended March 31, 2021,

the

Life Science

segment’s ten largest customers accounted for approximately 48% of Life Science segment net revenues and

30%

of consolidated net revenues.

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Diagnostics or Life Science segment customer accounted for greater than 10% of consolidated accounts receivable as of March 31, 2022, while one Diagnostics segment customer (Customer B above) and one Life Science segment customer (Customer D above) accounted for approximately 12% and 10%, respectively, of consolidated accounts receivable as of September 30, 2021.

16.

~~Legal Matters~~

Income Taxes

~~On May 17, 2017, Meridian filed a complaint in the United States District Court~~

The effective rate for income taxes was approximately 21% and 22% for the ~~Southern District of Ohio, Western Division (Cincinnati) naming DiaSorin Inc. (“DiaSorin”) as a defendant. Meridian’s complaint alleges DiaSorin has breached the 2010Co-Development~~three and ~~License Agreement (the “Agreement”) between it~~six months ended March 31, 2022, respectively, and ~~Meridian relating to theco-development~~ ~~of certain tests~~20% and diagnostic products, pursuant to which Meridian disclosed certain trade secrets and proprietary information. The lawsuit underlying Meridian’s complaint alleges that DiaSorin breached the Agreement and used, and is currently using, Meridian’s proprietary information and therefore seeks injunctive relief to protect Meridian’s intellectual property and information with respect to its diagnostics products. Approximately $730 of expense related to this matter is included within the accompanying Condensed Consolidated Statement of Operations21% for the ~~fiscal quarter~~three and six months ended ~~December~~March 31, ~~2017.~~

~~Page 11~~

2021,

respectively.

17.	Subsequent Event

On ~~November 15, 2017, Barbara Forman filed~~April 30, 2022, the Company acquired substantially all of the assets of EUPROTEIN Inc. of North Brunswick, New Jersey (“EUPROTEIN”) for $4,250 in cash, of which $3,750 was paid at closing, with the remainder held back for final closing adjustments. EUPROTEIN offers custom development and production of high-quality bioresearch reagents, with a ~~class action complaint in the United States District Court for the Southern District~~particular focus on human and other mammalian proteins and recombinant monoclonal antibodies. The acquired assets of Ohio naming Meridian, its Chief Executive Officer and Chief Financial Officer (in their capacities as such) as defendants. The complaint alleges that Meridian made false and misleading representations concerning certain of Magellan’s lead test systems at or around the timeEUPROTEIN will be part of Meridian’s ~~acquisition~~Life Science segment and are expected to help the Company accelerate its pipeline of Magellan and subsequent thereto. The lawsuit underlying plaintiff’s class action complaint seeks compensatory damages, injunctive relief and attorneys’ fees to all members of the proposed class. Because the litigation and related discovery are in preliminary stages, we do not have sufficient information to determine or predict the ultimate outcome or estimate the range of possible losses, if any. Accordingly, no provision for litigation losses has been included within the accompanying Condensed Consolidated Statement of Operations for the fiscal quarter ended December 31, 2017.

On December 6, 2017, Michael Edelson filed a class action complaint in the United States District Court for the Southern District of Ohio naming Meridian, its Chief Executive Officer, Chief Financial Officer and certain members of Meridian’s Board of Directors and Audit Committee (in their capacities as such) as defendants. The complaint alleges that Meridian made false and misleading representations concerning certain of Magellan’s lead test systems at or around the time of Meridian’s acquisition of Magellan and subsequent thereto, and the complaint alleges that certain members of the Board of Directors and Audit Committee breached their fiduciary duties in their oversight of the Company’s public disclosures and corporate governance matters. The lawsuit underlying plaintiff’s class action complaint seeks compensatory damages, injunctive relief, equitable relief and attorneys’ fees to all members of the proposed class. Because the litigation and related discovery are in preliminary stages, we do not have sufficient information to determine or predict the ultimate outcome or estimate the range of possible losses, if any. Accordingly, no provision for litigation losses has been included within the accompanying Condensed Consolidated Statement of Operations for the fiscal quarter ended December 31, 2017.

new immunological reagents, while expanding recombinant capabilities.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Refer to “Forward-Looking Statements” following the Table of Contents in front of this Form
10-Q. In
the discussion that follows, all dollar amounts are in thousands (both tables and text), except per share data.

~~Following~~

The purpose of Management’s Discussion and Analysis is ~~a discussion and analysis of the financial statements and other statistical data that management believes will enhance the~~to provide an understanding of ~~Meridian’s~~the financial condition, changes in financial condition and results of ~~operations.~~operations of Meridian Bioscience, Inc. (“Meridian”, the “Company”, “We”). This discussion should be read in conjunction with the ~~financial statements and notes thereto beginning on page 1.~~

~~QUARTERLY HIGHLIGHTS~~

~~The first quarter of fiscal 2018 proved to be a successful quarter; a quarter highlighted by the following, the effects of which are discussed throughout this MD&A:~~

~~double-digit percentage revenue growth in both our Diagnostics and Life Science reportable segments compared to the fiscal 2017 first quarter;~~

~~significant executive leadership announcements of Mr. Jack Kenny as Meridian’s new CEO, and Mr. Jack Kraeutler continuing to serve the Company as Executive Chairman of the Board; and~~

~~U.S. Congress’ passage of the Tax Cuts and Jobs Act (the “tax reform act”).~~

~~Page 12~~

~~RESULTS OF OPERATIONS~~

~~Three Months Ended December 31, 2017~~

Net earnings for the first quarter of fiscal 2018 totaled $6,302, or $0.15 per diluted share, relatively flat compared to the net earnings for the first quarter of fiscal 2017 of $6,279, or $0.15 per diluted share. The fiscal 2018 first quarter results include $1,483 of costs associated with the transition to our new CEO and litigation costs (collectively, “CEO transition and litigation costs”) (see Note 9 of the accompanying Condensed Consolidated Financial ~~Statements), along with~~Statements and notes. It should be noted that the terms revenue and/or revenues are utilized throughout the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) to indicate net revenue and/or net revenues. In addition, throughout the MD&A, we refer to certain~~one-time~~ ~~tax effects~~ product tradenames and trademarks, which are protected under applicable intellectual property laws and are our property. Solely for convenience, these tradenames and trademarks are referred to without the

™

symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent of the ~~recently-enacted U.S. tax reform act. These items impacted earnings by $239, or less than $0.01 per diluted share on a net basis (see “USE OFNON-GAAP~~ ~~MEASURES” below). Consolidated revenues increased 12%~~law, our rights to ~~$52,283 for the first quarter of fiscal 2018 compared to the same period of the prior year (10% on a constant-currency basis).~~

Revenues for the Diagnostics segment for the first quarter of fiscal 2018 increased 11% compared to the first quarter of fiscal 2017 (10% on a constant-currency basis), comprised of a 12% increase in molecular assay productsthese tradenames and a 10% increase in immunoassay and lead testing products. With a 12% increase in its molecular components business and a 15% increase in its immunoassay components business, revenues of our Life Science segment increased by 14% during the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017, increasing 12% on a constant-currency basis.

Our outlook for Magellan’s LeadCare II testing volume continues to be healthy. In the time period since the FDA released its Safety Notification (which pertained to venous blood lead testing performed on the systems produced by Magellan), nearly 700 new LeadCare II systems utilizing capillary blood samples have been placed in physician offices and clinics. Quality System remediation costs in the first quarter of fiscal 2018 associated with the Magellan FDA matter totaled approximately $500~~pre-tax,~~ ~~resulting in a total impact of less than $0.01 on diluted earnings per share for the quarter. Remediation costs in the remainder of fiscal 2018 are expected to be approximately $250pre-tax,~~ or less than $0.01 impact on diluted earnings per share. Remediation costs relate primarily to professional fees for regulatory consultants and periodic Quality System audits. In the course of remediation, Magellan may encounter additional matters that warrant notifications to the FDA and/or customers regarding the use of its products. At this time, we do not believe that any such notifications would impact the ability to use the LeadCare systems with capillary blood samples. In addition, at this time, we do not anticipate any further significant impact on our results of operations or financial condition.

~~USE OFNON-GAAP~~ ~~MEASURES~~

We have supplemented our reported GAAP financial information with information on net earnings, basic earnings per share and diluted earnings per share excluding the effects of CEO transition costs, litigation costs and certain~~one-time~~ ~~tax effects of the tax reform act, each of which is anon-GAAP~~ ~~measure. We have provided in the tables below reconciliations of net earnings, basic earnings per share and diluted earnings per share, with and without the effects of thesenon-routine~~ ~~items, for the fiscal quarters ended December 31, 2017 and December 31, 2016.~~

~~We believe that this information is useful to those who read our financial statements and evaluate our operating results because:~~

~~These measures help to appropriately evaluate and compare the results of operations from period to period by removing the impacts of thesenon-routine~~ ~~items; and~~

These measures are used by our management for various purposes, including evaluating performance against incentive bonus achievement targets, comparing performance from period to period in presentations to our board of directors, and as a basis for strategic planning and forecasting.

~~Thesenon-GAAP~~ ~~measures may be different fromnon-GAAP~~ ~~measures used by other companies. In addition, thesenon-GAAP~~ ~~measures are not based on any comprehensive set of accounting rules or principles.Non-GAAP~~ measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP. Therefore, these measures should only be used to evaluate our results in conjunction with corresponding GAAP measures.

~~Page 13~~

   Three Months Ended
December 31,
   2017    2016
Net Earnings -

U.S. GAAP basis
   $ 6,302    $ 6,279
CEO transition and litigation costs (1)
   1,080    —
One-time benefit from tax law change
   (1,695 )    —
Repatriation transition tax
   854    —




Adjusted earnings
   $ 6,541    $ 6,279




Net Earnings per Basic Common Share -

U.S. GAAP basis
   $ 0.15    $ 0.15
CEO transition and litigation costs (1)
   0.03    —
One-time benefit from tax law change
   (0.04 )    —
Repatriation transition tax
   0.02    —




Adjusted Basic EPS (2)
   $ 0.15    $ 0.15




Net Earnings per Diluted Common Share -

U.S. GAAP basis
   $ 0.15    $ 0.15
CEO transition and litigation costs (1)
   0.03    —
One-time benefit from tax law change
   (0.04 )    —
Repatriation transition tax
   0.02    —




Adjusted Diluted EPS (2)
   $ 0.15    $ 0.15

~~(1)~~

~~These CEO transition and litigation costs are net of income tax effects of $403, which were calculated using the effective tax rates of the jurisdictions in which the costs were incurred.~~

~~(2)~~

~~Neither Net Earnings per Basic Common Share nor Net Earnings per Diluted Common Share sum to their respective Adjusted EPS amounts due to rounding.~~

~~Page 14~~

~~REVENUE OVERVIEW~~

~~Below are analyses of the Company’s revenue, provided for each of the following:~~

trademarks.

Reportable ~~Segment & Geographic Region~~Segments

~~By Product Platform/Type~~

~~Revenue Overview – By Reportable Segment & Geographic Region~~

Our reportable segments are Diagnostics and Life ~~Science, with~~Science. The Diagnostics segment consists of manufacturing operations for infectious disease products in Cincinnati, Ohio; Quebec City, Canada; and Modi’in, Israel; and manufacturing operations for blood chemistry products in Billerica, Massachusetts. These diagnostic test products are sold and distributed in the countries comprising North and Latin America (the “Americas”); Europe, Middle East and Africa (“EMEA”); and other countries outside of the Americas and EMEA (rest of the world, or “ROW”). ~~A full description~~The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany, and the sale and distribution of bulk antigens, antibodies, immunoassay blocking reagents, various Polymerase Chain Reaction (“PCR”) and isothermal amplification master mixes, and bioresearch reagents domestically and abroad, including a sales and business development facility, with outsourced distribution capabilities, in Beijing, China to further pursue growing revenue opportunities in Asia.

Recent Developments

Impact of

COVID-19

Pandemic

Starting in the latter half of fiscal 2020 and continuing to the date of this filing, the ongoing

COVID-19

pandemic has had both positive and negative effects on our business.

Our Life Science segment’s products have been well positioned to respond to in vitro device (“IVD”) manufacturers’ increased demand for reagents used in the manufacture of molecular, rapid antigen and serology tests. Consequently, our Life Science segment has consistently delivered significantly higher levels of net revenues and operating income than those achieved prior to the

COVID-19

pandemic, with the peak to date in such levels occurring during the second quarter of fiscal 2022.

Page 18

Table of Contents

Our Diagnostics segment, on the other hand, has generally been negatively impacted by health systems’ increased focus on

COVID-19

testing over traditional infectious disease testing. The impacts of the

COVID-19

pandemic are most dramatically evident in the 34% year-over-year decline in revenues from respiratory illness assays in fiscal 2021, following flat year-over-year revenue levels experienced in fiscal 2020. Reflecting significant net revenues from the sale of

SARS-CoV-2

tests, as well as what we believe to be a continuation of a return to

pre-pandemic

activity levels, during the second quarter of fiscal 2022, revenues from respiratory illness assays were 157% higher than the second quarter of fiscal 2021, a marked improvement over the aforementioned 34% decline in fiscal 2021.

Despite these recent

COVID-19

pandemic related trends, due to the many uncertainties surrounding the

COVID-19

pandemic, we can provide no assurances with respect to our views of the longevity or severity of the positive or negative impacts to our consolidated financial condition of the ongoing

COVID-19

pandemic.

Employee Safety

While our employee base in the U.S. has returned to working

on-site

at our facilities, we have implemented a hybrid work-from-home program for certain personnel, and we continue to utilize a work-from-home process as needed on a

site-by-site

basis outside the U.S. for those employees whose

on-site

presence has been deemed to be

non-essential.

We also continue to utilize enhanced cleaning and sanitizing procedures and provide additional personal hygiene supplies at all our sites. We have implemented policies for employees to adhere to Centers for Disease Control and Prevention (“CDC”) guidelines on social distancing, and similar guidelines by authorities outside the U.S. To date, we have been able to manufacture and distribute products globally, and all our sites have continued to operate with little, if any, impact on shipments to customers to date. As the

COVID-19

pandemic continues, along with continuing governmental restrictions which vary by locale and jurisdiction, there is an increased risk of employee absenteeism, which could materially impact our operations at one or more sites. To date, the steps we have taken, including our work-from-home processes, have not materially impacted the Company’s financial reporting systems, internal controls over financial reporting or disclosure controls.

Supply Chains

Supply chains supporting our products have generally remained intact, providing access to sufficient inventory of the key materials needed for manufacturing. While we have experienced extended lead times for certain select raw materials, delays and allocations for raw materials have to date been limited and have not had a material impact on our results of operations. From time to time, we identify alternative suppliers to address the risk of a current supplier’s inability to deliver materials in volumes sufficient to meet our manufacturing needs; or we may choose to purchase certain materials in bulk volumes where we have supply chain scarcity concerns. It remains possible that we may experience some sort of interruption to our supply chains, and such an interruption could materially affect our ability to timely manufacture and distribute our products and unfavorably impact our results of operations.

We are also starting to experience input cost inflation, including materials and labor. Pricing actions and supply chain productivity initiatives have mitigated and are expected to continue to mitigate some of these inflationary pressures, but we may not be successful in fully offsetting these incremental costs, which could have an impact on the Company’s consolidated results of operations and cash flows during 2022 and beyond.

Product Development and Clinical Trials

Our Diagnostics segment’s new product development programs are continuing to progress at a slower pace than normal, due in part to the prevalence of certain infectious diseases having been lower than normal during the

COVID-19

pandemic. These matters continue to impact our timing for filing applications for product clearances with the U.S. Food and Drug Administration (“FDA”), as well as related timing of FDA clearances of such filings. Additionally, the ongoing

COVID-19

pandemic has slowed and could continue to slow down our efforts to expand our product portfolio, impacting the speed with which we are able to bring additional products to market.

Product Demand

Our Life Science segment manufactures, markets and sells a number of molecular and immunological reagents to IVD customers, including those who are making both molecular and immunoassay

COVID-19

tests. While there have been

quarter-to-quarter

fluctuations in demand throughout the

COVID-19

pandemic, since late in the second quarter of fiscal 2020, we have generally experienced unprecedented demand for certain of our ~~segments is set forth~~molecular reagents (e.g., ribonucleic acid (“RNA”) master mixes and nucleotides). While we expect demand to continue to exceed

pre-COVID-19

pandemic levels, we do not expect demand in ~~Note 8~~the second half of fiscal 2022 to be as high as that of the ~~accompanying~~first half, reflecting an anticipated decline in testing. These expectations will certainly be impacted by infection rates and the responses to such levels of infection varying by country based on their individual

COVID-19

case statistics, potential seasonality of infection rates and vaccine programs.

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Table of Contents

Our Diagnostics segment manufactures, markets and sells a number of molecular, immunoassay, blood chemistry and urea breath tests

for various infectious diseases and blood-lead levels. Sales volumes for a number of these assays have been adversely affected by the

COVID-19

pandemic over the past two years, as such assays are often used in

non-critical

care settings; however, we have seen indications of a return to more normal

pre-pandemic

levels. The

COVID-19

pandemic also has depressed instrument orders and placements for our BreathID, Curian and Revogene platforms. Order activity for our Revogene platform was affected by the delay in obtaining emergency use authorization (“EUA”) for our

SARS-CoV-2

assay, as customers took a “wait and see” approach throughout our entire EUA application process. We received the EUA on November 9, 2021, but have not yet begun to ship product, as our

SARS-CoV-2

assay required enhancement to detect the recently prevalent Omicron variants of the

COVID-19

infection. We completed validation of these changes during the second quarter of fiscal 2022 and submitted the required information to the FDA. The FDA has also requested the completion of additional clinical studies, which are currently under way. Despite the situation encountered with our EUA application for the

SARS-CoV-2

assay, and the delay in shipment due to the Omicron variant related enhancements, we have proceeded with the process of increasing our capacity to produce these tests, as well as other tests on the Revogene platform, at our facilities in Quebec and Cincinnati. Specifically, we have: (i) added a second production line at our Quebec manufacturing facility; (ii) installed a production line in a leased facility near our corporate headquarters in Cincinnati; and (iii) are in the process of installing an additional production line in the Cincinnati leased facility. With approximately $11,700 expended on these expansion efforts through March 31, 2022, we expect them to be completed during calendar 2022 at a total cost of approximately $21,300, which is expected to be partially offset by the monies received under the National Institutes of Health Rapid Acceleration of Diagnostics (“RADx”) initiative grant entered into on February 1, 2021, and as amended on January 25, 2022, $1,500 of which had been received as of March 31, 2022 (see Note 14,

“National Institutes of Health Contracts”

of the Condensed Consolidated Financial ~~Statements.~~

Statements for further discussion).

Critical Accounting Estimates

As of and for the three and six months ended March 31, 2022, there were no significant changes to our critical accounting estimates, as outlined in our Annual Report on Form

10-K

as of and for the year ended September 30, 2021, filed with the SEC on November 23, 2021.

Lead Testing Matters

On September 1, 2021, the Company’s wholly owned subsidiary Magellan announced the expansion of the Class I voluntary recall of its LeadCare test kits for the detection of lead in blood, which it had initiated in May 2021 after identifying an ongoing issue with the testing controls included in certain manufactured lots of its LeadCare test kits. As a result of the identified issue, impacted test kit lots could potentially underestimate blood lead levels when processing patient blood samples. Although it was initially believed that the root cause of the issue related to the plastic containers used for the treatment reagent, additional studies have indicated that the root cause relates to the third-party-sourced cardboard trays that hold the treatment reagent containers. Upon correction of the identified supplier issue, shipment of product resumed during February 2022. The Company continues to work closely with the FDA in its execution of the recall activities, which include Magellan notifying customers and distributors affected by the recall and providing instructions for the return of impacted test kits. The evaluation of the recall and the related notification process are ongoing. Of the approximate $5,100 estimated and accrued as of September 30, 2021 to cover the estimated costs of the recall, approximately $3,375 remains accrued and is reflected in the Condensed Consolidated Balance Sheet as of March 31, 2022. Anticipated recall-related costs primarily include product replacement and/or refund costs, mailing/shipping costs, attorneys’ fees and other miscellaneous costs.

As previously disclosed, on April 17, 2018, the Company’s wholly owned subsidiary Magellan received a subpoena from the U.S. Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlined documents to be produced, and the Company is cooperating with the DOJ in this matter. The Company maintains rigorous policies and procedures to promote compliance with applicable regulatory requirements and is working with the DOJ to promptly respond to the subpoena, including responding to additional information requests that have followed receipt of the subpoena in April 2018. The Company has executed tolling agreements to extend the statute of limitations. In March and April 2021, the DOJ issued two subpoenas calling for witnesses to testify before a federal grand jury related to this matter. The March 2021 subpoena was issued to a former employee of Magellan, and the April 2021 subpoena was issued to a current employee of Magellan. In September and October 2021, the DOJ issued additional subpoenas to individuals seeking testimony and documents in connection with its ongoing investigation. It is the Company’s understanding that multiple witnesses have testified before the federal grand jury and the DOJ’s investigation is ongoing. Discussions continue with the DOJ to explore resolution of the matter. The Company cannot predict when the investigation will be resolved, the outcome of the investigation, or its potential impact on the Company. Approximately $508 and $1,030 of expense for attorneys’ fees related to this matter is included within the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021, respectively, and $789 and $2,257, for the six months ended March 31, 2022 and 2021, respectively.

Page 20

Table of Contents

Having issued a Warning Letter to Magellan on October 23, 2017 related to the Billerica location’s manufacturing of LeadCare testing systems for venous blood samples (the “Warning Letter”), on August 3, 2021, the FDA sent Magellan a

close-out

letter for the Warning Letter. The FDA’s

close-out

letter notified Magellan that the FDA has completed an evaluation of Magellan’s corrective actions in response to the FDA’s Warning Letter, and based on the FDA’s evaluation, Magellan has addressed the issues identified in the Warning Letter. The FDA’s

close-out

letter also stated that future FDA inspections of Magellan and regulatory activities will further assess the adequacy and sustainability of Magellan’s corrections. For a more detailed discussion of this matter, see the “Lead Testing Matters” section beginning on page 29 of the Company’s fiscal 2021 Annual Report on Form

10-K,

filed with the SEC on November 23, 2021.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2022

Net earnings for second quarter of fiscal 2022 increased 9% to $28,752, or $0.65 per diluted share, from net earnings for the second quarter of fiscal 2021 of $26,302, or $0.60 per diluted share. The level of net earnings in the second quarter of fiscal 2022 reflects primarily the increase in net revenues in our Life Science segment, partially offset by the overall increase in operating expenses described in the Operating Expenses section below. As it relates to our Life Science segment net revenues, a significant number of our Life Science segment customers now use our molecular reagents in multiple tests, including

non-COVID-19

related tests, making it increasingly difficult to accurately estimate the portion of molecular reagent sales related specifically to

COVID-19.

As a result, we are no longer reporting the portion of Life Science segment net revenues related to

COVID-19.

Such net revenues were identified and reported throughout fiscal 2021 and totaled approximately $31,000 in the second quarter of fiscal 2021.

Consolidated net revenues for the second quarter of fiscal 2022 totaled $111,231, an increase of 30% compared to the second quarter of fiscal 2021.

Net revenues from the Diagnostics segment for the second quarter of fiscal 2022 increased 29% compared to the second quarter of fiscal 2021, comprised primarily of an in increase in sales of

non-molecular

assay products including the addition of sales of the BreathTek product, which was acquired July 31, 2021. The second quarter of fiscal 2022 represents the fourth consecutive quarter our Diagnostics segment has shown positive revenue growth versus the same quarter in the prior fiscal year. Our Diagnostics segment generated $1,589 of operating income for the second quarter of fiscal 2022, compared to $2,641 of operating income in the second quarter of fiscal 2021, reflecting the increase in net revenues being offset by the decrease in gross profit margins and increase in operating expenses described in the respective sections below.

With a 7% increase in net revenues from molecular reagent products and a 91% increase in net revenues from immunological reagent products, including

COVID-19

related products, net revenues for our Life Science segment increased 32% during the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021. Our Life Science segment generated $40,286 of operating income for the second quarter of fiscal 2022, an increase of $4,261 over the second quarter of fiscal 2021, primarily due to the increase in net revenues being partially offset by the decrease in gross profit margins, resulting from the immunological reagent products representing a higher percentage of net revenues, and the increase in operating expenses, as described in the respective sections below.

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Table of Contents

Six Months Ended March 31, 2022

Net earnings for the six months ended March 31, 2022 decreased 17% to $44,092, or $1.00 per diluted share, from net earnings for the comparable fiscal 2021 period of $53,081, or $1.21 per diluted share. The level of net earnings in the first six months of fiscal 2022 reflects primarily: (i) the decrease in gross profit margins resulting from immunological reagent products representing a higher percentage of net revenues in the fiscal 2022 period, compared to higher margin molecular reagent products in the fiscal 2021 period; and (ii) the overall increase in operating expenses described in the Operating Expenses section below. As previously noted, we are no longer reporting the portion of Life Science segment net revenues related to

COVID-19,

noting that such net revenues totaled approximately $74,000 in the first six months of fiscal 2021.

Consolidated net revenues increased 12% to $199,572 for the first six months of fiscal 2022 compared to the same period of the prior year.

Diagnostics segment net revenues increased 19%, comprised of a 2% increase in sales of molecular assay products and a 22% increase in sales of

non-molecular

assay products including the addition of sales of the BreathTek product, which was acquired July 31, 2021. Our Diagnostics segment generated a $174 operating loss for the first six months of fiscal 2022, compared to $1,683 of operating income in the first six months of fiscal 2021, reflecting the increase in net revenues being offset by the decrease in gross profit margins and increase in operating expenses described in the respective sections below.

With a 14% decrease in net revenues from molecular reagent products and a 66% increase in net revenues from immunological reagent products, including

COVID-19

related products, net revenues for our Life Science segment increased 8% during the first six months of fiscal 2022 compared to the same period of the prior year. Our Life Science segment generated $66,888 of operating income for the first six months of fiscal 2022, a decrease of $8,866 from the first six months of fiscal 2021, primarily due to the increase in net revenues being partially offset by the decrease in gross profit margins, resulting from the aforementioned mix of products sold, and the increase in operating expenses, as described in the respective sections below.

REVENUE OVERVIEW

Below are analyses of the Company’s net revenues, provided for each of the following:

By Reportable Segment & Geographic Region

By Product Platform/Type

Revenue Overview- By Reportable Segment & Geographic Region

Revenues for the Diagnostics segment, in the normal course of business, may be affected from quarter to quarter by buying patterns of major distributors, seasonality and ~~the~~ severity of seasonal diseases and outbreaks (including the ongoing

COVID-19

pandemic), and foreign currency exchange rates. Revenues for the Life Science segment, in the normal course of business, may be affected from quarter to quarter by buying patterns of major IVD manufacturing customers, severity of disease outbreaks (including the ongoing

COVID-19

pandemic), and foreign currency exchange rates. ~~We believe that~~

See the ~~overall breadth~~“Revenue Disaggregation” section of ~~our product lines serves to reduce the variability in consolidated revenues due to these factors.~~

   Three Months Ended December 31,
   2017 2016 Inc (Dec)
Diagnostics -

Americas
   $ 31,462 $ 27,569 14 %
EMEA
   5,341 5,662 (6 )%
ROW
   687 577 19 %


Total Diagnostics
   37,490 33,808 11 %


Life Science -

Americas
   5,351 5,399 (1 )%
EMEA
   5,106 4,898 4 %
ROW
   4,336 2,704 60 %


Total Life Science
   14,793 13,001 14 %


Consolidated
   $ 52,283 $ 46,809 12 %


% of total revenues -

Diagnostics
   72 % 72 %
Life Science
   28 % 28 %


Total
   100 % 100 %


Ex-Americas
   30 % 30 %

Note 4,

“Revenue ~~Overview – By Product Platform/Type~~

~~The revenues generated by each of our reportable segments result primarily from the sale~~ Recognition”

of the ~~following segment-specific categories~~Condensed Consolidated Financial Statements for detailed revenue disaggregation information.

Page 22

Table of ~~products:~~

~~Diagnostics~~

~~Molecular assays that operate on our~~~~illumi~~~~gene~~ ~~platform~~

~~Immunoassays and lead tests on multiple technology platforms~~

~~Life Science~~

~~Molecular components~~

~~Immunoassay components~~

~~Page 15~~

~~Revenues for each product platform/type, as well as its relative percentage of segment revenues, are shown below.~~

   Three Months Ended December 31,
   2017 2016 Inc (Dec)
Diagnostics -

Molecular assays
   $ 8,668 $ 7,711 12 %
Immunoassays & lead tests
   28,822 26,097 10 %


Total Diagnostics
   $ 37,490 $ 33,808 11 %


Life Science -

Molecular components
   $ 5,705 $ 5,116 12 %
Immunoassay components
   9,088 7,885 15 %


Total Life Science
   $ 14,793 $ 13,001 14 %


% of Diagnostics revenues -

Molecular assays
   23 % 23 %
Immunoassays & lead tests
   77 % 77 %


Total Diagnostics
   100 % 100 %


% of Life Science revenues -

Molecular components
   39 % 39 %
Immunoassay components
   61 % 61 %


Total Life Science
   100 % 100 %

Contents

Following is a discussion of the net revenues generated by ~~each of~~ these product platforms/~~types:~~

types and/or disease states:

Diagnostics Segment Products

~~Molecular Assay Products~~

~~Revenues for our~~~~illumi~~~~gene~~ ~~molecular platform~~

The Diagnostics segment’s overall growth in net revenues of ~~products increased 12% to $8,668 for~~29% and 19% during the second quarter and first ~~quarter~~six months of fiscal ~~2018 (also 12% on a constant-currency basis). This increase~~2022, respectively, compared to the same periods of fiscal 2021, primarily ~~reflects strong revenue~~results from the combined net effects of the following:

Volume growth in ~~our respiratory-related~~the gastrointestinal products ~~and a continuation~~benefitting from sales of the ~~revenue stabilization trend for our~~~~C. difficile~~ ~~tests over the last four quarters.~~

~~We have over 1,650 customer account placements. Of these account placements, over 1,375 accounts have completed evaluations~~BreathTek product, acquired on July 31, 2021 (approximately $5,500 and ~~validations and are regularly purchasing product, with the balance~~$11,100 of our account placements being in some stage of product evaluation and/or validation. Of our account placements, we have approximately 600 accounts that are regularly purchasing, evaluating and/or validating two or more assays. Increasing the number of customers utilizing two or more assays is a key objective, as we believe broader menu utilization lessens the risk of displacement by competitors.

We continue to invest in new product development for our molecular testing platform, and this platform now has nine commercialized tests spanning hospital acquired infections, women’s health, respiratory, sexually transmitted diseases, and tropical diseases. As of December 31, 2017, our~~illumi~~~~gene~~ ~~Malaria test has been placed in nearly 175 accounts~~net revenues from BreathTek in the EMEA region for use as a screening test for travelers returning to Europe from endemic areas in Africa. Our efforts to develop market channels in the endemic areas of Africa continue, as we work to convince policy-makers of the advantages of a more accurate molecular test to assist in efforts to eradicate malaria.

~~We believe that the diagnostic testing market, particularly in the U.S., is continuing to selectively move away from culture~~second quarter and immunoassay testing to molecular testing for diseases where there is a favorable cost/benefit position for the total cost of health care. While this market is competitive, with molecular companies such as Cepheid and Becton Dickinson, and others such as Quidel, Luminex and Abbott (Alere division), we believe we are well-

~~Page 16~~

~~positioned. Our simple,easy-to-use,~~~~illumi~~~~gene~~ ~~platform, with its expanding menu, requires no expensive equipment purchase and little to no maintenance cost. We believe these features, along with its small footprint and the performance of the~~~~illumi~~~~gene~~ ~~assays, make~~~~illumi~~~~gene~~ an attractive molecular platform for any size hospital or physician office laboratory that runs moderately-complex tests. We continue to invest in the development of additional assays for this platform and expect a test for congenital cytomegalovirus (CMV), a leading cause of deafness in infants, to be our next~~FDA-cleared~~ ~~test on the~~~~illumi~~~~gene~~~~platform.~~

~~Immunoassay and Lead Testing Products~~

~~Revenues from our Diagnostics segment’s immunoassay and lead testing products increased 10% in the~~ first ~~quarter~~six months of fiscal ~~2018. These results reflect increased revenues~~2022, respectively);

Volume growth in ~~our~~~~H. pylori~~~~and other immunoassay product lines, partially offset by decreased revenue from Magellan’s lead testing products.~~

~~During the first quarter~~sales of ~~fiscal 2018, revenues from our~~~~H. pylori~~respiratory illness products, ~~increased 24% (22% on a constant-currency basis) to $8,860,~~comprised of tests for Group A Strep, Mycoplasma pneumonia, Influenza, Pertussis and

SARS-CoV-2,

among others, reflecting the ongoing conversion of serology testing to our antigen tests and buying patterns of certain customers. We continue to believe there are ongoing benefits to be realized from our partnerships with managed care companies in promoting (i) the health and economic benefits of a test and treat strategy; (ii) changes in policies that discourage the use of traditional serology methods and promote the utilization of active infection testing methods; and (iii) physician behavior movement away from serology-based testing and toward direct antigen testing. A significant amount of the~~H. pylori~~ product revenues are sales to reference labs, whose buying patterns may not be consistent from period to period. During fiscal 2017, we also introduced capabilities to identify resistance to Clarithromycin, the antibiotic commonly used to treat~~H. pylori.This is currently available in~~ an ~~Analyte Specific Reagent (ASR) format. We believe that partnering the ability to diagnose~~~~H. pylori~~ ~~and identify resistance provides a competitive advantage.~~

~~The patents for our~~~~H. pylori~~ ~~products, owned by us, expired in May 2016 in the U.S. and in May 2017 in countries outside the U.S. We expect competition with respect to our~~~~H. pylori~~ ~~products to~~ increase in the ~~near future, as we currently market the onlyFDA-cleared~~ ~~tests to detect~~~~H. pylori~~ ~~antigen in stool samples in the U.S. market. Such competition may have an adverse impact on our selling prices~~testing for these illnesses compared to the quarterly and

year-to-date

fiscal 2021 periods (total increases in respiratory illness products ~~or our ability~~compared to retain business at prices acceptable to us, and consequently, adversely affect our future results of operations and liquidity, including revenues and gross profit. In order to mitigate competition, our product development pipeline includes multiple new product initiatives for the detection of~~H. pylori~~.We are unable to provide assurances that we will be successful with any mitigation strategy or that any mitigation strategy will prevent an adverse effect on our future results of operations and liquidity, including revenues and gross profit.

~~During the first quarter of fiscal 2018, revenues from our other immunoassay products (including~~~~C. difficile~~, foodborne and respiratory) increased 16% (14% in constant-currency) to $15,544. Although benefiting from the effects of strong seasonal respiratory sales, the extension of the growth experienced during the second half of fiscal 2017 continues to support our belief that this portion of our business has stabilized and is positioned for continued future growth.

Revenues from Magellan’s sale of products to test for elevated levels of lead in blood totaled $4,159 during the fiscal 2018 first quarter. This level of revenues reflects a 20% decrease from the three-month period ended December 31, 2016, primarily resulting from (i) the effect of the prior year periods of 157% and 87% in the second quarter ~~including an international bulk kit purchase that was not repeated during~~and first six months of fiscal 2022, respectively); and

Volume declines from sales of blood chemistry products due to the ~~current year quarter;~~ongoing LeadCare product recall, which commenced in May 2021, reflecting the resumption of product shipment in February 2022 ($933 and ~~(2) decreased revenue from lead testing systems utilizing venous blood samples,~~$5,250 decrease in ~~connection with~~net revenues compared to the ~~FDA matter noted above.~~

~~Page 17~~

second quarter and first six months of fiscal 2021, respectively).

Life Science Segment Products

During the second quarter and first ~~quarter~~six months of fiscal ~~2018,~~2022, net revenues ~~from~~for our Life Science segment increased ~~14%~~32% and 8%, ~~with revenues from molecular component sales increasing 12% from~~respectively, over the comparable fiscal ~~2017 quarter and~~2021 periods. The level of net revenues ~~from immunoassay component sales increasing 15%. Our molecular component business’ growth was impacted by~~during the ~~movement in currency exchange rates since the first~~second quarter of fiscal ~~2017, with revenues increasing 7% on a constant-currency basis over~~2022 was higher than that of any quarter during the first quarter of fiscal 2017. Our Life Science segment continued to benefit from (i) increased revenues in the steadily-expanding tropical disease product family, with sales of such products increasing 20% over the fiscal 2017 first quarter to approximately $1,300 in the first quarter of fiscal 2018;

COVID-19

pandemic, and (ii) increased revenue from sales into China, with such sales totaling approximately $1,500 during first quarter of fiscal 2018 (approximately $200 in the molecular components business and $1,300 in the immunoassay components business) – representing an approximate 115% increase over the first quarter of fiscal 2017.

significantly higher than

pre-pandemic

levels.

Significant Customers

Revenue concentrations related to certain customers within our Diagnostics and Life Science segments are set forth in Note 8 15,

“Reportable Segment and Major Customers Information”

of the ~~accompanying~~ Condensed Consolidated Financial Statements.

Gross Profit

   Three Months Ended December 31,
   2017 2016 Change
Gross Profit
   $ 31,786 $ 29,039 9 %
Gross Profit Margin
   61 % 62 % -1 point

~~The~~


	Three Months Ended March 31,									Six Months Ended March 31,
	2022			2021			Change			2022			2021			Change
Gross profit	$	68,477		$	57,772			19	%	$	117,636		$	119,320			(1	)%
Gross profit margin		62	%		68	%		-6 points			59	%		67	%		-8 points

Overall gross profit ~~decreases experienced~~margins during fiscal 2022 have been unfavorably impacted by a decline in net revenues from our Life Science segment’s molecular reagent products, which are some of our highest margin products. During both the second quarter and first six months of fiscal 2022, approximately 36% of consolidated net revenues related to sales of molecular reagent products, compared to approximately 44% and 47% during the comparable periods of fiscal 2021, respectively.

Additionally, overall gross profit margins in fiscal ~~2018~~2022 have been unfavorably impacted in our Diagnostics segment by the previously discussed LeadCare product recall (see “Lead Testing Matters” above) and production capacity

ramp-up

costs at our Cincinnati and Quebec Revogene manufacturing facilities.

Page 23

Table of Contents

Operating Expenses – Segment Detail and Corporate


	Three Months Ended March 31,
	Research & Development		Selling & Marketing		General & Administrative		Other			Total Operating Expenses
Fiscal 2021:
Diagnostics	$	5,478	$	5,220	$	6,333	$	(2,989	)	$	14,042
Life Science		587		1,320		3,141		—			5,048
Corporate		—		—		3,451		1,030			4,481

Total Expenses (2021 Quarter)	$	6,065	$	6,540	$	12,925	$	(1,959	)	$	23,571

Fiscal 2022:
Diagnostics	$	5,072	$	5,678	$	8,326	$	—		$	19,076
Life Science		619		1,836		4,985		68			7,508
Corporate		—		—		5,244		508			5,752

Total Expenses (2022 Quarter)	$	5,691	$	7,514	$	18,555	$	576		$	32,336


	Six Months Ended March 31,
	Research & Development		Selling & Marketing		General & Administrative		Other			Total Operating Expenses
Fiscal 2021:
Diagnostics	$	10,548	$	10,948	$	11,857	$	(1,942	)	$	31,411
Life Science		1,168		2,613		6,663		—			10,444
Corporate		—		—		6,343		2,257			8,600

Total Expenses (2021 Year-to-Date)	$	11,716	$	13,561	$	24,863	$	315		$	50,455

Fiscal 2022:
Diagnostics	$	10,628	$	11,687	$	14,620	$	—		$	36,935
Life Science		1,257		3,568		9,061		68			13,954
Corporate		—		—		9,534		789			10,323

Total Expenses (2022 Year-to-Date)	$	11,885	$	15,255	$	33,215	$	857		$	61,212

Compared to the prior year periods, operating expenses increased $8,765 to $32,336 in the second quarter of fiscal 2022 and increased $10,757 to $61,212 in the first six months of fiscal 2022. Major components of these increases were as follows:

Increased Selling & Marketing costs in both the Diagnostics and Life Science segments, primarily ~~result from~~reflecting the effects of filling certain open positions and the easing of certain travel and meeting restrictions imposed during the prior year in connection with the

COVID-19

pandemic;

Increased General & Administrative costs, primarily reflecting the combined effects of ~~mix~~additional investment in incentive compensation tied to the Company’s financial performance, the timing of ~~products sold~~certain outside services costs and increased commercial insurance costs for Directors & Officers and Property & Casualty coverages; and

A $2,989 and $1,942 year-over-year increase in net expense within our Diagnostics segment resulting from adjustments to the fair value
of acquisition consideration in the second quarter and first six months of fiscal 2021, respectively.

Offsetting these increases was lower spending on selected legal costs.

Page 24

Table of Contents

Operating Income

Compared to the prior year periods, operating ~~segment mix.~~

~~Operating Expenses~~

   Research &
Development Selling &
Marketing General &
Administrative Other Total Operating
Expenses
Fiscal 2017 First Quarter:

Diagnostics
   $ 2,973 $ 5,494 $ 5,805 $ —   $ 14,272
Life Science
   624 2,124 1,934 —   4,682


Total 2017 First Quarter Expenses
   $ 3,597 $ 7,618 $ 7,739 $ —   $ 18,954


Fiscal 2018 First Quarter:

Diagnostics
   $ 3,737 $ 6,445 $ 6,772 $ 1,483 $ 18,437
Life Science
   759 2,397 2,132 —   5,288


Total 2018 First Quarter Expenses
   $ 4,496 $ 8,842 $ 8,904 $ 1,483 $ 23,725


   Research &
Development Selling &
Marketing General &
Administrative Other Total Operating
Expenses
Fiscal 2017 First Quarter Expenses
   $ 3,597 $ 7,618 $ 7,739 $ —   $ 18,954


% of Revenues
   8 % 16 % 17 % —   % 40 %
Fiscal 2018 First Quarter Increases:

Diagnostics
   764 951 967 1,483 4,165
Life Science
   135 273 198 —   606


Fiscal 2018 First Quarter Expenses
   $ 4,496 $ 8,842 $ 8,904 $ 1,483 $ 23,725


% of Revenues
   9 % 17 % 17 % 3 % 45 %
% Increase
   25 % 16 % 15 % NMF 25 %

~~Page 18~~

~~Total operating expenses~~income increased ~~during~~6% to $36,141 in the ~~first~~second quarter of fiscal ~~2018 compared~~2022 and decreased 18% to ~~the first quarter of fiscal 2017, relating primarily to overall increases in spending in our Diagnostics segment, reflecting the following:~~

•

~~Increased R&D costs in connection with instrumentation development programs and clinical trials for our~~~~illumi~~~~gene~~ ~~CMV test;~~

~~Increased sales commission and bonus payments made in connection with increased sales levels;~~

~~Increased Quality System remediation costs related to Magellan;~~

~~Increased accrual of cash incentive compensation expenses (also for the Life Science segment); and~~

CEO transition and litigation costs. CEO transition costs, which totaled $734, reflect compensation and benefits for our Executive Chairman (formerly Chairman and CEO) during 2018, while we also have the compensation and benefits costs of a new CEO. Litigation costs, which totaled $749, relate to the matters discussed in Note 9 of the accompanying Condensed Consolidated Financial Statements and Part II. Item 1 of this Quarterly Report on Form~~10-Q.~~

~~Operating Income~~

~~Operating income decreased 20% to $8,061~~$56,424 for the first ~~quarter~~six months of fiscal ~~2018,~~2022, as a result of the factors discussed above.

Income Taxes

The effective rate for income taxes was 18% for the first quarter of fiscal 2018, compared to 35% for the first quarter of 2017. This lower fiscal 2018 tax primarily results from the combined net impact of the following effects of the recently-enacted tax reform act (see Note 6 of the accompanying Condensed Consolidated Financial Statements):

~~Application of an approximate 24.5% blended rate due to the lowering of the applicable rate from 35% to 21%;~~

~~Recognizing aone-time~~ ~~$1,695 tax benefit, including there-measurement~~ ~~of deferred tax balances at the lower rate; and~~

~~Recording a provisionalone-time~~ ~~$854 tax expense related to the estimated repatriation transition tax on foreign earnings.~~

~~Excluding the effects of theseone-time~~ ~~tax effects, we expect the~~ effective tax rate has remained relatively consistent throughout the periods presented, at approximately 21% and 22% for three and six months ended March 31, 2022, respectively, and approximately 20% and 21% for the three and six months ended March 31, 2021, respectively.

Impact of Inflation

To the extent feasible, we have consistently followed the practice of reviewing our prices to consider the impacts of inflation on salaries and fringe benefits for employees and the cost of purchased materials and services. Inflation and changing prices did not have a material adverse impact on our gross margin, revenues or operating income in the second quarter or first six months of fiscal ~~year ending September 30, 2018 to approximate26%-27%.~~

2022 or fiscal 2021.

Liquidity and Capital Resources

~~Comparative Cash Flow Analysis~~

Liquidity

Our cash flow and financing requirements are determined by analyses of operating and capital spending budgets and debt ~~service, consideration of acquisition plans, and consideration of common share dividends.~~service. We have historically maintained a credit facility to augment working capital requirements and to respond quickly to acquisition opportunities.

~~Page 19~~

We have an investment policy that guides the holdings of our investment portfolio, which presently consists of bank savings accounts and institutional money market mutual funds. Our objectives in managing the investment portfolio are toto: (i) preserve capital; (ii) provide sufficient liquidity to meet working capital requirements and fund strategic objectives such as acquisitions; and (iii) capture a market rate of return commensurate with market conditions and our policy’s investment eligibility criteria. As we look forward, we will continue to manage the holdings of our investment portfolio with preservation of capital being the primary objective.

~~Considering the various worldwidegeo-political~~ ~~andgeo-economic~~ conditions (including Brexit), we do not expect macroeconomic conditions to have a significant impact on our liquidity needs, financial condition or results of operations, although no assurances can be made in this regard.

We intend to continue to fund our working capital requirements ~~and dividends~~ from current cash flows from operating activities and cash on ~~hand. If~~hand, and such sources are anticipated to be adequate to fund working capital requirements, capital expenditures and debt service during the next twelve months. However, if needed, we also have an additional source of liquidity through the amount remaining available on our ~~$30,000~~$200,000 bank revolving credit ~~facility.~~facility, which totaled $175,000 as of March 31, 2022. Our liquidity needs may change if overall economic conditions worsen and/or liquidity and credit within the financial markets tightens for an extended period, ~~of time,~~ and such conditions impact the ~~collectibility~~collectability of our customer accounts receivable, impact credit terms with our vendors, or disrupt the supply of raw materials and services.

~~Net~~

As of March 31, 2022, our cash ~~provided by operating activities totaled $5,171 for~~and cash equivalents balance was $76,487, an increase of $26,716 compared to September 30, 2021. This net increase primarily results from: (i) generating $65,972 of cash flow from operations, an increase of 59% over the first ~~three~~six months of fiscal ~~2018, a 60% decrease from~~2021; and (ii) the ~~$12,993 provided during~~use of cash to pay down $35,000 on the ~~first three months~~revolving credit facility.

Considering these factors, our balance of ~~fiscal 2017. While reflecting the timing of payments from customers,~~cash and ~~to suppliers~~cash equivalents on hand exceeded our total debt (defined as bank debt, government grant obligations and taxing authorities, this decrease also results in large part from the net effects of (i) increased customer receivables from higher sales levels; (ii) increased inventory levels during the first quarter of fiscal 2018, largelyobligations related to continued expansion in Asia; and (iii) decreased accrued employee compensation costs during the first quarter of fiscal 2017, reflecting the payment of discretionary bonuses and the timing of regularly scheduled payroll payments. Net cash flows from operating activities and cash on hand are anticipated to be adequate to fund working capital requirements, capital expenditures and dividends during the next 12 months.

Following the release of results for the fiscal 2017 first quarter, the Board of Directors reduced the fiscal 2017 indicated annual cash dividend rate to $0.50 per share (down from $0.80 per share) in order to align it with the stated policy guidelines of the payout ratio to range between 75% and 85% of each fiscal year’s net earnings. Consistent with this annual indicated dividend rate, a cash dividend of $0.125 per share was declared for the first quarter of fiscal 2018, representing 83% of the quarter diluted earnings per share.

acquisitions) by approximately $45,000 at March 31, 2022.

Capital Resources

As described in Note 7 12,

“Bank Credit Arrangements”

of the ~~accompanying~~ Condensed Consolidated Financial Statements, ~~in connection with the acquisition of Magellan,~~ the Company ~~entered into~~maintains a $60,000 five-year term loan with a commercial bank. The term loan requires quarterly principal and interest payments, with interest at a variable rate tied to LIBOR, and a balloon principal payment due March 31, 2021. In addition, we have a $30,000$200,000 revolving credit facility, which is secured by substantially all of our U.S. assets and includes certain restrictive financial covenants. The Company also maintains a shelf registration statement on file with a commercial bank that expires March 31, 2021. As of January 31, 2018, there were no borrowings outstanding on this facility and we had 100% borrowing capacity available to us. We have had no borrowings outstanding under this revolving credit facility during the ~~first three months of~~SEC.

During fiscal ~~2018 or during the full year of fiscal 2017.~~

~~Our~~2022, our capital expenditures are estimated to ~~range between~~total approximately ~~$4,000~~$15,500, comprised of approximately $12,500 and $3,000 in the Diagnostics and Life Science segments, respectively. Included within the Diagnostics segment capital expenditures estimate is approximately $9,600 related to ~~$5,000~~completion of the manufacturing capacity

Page 25

Table of Contents

scale-up

and automation initiatives for ~~fiscal 2018, with the actual amount dependent upon actual operating results and the phasing of certain projects.~~Revogene assay production. Such expenditures may be funded with cash and cash equivalents on hand, operating cash flows, and/or availability under the ~~$30,000~~$200,000 revolving credit facility discussed above.

In addition, a portion of the Diagnostics segment expansion may be funded by the remaining amounts to be received under the previously noted RADx grant entered into on February 1, 2021, and as amended on January 25, 2022 (see Note 14,

“National Institutes of Health Contracts”

of the Condensed Consolidated Financial Statements for further discussion).

License Agreements

The Company has entered into various license agreements that require payment of royalties based on a specified percentage of sales of related products. During the second quarter and first six months of fiscal 2022, royalty expense totaled approximately $900 and $1,700, respectively, with 30% and 70% of such expense relating to our Diagnostics and Life Science segments, respectively, during both periods. This compares to a total of approximately $2,700 and $3,200 of royalty expense in the second quarter and first six months of fiscal 2021, respectively, with the Diagnostics/Life Science segment split of such revenues equating to approximately 15/85 and 20/80 in the second quarter and first six months of fiscal 2021, respectively. The Company expects that payments under these agreements will amount to approximately $3,000 in fiscal 2022, a decrease from $5,200 in fiscal 2021.

Off-Balance

Sheet Arrangements

We utilize foreign currency exchange forward contracts to limit exposure to volatility in foreign currency gains and losses related to financial assets denominated in other than the holding subsidiary’s functional currency. These contracts are generally settled within a

30-day

time frame and are not formally designated or accounted for as accounting hedges. We also utilize interest rate swap agreements to limit exposure to volatility in the LIBOR interest rate in connection with the revolving credit facility. The interest rate swap agreements are designated and accounted for as accounting hedges (see Note 5,

“Fair Value Measurements”

of the Condensed Consolidated Financial Statements). Aside from these instruments, we do not utilize ~~any~~ special-purpose financing vehicles or have any material undisclosed

off-balance

sheet arrangements.

~~Page 20~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There have been~~

As of March 31, 2022, there were no material changes to the information provided under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s ~~exposure to market risk since~~Form

10-K

for the year ended September 30, ~~2017.~~

2021, filed with the SEC on November 23, 2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules

13a-15(e)

and

15d-15(e)

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of ~~December~~March 31, ~~2017.~~2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were ~~not~~ effective as of ~~December 31, 2017~~the period covered by this report.

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that control objectives are met. Because of inherent limitations in all control systems, no evaluation of controls can provide assurance that all control issues and instances of fraud, if any, within a company will be detected. Additionally, controls can be circumvented by individuals, by collusion of two or more people or by management override. Over time, controls can become inadequate because of changes in conditions or the degree of compliance may deteriorate. Further, the design of any system of controls is based in part upon assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions. Because of the inherent limitations in any cost-effective control system, misstatements due to ~~the material weakness identified in our internal control over financial reporting described below.~~

~~As previously disclosed in the Company’s Annual Report on Form10-K~~ ~~for the fiscal year ended September 30, 2017, a material weakness was identified in the design~~errors or fraud may occur and ~~operating effectiveness~~not be detected.

Page 26

Table of the Company’s internal control over financial reporting. Specifically, deficiencies were identified related to Information Technology General Controls (“ITGC”) intended to restrict access to certain data and applications, resulting in inappropriate access at both the Information Technology and end user levels within an application impacting financial reporting functions and controls. As a result, we concluded that the Company’s disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act was recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information was accumulated and communicated to our management to allow timely decisions regarding required disclosure.

The Company has implemented and continues to implement changes to its internal control over financial reporting to remediate the control deficiencies that gave rise to the material weakness. Since the end of the fiscal year, we have taken steps to strengthen information technology security and user access controls and begin the remediation of the material weakness described above. We are working to complete our evaluation, fully implement these controls and identify the appropriate level of documentation to be maintained to evidence the effectiveness of these controls. We believe the remediation measures will strengthen our internal control over financial reporting and remediate the material weakness identified. However, as we are still assessing the design and operating effectiveness of these measures, the identified material weakness has not been fully remediated as of December 31, 2017. We will continue to monitor the effectiveness of these remediation measures and will make any changes and take such other actions that we deem appropriate.

Contents

Changes in Internal Control over Financial Reporting

~~Except as described above, there~~

In the ordinary course of business, we routinely enhance our information systems by either upgrading current systems or implementing new ones. There were no changes in our internal control over financial reporting (as that term is defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) during the quarter ended ~~December~~March 31, ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Page 21~~

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~See~~

Information with respect to legal proceedings can be found in Note 9 7,

“Lead Testing Matters”

of the ~~accompanying~~ Condensed Consolidated Financial ~~Statements.~~

Statements in Part I, Item 1 of this Quarterly Report on Form

10-Q

and is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Item 1A, “Risk Factors” in our Annual Report on Form

10-K

for the year ended September 30, 2021, filed with the SEC on November 23, 2021, as may be supplemented by our Quarterly Reports on Form

10-Q,

any or all of which could materially affect our business, financial condition or future results. The risks described therein are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may adversely affect our business, financial condition and/or operating results. There have been no material changes ~~from~~with respect to the risk factors ~~as previously~~ disclosed in ~~the Company’s fiscal 2017~~our Annual Report on Form

10-K ~~in response~~

for the year ended September 30, 2021, filed with the SEC on November 23, 2021, as may be supplemented by our Quarterly Reports on Form

10-Q,

except that the following risk factor related to ~~Item 1A~~the Company’s supply chain management is amended as follows:

Our ability to ~~Part I~~ meet future customer demand for selected products is dependent upon our ability to successfully manage our manufacturing capacity and supply chains.

To manage our anticipated future growth effectively, it may become necessary for us to enhance our manufacturing and supply chain capabilities, infrastructure and operations, information technology infrastructure, and financial and accounting systems and controls. Organizational growth

and scale-up

of ~~Form10-K.~~

operations could strain our existing managerial, operational, financial, and other resources. If our management is unable to effectively prepare for our expected future growth, our expenses may increase more than anticipated, our net revenues could grow more slowly than expected, and we may not be able to achieve our commercialization, profitability, or product development goals. Our failure to effectively implement the necessary processes and procedures and otherwise prepare for our anticipated growth could have a material adverse effect on our future consolidated financial condition and results of operations.

The Russia / Ukraine war that developed during the second quarter of fiscal year 2022 also could disrupt our supply chains. While to date this war has not caused us to experience any material negative impacts on our business, financial condition, or results of operations, we are unable to estimate the extent to which, if at all, the war could hurt our supply chains. The evolving nature of the war, related international sanctions, other potential government actions, and economic consequences of the war, including incurring higher costs to source materials due to inflation or otherwise, are factors that could disrupt supply chains throughout the world, including potentially the supply chains on which our business relies. If the Russia / Ukraine war either directly or indirectly disrupts our supply chains and we are unable to mitigate such disruption, the war could have material adverse effect on our future consolidated financial condition and results of operations.

Page 27

Table of Contents

ITEM 6. EXHIBITS

The following exhibits are being filed or furnished as a part of this Quarterly Report on Form~~10-Q.~~

10-Q:



~~10.1~~10.1*		~~Employment Agreement~~Andrew S. Kitzmiller Meridian Offer Letter, dated ~~October 9, 2017 between Meridian and John P. Kenny~~February 8, 2022 (Incorporated by reference to Meridian’s Form8-K filed with the ~~Securities and Exchange Commission~~SEC on ~~October 11, 2017)~~February 22, 2022)

31.1		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule13a-14(a)/15d-14(a)

31.2		Certification of Principal ~~Financial~~Accounting Officer Pursuant to Securities Exchange Act Rule13a-14(a)/15d-14(a)

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101~~101.INS		~~The following financial information from Meridian Bioscience Inc.’s Quarterly Report on Form10-Q~~ ~~for the quarter ended December 31, 2017 filed with the SEC on February 7, 2018, formatted~~Inline XBRL Instance Document

101.SCH		Inline XBRL Instance Extension Schema

101.CAL		Inline XBRL Instance Extension Calculation Linkbase

101.DEF		Inline XBRL Instance Extension Definition Linkbase

101.LAB		Inline XBRL Instance Extension Label Linkbase

101.PRE		Inline XBRL Instance Extension Presentation Linkbase

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in XBRL includes: (i) Condensed Consolidated Statements of Operations for the three months ended December 31, 2017 and 2016; (ii) Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2017 and 2016; (iii) Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2017 and 2016; (iv) Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017; (v) Condensed Consolidated Statement of Shareholders’ Equity for the three months ended December 31, 2017; and (vi) the Notes to Condensed Consolidated Financial StatementsExhibit 101)

~~SIGNATURE~~

*	Management Compensatory Contracts

SIGNATURES

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


		MERIDIAN BIOSCIENCE, INC.

Date:~~February 7, 2018~~ May 6, 2022	By:	/s/ ~~Melissa A. Lueke~~ Andrew S. Kitzmiller
		~~Melissa A. Lueke~~Andrew S. Kitzmiller
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: May 6, 2022	By:	/s/ Julie Smith
		Julie Smith
		Senior Vice President and Controller (Principal Accounting Officer)

Page 22


	Three Months Ended
	December 31,
	2017			2016
NET REVENUES	$	52,283		$	46,809
COST OF SALES		20,497			17,770

GROSS PROFIT		31,786			29,039

OPERATING EXPENSES
Research and development		4,496			3,597
Selling and marketing		8,842			7,618
General and administrative		8,904			7,739
CEO transition and litigation costs		1,483			—

Total operating expenses		23,725			18,954

OPERATING INCOME		8,061			10,085
OTHER INCOME (EXPENSE)
Interest income		72			22
Interest expense		(395	)		(423	)
Other, net		(80	)		(25	)

Total other expense		(403	)		(426	)

EARNINGS BEFORE INCOME TAXES		7,658			9,659
INCOME TAX PROVISION		1,356			3,380

NET EARNINGS	$	6,302		$	6,279

BASIC EARNINGS PER COMMON SHARE	$	0.15		$	0.15
DILUTED EARNINGS PER COMMON SHARE	$	0.15		$	0.15
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		42,263			42,159
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS		399			376

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		42,662			42,535

ANTI-DILUTIVE SECURITIES:
Common share options and restricted share units		1,034			715

DIVIDENDS DECLARED PER COMMON SHARE	$	0.125		$	0.20


	Three Months Ended December 31,
	2017			2016
NET EARNINGS	$	6,302		$	6,279
Other comprehensive income (loss):
Foreign currency translation adjustment		291			(1,423	)
Unrealized gain on cash flow hedge		341			1,560
Income taxes related to items of other comprehensive income		(112	)		(589	)

Other comprehensive income (loss), net of tax		520			(452	)

COMPREHENSIVE INCOME	$	6,822		$	5,827


Three Months Ended December 31,	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	6,302		$	6,279
Non-cash items included in net earnings:
Depreciation of property, plant and equipment		1,146			1,078
Amortization of intangible assets		938			968
Amortization of deferred instrument costs		201			257
Stock-based compensation		1,759			1,884
Deferred income taxes		(1,624	)		2,091
Change in:
Accounts receivable		(2,989	)		2,191
Inventories		(2,353	)		(169	)
Prepaid expenses and other current assets		87			(406	)
Accounts payable and accrued expenses		1,315			(913	)
Income taxes payable		497			44
Other, net		(108	)		(311	)

Net cash provided by operating activities		5,171			12,993

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(1,234	)		(1,392	)

Net cash used for investing activities		(1,234	)		(1,392	)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		(5,288	)		(8,440	)
Payments on term loan		(1,125	)		(750	)
Proceeds and tax benefits from exercises of stock options		—			301

Net cash used for financing activities		(6,413	)		(8,889	)

Effect of Exchange Rate Changes on Cash and Equivalents		115			(662	)

Net (Decrease) Increase in Cash and Equivalents		(2,361	)		2,050
Cash and Equivalents at Beginning of Period		57,072			47,226

Cash and Equivalents at End of Period	$	54,711		$	49,276


	December 31, 2017 (Unaudited)		September 30, 2017
CURRENT ASSETS
Cash and equivalents	$	54,711	$	57,072
Accounts receivable, less allowances of $306 and $307		32,136		29,106
Inventories		43,644		41,493
Prepaid expenses and other current assets		6,126		6,204

Total current assets		136,617		133,875

PROPERTY, PLANT AND EQUIPMENT, at Cost
Land		1,164		1,162
Buildings and improvements		32,244		32,207
Machinery, equipment and furniture		49,367		48,836
Construction in progress		2,374		1,895

Subtotal		85,149		84,100
Less: accumulated depreciation and amortization		54,749		53,590

Net property, plant and equipment		30,400		30,510

OTHER ASSETS
Goodwill		54,997		54,926
Other intangible assets, net		25,777		26,704
Restricted cash		1,000		1,000
Deferred instrument costs, net		1,415		1,368
Fair value of interest rate swap		1,156		815
Deferred income taxes		146		158
Other assets		443		421

Total other assets		84,934		85,392

TOTAL ASSETS	$	251,951	$	249,777


	December 31, 2017				September 30, 2017
	Cash and Equivalents		Other Assets		Cash and Equivalents		Other Assets
Institutional money market funds	$	20,155	$	—	$	20,104	$	—
Cash on hand -
Restricted		—		1,000		—		1,000
Unrestricted		34,556		—		36,968		—

Total	$	54,711	$	1,000	$	57,072	$	1,000


	December 31, 2017		September 30, 2017
	December 31, 2017		September 30, 2017
Raw materials	$	7,989	$	6,575
Work-in-process		12,110		11,559
Finished goods - instruments		1,271		1,460
Finished goods - kits and reagents		22,274		21,899

Total	$	43,644	$	41,493


	Diagnostics		Life Science		Eliminations(1)			Total
Three Months Ended December 31, 2017
Net revenues -
Third-party	$	37,490	$	14,793	$	—		$	52,283
Inter-segment		121		192		(313	)		—
Operating income		5,291		2,784		(14	)		8,061
Goodwill (December 31, 2017)		35,213		19,784		—			54,997
Other intangible assets, net (December 31, 2017)		24,202		1,575		—			25,777
Total assets (December 31, 2017)		179,943		72,480		(472	)		251,951
Three Months Ended December 31, 2016
Net revenues -
Third-party	$	33,808	$	13,001	$	—		$	46,809
Inter-segment		79		125		(204	)		—
Operating income		6,643		3,267		175			10,085
Goodwill (September 30, 2017)		35,213		19,713		—			54,926
Other intangible assets, net (September 30, 2017)		24,973		1,731		—			26,704
Total assets (September 30, 2017)		180,226		69,938		(387	)		249,777

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company