Table of Contents

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark one) 

For the quarterly period ended December 31, 2023, 2017

or

For the transition period from ___ to ___

Commission File No: 0-11740

MESA LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

Registrant’sRegistrant’s telephone number, including area code: (303) 987-8000

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   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 RegulationRegulation S-T (Section 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, a 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. (Check one):

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:

There were 3,783,158 5,394,051 shares of the Issuer’s common stock, no par value, outstanding as of January 26, 2018.29, 2024.

Table of Contents

Note 1 -. Description of Business and Summary of Significant Accounting Policies

Description of Business

In this quarterly report on Form 10-Q, Mesa Laboratories, Inc. was incorporated under the laws of the State of, a Colorado on March 26, 1982. The termscorporation, together with its subsidiaries, is collectively referred to as “we,” “us,” “our,” the “Company”“Company,” or “Mesa”“Mesa.”

We are useda multinational leader in this report to refer collectively to the parent companydesign and the subsidiaries through which our various businesses are conducted. We pursue a strategymanufacture of focusing primarily onlife sciences tools and critical quality control solutions for regulated applications in the pharmaceutical, healthcare, and medical device industries. We offer products and services whichto help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world. We have manufacturing operations in the United States and Europe, and our products are sold into niche markets that are drivenmarketed by regulatory requirements.our sales personnel in North America, Europe, and Asia Pacific, and by independent distributors in these areas as well as throughout the rest of the world. We prefer markets wherein which we can establish a strong presence and achieve high gross profit margins. We are organized into

As of December 31, 2023, we managed our operations in four divisions across ten physical locations. Our Instruments Division designs,reportable segments, or divisions:

Unallocated corporate expenses are reported within Corporate and markets quality control instruments and disposable products utilized in the healthcare, pharmaceutical, food and beverage, medical device, industrial hygiene and environmental air sampling industries. Our Sterilization and Disinfection Control Division (formerly named the Biological Indicators Division) provides testing services, along with the manufacturing and marketing of both biological and cleaning indicators, and the marketing of chemical indicators used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device and pharmaceutical industries. Our Cold Chain Monitoring Division designs, develops and markets systems which are used to monitor various environmental parameters such as temperature, humidity and differential pressure to ensure that critical storage and processing conditions are maintained in hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies and other laboratory and industrial environments. Our Cold Chain Packaging Division provides packaging development consulting services and thermal packaging products such as coolers, boxes, insulation materials and phase-change products to control temperature during transport.Other.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of March 31, 2017, has been derived from audited consolidated financial statements. The accompanying unaudited interim condensed consolidated financial statementsCondensed Consolidated Financial Statements have been prepared onin accordance with the same basis as our annual audited consolidated financial statementsrules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.information. In the opinion of management, such unaudited information includes all adjustments, (consisting onlyconsisting of normal recurring accruals)adjustments necessary for athe fair presentationstatement of this interim information. Operatingour financial position and results and cash flowsof operations. The results of operations for interim periods are not necessarily indicative of results that can may be expectedachieved for the entire year. The information includedyear-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in thisthe United States of America. The Condensed Consolidated Financial Statements include the accounts of Mesa and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We made no material changes to the application of our significant accounting policies disclosed in our annual report on Form 10-K. This quarterly report should be read in conjunction with our auditedthe consolidated financial statements and notes thereto included in our Annual Reportannual report on Form 10-K for the year ended March 31, 2017.2023.

Our fiscal year ends on March 31. References in this Quarterly Report to a particular “year” or “quarter” refer to our fiscal year or fiscal quarters, respectively.

Prior Period Reclassifications

Certain prior year amounts presented have been reclassified to conform with current presentation. The reclassifications have not resulted in any changes to consolidated or segment amounts reported in the Consolidated Financial Statements for any periods presented in this Form 10-Q.

Risks and Uncertainties

The summarypreparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods. These estimates represent management's judgment about the outcome of future events. The global business environment continues to be impacted by cost pressure, the overall effects of economic uncertainty on customers' purchasing patterns, high interest rates, and other factors. It is not possible to accurately predict the future impact of such events and circumstances. Actual results could differ from our significant accounting policies is incorporated by reference to our Annual Report on Form 10-K for the year ended March 31, 2017.estimates.

Recently Issued Accounting Pronouncements

In May 2014,November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014No.2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." ASU No.2023-07 requires all annual disclosures currently required by Topic 280 to be included in interim periods and requires disclosure of significant segment expenses regularly provided to the chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and applicable additional measures of segment profit or loss used by the CODM when allocating resources and assessing business performance. The guidance is effective for public business entities for fiscal years beginning after December 31, 2023 (our fiscal year 2025), with early adoption permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

In December 2023, the FASB issued ASU No.2023-09, Revenue from Contracts with Customers"Income Taxes (Topic 606740), which will replace most existing revenue recognition guidance in U.S. GAAP and is intended: Improvements to improve and converge with international standards the financial reporting requirements for revenue from contracts with customers. The core principle ofIncome Tax Disclosures." ASU 2014No.2023-09, is that an entity should recognize revenue forwhich enhances the transfertransparency, effectiveness and comparability of goods or services equalincome tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changesjurisdictions in judgments. ASU 2014-09 allows for adoption either on a full retrospective basis to each prior reporting period presented or on a modified retrospective basis with the cumulative effect of initially applying the newwhich income taxes are paid. The guidance recognized at the date of initial application, which will beis effective for public business entities for fiscal years beginning after December 15, 2024 (our fiscal year 2026), with early adoption permitted. We are currently assessing the Company beginning April 1, 2018.effect the adoption of this standard will have on our financial statements.

We plan to adopt ASU 2014-09have reviewed all recently issued accounting pronouncements and its amendments on a modified retrospective basis andhave concluded that, other than as described above, they are continuing to assess all future impacts of the guidance by reviewing our current contracts with customers to identify potential differences that could result from applying the new guidance. Based on our review, we expect that the adoption of ASU 2014-09 willeither not applicable to us or are not expected to have a materialsignificant impact on our consolidated financial statements. As

Note 2. Significant Transactions

Acquisition of GKE

In accordance with the sale and purchase agreement executed October 14, 2023, we continueacquired 100% of the outstanding shares of GKE GmbH and SAL GmbH effective October 16, 2023, and upon approval by applicable Chinese regulators, we acquired 100% of the outstanding shares of Beijing GKE Science & Technology Co. Ltd. (“GKE China,” and, together with GKE GmbH and SAL GmbH, “GKE”), effective December 31, 2023 (the "GKE acquisition"). GKE primarily develops, manufactures and sells a highly competitive portfolio of chemical sterilization indicators, biologics, and process challenge devices to protect patient safety across global healthcare markets. GKE’s strength in chemical indicators and our assessment, weSterilization and Disinfection Control division’s strength in biologic indictors are also identifyingcomplementary, as chemical and preparingbiologic indicators are used in the same sterility validation workflows. Additionally, GKE’s healthcare-focused commercial capabilities in Europe and Asia greatly expand our reach in the healthcare markets in those geographies. We are working to implement minor changesobtain regulatory 510(k) clearance on certain GKE products for sale in the United States, which would further expand organic revenues growth opportunities from the GKE business. 

Total cash consideration for the GKE acquisition was $88,789, net of cash and financial liabilities and subject to our accounting policies and practices, business processes, systems and controlscustomary purchase price adjustments, including working capital adjustments of approximately $1,000 expected to supportbe paid to Mesa from the new revenue recognition and disclosure requirements. Our assessmentseller during the fourth quarter of fiscal year 2024. Of the total acquisition price approximately $9,500, will be completed duringheld back for a period of 18 months from the year endingacquisition closing as security against potential indemnification losses. We funded the acquisition through a combination of cash on-hand and a total of $71,000 borrowed under our line of credit (See Note March7. "Indebtedness"). We began operating GKE GmbH and SAL GmbH on October 16, 2023, and they are included as wholly owned subsidiaries in our consolidated financial statements beginning on that date. GKE China is included as a wholly owned subsidiary in our Condensed Consolidated Balance Sheets as of December 31, 2018.2023, and we began consolidating its results of operations beginning January 1, 2024.

Preliminary Allocation of Purchase Price

We accounted for the GKE acquisition as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the acquiree's identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values and are consolidated with those of Mesa. The relief from royalty method was used to value our trade names and intellectual property, while the multi-period excess earnings method, a form of the income approach, was used to value our customer relationships. The non-compete agreements were valued using a probability-weighted estimate of the expected economic impact that would occur in the absence of the agreements. Significant judgments and estimates are required when performing valuations, including, among other assumptions, internal rates of return, revenue growth rates, customer attrition rates, and royalty rates, all of which are considered Level 3 inputs. We worked with external valuation experts to prepare the preliminary valuation using information obtained during due diligence and from professional valuation databases and other sources. These estimates were based on assumptions that we believe to be reasonable; however, actual results may differ from these estimates.

In January 2017, the FASB issued ASU 2017-04,Intangibles – Goodwill and Other, which eliminates the requirementThis preliminary purchase price allocation is subject to calculaterevision as more detailed analyses are completed. If additional information about the implied fair value of assets acquired and liabilities assumed becomes available, we may further revise the preliminary purchase price allocation as soon as is practical, but will not do so more than one year from the acquisition date. Only items identified as of the acquisition date are considered for subsequent adjustment. Any such revisions or changes may be material. The final valuation may include, but may not be limited to: (1) changes in allocations to intangible assets such as customer relationships, trade names, intellectual property, and non-compete agreements, as well as goodwill, to measure a goodwill impairment charge. ASU 2017-04 is required to be applied prospectively and we elected to early adopt ASU 2017-04 effective April 1, 2017.

Note (2– Acquisitions) changes to inventory, (3) changes to deferred tax balances, (4) changes in our assessment of the purchase price, and (5) other changes to assets and liabilities. 

ForThe following table summarizes the nine months ended December 31, 2017, our acquisitionsallocation of businesses totaled $15,433,000,the preliminary purchase price as of which none were material in nature (see Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations).acquisition: 

Note 4 - Inventoriesan environmentally conscious chemistry solution to purify peptides.

Inventories consistDuring fiscal year 2023, we prepared an analysis of the following (in thousands):

Note 5 – Facility Relocation

In August 2016, we announced that we planned to shut down both our Omaha and Traverse City manufacturing facilities and relocate those operations tovaluation of net assets acquired in the new Bozeman building. The move of those two facilities, along with the current Bozeman operations, began in March 2017 and is estimated to be completed by June 30, 2018. We estimate that the total costs of the relocation will be $2,100,000 (which is comprised primarily of facility moving expenses, retention bonuses for existing personnel and payroll costs for duplicative personnel during the transition period) of which $725,000 was incurred during the year ended March 31, 2017. We incurred $772,000 in relocation costs forBelyntic acquisition. During the nine months ended December 31, 2017,2023, based on a detailed financial analysis of the financial model, we recorded certain measurement period adjustments to reclassify amounts from intangible assets into goodwill. Our preliminary purchase price allocation has been finalized as of December 31, 2023. 

Note 3. Revenue

We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related consumables. We evaluate revenues internally primarily based on operating segment and the nature of goods and services provided.

Hardware sales include physical products such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers. Hardware sales may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function.

Consumables are typically used on a $503,000one-time basis and $269,000require frequent replacement in our customers' operating cycles. Consumables sold by our Clinical Genomics and Biopharmaceutical Development divisions, such as reagents used for molecular and genetic analysis or solutions used for protein synthesis, are reflected in costcritical to the ongoing use of revenues and general and administrative expense, respectively, in the accompanying condensed consolidated statements of operations. Facility relocation costs, which are associated withour instruments. Consumables such as biological indicator test strips sold by our Sterilization and Disinfection Control Division are used on a standalone basis.

We also offer maintenance, calibration, and testing service contracts. Under our service contracts we perform labor and replace parts on an as-needed basis over a contractually specified period of time, or perform specific, discrete services. 

Typically, revenue is recognized upon shipment of a product, upon completion of a discrete service, or over a period of time reflective of the performance period in the applicable contract, depending on when our obligation to the customer is satisfied. The significant majority of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration.

The following tables present disaggregated revenues for the three and nine months ended December 31, 2023 and December 31,2022, respectively: