United States

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 31, 2021~~June 30, 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 No: 0-11740

MESA LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

	Colorado		84-0872291
	(State or other jurisdiction of		(I.R.S. Employer
	incorporation or organization)		Identification number)

	12100 West Sixth Avenue
	Lakewood, Colorado		80228
	(Address of principal executive offices)		(Zip Code)

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

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

Title of each class	Trading Symbol	Name on each exchange on which registered
Common Stock, no par value	MLAB	The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation 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 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.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

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 ~~5,245,943~~5,317,270 shares of the Issuer’s common stock, no par value, outstanding as of ~~January 27,~~July 28, 2022.

Table of Contents

Table of Contents

Part I. Financial Information		1

	Item 1. Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive (Loss) Income	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Notes to Condensed Consolidated Financial Statements	6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1815
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	2520
	Item 4. Controls and Procedures	2521

Part II. Other Information		2622

	Item 1. Legal Proceedings	2622
	Item 1A. Risk factors	2622
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2622
	Item 6. Exhibits	2723
	Signatures	2824
	Exhibit 31.1 Certifications Pursuant to Rule 13a-14(a)
	Exhibit 31.2 Certifications Pursuant to Rule 13a-14(a)
	Exhibit 32.1 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350
	Exhibit 32.2 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Mesa Laboratories, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(dollars in thousands, except share amounts)

	*December 31,*		*March 31,*		*June 30,*			*March 31,*
	*2021*		*2021*		*2022*			*2022*
ASSETS
Current assets:
Cash and cash equivalents	$	51,706	$	263,865	$	43,747		$	49,346
Accounts receivable, less allowances of $339 and $218, respectively		37,289		23,787
Inventories, net		23,719		11,178
Accounts receivable, less allowances of $1,035 and $630, respectively						41,840			41,224
Inventories						26,874			24,606
Prepaid expenses and other		8,281		4,919		15,666			9,142
Total current assets		120,995		303,749		128,127			124,318
Property, plant and equipment, net of accumulated depreciation of $17,998 and $16,330, respectively		30,152		21,998
Property, plant and equipment, net of accumulated depreciation of $18,495 and $17,726 respectively						28,006			28,620
Deferred tax asset		594		616		689			1,318
Other assets		11,763		2,530		10,424			11,830
Intangibles, net		264,666		111,741		235,000			250,117
Goodwill		293,542		160,841		283,565			291,166
Total assets	$	721,712	$	601,475	$	685,811		$	707,369

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,827	$	4,473	$	7,557		$	7,897
Accrued payroll and benefits		13,978		9,388		9,401			14,717
Unearned revenues		12,483		8,777		15,268			13,830
Other accrued expenses		12,487		9,945		11,901			11,611
Total current liabilities		46,775		32,583		44,127			48,055
Deferred tax liability		41,134		16,275		37,323			39,224
Other long-term liabilities		8,334		715		7,340			7,924
Credit Facility		60,000		0		47,000			49,000
Convertible senior notes, net of discounts and debt issuance costs		169,140		145,675		169,590			169,365
Total liabilities		325,383		195,248		305,380			313,568
Stockholders’ equity:
Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,244,628 and 5,140,568 shares, respectively		308,208		317,652
Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,297,308 and 5,265,627 shares, respectively						318,328			313,460
Retained earnings		79,302		72,459		74,394			76,675
Accumulated other comprehensive income		8,819		16,116
Accumulated other comprehensive (loss) income						(12,291	)		3,666
Total stockholders’ equity		396,329		406,227		380,431			393,801
Total liabilities and stockholders’ equity	$	721,712	$	601,475	$	685,811		$	707,369

See accompanying notes to Condensed Consolidated Financial Statements.

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Mesa Laboratories, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	*Three Months Ended December 31,*						*Nine Months Ended December 31,*						*Three Months Ended June 30,*
	*2021*			*2020*			*2021*			*2020*			*2022*			*2021*

Revenues	$	54,696		$	34,172		$	125,456		$	95,973		$	50,453		$	34,920
Cost of revenues		26,069			13,519			51,478			33,695			19,112			12,709
Gross profit		28,627			20,653			73,978			62,278			31,341			22,211
Operating expenses:
Selling		8,958			4,753			18,459			12,614			10,023			4,858
General and administrative		17,017			13,173			40,119			33,887			20,212			11,419
Research and development		5,164			2,705			10,588			7,715			5,700			2,811
Total operating expenses		31,139			20,631			69,166			54,216			35,935			19,088
Operating (loss) income		(2,512	)		22			4,812			8,062			(4,594	)		3,123
Nonoperating (income) expense:
Nonoperating expense (income):
Interest expense and amortization of debt discount		1,018			1,950			2,647			5,803			1,014			874
Other (income) expense, net		(1,189	)		3,799			(1,455	)		4,848			(196	)		831
Total nonoperating (income) expense		(171	)		5,749			1,192			10,651
Total nonoperating expense														818			1,705
(Loss) earnings before income taxes		(2,341	)		(5,727	)		3,620			(2,589	)		(5,412	)		1,418
Income tax (benefit)		(281	)		(1,185	)		(35	)		(1,943	)		(3,974	)		(577	)
Net (loss) income	$	(2,060	)	$	(4,542	)	$	3,655		$	(646	)	$	(1,438	)	$	1,995

(Loss) earnings per share:
Basic	$	(0.39	)	$	(0.89	)	$	0.70		$	(0.13	)	$	(0.27	)	$	0.39
Diluted	$	(0.39	)	$	(0.89	)	$	0.69		$	(0.13	)	$	(0.27	)	$	0.38

Weighted-average common shares outstanding:
Basic		5,233			5,125			5,199			4,922			5,273			5,152
Diluted		5,233			5,125			5,333			4,922			5,273			5,301

See accompanying notes to Condensed Consolidated Financial Statements.

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Mesa Laboratories, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(unaudited)

(in thousands)

	*Three Months Ended December 31,*						*Nine Months Ended December 31,*						*Three Months Ended June 30,*
	*2021*			*2020*			*2021*			*2020*			*2022*			*2021*

Net (loss) income	$	(2,060	)	$	(4,542	)	$	3,655		$	(646	)	$	(1,438	)	$	1,995
Other comprehensive (loss) income:
Foreign currency translation adjustments		(6,165	)		21,142			(7,297	)		39,264			(15,957	)		5,371
Comprehensive (loss) income	$	(8,225	)	$	16,600		$	(3,642	)	$	38,618		$	(17,395	)	$	7,366

See accompanying notes to Condensed Consolidated Financial Statements.

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Mesa Laboratories, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	*Nine Months Ended December 31,*						*Three Months Ended June 30,*
	*2021*			*2020*			*2022*			*2021*
Cash flows from operating activities:
Net income (loss)	$	3,655		$	(646	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net (loss) income							$	(1,438	)	$	1,995
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		15,686			12,933			8,134			4,572
Stock-based compensation expense		7,939			6,887			3,432			2,197
Non-cash interest and debt amortization		804			4,024			225			221
Amortization of step-up in inventory basis		6,062			(436	)
Foreign currency adjustments		(1,375	)		4,583
Deferred taxes								(908	)
Other		67			(917	)		(1,763	)		(826	)
Cash (used in) provided by changes in operating assets and liabilities:
Accounts receivable, net		(2,258	)		2,224			(1,484	)		3,285
Inventories, net		351			(485	)
Inventories								(2,732	)		(753	)
Prepaid expenses and other assets		(1,933	)		(2,691	)		(2,180	)		(1,631	)
Accounts payable		1,270			71			(205	)		(476	)
Accrued liabilities and taxes payable		(1,403	)		(2,517	)		(5,328	)		867
Unearned revenues		1,056			523			1,436			138
Net cash provided by operating activities		29,921			23,553
Net cash (used in) provided by operating activities								(2,811	)		9,589
Cash flows from investing activities:
Acquisitions, net of cash acquired		(300,793	)		0
Purchases of property, plant and equipment		(3,650	)		(954	)		(225	)		(653	)
Net cash (used in) investing activities		(304,443	)		(954	)		(225	)		(653	)
Cash flows from financing activities:
Proceeds from the issuance of debt		70,000			0
Payments of debt		(10,000	)		0			(2,000	)		0
Dividends		(2,495	)		(2,341	)		(843	)		(824	)
Proceeds from the exercise of stock options		5,352			3,692			1,436			1,089
Payments of contingent consideration		(234	)		(11	)
Proceeds from the issuance of common stock, net		0			145,935
Net cash provided by financing activities		62,623			147,275
Net cash (used in) provided by financing activities								(1,407	)		265
Effect of exchange rate changes on cash and cash equivalents		(260	)		2,477			(1,156	)		2,644
Net (decrease) increase in cash and cash equivalents		(212,159	)		172,351			(5,599	)		11,845
Cash and cash equivalents at beginning of period		263,865			81,380			49,346			263,865
Cash and cash equivalents at end of period	$	51,706		$	253,731		$	43,747		$	275,710

See accompanying notes to Condensed Consolidated Financial Statements.

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Mesa Laboratories, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(dollars in thousands, except per share data)

	*Common Stock*														*Common Stock*
	*Number of Shares*		*Amount*			*Retained Earnings*			AOCI*			*Total*			*Number of Shares*		*Amount*		*Retained Earnings*			AOCI*			*Total*
March 31, 2021		5,140,568	$	317,652		$	72,459		$	16,116		$	406,227
Exercise of stock options and vesting of restricted stock units		58,324		1,089			0			0			1,089
Dividends paid, $0.16 per share		-		0			(824	)		0			(824	)
Stock-based compensation expense		-		2,197			0			0			2,197
Foreign currency translation		-		0			0			5,371			5,371
Cumulative adjustment due to adoption of ASU 2020-06		-		(22,735	)		5,683			0			(17,052	)
Net income		-		0			1,995			0			1,995
June 30, 2021		5,198,892	$	298,203		$	79,313		$	21,487		$	399,003
Exercise of stock options and vesting of restricted stock units		24,340		1,992			0			0			1,992
Dividends paid, $0.16 per share		-		0			(834	)		0			(834	)
Stock-based compensation expense		-		2,039			0			0			2,039
Foreign currency translation		-		0			0			(6,503	)		(6,503	)
Net income		-		0			3,720			0			3,720
September 30, 2021		5,223,232	$	302,234		$	82,199		$	14,984		$	399,417
March 31, 2022																5,265,627	$	313,460	$	76,675		$	3,666		$	393,801
Exercise of stock options and vesting of restricted stock units		21,396		2,271			0			-			2,271			31,681		1,436		0			0			1,436
Dividends paid, $0.16 per share		-		0			(837	)		0			(837	)		-		-		(843	)		-			(843	)
Stock-based compensation expense		-		3,703			0			0			3,703			-		3,432		-			-			3,432
Foreign currency translation		-		0			0			(6,165	)		(6,165	)		-		-		-			(15,957	)		(15,957	)
Net (loss)		-		0			(2,060	)		0			(2,060	)		-		0		(1,438	)		0			(1,438	)
December 31, 2021		5,244,628	$	308,208		$	79,302		$	8,819		$	396,329
June 30, 2022																5,297,308	$	318,328	$	74,394		$	(12,291	)	$	380,431

	*Common Stock*													*Common Stock*
	*Number of Shares*		*Amount*		*Retained Earnings*			AOCI*			*Total*			*Number of Shares*		*Amount*			*Retained Earnings*			AOCI*		*Total*
March 31, 2020		4,387,140	$	158,023	$	72,359		$	(10,369	)	$	220,013
Proceeds from the issuance of common stock, net of issuance costs of $9,315		690,000		145,935		0			0			145,935
March 31, 2021															5,140,568	$	317,652		$	72,459		$	16,116	$	406,227
Exercise of stock options and vesting of restricted stock units		25,799		1,654		0			0			1,654			58,324		1,089			0			0		1,089
Dividends paid, $0.16 per share		-		0		(704	)		0			(704	)
Dividends paid, $0.16 per share															-		-			(824	)		-		(824	)
Stock-based compensation expense		-		1,268		0			0			1,268			-		2,197			-			-		2,197
Foreign currency translation		-		0		0			12,860			12,860			-		-			-			5,371		5,371
Adoption of accounting standards, net		-		0		(9	)		0			(9	)
Cumulative adjustment due to adoption of ASU No. 2020-06															-		(22,735	)		5,683			-		(17,052	)
Net income		-		0		1,217			0			1,217			-		-			1,995			-		1,995
June 30, 2020		5,102,939	$	306,880	$	72,863		$	2,491		$	382,234
Exercise of stock options and vesting of restricted stock units		14,502		1,047		0			0			1,047
Dividends paid, $0.16 per share		-		0		(818	)		0			(818	)
Stock-based compensation expense		-		2,008		0			0			2,008
Foreign currency translation		-		0		0			5,262			5,262
Net income		-		0		2,679			0			2,679
September 30, 2020		5,117,441	$	309,935	$	74,724		$	7,753		$	392,412
Exercise of stock options and vesting of restricted stock units		13,590		991		0			0			991
Dividends paid, $0.16 per share		-		0		(819	)		0			(819	)
Stock-based compensation expense		-		3,611		0			0			3,611
Foreign currency translation		-		0		0			21,142			21,142
Net (loss)		-		0		(4,542	)		0			(4,542	)
December 31, 2020		5,131,031	$	314,537	$	69,363		$	28,895		$	412,795
June 30, 2021															5,198,892	$	298,203		$	79,313		$	21,487	$	399,003

*Accumulated Other Comprehensive ~~Income~~ (Loss). Income.

See accompanying notes to Condensed Consolidated Financial Statements.

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Mesa Laboratories, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(dollar and share amounts in thousands, unless otherwise specified)

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

Description of Business

In this quarterly report on Form 10-Q, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company” or “Mesa.”

We are a multinational manufacturer, developer, and seller of life science tools and critical quality control products and services, many of which are sold into niche markets that are driven by regulatory requirements. We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe, and Asia Pacific, and by independent distributors in these areas as well as throughout the rest of the world. We prefer markets in which we can establish a strong presence and achieve high gross profit margins.

As ~~described in Note~~ ~~12.~~ ~~"Segment Information," following the acquisition (the "Agena Acquisition") of Agena Bioscience, Inc. ("Agena") on~~ ~~October 20, 2021,~~ ~~we changed our financial reporting segments to align with strategic changes in the way we manage our business units. These changes impacted our reportable segments but did~~ ~~not~~ ~~impact our consolidated financial statements. Segment information presented herein reflects the impact of these changes for all periods presented. As~~ of ~~December 31, 2021,~~June 30, 2022, we managed our operations in four reportable segments, or divisions:

	●	Clinical Genomics - develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by labs to perform clinical genomic testing in several therapeutic areas, such as newborn screenings, pharmacogenetics, and oncology.
	●	Sterilization and Disinfection Control - manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry.

●

Biopharmaceutical Development - develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions. Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic drugs. Customers include biopharmaceutical research, development, and manufacturing teams at biopharmaceutical companies and academic research and development laboratories.

●

Calibration Solutions - develops, manufactures, and sells quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other such parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and various laboratory environments. ~~This division represents a combination of the historical Instruments and Continuous Monitoring reportable segments.~~

●

~~Clinical Genomics~~ - develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by labs to perform clinical genomic testing in several therapeutic areas, such as newborn screenings, pharmacogenetics, and oncology. This division is a new reportable segment comprised entirely of Agena's operations. For more information on Mesa's acquisition of Agena, see Note ~~11.~~ ~~"Significant Transactions."~~

Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for the fair statement of our financial position and results of operations. The results of operations for the interim periods are not necessarily indicative of results that may be achieved for the entire year. The year-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 the United States of America. This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form 10-K for the year ended March 31, ~~2021~~2022.

Certain prior year amounts have been reclassified in order to conform to the current year presentation.

Our fiscal year ends on March 31. References in this Quarterly Report to a particular “year” or “year-end” mean our fiscal year and references to the first quarter of fiscal year ~~2022~~2023 refer to the period from April 1, ~~2021~~2022 through June 30, ~~2021,~~2022. ~~references to the~~ ~~second~~ ~~quarter of fiscal year~~ ~~2022~~ ~~refer to the period from~~ ~~July 1, 2021~~ ~~through~~ ~~September 30, 2021,~~ ~~and references to the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2022~~ ~~refer to the period from~~ ~~October 1, 2021~~ ~~through~~ ~~December 31, 2021.~~ References ~~to “fiscal year~~ ~~2021”~~ ~~refer to the fiscal year ended~~ ~~March 31, 2021,~~ ~~and~~ to “fiscal year 2022” refer to the fiscal year ended March 31, 2022, and to “fiscal year 2023” refer to the fiscal year ending March 31, ~~2022.~~2023.

Prior Period Reclassification

Certain amounts presented in Note 3. "Revenue Recognition" in prior periods of fiscal year 2022 have been reclassified out of revenues from consumables and into revenues from hardware and services. These reclassifications have not resulted in any change to the Condensed Consolidated Financial Statements for the three months ended June 30, 2022 and 2021.

Risks and Uncertainties

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods. These estimates represent management's judgement about the outcome of future events. Our estimates include, among others, asset reserve requirements as well as the amounts of future cash flows associated with certain assets and businesses that are used in assessing the risk of impairment. The ~~current global business environment continues to be impacted directly and indirectly by~~negative impacts associated with the ~~effects of the~~ongoing novel coronavirus ("COVID-19") global pandemic significantly lessened during fiscal year 2022. The extent and ~~its variants, and it is~~ ~~not~~ ~~possible to accurately predict~~duration of negative impacts in the future, ~~impact of COVID-~~which ~~19.~~may ~~However, we have reviewed the estimates used in preparing the financial statements~~include inflationary pressures and ~~have identified the following factors that have a reasonable possibility of being materially affected by the impacts of COVID-~~supply chain disruptions, are uncertain and 19may ~~during the near term:~~ require changes to estimates. Actual results could differ from those estimates.

●

~~Estimates regarding the future financial performance of the business used in the impairment tests for goodwill and long-lived assets acquired in a business combination; however, we have identified~~ no ~~COVID-~~19~~-related triggering events since our impairment analysis was completed during the quarter ended~~ ~~March 31, 2021;~~

●

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

●

~~Estimates regarding recoverability of customer receivables;~~

●

~~Estimates of the net realizable value of inventory.~~

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Recently Issued Accounting Pronouncements

We have reviewed all recently issued accounting pronouncements and have concluded that they are either not applicable to us or are not expected to have a significant impact on our consolidated financial statements.

~~Recently~~ ~~Adopted~~ ~~Accounting Pronouncements~~

In ~~August~~ ~~2020,~~ ~~the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update~~ ~~No.~~~~2020~~-~~06,~~~~Debt with Conversion and Other Options and Derivatives and Hedging~~~~Accounting for Convertible Instruments and Contracts in an Entity's Own Equity~~ ~~("ASU~~ ~~2020~~-~~06"~~~~), which simplifies the accounting for certain financial instruments with characteristics of both liabilities and equity, such as our convertible senior notes due~~ ~~2025~~ ~~(the "Notes"). ASU~~ ~~2020~~-06 ~~also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. It is effective for annual reporting periods beginning after~~ ~~December 15, 2021,~~ ~~including interim periods within those fiscal years. Early adoption is permitted at the beginning of any fiscal year after~~ ~~December 15, 2020.~~ ~~The update permits the use of either the modified retrospective or full retrospective method of transition.~~

~~We early adopted ASU~~ ~~2020~~-06 ~~effective~~ ~~April 1, 2021~~ on a modified retrospective basis, and our adoption of this standard had a material effect on our consolidated financial statements. Upon adoption, we derecognized the $22,735 equity conversion feature, net of taxes, that was recorded to common stock, and we derecognized the deferred tax liability of $5,747. We recorded an increase of $22,799 in aggregate to the Note balance as a result of the reversal of the separation of the debt and equity components of the convertible debt. The net effect of these adjustments, which represents ~~$5,683~~ ~~of historical non-cash interest expense, net of taxes, was recorded as an increase in the balance of beginning retained earnings as of~~ ~~April 1, 2021~~. The adoption of this standard has significantly decreased the amount of non-cash interest expense recognized in our Condensed Statement of Operations as a result of eliminating the discount associated with the equity component. Our statements of cash flows reflect the lower non-cash interest expense in effect after the adoption of ASU ~~2020~~-~~06.~~

In each period in which the Notes have been outstanding, we have always intended to settle the Notes in shares of common stock rather than in cash, and therefore, we have applied the if-converted method to calculate the potentially dilutive impact of the Notes on earnings per share. In each reporting period, we have determined that the Notes were antidilutive. Due to decreases in non-cash interest expense that will result from the adoption of ASU ~~2020~~-~~06,~~ ~~it is likely the Notes will have a dilutive effect in future periods, which would decrease our diluted earnings per share.~~

On ~~October 28, 2021,~~ ~~the FASB issued Accounting Standard Update~~ ~~No.~~~~2021~~-08 ~~("ASU~~ ~~2021~~-~~08"~~), ~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,~~ ~~which amends Accounting Standards Codification ("ASC")~~ ~~805~~ ~~to require acquiring entities to apply ASC~~ ~~606~~ ~~to recognize and measure contract assets and contract liabilities in a business combination. Prior to adoption, an acquirer generally recognized such items at fair value on acquisition date.~~

~~We early adopted ASU~~ ~~2021~~-08 ~~upon its issuance effective~~ ~~October 28, 2021~~ ~~and applied the amendments retrospectively to the Agena Acquisition, which occurred during fiscal year~~ ~~2022,~~ ~~the year in which we adopted the amendment. As a result of adopting ASU~~ ~~2021~~-~~08,~~ ~~we recognized Agena's deferred revenue at its recorded book value of $3,168 rather than at fair value, after determining that Agena's application of ASC~~ ~~606~~ ~~was appropriate and the underlying accounting for deferred revenue included~~ no ~~material errors.~~

Note 2.2. Significant Transactions

Acquisition of Agena Bioscience, Inc.

On October 20, 2021, we completed the acquisition of Agena Bioscience, Inc. (“Agena”) for $300,793, net of cash acquired but inclusive of working capital adjustments (the “Agena Acquisition”). The Agena Acquisition aligned with our overall acquisition strategy, moved our business towards the life sciences tools sector, and expanded our market opportunities, particularly in Asia. Agena is a leading clinical genomics tools company that develops, manufactures, markets, and supports proprietary instruments and related consumables and services that enable genetic analysis for a broad range of diagnostic and research applications. Using Agena's MassARRAY® instruments and chemical reagent solutions, customers can analyze DNA samples for a variety of high volume clinical testing applications, such as inherited genetic disease testing, pharmacogenetics, various oncology tests, infectious disease testing, and other highly-differentiated applications.

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

Agena Preliminary Purchase Price Allocation

During the three months ended June 30, 2022, we continued analyses of the valuation of net assets acquired in the Agena Acquisition. This preliminary purchase price allocation is subject to revision as more detailed analyses are completed with respect to prepaid taxes, tax accruals, and deferred tax positions.

The following table summarizes the allocation of the preliminary purchase price as of October 20, 2021:

	*Life (in years)*		*Amount*
Cash and cash equivalents			$	7,544
Accounts receivable				11,100
Other current assets				25,480
Total current assets				44,124
Property, plant and equipment/noncurrent assets				15,832
Deferred tax asset				811
Intangible assets:
Goodwill		N/A		135,880
Customer relationships		12		103,800
Intellectual property		8		45,400
Tradenames		12		15,700
Total Assets acquired			$	361,547
Accounts payable				2,174
Unearned revenues				2,713
Other current liabilities				12,295
Total current liabilities				17,182
Deferred tax liability				27,765
Other noncurrent liabilities				8,263
Total liabilities assumed			$	53,210
Total purchase price, net of cash acquired			$	300,793

Acquired Goodwill

Acquired goodwill of $135,880, all of which is allocated to the Clinical Genomics reportable segment, represents the value expected to arise from the value of expanded market opportunities, expected synergies, and assembled workforce, none of which qualify as amortizable intangible assets. The goodwill acquired is not deductible for income tax purposes.

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Unaudited Pro Forma Information

The following unaudited pro forma financial information presents the combined results of operations of Mesa and Agena as if the acquisition had occurred on April 1, 2021 after giving effect to certain pro forma adjustments.

	Three Months Ended June 30,
	2022			2021
Pro forma total revenues	$	50,453		$	53,553
Pro forma net income		(4,709	)		2,521

The pro forma financial information includes adjustments that are directly attributable to the business combinations and are factually supportable. The pro forma adjustments include incremental amortization of intangible assets, additional stock based compensation expense for key Agena employees, the removal of interest expense attributable to Agena’s external debt that was paid off as part of the acquisition, and the pro forma tax impact for such adjustments. Cost savings or operating synergies expected to result from the acquisition are not included in the pro forma results. For the three months ended June 30, 2022, the pro forma financial information excludes $356 of non-recurring acquisition-related expenses as well as costs associated with a performance share award granted to key employees of Agena that would have been fully expensed by the start of our first quarter 2022. These pro forma results are illustrative only and not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations.

Note 3. Revenue Recognition

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

Sales of hardware and software, such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers, are generally driven by our acquisition of new customers, growth of existing customers, or customers replacing existing equipment. Hardware sales may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function. We also offer ~~on-demand~~discrete and ~~time-based~~ongoing service and maintenance contracts on our instruments.

Our consumables, such as panels or reagents that are used for molecular and genetic analysis, are critical for the ongoing use of our instruments. In contrast, biological indicator test strips are used on a standalone ~~basis; however, some of our consumables, such as reagents used for molecular and genetic analysis, protein synthesis, and calibration solutions, are critical to the ongoing use of our instruments.~~basis. Consumables are typically used on a one-time basis and require frequent replacement in our customers' operating cycles. ~~Revenues from our new Clinical Genomics segment are derived from our recently acquired Agena business (See Note~~ ~~11.~~ "Significant Transactions"). These revenues consist of sales of consumables and instruments used in molecular and genetic analysis, as well as sales of discrete and contracted instrument maintenance agreements.

We evaluate our revenues internally based on operating segment, the timing of revenue generation, and the nature of goods and services provided. Typically, discrete revenue is recognized at the shipping point or upon completion of the service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract. The significant majority of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration.

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The following tables present disaggregated revenues for the three ~~and~~ ~~nine~~months ended ~~December 31, 2021~~June 30, 2022 and ~~2020~~2021, respectively:

	*Three Months Ended December 31, 2021*										*Three Months Ended June 30, 2022*
	*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		Clinical Genomics*		*Total*		Clinical Genomics*		*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
Discrete Revenues
Consumables	$	11,718	$	5,503	$	889	$	10,221	$	28,331	$	10,910	$	12,228	$	4,856	$	854	$	28,848
Hardware and Software		250		4,907		6,978		4,407		16,542		2,105		306		3,686		5,693		11,790
Services		392		1,297		2,826		931		5,446		528		765		1,159		2,661		5,113
Contracted Revenues
Services and Software		1,471		1,049		931		926		4,377		962		1,475		1,266		999		4,702
Total Revenues	$	13,831	$	12,756	$	11,624	$	16,485	$	54,696	$	14,505	$	14,774	$	10,967	$	10,207	$	50,453

Three Months Ended December 31, 2020

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Clinical Genomics*

Total

Discrete Revenues

Consumables
$ 11,250 $ 3,406 $ 726 $ - $ 15,382
Hardware and Software
151 3,771 8,130 0 12,052
Services
433 506 2,841 0 3,780
Contracted Revenues

Services and Software
1,243 1,028 687 0 2,958
Total Revenues
$ 13,077 $ 8,711 $ 12,384 $ - $ 34,172

Nine Months Ended December 31, 2021

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Clinical Genomics*

Total

Discrete Revenues

Consumables
$ 36,579 $ 14,329 $ 2,701 $ 10,221 $ 63,830
Hardware and Software
495 11,936 20,608 4,407 37,446
Services
1,586 2,729 8,042 931 13,288
Contracted Revenues

Services and Software
4,354 3,194 2,418 926 10,892
Total Revenues
$ 43,014 $ 32,188 $ 33,769 $ 16,485 $ 125,456

	*Nine Months Ended December 31, 2020*										*Three Months Ended June 30, 2021*
	*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		Clinical Genomics*		*Total*		Clinical Genomics*		*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
Discrete Revenues
Consumables	$	32,252	$	8,583	$	2,294	$	-	$	43,129	$	0	$	12,876	$	3,772	$	952	$	17,600
Hardware and Software		388		10,518		22,127		-		33,033		0		160		3,393		7,082		10,635
Services		1,389		2,293		7,866		-		11,548		0		701		582		2,235		3,518
Contracted Revenues
Services and Software		3,667		2,397		2,199		-		8,263		0		1,413		1,130		624		3,167
Total Revenues	$	37,696	$	23,791	$	34,486	$	-	$	95,973	$	0	$	15,150	$	8,877	$	10,893	$	34,920

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

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Revenues from external customers are attributed to individual countries based upon the locations to which the products are shipped or exported, or the location of service performed, as follows:

	*Three Months Ended December 31,*				*Nine Months Ended December 31,*				*Three Months Ended June 30,*
	*2021*		*2020*		*2021*		*2020*		*2022*		*2021*
United States	$	30,414	$	18,480	$	68,253	$	52,246	$	29,122	$	18,455
Foreign		24,282		15,692		57,203		43,727		21,331		16,465
Total revenues	$	54,696	$	34,172	$	125,456	$	95,973	$	50,453	$	34,920

No foreign country exceeds 10% of total revenues.

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Contract Balances

Our contracts have varying payment terms and conditions. Some customers prepay for products and services, resulting in unearned revenues or customer deposits, called contract liabilities. Short-term contract liabilities are included within other accrued expenses and unearned revenues in the accompanying Condensed Consolidated Balance Sheets, and long-term contract liabilities are included within other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets. ~~We did~~ ~~not~~ ~~have any contract assets as of~~ ~~December 31, 2021~~ or ~~March 31, 2021.~~ ~~Unbilled receivables, which are~~ ~~not~~ ~~classified as contract assets, represent arrangements in which sales have been recorded prior to billing and right to payment is unconditional.~~

A summary of contract liabilities is as follows:

Contract liabilities as of March 31, 2021
$ 8,994
Prior year liabilities recognized in revenues during the nine months ended December 31, 2021
(5,387 )
Contract liabilities added during the nine months ended December 31, 2021, net of revenues recognized
10,201
Contract liabilities balance as of December 31, 2021
$ 13,808

Contract liabilities as of March 31, 2022	$	15,069
Prior year liabilities recognized in revenues during the three months ended June 30, 2022		(3,298	)
Contract liabilities added during the three months ended June 30, 2022, net of revenues recognized		3,497
Contract liabilities balance as of June 30, 2022	$	15,268

Contract liabilities primarily relate to service contracts with original expected service durations of ~~$3,538 added during the~~ ~~nine~~12 months ~~ended~~ ~~December 31, 2021~~ ~~are attributable~~or less and will be recognized to ~~the Agena Acquisition (See Note~~ ~~11.~~ ~~"Significant Transactions").~~revenue as time passes.

Note 3.4. Fair Value Measurements

Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable, and debt. Due to their short-term nature, the carrying values for cash and cash equivalents, trade accounts receivable, and trade accounts payable approximate fair value. We measure our cash equivalents at fair value using quoted market prices in an active market, and we classify them within Level 1 of the fair value hierarchy. ~~Cash and cash equivalents on our Condensed Consolidated Balance Sheets included $0 held in a money market account as of~~ ~~December 31, 2021,~~ ~~compared to $230,822 held in a money market account as of~~ ~~March 31, 2021.~~ ~~We used the money market funds for the Agena Acquisition, see Note~~ ~~11.~~ ~~"Significant Transactions."~~

~~During fiscal year~~ ~~2020,~~ ~~we issued $172,500 aggregate principal of 1.375% convertible senior notes due~~ ~~August 15, 2025.~~ ~~We estimate the fair value of the Notes based on Level~~ 2 ~~inputs of the last actively traded price or market observable input before the end of the reporting period. The estimated fair value and carrying value of the Notes are as follows:~~

December 31, 2021

March 31, 2021

Carrying Value

Fair Value (Level 2)

Carrying Value

Fair Value (Level 2)

Notes
$ 169,140 $ 220,477 $ 145,675 $ 188,780

~~The carrying value of the Notes increased as a result of the adoption of ASU~~ ~~2020~~-~~06,~~ ~~discussed further in Note~~ 1. ~~"Description of Business and Summary of Significant Accounting Policies" and Note~~ 6. ~~"Indebtedness."~~

Assets recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets, including those that were part of the Agena Acquisition. These assets are measured at fair value if determined to be impaired. Preliminary fair values assigned to assets acquired and liabilities assumed in the Agena Acquisition, except deferred revenues, were measured using Level 3 ~~inputs, as discussed further in Note~~ ~~11.~~ ~~"Significant Transactions." There were~~ no ~~transfers between the levels of the fair value hierarchy during the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021~~ ~~or the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2020~~.

~~Cash and cash equivalents and accounts receivable are~~Historically, the financial instruments that subject us to the highest concentration of credit ~~risk.~~risk are cash and cash equivalents and accounts receivable. It is our policy to invest in highly liquid cash equivalent financial instruments with high credit ratings and to maintain low single issuer exposure (except U.S. treasuries). Concentration of credit risk with respect to accounts receivable is limited to customers to ~~whom~~which we make significant sales. We reserve an allowance for potential write-offs of accounts receivable using historical collection experience and current and expected future economic and market conditions, but we have not written off any significant accounts to date. To manage credit risk, we consider the creditworthiness of new and existing customers, and we regularly review outstanding balances and payment histories. We may require pre-payments from customers under certain circumstances and may limit future purchases until payments are made on past due amounts.

We have outstanding $172,500 aggregate principal of 1.375% convertible senior notes due August 15, 2025 (the "Notes"). We estimate the fair value of the Notes based on the last actively traded price or observable market input preceding the end of the reporting period and the fair value is approximately correlated to our stock price. The estimated fair value and carrying value of the Notes were as follows:

	*June 30, 2022*				*March 31, 2022*
	*Carrying Value*		*Fair Value (Level 2)*		*Carrying Value*		*Fair Value (Level 2)*
Notes	$	169,590	$	161,934	$	169,365	$	185,438

Assets recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired. There were no transfers between the levels of the fair value hierarchy during the three months ended June 30, 2022 or 2021, respectively.

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Note 4.5. Supplemental Balance Sheets Information

Inventories consist of the following:

	*December 31, 2021*		*March 31, 2021*		*June 30, 2022*		*March 31, 2022*
Raw materials	$	13,962	$	5,755	$	15,014	$	14,172
Work in process		1,956		426		2,150		4,419
Finished goods		7,801		4,997		9,710		6,015
Inventories, net	$	23,719	$	11,178	$	26,874	$	24,606

~~As of~~ ~~December 31, 2021,~~ ~~$11,560 of the total inventory on hand was acquired as part of the Agena Acquisition~~Prepaid and ~~is attributable to the Clinical Genomics division. Finished goods inventory of Agena included $6,062 of inventory step-up as of~~ ~~October 20, 2021,~~ ~~which was required to report inventory at fair value at the time of acquisition. The inventory step-up was amortized to cost of revenues over approximately~~ ~~two~~ months following the acquisition date, which resulted in a temporary reduction in gross profit for the Clinical Genomics division and the consolidated financial results. We fully amortized the $6,062 inventory step-up to costs of revenues on the Consolidated Statement of Operations during the period from ~~October 20, 2021~~ to ~~December 31, 2021.~~

~~Other accrued expenses~~other consist of the following:

December 31, 2021

March 31, 2021

Accrued business taxes
$ 6,289 $ 6,397
Current operating lease liabilities
2,733 1,023
Interest payable
918 303
Warranty
606 253
Accrued professional services
547 473
Other
1,394 1,496
Total other accrued expenses
$ 12,487 $ 9,945

	*June 30, 2022*		*March 31, 2022*
Prepaid expenses	$	4,173	$	2,871
Prepaid income taxes		6,181		2,536
Other current assets		5,312		3,735
Total prepaid expenses and other	$	15,666	$	9,142

AsAccrued payroll and benefits consist of ~~December~~ ~~31,~~~~2021~~ ~~and~~ ~~March 31, 2021,~~ ~~operating lease right-of-use assets where we are~~ the lessee were $10,785 and $1,930, respectively, and are included within other assets in the accompanying Condensed Consolidated Balance Sheets. The associated operating lease liabilities were $10,604 and $1,700 as of ~~December~~ ~~31,~~~~2021~~ ~~and~~ ~~March 31, 2021,~~ ~~respectively, and are included in other accrued expenses and other long-term liabilities. The increased balances are due to the acquisition of Agena.~~ following:

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	*June 30, 2022*		*March 31, 2022*
Bonus payable	$	2,138	$	7,468
Wages and paid-time-off payable		3,116		3,677
Payroll related taxes		2,551		2,069
Other benefits payable		1,596		1,503
Total accrued payroll and benefits	$	9,401	$	14,717

Note 5.6. Goodwill and Intangible Assets, Net

Finite-lived intangible assets consist of the following:

December 31, 2021

March 31, 2021

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Intellectual property
$ 66,984 $ (10,662 ) $ 56,322 $ 21,201 $ (8,595 ) $ 12,606
Trade names
24,360 (3,333 ) 21,027 8,612 (3,129 ) 5,483
Customer relationships
249,612 (62,369 ) 187,243 145,754 (52,206 ) 93,548
Non-compete agreements
1,299 (1,225 ) 74 1,299 (1,195 ) 104
Total
$ 342,255 $ (77,589 ) $ 264,666 $ 176,866 $ (65,125 ) $ 111,741

~~The increase in the intangible assets balance from~~ ~~March 31, 2021~~ to ~~December 31, 2021~~ ~~is primarily related to the Agena Acquisition. See Note~~ ~~11.~~ ~~"Significant Transactions" for more information.~~

	*June 30, 2022*							*March 31, 2022*
	*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*		*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*
Customer relationships	$	235,519	$	(70,499	)	$	165,020	$	244,157	$	(67,469	)	$	176,688
Intellectual property		64,953		(14,186	)		50,767		65,893		(12,620	)		53,273
Other Intangibles		24,752		(5,539	)		19,213		25,350		(5,194	)		20,156
Total	$	325,224	$	(90,224	)	$	235,000	$	335,400	$	(85,283	)	$	250,117

Amortization expense for finite-lived intangible assets acquired in a business combination was ~~$5,922~~$7,320 and ~~$13,495~~$3,816 for the three ~~and~~ ~~nine~~months ended ~~December 31, 2021~~June 30, 2022 ~~, respectively, and $3,828 and $10,694 for the~~ ~~three~~and ~~nine~~2021, ~~months ended~~ ~~December 31, 2020~~, respectively. ~~The increase~~Amortization for technology intangibles is included in cost of revenues and amortization for other types of intangibles ~~amortization was primarily attributable~~is expensed to ~~amortizing intangible assets acquired in~~general and administrative expense on the ~~Agena Acquisition.~~Statements of Operations.

For the following fiscal years ending March 31, amortization expense is estimated as follows:

Remainder of 2022	$ 6,447
2023	25,670
Remainder of 2023		21,591
2024	25,154	28,278
2025	23,566	26,704
2026	22,789	25,950
2027		25,453

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

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Clinical Genomics

Total

March 31, 2021
$ 30,153 $ 93,399 $ 37,289 $ 0 $ 160,841
Effect of foreign currency translation
(275 ) (2,995 ) (35 ) 0 (3,305 )
Goodwill acquired in Agena Acquisition
0 0 0 136,006 136,006
December 31, 2021
$ 29,878 $ 90,404 $ 37,254 $ 136,006 $ 293,542

	*Clinical Genomics*		*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
March 31, 2022	$	135,914	$	29,750	$	88,265	$	37,237	$	291,166
Effect of foreign currency translation		(197)		(455)		(6,894)		(55)		(7,601)
June 30, 2022	$	135,717	$	29,295	$	81,371	$	37,182	$	283,565

~~The Agena Acquisition created an impetus for us to realign our financial reporting segments (See Note~~ ~~12.~~ “Segment Information”) and reevaluate the underlying reporting units that form the basis of our goodwill impairment testing. As a result of adjustments to our reporting units, we performed goodwill impairment assessments during the quarter ended ~~December 31, 2021.~~ ~~Based on those assessments, we determined that the fair value of each reporting unit exceeded its carrying value, and 0 impairment existed as of the date of the Agena Acquisition or as of~~ ~~December 31, 2021.~~

Note 67. Indebtedness

Credit Facility

On ~~March 5, 2021,~~ ~~we entered into~~We maintain a ~~four-year~~ senior ~~secured~~ credit ~~agreement~~facility (the “Credit Facility”) that includes 1) a revolving credit facility in an aggregate principal amount of up to $75,000, 2) a swingline loan in an aggregate principal amount not exceeding $5,000, and 3) letters of credit in an aggregate stated amount not exceeding $2,500 at any ~~time.~~ time and

matures in March, 2025. The Credit Facility also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $25,000 and at a maximum $75,000, subject to the satisfaction of certain conditions and lender ~~considerations (together,~~considerations. As of June 30, 2022, we had $47,000 outstanding under the ~~available facilities are referred to as the "Credit Facility").~~Credit Facility.

Amounts borrowed under the Credit Facility bear interest at either a base rate or a Eurodollar rate, plus an applicable spread. The weighted average interest rate on borrowing under our line of credit during the ~~third~~first quarter of fiscal year ~~2022~~2023 was ~~1.5%~~1.75%. We are obligated to pay quarterly unused commitment fees of between 0.15% and 0.35% of the Credit Facility’s aggregate principal amount, based on our leverage ratio. ~~Since the Credit Facility's inception, the rate applied to our unused commitment fees has been 0.15%. We incurred unused commitment fees of $13 and $70 during the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021~~~~, respectively, and the balance of unamortized customary lender fees was $526 and $650 as of~~ ~~December 31, 2021~~ ~~and~~ ~~March 31, 2021~~, respectively. On our Consolidated Balance Sheets, the short term portion of unamortized fees is recorded within prepaid expenses and other, and the long term portion is recorded in other assets. The fees are being expensed on a straight line basis over the life of the agreement.

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The financial covenants in the Credit Facility include a maximum leverage ratio of ~~5.50 to~~ ~~1.00~~ ~~for the~~ ~~first~~~~four~~ ~~testing dates on which the line of credit is outstanding;~~ 5.0 to 1.0 ~~on each of~~for the ~~fifth, sixth, seventh, and~~period ended ~~eighth~~June 30, 2022, ~~testing dates; and 4.5 to~~ ~~1.0~~ ~~on each testing date following the~~ ~~eighth~~ ~~testing date,~~ except that we may have a leverage ratio of 5.75 to 1.0 for a period of four consecutive quarters following a permitted acquisition. The Credit Facility also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0. Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales. As of ~~December 31, 2021~~June 30, 2022, we were in compliance with all ~~required~~ covenants.

OnIn ~~October 18, 2021,~~July 2022, we ~~borrowed $70,000 under the Credit Facility to provide a portion of the cash needed to complete the Agena Acquisition as further discussed in Note~~repaid ~~11.~~$12,000 ~~"Significant Transactions." Subsequent to the Agena Acquisition, we repaid $10,000 against our outstanding balance during the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2022.~~ ~~As of~~ ~~December 31, 2021,~~ ~~the outstanding balance under our Credit Facility was $60,000. In~~ ~~January~~ ~~2022,~~ ~~we repaid $4,000~~ of the outstanding balance on our Credit Facility.

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Convertible Notes

On August 12, 2019, we issued an aggregate principal amount of $172,500 of ~~convertible senior notes.~~Notes. The net proceeds from the Notes, after deducting underwriting discounts and commissions and other related offering expenses payable by us were approximately $167,056. The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375% payable semi-annually in arrears on February 15 and August 15 each year beginning on February 15, 2020. ~~The Notes are initially convertible at a conversion rate of 3.5273 shares of common stock per~~ ~~$1,000~~ ~~principal amount of Notes, which is equivalent to an initial conversion price of approximately $283.50 per share of common stock. Noteholders~~ ~~may~~ ~~convert their Notes at their option only in the following circumstances:~~

~~(i)~~			~~during any calendar quarter commencing after the calendar quarter ended on~~ ~~December~~ ~~31,~~~~2019~~ (and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
~~(ii)~~			~~during the~~ ~~five~~ ~~consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per~~ ~~$1,000~~ ~~principal amount of Notes for each trading day of the measurement period was less than~~ ~~98%~~ ~~of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;~~
~~(iii)~~			upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets; and
~~(iv)~~			~~at any time from, and including,~~ ~~April~~ ~~15,~~~~2025~~ ~~until the close of business on the~~ ~~second~~ ~~scheduled trading day immediately before the maturity date.~~

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. Our current intent is to settle conversions entirely in shares of common stock. We will reevaluate this policy from time to time as we receive conversion notices from note holders. The circumstances necessary for conversion were not met during the three or ~~nine~~months ended ~~December 31, 2021~~June 30, 2022. As of ~~December 31, 2021~~June 30, 2022, the Notes are classified as a long-term liability on our Condensed Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period. The if-converted value of the Notes did not exceed the principal balance as of ~~December 31, 2021~~June 30, 2022.

~~Debt issuance costs related to the Notes are comprised of discounts and commissions payable to the initial purchasers of $5,175 and~~ ~~third~~ ~~party offering costs of $255. The debt issuance costs are being amortized to interest expense using the effective interest method over the~~ ~~six-year contractual term of the Notes.~~

~~Due to our adoption of ASU~~ ~~2020~~-06 on ~~April 1, 2021,~~ we no ~~longer bifurcate the Notes into a liability and an equity component in our Condensed Consolidated Balance Sheets (see Note~~ 1. "Description of Business and Summary of Significant Accounting Policies"). The Notes are accounted for entirely as a liability, and the issuance costs of the Notes are accounted for wholly as debt issuance costs. The equity conversion feature that was recorded to common stock, as well as the unamortized debt discount and amortization expense attributable to equity, have been derecognized.

The net carrying amount of the Notes was as follows:

	*December 31, 2021*			*March 31, 2021*			*June 30, 2022*			*March 31, 2022*
Principal outstanding	$	172,500		$	172,500		$	172,500		$	172,500
Unamortized debt discount attributable to equity		0			(23,497	)
Unamortized debt issuance costs		(3,360	)		(3,328	)		(2,910	)		(3,135	)
Net carrying value	$	169,140		$	145,675		$	169,590		$	169,365

We recognized interest expense on the Notes as follows:

	*Three Months Ended December 31,*				*Nine Months Ended December 31,*				*Three Months Ended June 30,*
	*2021*		*2020*		*2021*		*2020*		*2022*		*2021*
Coupon interest expense at 1.375%	$	593	$	593	$	1,779	$	1,779
Coupon interest expense at 1.375%									$	593	$	593
Amortization of debt discounts and issuance costs		223		1,357		666		4,024		225		221
Total	$	816	$	1,950	$	2,445	$	5,803	$	818	$	814

The effective interest rate on the notes is approximately 1.9%. ~~Prior to the adoption of ASU~~ ~~2020~~-~~06,~~ ~~the effective interest rate was approximately 5.5%.~~

Note 78. Stockholders' Equity

Stock-Based Compensation

During the ~~second~~first quarter of fiscal year ~~2022,~~2023, ~~our shareholders approved~~we issued stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc. 2021 Equity Incentive Plan (the "2021 Equity Plan"), which authorizes the issuance of 330 shares of common stock to eligible participants. ~~For the purpose of counting the shares remaining under the~~ ~~2021~~ ~~Equity Plan, each share underlying a stock option or a full value award (such as restricted stock units and performance shares) counts as~~ ~~one~~ ~~share used. The~~ ~~2021~~ Equity Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to grant equity awards, or to delegate its authority under the plan to make grants (subject to certain legal and regulatory restrictions), including the authority to determine the individuals to whom awards will be granted, the type of awards and when the awards are to be granted, the number of shares to be covered by each award, the vesting schedule, and all other terms and conditions of the awards.

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

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~~The exercise price of stock awards granted under the~~ ~~2021~~ ~~Equity Plan cannot be less than the fair market value at the date of grant. Shares issued during the~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021~~ ~~were issued in connection with the~~ ~~2021~~ ~~Equity Plan.~~

~~Amounts~~Expense recognized related to stock-based compensation ~~are~~is as follows:

	*Three Months Ended December 31,*					*Nine Months Ended December 31,*						*Three Months Ended June 30,*
	*2022*			*2021*		*2021*			*2020*			*2022*			*2021*
Stock-based compensation expense	$	3,703		$	3,611	$	7,939		$	6,887		$	3,432		$	2,197
Amount of income tax (benefit) expense recognized in earnings		(743	)		320		(4,247	)		(1,127	)		(1,992	)		(2,785	)
Stock-based compensation expense, net of tax	$	2,960		$	3,931	$	3,692		$	5,760		$	1,440		$	(588	)

Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying unaudited Condensed Consolidated Statements of Operations.

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The following is a summary of stock option award activity for the ~~nine~~three months ended ~~December 31, 2021:~~June 30, 2022:

	*Stock Options*									*Stock Options*
	*Shares Subject to Options*			*Weighted- Average Exercise Price per Share*		*Weighted-Average Remaining Contractual Life (Years)*		*Aggregate Intrinsic Value*		*Shares Subject to Options*			*Weighted- Average Exercise Price per Share*		*Weighted-Average Remaining Contractual Life (Years)*		*Aggregate Intrinsic Value*
Outstanding as of March 31, 2021		253		$	129.55		2.7	$	28,856
Outstanding as of March 31, 2022											202		$	167.14		2.9	$	18,261
Awards granted		37			268.85						42			185.57
Awards forfeited or expired		(4	)		191.52						(4	)		231.15
Awards exercised		(62	)		98.99						(16	)		93.12
Outstanding as of December 31, 2021		224		$	159.79		2.8	$	37,597
Outstanding as of June 30, 2022											224		$	174.93		3.3	$	9,493

The stock options granted during the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 vest in equal installments on ~~September 1, 2022,~~ ~~June 15, 2023~~ the first, second, and ~~June 15, 2024.~~third anniversary of the grant date.

The following is a summary of ~~restricted stock unit ("RSU")~~RSU award activity for the ~~nine~~three months ended ~~December 31, 2021:~~June 30, 2022:

	*Time-Based Restricted Stock Units*					*Performance-Based Restricted Stock Units*					*Time-Based Restricted Stock Units*					*Performance-Based Restricted Stock Units*
	*Number of Shares*			*Weighted- Average Grant Date Fair Value per Share*		*Number of Shares*			*Weighted- Average Grant Date Fair Value per Share*		*Number of Shares*			*Weighted- Average Grant Date Fair Value per Share*		*Number of Shares*			*Weighted- Average Grant Date Fair Value per Share*
Outstanding as of March 31, 2021⁽¹⁾		37		$	206.56		20		$	207.88
Outstanding as of March 31, 2022⁽¹⁾												51		$	252.86		55		$	288.45
Awards granted ⁽¹⁾		37			274.83		47			302.15		33			185.57		19			185.57
Performance adjustment⁽²⁾		0			0		16			190.07		0			0		2			202.00
Awards forfeited		(2	)		224.66		0			0		(2	)		245.31		0			0
Awards distributed		(20	)		207.98		(28	)		197.81		(7	)		204.62		(10	)		202.00
Outstanding as of December 31, 2021⁽¹⁾		52		$	253.59		55		$	288.45
Outstanding as of June 30, 2022⁽¹⁾												75		$	227.63		66		$	269.18

⁽¹⁾	Balances for performance-based restricted stock units ("PSUs") are reflected at target.

⁽²⁾

During the three months ended June 30, ~~2021,~~2022, the fiscal year ~~2019~~2020 PSUs vested and were ~~paid~~distributed at ~~280%~~126% of target, based on actual performance results and completion of service conditions. In addition, the PSUs granted to employees of Gyros Protein Technologies Holding AB vested at 60% of target, following a modification of the performance targets by the Compensation Committee of the Board of Directors during fiscal year ~~2021.~~

The outstanding time-based RSUs vest and settle in shares of our common stock on a one-for-one basis. OfAll of the RSUs granted during the ~~nine~~three months ended ~~December 31, 2021,~~June 30, 2022 ~~approximately~~ 28vest in equal installments on ~~September 1, 2022,~~ ~~June 15, 2023~~ the first, second, and ~~June 15, 2024;~~ ~~approximately~~ 8third ~~vest in equal installments on~~ ~~November 15, 2022,~~ ~~November 15, 2023,~~ ~~and~~ ~~November 15, 2024;~~ ~~and the remainder represent time-based RSUs issued to non-employee directors, which vest~~ ~~one~~ ~~year from~~anniversary of the grant date. We recognize the expense relating to RSUs, net of estimated forfeitures, on a straight-line basis over the vesting period.

~~Performance-based RSUs~~PSUs vest upon completion of the service period described in the award agreement and based on achievement of the financial targets described in the award agreements. We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the financial targets on a straight-line basis over the service period.

During ~~fiscal year~~the ~~2020,~~three ~~we awarded~~ 8months ended June 30, 2022, the Compensation Committee of the Board of Directors created a plan to award 19 PSUs at target (the "FY 2023 PSUs") that are subject to both service and performance conditions to eligible employees. The performance period for the FY 2023 PSUs ~~had a grant date fair value of $202.00 per share~~ is from April 1, 2022 until March 31, 2023 and the service period is from April 1, 2022 until March 31, 2025. Of the FY 23 PSUs, 13 vest based on our achievement of specific performance criteria ~~for~~during fiscal year 2023 and they have a grant date fair value of $185.57. The remaining 6 awards will be settled in shares of our common stock, but they are subject to performance criteria that are subjective and as such do not have a grant date. The awards will be marked-to-market each reporting period during the ~~three~~~~-year period from~~ ~~April 1, 2019~~ ~~through~~ ~~March 31, 2022~~ ~~and on a pro-rata basis after~~ 12 ~~months of continued service through~~ ~~June 15, 2022.~~ performance period. The quantity of shares that will be issued upon vesting will range from 0% to 200% of the targeted number of shares; if the defined minimum targets are not met, then no shares will vest. ~~Based on actual and projected performance through the quarter ended~~ ~~December 31, 2021,~~ ~~we increased our estimate of FY~~ 20 ~~PSUs expected to vest from~~ 6 ~~to 9 shares, resulting in a cumulative effect true up of $584 recorded during the~~ ~~third~~ ~~quarter of~~

During fiscal year ~~2022.~~ ~~We expect to record $151 of expense related to the FY~~ 20 ~~PSUs in the~~ ~~fourth~~ ~~quarter of fiscal year~~ ~~2022.~~

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~~During the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2022,~~2020, we awarded 78 PSUs ~~to key employees of Agena that are~~(the "FY 20 PSUs") subject to both service and performance conditions ~~("Agena PSUs").~~to eligible employees. The ~~Agena~~FY 20 PSUs had a grant date fair value of ~~$305.79~~$202.00 per share and ~~vest based on continued service, completion of certain compliance requirements, and achievement of specific financial performance targets for the period from~~ ~~October 20, 2021~~ ~~through~~ ~~March 31, 2023.~~ ~~The quantity of shares that will be issued upon vesting will range from 50% to~~ ~~200%;~~ ~~if financial performance is less than~~ ~~50%~~ ~~of targets, then~~ no ~~shares will vest.~~

On ~~October 28, 2021,~~ the Compensation Committee of the Board of Directors granted a special long-term equity award consisting of performance stock units covering a target of 40 shares (“PSUs”) that is subject to both performance and service conditions to our Chief Executive Officer. The performance period of the award isvested during the three~~-year period from~~ ~~April 1, 2021~~ ~~through~~ ~~March 31, 2024~~ ~~and the service is the period commencing on~~ ~~October 28, 2021~~ ~~and ending on~~ ~~October 27, 2024,~~ ~~October 27, 2025,~~ ~~and~~ ~~October 27, 2026~~ on which dates eligible PSUs will vest and be distributed. The performance metrics are cumulative GAAP revenues over the performance period and cumulative adjusted operating income over the performance period. The quantity of shares that will be issued upon vesting will range from 0 to ~~40;~~ ~~if financial performance targets are~~ ~~not~~ ~~met, then~~ no ~~shares will vest.~~

~~During the~~ ~~three~~ months ended June 30, ~~2021,~~2022. Based on actual performance targets achieved, the ~~Compensation Committee~~awards vested at 126% of ~~the Board~~target, resulting in a total of ~~Directors modified a time-based restricted stock award granted to our Chief Executive Officer during fiscal year~~ ~~2017,~~ ~~distributing~~ 3 ~~remaining outstanding shares effective~~ ~~June 8, 2021.~~ ~~The original award required vesting of~~ 1 ~~award on each of~~ ~~March 20, 2022,~~ ~~2023,~~ ~~and~~ ~~2024.~~ ~~As a result of the modification, we recognized the previously unrecognized compensation cost of $351 during the~~ ~~three~~ ~~months ended~~ ~~June~~ ~~30,~~~~2021.~~

~~Public Offering of Common Stock~~

On ~~June 12, 2020,~~ ~~we completed the sale and issuance of 600 shares of our common stock and on~~ ~~June 19, 2020,~~ ~~our underwriters exercised in full their option to purchase an additional~~ 90 shares of our common stock. The offering price to the public was $225.00 per share. The total proceeds we received from the offering, net of underwriting discounts and commissions and other offering expenses, was $145,935.10 awards distributed.

Note 89. Earnings (Loss) Per Share

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the reporting period. Diluted (loss) earnings per share (“diluted EPS”) is computed similarly to basic (loss) earnings per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Potentially dilutive securities include stock options and ~~RSUs, including RSUs that contain~~both time and performance ~~conditions which have been achieved as of the reporting period~~based RSUs (collectively “stock awards”), as well as common shares underlying the Notes. Stock awards are excluded from the calculation of diluted EPS if they are subject to performance conditions that have not yet been achieved or are antidilutive. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would then have an antidilutive effect. There was no dilution in our diluted EPS calculation for the three months ended ~~December 31, 2021~~June 30, 2022 ~~nor the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2020~~ ~~because~~as we incurred a net ~~losses in those periods~~loss and the effect would have been antidilutive.

The impact of the assumed conversion of the Notes calculated under the if-converted method was antidilutive, and as such, shares underlying the Notes were excluded from the diluted EPS calculation for three ~~and~~ ~~nine~~months ended ~~December 31, 2021~~June 30, 2022 and ~~December 31, 2020.~~June 30, 2021.

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

	*Three Months Ended December 31,*						*Nine Months Ended December 31,*					*Three Months Ended June 30,*
	*2021*			*2020*			*2021*		*2020*			*2022*			*2021*
Net (loss) income available for shareholders	$	(2,060	)	$	(4,542	)	$	3,655	$	(646	)	$	(1,438	)	$	1,995
Weighted average outstanding shares of common stock		5,233			5,125			5,199		4,922			5,273			5,152
Dilutive effect of stock options		0			0			107		0			0			108
Dilutive effect of RSUs		0			0			27		0			0			41
Fully diluted shares		5,233			5,125			5,333		4,922			5,273			5,301

Basic (loss) earnings per share	$	(0.39	)	$	(0.89	)	$	0.70	$	(0.13	)	$	(0.27	)	$	0.39
Diluted (loss) earnings per share	$	(0.39	)	$	(0.89	)	$	0.69	$	(0.13	)	$	(0.27	)	$	0.38

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

	*Three Months Ended December 31,*				*Nine Months Ended December 31,*				*Three Months Ended June 30,*
	*2021*		*2020*		*2021*		*2020*		*2022*		*2021*
Assumed conversion of the Notes		608		608		608		608		608		608
Stock awards that were anti-dilutive		285		307		38		313		315		38
Stock awards subject to performance conditions		40		11		18		17		45		8
Total stock awards excluded from diluted EPS		933		926		664		938		968		654

Note 910. Income Taxes

For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income. Each quarter, our estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. Additionally, the tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, impairments of non-deductible goodwill, excess benefits from stock-based compensation, and changes in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs. There is a potential for volatility in the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, settlement with taxing authorities, and foreign currency fluctuations.

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Our effective income tax rate was ~~(1.0%~~(73.4%) for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 and ~~75%~~(40.7%) for the ~~nine~~three months ended ~~December~~June 30, 2021. ~~31,~~~~2020.~~The effective tax rate for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 differed from the statutory federal rate of 21% primarily due to the ~~benefit of~~ share-based payment awards for employees and the effect of income generated in foreign ~~derived intangible income, partially offset by the limitations imposed by Section~~ ~~162~~~~(m), and expenses~~jurisdictions The effective tax rate for ~~state income taxes.~~

~~During~~ the ~~third~~first ~~quarter~~three months of ~~fiscal year~~2023 was higher than the same period in 2022 ~~we recorded a $1,164 uncertain tax position related to research and development tax credits claimed by Agena prior~~primarily due to the ~~Acquisition, which is included~~share based compensation and the effect of income in ~~the preliminary purchase price.~~

~~The tax year ended~~ ~~December 31,~~ ~~2018~~~~for Gyros US, Inc., and its subsidiary, which we acquired as part of the Gyros Protein Technologies ("GPT") acquisition, is under examination by the IRS. Additionally, the tax year ended~~ ~~March 31,~~ ~~2019~~~~for Mesa Laboratories, Inc. is under review by the IRS. We expect the examinations to be completed during fiscal year~~ ~~2022.~~

~~Since we are subject to audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next~~ 12 ~~months. However, we do~~ ~~not~~ ~~expect the change, if any, to have a material effect on our financial condition or results of operations within the next~~ 12 ~~months.~~foreign jurisdictions.

Note 1011. Commitments and Contingencies

We review the adequacy of our legal reserves on a quarterly basis and establish reserves for loss contingencies that are both probable and reasonably estimable. As of ~~December 31, 2021~~June 30, 2022, there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets.

Companies are required to collect and remit sales tax from certain customers if the company is determined to have nexus in a particular state. The determination of nexus varies by state and often requires technical knowledge of each jurisdiction's tax case law. During fiscal year ~~2021,~~ we determined that certain subsidiaries of GPT had established nexus in various jurisdictions during prior periods without properly collecting and remitting sales tax, and in certain cases had collected sales tax and ~~not~~ ~~remitted it. The estimated accrued liability for this matter is included in other accrued expenses on the Condensed Consolidated Balance Sheets. The balance was $2,317 and $2,714 as of~~ ~~December 31, 2021~~ ~~and~~ ~~March 31, 2021~~~~, respectively. The balance decreased because we settled our obligations with certain states during the~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021,~~ ~~partially offset by additional taxes, interest, and penalties incurred. Approximately $1,899 of the liability is considered a preacquisition contingency and was included in purchase accounting.~~

~~Note~~ 11~~. Significant Transactions~~

~~Acquisition of Agena Bioscience, Inc.~~

On ~~October 20, 2021,~~ we completed the acquisition of Agena Bioscience, Inc., which aligns with our overall acquisition strategy, moves our business towards the life sciences tools sector, and expands our market opportunities, particularly in Asia. Agena is a leading clinical genomics tools company that develops, manufactures, markets, and supports proprietary instruments and related consumables and services that enable genetic analysis for a broad range of diagnostic and research applications. Using Agena's MassARRAY® instruments and chemical reagent solutions, customers can analyze DNA samples for a variety of high volume clinical testing applications, such as inherited genetic disease testing, pharmacogenetics, various oncology tests, infectious disease testing, and other highly-differentiated applications. Agena sells its products primarily to clinical labs, including large specialty, reference and pathology labs, as well as a variety of academic, hospital, and government facilities. Agena’s products are marketed directly to laboratories as well as to in vitro diagnostic development partners globally. Agena's products are differentiated in the market because they combine the throughput and analytical capabilities of mass spectrometry with the flexibility, ease-of-use and cost advantages of polymerase chain reaction ("PCR") methods.

~~We funded the acquisition and transactions relating thereto with cash on hand and borrowings under the Credit Facility. See Note~~ 6. ~~"Indebtedness" for additional details regarding the Credit Facility. At the completion of the Agena Acquisition on~~ ~~October 20, 2021,~~ each Agena common share issued and outstanding was converted into the right to receive $5.96 per share in cash, subject to adjustment, without interest. We paid $300,793, net of cash acquired, but inclusive of working capital adjustments, to complete the Agena Acquisition. Of the cash consideration we paid, approximately $267,000 represented cash consideration to holders of Agena’s preferred and common stock, approximately $2,000 represented cash consideration paid for the settlement of Agena’s warrants, and approximately $31,800 represented cash consideration for the settlement of Agena's vested stock options as of the closing date.

~~Preliminary Allocation of Purchase Price~~

We accounted for the Agena Acquisition as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the acquiree's identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values and consolidated with those of Mesa. Significant judgments and estimates are required when performing valuations. For example, we use judgment when estimating the fair value of intangible assets using a discounted cash flow model because this method involves the use of significant estimates and assumptions with respect to revenue growth rates, customer attrition rate and discount rates, all of which are considered Level 3 inputs. We obtained the information used to prepare the preliminary valuation during due diligence and from other sources. These estimates were based on assumptions that we believe to be reasonable; however, actual results ~~may~~ ~~differ from these estimates. The following table summarizes the allocation of the preliminary purchase price as of~~ ~~October 20, 2021:~~

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Life (in years)

Amount

Cash and cash equivalents
$ 7,544
Accounts receivable (a)
11,100
Other current assets (b)
24,324
Total current assets
42,968
Property, plant and equipment/ noncurrent assets
16,976
Deferred tax asset
792
Intangible assets:

Goodwill (c)
N/A 136,006
Customer relationships (d)
16 107,100
Intellectual property (d)
10 46,200
Tradenames (d)
N/A 15,900
Total assets acquired
$ 365,942
Accounts payable
2,174
Unearned revenues
2,713
Other current liabilities
12,549
Total current liabilities
17,436
Deferred tax liability
31,907
Other noncurrent liabilities
8,262
Total liabilities assumed
57,605
Total purchase price, net of cash acquired
$ 300,793

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

~~(b) Includes~~ ~~$6,062~~ ~~of inventory step-up, which was amortized entirely within the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2022.~~

~~(c) Acquired goodwill of~~ ~~$136,006,~~ all of which is allocated to the Clinical Genomics reportable segment, represents the value expected to arise from the value of expanded market opportunities, expected synergies, and assembled workforce, ~~none~~ ~~of which qualify as amortizable intangible assets. The goodwill acquired is~~ ~~not~~ ~~deductible for income tax purposes.~~

(d) Customer relationships and intellectual property are currently expected to be amortized on a straight line basis over a weighted average 14.2 year period. The identified intangible assets will be amortized on a straight line basis over their useful lives, which approximates the pattern that the assets' economic benefits are expected to be consumed over time. Tradenames are considered indefinite-lived intangibles. Amortization expense for customer relationships will be amortized to general and administrative expenses; amortization expense for intellectual property will be recorded to cost of revenues. During the period from ~~October 20, 2021~~ ~~until~~ ~~December 31, 2021,~~ $1,320 of amortization expense was recorded to general and administrative costs and $911 of amortization expense was recorded to cost of revenues and allocated to the Clinical Genomics Division. Once our final valuation is complete, the amount of amortization expense will be trued up and amortization will be based on our final allocation.

This preliminary purchase price allocation is subject to revision as more detailed analyses are completed. If additional information about the 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 allocation~~ ~~may~~ ~~include, but~~ ~~not~~ ~~be limited to: (~~1~~) changes in allocations to intangible assets such as trade names, intellectual property and customer relationships, as well as goodwill, (~~2~~) changes to inventory, (~~3~~) changes to deferred tax balances, and (~~4~~) other changes to assets and liabilities.~~

~~Acquisition-related costs, such as legal and advisory fees, of $605 and $723 for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021,~~ ~~respectively, are~~ ~~not~~ included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred and are reflected on the Condensed Consolidated Statement of Operations in general and administrative expenses.

~~Unaudited Pro Forma Information~~

~~Agena's operations contributed $16,485 to revenues and ($4,532) of net loss to our consolidated results during the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2022,~~ ~~including the inventory-step up amounting to $6,062 that was fully amortized in the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2022.~~ ~~We included the operating results of Agena in our Condensed Consolidated Statements of Operations beginning on~~ ~~October 20, 2021,~~ ~~subsequent to the acquisition date. The following pro forma financial information presents the combined results of operations of Mesa and Agena as if the acquisition had occurred on~~ ~~April 1, 2020~~ after giving effect to certain pro forma adjustments. The pro forma adjustments reflected only include those adjustments that are directly attributable to the Agena Acquisition, are factually supportable and have a recurring impact; they do ~~not~~ ~~reflect any adjustments for anticipated expense savings resulting from the acquisition and are~~ ~~not~~ ~~necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on~~ ~~April 1, 2020~~ ~~or of future results.~~

Three Months Ended December 31,

Nine Months Ended December 31,

2021

2020

2021

2020

Pro forma total revenues (1)
$ 56,659 $ 62,424 $ 163,734 $ 154,172
Pro forma net income (2)
477 (1,712 ) 7,318 (6,082 )

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

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

~~● Excludes acquisition-related transaction costs incurred in the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021.~~

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

~~● Additional amortization expense of $2,828 and $8,485 for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~month periods presented, respectively, based on the increased fair value of amortizable intangible assets acquired.~~

~~● Additional charge to cost of revenues of $6,062 was included in the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2020~~ ~~based on the step up value of inventory. $6,062 was excluded from the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021~~ ~~based on the step up value of inventory which would have been fully amortized within the~~ ~~first~~~~three~~ ~~months of the acquisition.~~

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

~~● Income tax effect of applicable adjustments made at a blended federal and state statutory rate (approximately 26%).~~

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~~Table of Contents~~

~~Butler, New Jersey Closure~~

~~We completed the previously announced closure of our Butler, New Jersey facility during the~~ ~~three~~ ~~months ended~~ ~~June 30, 2021.~~ The facility was primarily used in the production of our gas flow calibration and air sampling equipment, which is part of our Calibration Solutions division. Our manufacturing facility in Lakewood, Colorado is currently undergoing renovations that will allow it to accommodate the production of the gas flow calibration and air sampling equipment. Consolidating the production of these products is expected to reduce facilities costs and streamline our use of lean manufacturing tools under central management to further encourage production efficiencies. As a result of the facility consolidation, we incurred $0 and $77 of severance costs during the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2021,~~ ~~respectively, which were recorded to cost of revenues, selling, and general and administrative expense on the Condensed Consolidated Statement of Operations. As of~~ ~~December 31, 2021,~~ ~~there were 0 outstanding and accrued costs, and we do~~ ~~not~~ ~~expect to incur any material expenses related to the Butler, New Jersey facility closure in future periods.~~

Note 12. Segment Information

~~Following the Agena Acquisition discussed in Note~~During fiscal year ~~11.~~2022, ~~"Significant Transactions,"~~ we realigned our financial reporting segments to reflect how management evaluates the business and allocates resources. The acquisition of Agena expanded our presence further into the life sciences tools market and provided an impetus for the creation of our new Clinical Genomics reportable segment. The strategic shift in our business also resulted in a change to the way we manage other business units, and as a result, our historical Instruments and Continuous Monitoring reportable segments have been combined to create Calibration Solutions. Prior year amounts presented have been reclassified to conform to current year presentation. Our change in financial reporting segments has not resulted in any change to previously reported consolidated amounts.

	*Three Months Ended December 31,*						*Nine Months Ended December 31,*						*Three Months Ended June 30,*
	*2021*			*2020*			*2021*			*2020*			*2022*			*2021*
Revenues:
Clinical Genomics													$	14,505		$	0
Sterilization and Disinfection Control	$	13,831		$	13,077		$	43,014		$	37,696			14,774			15,150
Biopharmaceutical Development		12,756			8,711			32,188			23,791			10,967			8,877
Calibration Solutions		11,624			12,384			33,769			34,486			10,207			10,893
Clinical Genomics		16,485			0			16,485			0
Total revenues (a)	$	54,696		$	34,172		$	125,456		$	95,973		$	50,453		$	34,920

Gross profit (loss)
Gross profit
Clinical Genomics													$	7,849		$	0
Sterilization and Disinfection Control	$	9,945		$	9,308		$	31,859		$	28,098			10,768			11,428
Biopharmaceutical Development		8,768			4,616			20,061			15,294			7,077			4,692
Calibration Solutions		6,090			6,869			18,330			18,962			5,664			6,112
Clinical Genomics		3,924			0			3,924			0
Reportable segment gross profit		28,727			20,793			74,174			62,354			31,358			22,232
Corporate and Other (b)		(100	)		(140	)		(196	)		(76	)		(17	)		(21	)
Gross profit	$	28,627		$	20,653		$	73,978		$	62,278		$	31,341		$	22,211
Reconciling Items:
Operating expenses		31,139			20,631			69,166			54,216			35,935			19,088
Operating (loss) income		(2,512	)		22			4,812			8,062			(4,594	)		3,123
Nonoperating (income) expense, net		(171	)		5,749			1,192			10,651			818			1,705
(Loss) earnings before income taxes	$	(2,341	)	$	(5,727	)	$	3,620		$	(2,589	)	$	(5,412	)	$	1,418

^(a)

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

^(b)

Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

The following table sets forth inventories by reportable segment. Our chief operating decision maker is not provided with any other segment asset information.

December 31,

March 31,

2021

2021

Sterilization and Disinfection Control
$ 2,146 $ 2,333
Biopharmaceutical Development
4,482 4,162
Calibration Solutions
5,531 4,683
Clinical Genomics
11,560 0
Total inventories
$ 23,719 $ 11,178

	*June 30,*		*March 31,*
	*2022*		*2022*
Clinical Genomics	$	12,711	$	11,802
Sterilization and Disinfection Control		2,310		2,176
Biopharmaceutical Development		4,960		4,495
Calibration Solutions		6,893		6,133
Total inventories	$	26,874	$	24,606

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in thousands, except per share amounts)

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position; potential impairment of future earnings; anticipated effects of, and future actions to be taken in response to, the COVID-19 pandemic; results of acquisitions; management’s strategy, plans and objectives for future operations or acquisitions, product development and sales; product research and development; regulatory ~~approval;~~approvals; selling, general and administrative expenditures; intellectual property; development and manufacturing plans; availability of materials and components; and adequacy of capital resources and financing plans constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management’s beliefs and assumptions. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company’s behalf. Words such as “expect,” “intend,” “seek,” “believe,” “anticipate,”“~~believe,~~”“could,” “estimate,” “plan,” “target,” “may,”“~~target,~~”“project,” or variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including risks associated with: ~~the duration and impact of the COVID-19 pandemic and its adverse effects on our business;~~ our ability to successfully grow our business, including as a result of acquisitions; the results that acquisitions have on ~~operations of acquisitions;~~our operations; our ability to consummate acquisitions at our historical rate and at appropriate prices, and our ability to effectively integrate acquired businesses and achieve desired results; the market acceptance of our products; technological or market viability of our products; reduced demand for our ~~products;~~products, including as a result of competitive factors; conditions in the global economy and the particular markets we serve; the duration and impact of the COVID-19 pandemic and its adverse effects on our business;significant developments or uncertainties stemming from governmental actions, including changes in trade policies and medical device regulations; the timely development and commercialization, and customer acceptance, of enhanced and new products and services; retirement of old products and customer migration to new products; projections of revenues, growth, operating results, profit margins, ~~expenses,~~ earnings, expenses,margins, tax rates, tax provisions, liquidity, cash flows, ~~liquidity,~~ demand, and competition; the effects of additional actions taken to become more efficient or lower costs; restructuring activities; laws regulating fraud and abuse in the health care industry and the privacy and security of health and personal information; product liability; information security; outstanding claims, legal and regulatory proceedings; international business challenges including anti-corruption and sanctions laws; tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic, industry, and capital markets conditions; the timing of any of the foregoing; and assumptions underlying any of the ~~foregoing~~; ~~and any other statements that address events or developments that we intend or believe will or may occur in the future.~~foregoing. Such risks and uncertainties also include those listed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2022 and ~~elsewhere~~ in this report. The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. We disclaim any obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

~~Business~~ Overview

We are a multinational manufacturer, developer, and seller of life science tools and ~~critical~~ quality control products and services, many of which are sold into niche markets that are driven by regulatory requirements. We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe, and Asia Pacific, and by independent distributors in these areas as well as throughout the rest of the world. We prefer markets in which we can establish a strong presence and achieve high gross profit margins. As ~~described in Item 1.~~ ~~Financial Statements~~ ~~Note 12. "Segment Information," during the third quarter~~ of ~~fiscal year~~June 30, 2022, ~~following the acquisition of Agena, Mesa changed its business segment reporting to align with strategic changes in the way we manage our business units. As of December 31, 2021,~~ we managed our operations in four reportable segments, or divisions: Clinical Genomics, Sterilization and Disinfection Control, Biopharmaceutical Development, and Calibration ~~Solutions, and Clinical Genomics, which is comprised of the newly-acquired Agena.~~Solutions. Each of our divisions are described further in "Results of Operations" below. Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

Corporate Strategy

We strive to create shareholder value and further our purpose of Protecting the Vulnerable^® by growing our business both organically and through acquisitions, by improving our operating efficiency, and by continuing to hire, develop and retain top talent. As a business, we commit to our purpose of Protecting the Vulnerable^® every day by taking a customer-focused approach to developing, building, and delivering our products. We serve a broad set of industries, in particular the pharmaceutical, healthcare services, and medical device verticals, that require dependable quality control and calibration solutions to ensure the safety and efficacy of the products they use. By delivering the highest quality products possible, we are committed to protecting people, the environment, and end products.

Organic Revenues Growth

Organic revenues growth is primarily driven by the expansion of our customer base, increases in sales volumes, price increases, and ~~price increases.~~changes in foreign currency rates. Our ability to increase organic revenues is affected by general economic conditions, both domestic and international, customer capital spending trends, competition, and the introduction of new products. ~~We typically evaluate costs and pricing annually.~~ Our policy is to price our products competitively and, where possible, we pass along cost increases to our customers in order to maintain our margins. We typically evaluate costs and pricing annually; however as a result of high inflation in recent quarters, we have elected to put through additional price increases which will take effect during the second quarter of our fiscal year 2023.

Gross profit is affected by many factors including our product mix, manufacturing efficiencies, costs of products and labor, foreign currency rates, and price competition. Historically, as we have integrated our acquisitions and taken advantage of manufacturing efficiencies, our gross profit percentages for some products have improved. There are, however, differences in gross profit percentages between product lines, and ultimately the mix of sales ~~and prices~~ will continue to impact our overall gross profit.

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Inorganic Growth - Acquisitions

During the third quarter of fiscal year 2022, we completed the acquisition of Agena for an aggregate net purchase price of ~~$300,793, net of cash acquired, subject to customary purchase price adjustments.~~$300,793. Agena is a leading clinical genomics tools company that develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as newborn screenings, pharmacogenetics and oncology. The acquisition of Agena ~~accelerates Mesa's~~accelerated our strategic trajectory towards higher growth applications within the regulated segments of the life sciences tools market.

Over the past decade, we have consummated a number of acquisitions as part of our growth strategy. The acquisitions of these businesses have allowed us to expand our product offerings, globalize our company, and increase the scale at which we operate, which in turn affords us the ability to improve our operating efficiency, extend our customer base, and further the pursuit of our purpose: Protecting the Vulnerable®.

Improving Our Operating Efficiency

We maximize value in both our existing businesses and those we acquire by implementing efficiencies in our manufacturing, commercial, engineering, and administrative operations. We achieve efficiencies using the four pillars that make up The Mesa Way, which is our customer-centric, lean-based system for continuously improving and operating a set of high-margin, niche businesses. The Mesa Way is focused on: Measuring What Matters using our customers' perspective and setting high standards for performance; Empowering Teams to improve operationally and exceed customer expectations; Steadily Improving using lean-based tools designed to help us identify the root cause of opportunities and prioritize the biggest opportunities; and Always Learning so that performance continuously improves. ~~As we integrate Agena into our business, we will focus on applying~~ ~~The Mesa Way~~ ~~to its operations which we hope will improve efficiency in some areas of Agena's business.~~

Hire, Develop, and Retain Top Talent

At the center of our organization are talented people who are capable of taking on new challenges using a team approach. It is our exceptionally talented workforce that works together and uses our lean-based tool set to find ways to continuously improve our products, our services, and ourselves, resulting in long-term value creation for our shareholders.

~~Business Update and COVID-19~~General Trends

The COVID-19 pandemic began to broadly impact our business late in fiscal year 2020, and its impacts continued to affect our business in various ways throughout fiscal year 2021 and to a lesser extent, into the first three quarters of fiscal year 2022. We continue to monitor the impacts of COVID-19, including the current spread of certain variants of the virus, and we have taken and will continue to take steps to identify and mitigate the adverse impact on, and risks to, our business (including but not limited to our employees, customers, vendors, manufacturing capabilities and capacity, and supply and distribution channels) posed by the spread of COVID-19 and the government responses thereto.

COVID-19 has caused or exacerbated broad market phenomena such as supply chain disruptions, inflation, and wage pressure to which we are susceptible. ~~Each quarter~~While supply chain constraints continue to impact all of our divisions and particularly our Calibration Solutions and Biopharmaceutical Development divisions, we expect that constraints will abate somewhat over the remainder of fiscal year 2022, we have experienced increased supply constraints for certain components used in our operations, particularly components used by the Calibration Solutions division, and to a lesser extent, our Biopharmaceutical Development division; Clinical Genomics has also experienced supply chain constraints although the division has only been part of Mesa since October 20, 2021.2023. We continue to work with our suppliers to understand the existing and potential future impacts to our supply chain and are taking actions in an effort to mitigate such impacts, including pre-ordering components in higher quantities than usual, which has resulted in increased raw materials balances on our consolidated balance ~~sheet~~sheets as of ~~December 31, 2021. The impact~~June 30, 2022. We have also experienced labor shortages and inflationary pressures due to labor market conditions, impacting all of ~~supply chain disruptions~~our divisions, but particularly our Sterilization and Disinfection Control division. It is ~~discussed in more detail~~possible that labor shortages in our ~~"Results~~Sterilization and Disinfection Control Division may continue to impact our ability to manufacture product on preferred timelines during the remainder of ~~Operations" and "Risk Factors" below. We expect disruptions to our supply chain to persist at least through~~ fiscal year ~~2023.~~2023 which could directly impact our revenues and related gross profit.

~~The~~We continue to actively monitor the COVID-19 pandemic, ~~and related public health recommendations and mandated precautions to mitigate~~including the spread of variants of the virus ~~including regulations to close or limit~~and the ~~operating hours of~~potential impacts that the virus may have on our ~~laboratory and facilities of~~employees, our customers, and our supply chain. Conditions related to ~~prevent non-essential personnel from going on-site to customer locations to service or market~~the COVID-19 pandemic have generally improved during the first quarter of our ~~products, have negatively affected our operations. While many recommendations and precautions that affected us~~fiscal year 2023; however, there has been significant variation in business impact by geography. For example, late in fiscal year ~~2021 have been rescinded~~2022, an increase in COVID-19 cases in certain parts of China resulted in the ~~United States, some~~re-imposition of government mandated shut-downs and restrictions, ~~were reimposed for portions of the nine months ended December 31, 2021 as COVID-19 variants spread widely. Our~~which impacted our operations in ~~Europe and Asia have been most impacted because regulations and restrictions have tended to be more widespread in those areas. In contrast to the negative impacts experienced by our other divisions,~~China, particularly our Clinical Genomics division produces a consumable reagent that can be used with its proprietary MassARRAY® instruments to accurately identify the presence of the COVID-19 virus and identify the variant from a biological sample. As a result, the Clinical Genomics division has benefited to some extent from outbreaks and resulting increased testing efforts. However, like in our other divisions,division. Such regulatory restrictions ~~particularly in Asia~~ have negatively impacted commercial execution, limiting sales of ~~all types of~~ Clinical Genomics consumables to existing customers and instruments to new customers.

~~Sales~~As stay-at-home and quarantine mandates have eased to some extent, we expect an eventual return to normalized activity levels. The continued impact of COVID-19 remains highly uncertain because of the speed with which the situation continues to evolve, the global breadth of its spread, the range of governmental and community responses thereto and the diversity of our ~~hardware products have historically been more sensitive to general economic conditions than sales of our consumables. This pattern was apparent during fiscal year 2021~~geographic reach and ~~continued into the first quarter of fiscal year 2022. In addition, even~~business offerings. Even after the COVID-19 pandemic has largely subsided as a public health matter, we may experience material adverse impacts to our business as a result of ~~its~~the pandemic's adverse impact on the global economy, in-person collaboration and sales efforts, and our customers’ changed purchasing ~~behavior~~behaviors and confidence.

~~Page 19~~

~~Table of Contents~~

Results of Operations

Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion below should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements and the notes thereto appearing in Item 1. Financial Statements (in thousands, except percent data).

Revenues from our reportable segments increased ~~60% and 31%~~44% for the three ~~and nine~~ months ended ~~December 31, 2021, respectively.~~June 30, 2022. Revenues growth was primarily attributable to the acquisition of Agena; however, organic revenues growth was ~~12% and 14%~~3% for the three ~~and nine~~ months ended ~~December 31, 2021, respectively.~~June 30, 2022. Gross profit as a percentage of revenues decreased ~~eight and six~~two percentage points for the three ~~and nine~~ months ended ~~December 31, 2021, respectively,~~June 30, 2022 compared to the three ~~and nine~~ months ended ~~December 31, 2020, respectively,~~June 30, 2021 primarily as a result of ~~amortization~~continued supply chain constraints, wage and other inflationary pressures, and impacts of government-imposed lockdowns related to the ~~inventory step-up of $6,062 as required by purchase accounting.~~COVID-19 pandemic. Results by reportable segment are as follows:

	Revenues				Organic Revenues Growth						Gross Profit as a % of Revenues						Revenues				Organic Revenues Growth						Gross Profit as a % of Revenues
	Three Months Ended December 31, 2021		Three Months Ended December 31, 2020		Three Months Ended December 31, 2021			Three Months Ended December 31, 2020			Three Months Ended December 31, 2021			Three Months Ended December 31, 2020			Three Months Ended June 30, 2022		Three Months Ended June 30, 2021		Three Months Ended June 30, 2022			Three Months Ended June 30, 2021			Three Months Ended June 30, 2022			Three Months Ended June 30, 2021
Clinical Genomics (*)																	$	14,505	$	-		N/A			N/A			54	%		N/A
Sterilization and Disinfection Control	$	13,831	$	13,077		6	%		13	%		72	%		71	%		14,774		15,150		(2	%)		16	%		73	%		75	%
Biopharmaceutical Development		12,756		8,711		46	%		14	%		69	%		53	%		10,967		8,877		24	%		49	%		65	%		53	%
Calibration Solutions		11,624		12,384		(6	%)		(13	%)		52	%		55	%		10,207		10,893		(6	%)		-	%		55	%		56	%
Clinical Genomics		16,485		-		N/A			N/A			24	%		N/A
Mesa Labs' reportable segments	$	54,696	$	34,172		12	%		1	%		53	%		61	%
Mesa's reportable segments																	$	50,453	$	34,920		3	%		17	%		62	%		64	%

Revenues

Organic Revenues Growth

Gross Profit as a % of Revenues

Nine Months Ended December 31, 2021

Nine Months Ended December 31, 2020

Nine Months Ended December 31, 2021

Nine Months Ended December 31, 2020

Nine Months Ended December 31, 2021

Nine Months Ended December 31, 2020

Sterilization and Disinfection Control
$ 43,014 $ 37,696 14 % 5 % 74 % 75 %
Biopharmaceutical Development
32,188 23,791 35 % 14 % 62 % 64 %
Calibration Solutions
33,769 34,486 (2 %) (13 %) 54 % 55 %
Clinical Genomics
16,485 - N/A N/A 24 % N/A
Mesa Labs' reportable segments
$ 125,456 $ 95,973 14 % (3 %) 59 % 65 %

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

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Table of Contents

Our unaudited condensed consolidated results of operations are as follows:

	Three Months Ended December 31,						Percentage			Nine Months Ended December 31,					Percentage			Three Months Ended June 30,					Percentage
		2021			2020			Change			2021		2020			Change		2022			2021		Change
Revenues	$	54,696		$	34,172			60	%	$	125,456	$	95,973			31	%	$	50,453		$	34,920		44	%
Gross profit		28,627			20,653			39	%		73,978		62,278			19	%		31,341			22,211		41	%
Operating expenses		31,139			20,631			51	%		69,166		54,216			28	%		35,935			19,088		88	%
Operating (loss) income		(2,512	)		22			(11,518	%)		4,812		8,062			(40	%)		(4,594	)		3,123		(247	%)
Net (loss) income	$	(2,060	)	$	(4,542	)		(55	%)	$	3,655	$	(646	)		(666	%)	$	(1,438	)	$	1,995		(172	%)

Reportable Segments

Clinical Genomics

The Clinical Genomics division, created following the Agena Acquisition, develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications.

	Three Months Ended June 30,					Percentage
	2022			2021		Change
Revenues	$	14,505		$	-		N/A
Gross profit		7,849			-		N/A
Gross profit as a % of revenues		54	%		N/A		N/A

Clinical Genomics revenues were negatively impacted by the government-imposed shutdowns in parts of China due to the COVID-19 pandemic, which began at the end of fiscal year 2022 and continued throughout the majority of the first quarter of fiscal year 2023. Shut-downs in China limited our sales efforts and decreased sales of consumables as laboratory customers were closed, limiting usage of our products. As these government-imposed shutdowns become less frequent, we expect to see a recovery to more normal demand. Of the revenues reported, $195 represents revenues from COVID-19 related sales.

Clinical Genomics gross profit was $7,849 for the three months ended June 30, 2022 and was significantly impacted by lower than expected revenues due to the government-imposed shutdowns in China related to the COVID-19 pandemic. The decreased revenues impacted gross profit as a percentage of revenues as lower revenues were available to cover our partially fixed cost base.

Sterilization and Disinfection Control

Our Sterilization and Disinfection Control division manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the hospital, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. Sterilization and disinfection control products are disposable and are used on a routine basis.

	Three Months Ended December 31,						Percentage			Nine Months Ended December 31,						Percentage			Three Months Ended June 30,						Percentage
	2021			2020			Change			2021			2020			Change			2022			2021			Change
Revenues	$	13,831		$	13,077			6	%	$	43,014		$	37,696			14	%	$	14,774		$	15,150			(2	%)
Gross profit		9,945			9,308			7	%		31,859			28,098			13	%		10,768			11,428			(6	%)
Gross profit as a % of revenues		72	%		71	%		1	%		74	%		75	%		(1	%)		73	%		75	%		(2	%)

Sterilization and Disinfection Control revenues ~~increased 6% and 14%~~decreased 2% for the three ~~and nine~~ months ended ~~December 31, 2021, respectively, which was achieved through effective efforts by our sales team~~June 30, 2022 primarily due to ~~market and sell certain products to a larger customer base. Additionally, revenues increases were attributable to volume increases with existing customers, particularly in~~ the ~~healthcare and biopharmaceutical markets, partially offset by a~~ strengthening of the U.S. dollar ("USD") against the ~~euro.~~euro and labor shortages which impacted our ability to manufacture products on desired timelines, partially offset by favorable product mix and to a lesser extent price increases.

Sterilization and Disinfection Control's gross profit percentage ~~increased one~~decreased two percentage ~~point~~points for the three months ended ~~December 31, 2021, primarily~~June 30, 2022 as a result of ~~production efficiencies resulting from higher~~lower revenues due to the strengthening of the USD against the euro and favorable product mix, partially offset by unfavorable exchange rates. Gross profit percentage decreased one percentage point for the nine months ended December 31, 2021 as a result of unfavorable product mixincreased labor and ~~slightly higher production costs, and to a lesser extent, unfavorable exchange rates.~~ labor-related costs.

~~Page 20~~

~~Table of Contents~~

~~Biopharmaceutical Development~~Clinical Genomics

~~Our Biopharmaceutical Development~~The Clinical Genomics division, created following the Agena Acquisition, develops, manufactures, and sells ~~automated systems~~highly sensitive, low-cost, high-throughput, genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for ~~protein analysis (immunoassays)~~hereditary diseases, pharmacogenetics and ~~peptide synthesis solutions. Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacturing of biotherapeutic drugs.~~ oncology related applications.

	Three Months Ended December 31,						Percentage			Nine Months Ended December 31,						Percentage			Three Months Ended June 30,					Percentage
	2021			2020			Change			2021			2020			Change			2022			2021		Change
Revenues	$	12,756		$	8,711			46	%	$	32,188		$	23,791			35	%	$	14,505		$	-		N/A
Gross profit		8,768			4,616			90	%		20,061			15,294			31	%		7,849			-		N/A
Gross profit as a % of revenues		69	%		53	%		16	%		62	%		64	%		(2	%)		54	%		N/A		N/A

~~Biopharmaceutical Development~~Clinical Genomics revenues ~~increased 46% and 35% for~~were negatively impacted by the ~~three and nine months ended December 31, 2021, respectively, primarily~~government-imposed shutdowns in parts of China due to ~~increased~~the COVID-19 pandemic, which began at the end of fiscal year 2022 and continued throughout the majority of the first quarter of fiscal year 2023. Shut-downs in China limited our sales efforts and decreased sales of consumables as ~~our~~ laboratory customers were ~~open for~~closed, limiting usage of our products. As these government-imposed shutdowns become less frequent, we expect to see a recovery to more normal ~~operating hours~~demand. Of the revenues reported, $195 represents revenues from COVID-19 related sales.

Sterilization and Disinfection Control

Our Sterilization and Disinfection Control division manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the ~~first three quarters of fiscal year 2022 compared~~hospital, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the ~~first~~dental industry. Sterilization and disinfection control products are disposable and are used on a routine basis.

	Three Months Ended June 30,						Percentage
	2022			2021			Change
Revenues	$	14,774		$	15,150			(2	%)
Gross profit		10,768			11,428			(6	%)
Gross profit as a % of revenues		73	%		75	%		(2	%)

Sterilization and Disinfection Control revenues decreased 2% for the three quarters of fiscal year 2021, growing adoption in the cell and gene therapy market, and resumed in-person marketing efforts which resulted in higher hardware sales. Biopharmaceutical Development also benefited from more customers allowing in-person visits at certain times during the nine months ended ~~December 31, 2021, which enabled us to complete more service visits and to more effectively market our products in person.~~

~~Biopharmaceutical Development's gross profit percentage increased 16 percentage points for the third quarter of fiscal year~~June 30, 2022 ~~compared~~primarily due to the ~~third quarter~~strengthening of ~~fiscal year 2021 as a result of a favorable change in foreign exchange rates as well as production efficiencies resulting from increased revenues,~~the U.S. dollar ("USD") against the euro and ~~a favorable mix shift towards immunoassay~~labor shortages which impacted our ability to manufacture products on desired timelines, partially offset by ~~higher labor costs. Biopharmaceutical Development's~~favorable product mix and to a lesser extent price increases.

Sterilization and Disinfection Control's gross profit percentage decreased two percentage points for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 as a result of lower revenues due to the benefit of a positive $258 purchase accounting adjustment in the nine months ended December 31, 2020, higher labor-related costs, and to a lesser extent, net unfavorable changes in foreign exchange rates.

~~Substantially all of this division's sales are invoiced in either euros or U.S. dollars ("USD"); however, the majority~~strengthening of the ~~costs in this division are recorded in Swedish Krona ("SEK") and translated to~~ USD ~~for reporting purposes. During periods in which the USD is weaker~~ against the ~~SEK, such as in the first~~euro and ~~second quarters of fiscal year 2022, our USD reported costs are inflated~~increased labor and ~~gross profit is lower. In periods in which the USD strengthens against the SEK, such as in the third quarter of fiscal year 2022, our USD reported costs are lower and gross profit is higher.~~ labor-related costs.

~~Calibration Solutions~~

This new reportable segment is comprised of the historical Instruments and Continuous Monitoring reportable segments. The Calibration Solutions division designs, manufactures, and markets quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other such parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical, and laboratory environments.

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

2021

2020

Change

2021

2020

Change

Revenues
$ 11,624 $ 12,384 (6 %) $ 33,769 $ 34,486 (2 %)
Gross profit
6,090 6,869 (11 %) 18,330 18,962 (3 %)
Gross profit as a % of revenues
52 % 55 % (3 %) 54 % 55 % (1 %)

Calibration Solutions division revenues decreased 6% and 2% for the three and nine months ended December 31, 2021, respectively, primarily as a result of supply and labor constraints limiting our ability to manufacture ordered quantities of certain products, partially offset by higher service revenues as our service technicians were able to go to client sites to complete service requests and hardware installations as COVID-19 related restrictions were partially lifted. Despite fulfillment delays for many customer orders, demand for the division's products has continued to increase through fiscal year 2022 and to date, we have been able to retain the significant majority of our customers and orders.

The Calibration Solutions division's gross profit percentage decreased three percentage points and one percentage point during the three and nine months ended December 31, 2021, respectively. The decrease in gross profit percentage resulted from lower revenues on a partially fixed cost base, increased freight on purchased components, and higher labor costs as a result of a strong competition for employees in the labor market. Supply chain disruptions and higher labor costs are expected to continue through fiscal year 2023.

~~Page 21~~

~~Table of Contents~~

Clinical Genomics

~~This is a new reportable segment comprised of the recently acquired Agena.~~ The Clinical Genomics division, created following the Agena Acquisition, develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as ~~newborn~~ screenings for hereditary diseases, pharmacogenetics and ~~oncology.~~oncology related applications.

	Three Months Ended December 31,					Percentage		Nine Months Ended December 31,					Percentage		Three Months Ended June 30,					Percentage
	2021			2020		Change		2021			2020		Change		2022			2021		Change
Revenues	$	16,485		$	-		N/A	$	16,485		$	-		N/A	$	14,505		$	-		N/A
Gross profit		3,924			-		N/A		3,924			-		N/A		7,849			-		N/A
Gross profit as a % of revenues		24	%		N/A		N/A		24	%		N/A		N/A		54	%		N/A		N/A

~~Revenues in the~~ Clinical Genomics ~~division represent~~ revenues ~~from October 20, 2021 until December 31, 2021.~~were negatively impacted by the government-imposed shutdowns in parts of China due to the COVID-19 pandemic, which began at the end of fiscal year 2022 and continued throughout the majority of the first quarter of fiscal year 2023. Shut-downs in China limited our sales efforts and decreased sales of consumables as laboratory customers were closed, limiting usage of our products. As these government-imposed shutdowns become less frequent, we expect to see a recovery to more normal demand. Of the revenues reported, ~~$1,500~~$195 represents revenues from ~~COVID-19-related sales of which the substantial majority are consumables.~~COVID-19 related sales.

Clinical Genomics gross profit was ~~$3,924~~$7,849 for the ~~period from October 20, 2021 until December 31, 2021. Gross profit includes $6,062 of amortization on an inventory step-up recorded~~three months ended June 30, 2022 and was significantly impacted by lower than expected revenues due to the government-imposed shutdowns in ~~purchase accounting~~China related to the ~~Agena Acquisition. Excluding the step-up amortization, gross profit for the period ended December 31, 2021 would have been $9,986, and~~COVID-19 pandemic. The decreased revenues impacted gross profit as a percentage of revenues ~~would have been 61%. Gross~~as lower revenues were available to cover our partially fixed cost base.

Sterilization and Disinfection Control

	Three Months Ended June 30,						Percentage
	2022			2021			Change
Revenues	$	14,774		$	15,150			(2	%)
Gross profit		10,768			11,428			(6	%)
Gross profit as a % of revenues		73	%		75	%		(2	%)

Sterilization and Disinfection Control revenues decreased 2% for the three months ended June 30, 2022 primarily due to the strengthening of the U.S. dollar ("USD") against the euro and labor shortages which impacted our ability to manufacture products on desired timelines, partially offset by favorable product mix and to a lesser extent price increases.

Sterilization and Disinfection Control's gross profit ~~also includes $911~~percentage decreased two percentage points for the three months ended June 30, 2022 as a result of ~~amortization~~lower revenues due to the strengthening of ~~intellectual property~~the USD against the euro and increased labor and labor-related costs.

Biopharmaceutical Development

Our Biopharmaceutical Development division develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions. Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacturing of biotherapeutic drugs.

	Three Months Ended June 30,						Percentage
	2022			2021			Change
Revenues	$	10,967		$	8,877			24	%
Gross profit		7,077			4,692			51	%
Gross profit as a % of revenues		65	%		53	%		12	%

Biopharmaceutical Development revenues increased 24% for the three months ended June 30, 2022 primarily due to increased sales of both consumables and services, as well as price increases and an easier compare to the first quarter of fiscal year 2022. Increases in revenues were partially offset by unfavorable changes in foreign exchange rates.

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Biopharmaceutical Development's gross profit percentage increased 12 percentage points for the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 as a result of a favorable change in foreign exchange rates applied to costs recorded in Swedish Krona ("SEK"), favorable product mix of peptide synthesis solutions, and production efficiencies resulting from increased revenues, partially offset by higher labor and material costs.

Calibration Solutions

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

	Three Months Ended June 30,						Percentage
	2022			2021			Change
Revenues	$	10,207		$	10,893			(6	%)
Gross profit		5,664			6,112			(7	%)
Gross profit as a % of revenues		55	%		56	%		(1	%)

Calibration Solutions division revenues decreased 6% for the three months ended June 30, 2022 primarily as a result of supply constraints limiting our ability to manufacture ordered quantities of certain products, partially offset by price increases and increased calibration hardware sales.

The Calibration Solutions division's gross profit percentage decreased one percentage point during the three months ended June 30, 2022. Costs in this division increased somewhat from the ~~Agena Acquisition. Going forward, we expect gross profit as a percentage~~first quarter of ~~revenues to range from the high 50s~~2022 to the ~~low 60s, including~~first quarter of 2023, partially offset by a ~~quarterly impact of $1,155 of non-cash amortization of intellectual property.~~ favorable product mix.

Operating Expenses

Operating expenses increased ~~51% and 28%~~88% for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 compared to the three ~~and nine~~ months ended ~~December 31, 2020, respectively,~~June 30, 2021 primarily as a result of the Agena Acquisition and as our overall business grew.

Selling

Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.

	Three Months Ended December 31,						Percentage			Nine Months Ended December 31,						Percentage			Three Months Ended June 30,						Percentage
	2021			2020			Change			2021			2020			Change			2022			2021			Change
Selling expense	$	8,958		$	4,753			88	%	$	18,459		$	12,614			46	%	$	10,023		$	4,858			106	%
As a percentage of revenues		16	%		14	%		2	%		15	%		13	%		2	%		20	%		14	%		6	%

Selling expense for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 increased ~~88% and 46%, respectively,~~106% primarily as a result of the acquisition of Agena. Excluding the impact of Agena, selling expense increased ~~16% and 18%~~17% for the three ~~and nine~~ months ended ~~December 31, 2021,~~June 30, 2022, primarily as a result of professional services costs as we ~~executed on~~made improvements to our ~~previously-announced plan~~corporate website, as well as increased travel and tradeshow costs as we continued to ~~invest in sales~~resume in-person meetings and marketing resources in order to increase organic revenues growth. We have hired several sales employees throughout fiscal year 2022, resulting in higher labor-related costs, including accruing commissions on higher sales. Further, travel-related costs increased because we resumed some in-person sales events as restrictions on gatherings lifted compared to fiscal year 2021. Including the acquisition of Agena and its sales force, we expect total selling expense will approximate 16% to 18% of revenues for fiscal year 2023.events.

General and Administrative

Labor costs, including non-cash stock-based compensation, and amortization of intangible assets drive the substantial majority of our general and administrative expense.

	Three Months Ended December 31,						Percentage			Nine Months Ended December 31,						Percentage			Three Months Ended June 30,						Percentage
	2021			2020			Change			2021			2020			Change			2022			2021			Change
General and administrative expense	$	17,017		$	13,173			29	%	$	40,119		$	33,887			18	%	$	20,212		$	11,419			77	%
As a percentage of revenues		31	%		39	%		(8	%)		32	%		35	%		(3	%)		40	%		33	%		7	%

General and administrative expenses increased ~~29% and 18%~~77% for the three ~~and nine~~ months ended ~~December 31, 2021, respectively,~~June 30, 2022 primarily as a result of the acquisition of ~~Agena.~~Agena, including $2,490 of amortization of intangibles associated with intangibles acquired in the Agena Acquisition. Excluding the impact of Agena, general and administrative expenses increased ~~9% and 10%~~33% for the three ~~and nine~~ months ended ~~December 31, 2021.~~June 30, 2022.

Excluding Agena, the increase in general and administrative costs for the ~~third~~first quarter of fiscal year 2022 was a result of higher bonus accruals based on our financial results for the nine months ended December 31, 2021 and costs associated with the Agena Acquisition, partially offset by lower stock-based compensation expense due to a $1,629 cumulative effect true up related to certain performance stock units recorded during the third quarter of fiscal year 2021. For the nine months ended December 31, 2021, the increase in general and administrative costs excluding Agena2023 was a result of higher stock-based compensation expense, ~~as we expanded the number of participants in our stock based compensation programs,~~ increased ~~bonus expense,~~labor and labor-related expenses, and costs associated with the implementation of our enterprise resource planning tool for Agena, Acquisition, and increased amortization costs resulting from a $344 cumulative effect decrease to amortization expense recorded during the first quarter of fiscal year 2021 as part of a purchase price adjustment.

partially offset by lower legal expenses.

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Research and Development

Research and development expense is predominantly comprised of labor costs and costs of third-party consultants.

	Three Months Ended December 31,						Percentage			Nine Months Ended December 31,						Percentage			Three Months Ended June 30,						Percentage
	2021			2020			Change			2021			2020			Change			2022			2021			Change
Research and development expense	$	5,164		$	2,705			91	%	$	10,588		$	7,715			37	%	$	5,700		$	2,811			103	%
As a percentage of revenues		9	%		8	%		1	%		8	%		8	%		-	%		11	%		8	%		3	%

Research and development expenses increased ~~91% and 37%~~103% for the three ~~and nine~~ months ended ~~December 31, 2021, respectively,~~June 30, 2022 primarily as a result of the acquisition of Agena. Excluding the impact of Agena, research and development costs for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 increased ~~21% and 13%, respectively,~~23% primarily as a result of ~~higher personnel and third-party contractor expenditures supporting~~ our ~~continued incremental investments~~purchase of in ~~enhancing existing products as well as the development of new products and features. We expect~~process research and development ~~expenses will approximate 9%~~technology that we intend to ~~12% of revenues for fiscal year 2023.~~ further develop in order to enhance a product offering in our Sterilization and Disinfection Control division.

Nonoperating Expense

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

2021

2020

Change

2021

2020

Change

Nonoperating (income) expense
$ (171 ) 5,749 (103 %) $ 1,192 $ 10,651 (89 %)

	Three Months Ended June 30,				Percentage
	2022		2021		Change
Nonoperating (income) expense	$	818		1,705		(52	%)

Nonoperating ~~(income)~~ expense for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 is composed primarily of interest expense and amortization of the debt discount associated with the Notes and net gains ~~and losses~~ on foreign currency transactions.

~~We recorded net~~ Nonoperating expense was lower in the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 as the USD strengthened against the SEK and the euro resulting in realized and unrealized gains ~~on foreign currency which were primarily related to the movement of the SEK against the USD on certain intercompany notes. Foreign currency gains were~~that partially offset by interest expense and amortization of debt discount on the Notes and the Credit Facility. Interest expense and amortization of debt discount decreased for the three and nine months ended December 31, 2021 compared to the three and nine months ended December 31, 2020 due to our adoption of ASU 2020-06, which resulted in a reduction in non-cash interest expense related to the Notes.

Income Taxes

	Three Months Ended December 31,						Percentage			Nine Months Ended December 31,						Percentage			Three Months Ended June 30,						Percentage
	2021			2020			Change			2021			2020			Change			2022			2021			Change
Income tax provision (benefit)	$	(281	)	$	(1,185	)		(76	%)	$	(35	)	$	(1,943	)		(98	%)	$	(3,974	)	$	(577	)		589	%
Effective tax rate		12	%		21	%		(9	%)		(1	%)		75	%		(76	%)		73.4	%		(40.7	%)		114	%

Our effective tax rate benefited notably from the exercise of stock options and, to a lesser extent, the benefit of federal derived intangible income, partially offset by the limitations imposed by Section 162(m) and higher state income taxes. Our income tax rate ~~varies based upon many factors, but in general, we anticipate that on a go-forward basis our~~was (73.4%) for the three months ended June 30, 2022 and (40.7%) for the three months ended June 30, 2021. The effective tax rate ~~will be approximately 26%, plus or minus~~for the ~~impact~~three months ended June 30, 2022 differed from the statutory federal rate of ~~excess tax benefits and deficiencies associated with~~21% primarily due to the share-based payment awards ~~to employees; see Note 9. “Income Taxes” within Item 1.~~ ~~Financial Statements~~for ~~additional discussion.~~employees and the effect of income generated in foreign jurisdictions The ~~excess tax benefits and deficiencies associated with share-based payment awards to our employees have caused and, in the future, may cause large fluctuations in our realized~~ effective tax rate for the first quarter of our fiscal year 2023 was higher than the same period in 2022 primarily due to the share based compensation and the effect of income in foreign jurisdictions.

Our future effective income tax rate depends on ~~timing, volume,~~various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and ~~nature~~the geographic composition of ~~stock options exercised under~~ our ~~share-based payment program.~~pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

Net Income

Net income for the ~~nine~~three months ~~December 31, 2021~~ended June 30, 2022 varied with the changes in revenues, gross profit, and operating expenses (and included ~~$13,495, $7,939,~~$7,320 and ~~$6,062~~$3,432 of non-cash amortization of intangible assets acquired in a business combination and stock-based compensation expense, ~~and amortization of inventory step-up,~~ respectively). Prior to the adoption of ASU 2020-06 on April 1, 2021, we were required to recognize non-cash interest expense related to the amortization of debt discounts and issuance costs. Subsequent to the adoption, we recognize non-cash interest expense related to amortization of debt issuance costs only, resulting in higher net income subsequent to the adoption of ASU 2020-06.

Liquidity and Capital Resources

Our sources of liquidity include cash generated from operations, cash and cash equivalents on hand, cash available from our Credit Facility and our Open Market Sale Agreement^SM, working capital and potential additional equity and debt offerings. Despite lingering uncertainties surrounding the economic impacts of the COVID-19 pandemic, we continue to believe that we have the liquidity required to continue operations even if volatility in the economic environment reoccurs. We believe that cash flows from operating activities and potential cash ~~equivalents on hand and cash generated~~provided by borrowings from ~~operations, as well as the remainder of the unused capacity under~~ our Credit Facility or funds from our Open Market Sale Agreement^SM, when necessary, will be sufficient to meet our ~~short-term~~ongoing operating requirements, scheduled interest payments on debt, dividend payments, and ~~long-term needs.~~anticipated capital expenditures. We currently expect to settle the Notes in shares of our common stock, but we may re-finance the debt, depending on conditions in the market and the share price of our common stock.

Our more significant uses of resources have historically included acquisitions, ~~long-term capital expenditures,~~ payments of debt and interest obligations, long-term capital expenditures, and quarterly dividends to shareholders. Working capital is the amount by which current assets exceed current liabilities. We had working capital of ~~$74,220~~$84,000 and ~~$271,166~~$76,263 as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021,~~2022, respectively. As of ~~December 31, 2021,~~June 30, 2022, and March 31, ~~2021,~~2022, we had ~~$51,706~~$43,747 and ~~$263,865,~~$49,346, respectively, of cash and cash ~~equivalents; at March 31, 2021, the cash was primarily held in money market funds.~~equivalents. We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

~~Page 23~~

~~Table~~

As of ~~Contents~~

~~We completed the acquisition of Agena for an adjusted purchase price, net of cash acquired, of $300,793 during the third quarter of fiscal year 2022.~~

~~During fiscal year 2021, we entered into the Credit Facility, a four-year senior secured credit agreement that includes 1) a revolving credit facility~~June 30, 2022, $172,500 in an aggregate principal ~~amount of up to $75,000, 2) a swingline loan in an aggregate principal amount not exceeding $5,000,~~Notes was outstanding and 3) letters of credit in an aggregate stated amount not exceeding $2,500 at any time. The Credit Facility also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $25,000 and at a maximum $75,000, subject to the satisfaction of certain conditions and lender considerations. During the third quarter of fiscal year 2022, we borrowed $70,000$47,000 was outstanding under our line of credit to fund the acquisition of Agena, and we repaid $10,000 using cash on hand and cash generated from operations. As of December 31, 2021, we had $15,000 remaining available to draw on the Credit Facility. In ~~January~~July 2022, we repaid ~~$4,000~~$12,000 of the amount outstanding under the Credit Facility.

~~As of December 31, 2021, $172,500 in aggregate principal Notes was outstanding. The Notes bear interest at a rate of 1.375% payable semi-annually in arrears on February 15~~In April 2022 we entered into an Open Market Sale Agreement^SM pursuant to which we may issue and ~~August 15 of each year, beginning with our first payment made on February 15, 2020. The Notes can be converted by holders prior~~sell, from time to ~~maturity if certain conditions are met, but none of those conditions were met during fiscal year 2022. We currently expect to settle future conversions of the Notes entirely in~~time, shares of our common stock ~~and will reevaluate this policy from time~~with an aggregate value of up to time in the event that conversion conditions are met and conversion notices are received from holders of the Notes. We were in compliance with all debt agreements as of December 31, 2021 and for all prior years presented and have met all debt payment obligations. Refer to Note 6. "Indebtedness" within Item 1. ~~Financial Statements~~ ~~for more detail.~~ $150 million.

We routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require that we obtain additional capital, assume additional third-party debt or incur other long-term obligations. We believe that we have the ability to issue more equity or debt in the future in order to finance our acquisition and investment activities; however, additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all.

We may from time to time repurchase or take other steps to reduce our debt. These actions may include retirements or refinancing of outstanding debt, privately negotiated transactions or otherwise. The amount of debt that may be retired, if any, could be material and would be decided at the sole discretion of our Board of Directors and would depend on market conditions, our cash position, and other considerations.

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Dividends

We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share during ~~each of~~ the ~~quarters~~quarter ended June 30, ~~2021, September 30, 2021, and December 31, 2021,~~2022, as well as each quarter of fiscal year ~~2021.~~2022.

In ~~January~~July 2022, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on ~~March~~September 15, 2022, to shareholders of record at the close of business on ~~February 28,~~August 31, 2022.

Cash Flows

Our cash flows from operating, investing, and financing activities were as follows (in thousands):

Nine Months Ended December 31,

2021

2020

Net cash provided by operating activities
$ 29,921 $ 23,553
Net cash (used in) investing activities
(304,443 ) (954 )
Net cash provided by financing activities
62,623 147,275

	Three Months Ended June 30,
	2022			2021
Net cash (used in) provided by operating activities	$	(2,811	)	$	9,589
Net cash (used in) investing activities		(225	)		(653	)
Net cash (used in) provided by financing activities		(1,407	)		265

Cash flows from operating activities for the ~~nine~~three months ended ~~December 31, 2021 provided $29,921. The $6,368 increase in~~June 30, 2022 used $2,811. Of the amount of cash ~~flows from operating activities primarily resulted from non-cash adjustments~~used, $10,233 related to net ~~income, particularly~~decreases working capital accounts, $4,972 represented net loss for the first quarter of 2023, partially offset by amortization and stock-based compensation expense. Cash used in working capital during the first quarter of ~~the~~fiscal year 2023 included: payment of bonuses accrued at year end, higher inventory ~~step-up associated with the Agena Acquisition, and~~as we work to ~~a lesser extent, increased depreciation and amortization as a result~~manage supply chain constraints by increasing our stock of ~~higher intangibles balances resulting from the Agena Acquisition,~~raw materials inventory, as well as ~~increased net income. Further, cash provided by~~payments made for prepaid insurance policies and other annual renewals. In the first quarter of fiscal year 2022, changes in operating assets and liabilities ~~increased by $778 for~~represented $1,430 as our cash bonus paid was smaller, and more receivables were collected during the ~~nine months ended December 31, 2021 compared to the nine months ended December 31, 2020, primarily as a result of the impact of timing on our working capital accounts.~~quarter. Cash used in investing activities was ~~higher~~lower during the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 compared to the ~~nine~~three months ended ~~December 31, 2020,~~June 30, 2021, due to ~~cash expended on the Agena Acquisition, and to a lesser extent~~less purchases of property, plant, and equipment ~~primarily to support~~during the ~~renovations of our Lakewood, Colorado facility.~~period. Cash ~~provided~~used by financing activities primarily resulted from ~~a $70,000 draw~~$2,000 repaid on our Credit Facility ~~net of $10,000 repaid~~ during the quarter. The draw on our Credit Facility was used to fund a portion of the purchase price of the Agena Acquisition. Our equity raise completed during the nine months ended December 31, 2020 provided $145,935.

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Contractual Obligations and Other Commercial Commitments

We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business. For a description of our contractual obligations and other commercial commitments as of March 31, ~~2021,~~2022, see our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021,~~2022, filed with the Securities and Exchange Commission on June 1, 2021. As a result of the Agena Acquisition in the third quarter of fiscal year 2022, we have assumed certain contractual obligations, including an additional $9,884 of payments under existing lease agreements, and $4,564 of open purchase orders as of DecemberMay 31, ~~2021.~~2022.

On a consolidated basis, at ~~December 31, 2021,~~June 30, 2022, we had contractual obligations for open purchase orders of approximately ~~$18,852~~$24,081 for routine purchases of supplies and inventory, which are payable in less than one year. Open purchase orders continue to increase as we take proactive steps to mitigate risks in supply by increasing our orders of certain critical raw materials.

Off-Balance Sheet Arrangements

As of ~~December 31, 2021,~~June 30, 2022, we had no off-balance sheet arrangements or obligations.

Critical Accounting Policies and Estimates

Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. These estimates are based on historical experience and various other factors that we believe to be appropriate under the circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended March 31, ~~2021,~~2022, in the Critical Accounting Policies and Estimates section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our reporting currency is U.S. dollars, and the functional currency of each of our material foreign subsidiaries is its respective local currency. Our operations include activities outside of the U.S. and we have currency risk on the transactions in other currencies and translation adjustments resulting from the conversion of our international financial results into the U.S. dollar. We face currency exposures in our global operations as a result of various factors including intercompany currency denominated loans, selling our products in various currencies, purchasing raw materials and equipment in various currencies, and tax exposures not denominated in the functional currency. These exposures have increased as we have continued to expand internationally, including the acquisition of ~~GPT,~~Gyros Protein Technologies Holding AB, which conducts a substantial portion of its business expenses in Swedish Krona, and the acquisition of Agena, which conducts a portion of its business in euros and a portion in Chinese Yuan. Fluctuations in exchange rates have and may continue to adversely affect our results of operations, financial position, and cash flows. We do not hedge exposure to exchange rates.

We have in the past held investments in money market funds. As a result, we have been exposed to potential loss from market risks that may occur as a result of changes in interest rates, credit quality of the issuer, or other factors. Our Credit Facility bears interest at either a base rate or a Eurodollar rate, plus an applicable spread. Based on the balance currently outstanding against our line of credit, if interest rates increased by 75 basis points, we would incur approximately ~~$420~~$353 of additional interest expense per year.

We have no derivative instruments. We have minimal exposure to commodity market risks.

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”)~~Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As of ~~December 31, 2021,~~June 30, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

The Agena Acquisition was completed on October 20, ~~2021. The~~2021, and the financial results of Agena are included in our ~~unaudited consolidated financial statements~~Condensed Consolidated Financial Statements as of ~~December~~March 31, ~~2021~~2022 and for the ~~quarter~~period then ended, and as of June 30, 2022 and for the three months then ended. ~~The~~During the time since acquisition, we have assessed the control environment of Agena ~~business represented approximately $16,485~~and made certain changes to ~~revenues and ($4,532) of net loss for the third quarter of fiscal year 2022. As this acquisition occurred~~Agena's internal controls over financial reporting, including design changes that were required as we brought Agena onto our enterprise resource planning tool. We now consider Agena to be included in ~~the third quarter of fiscal year 2022,~~ the scope of our assessment of our internal control over financial reporting does not include Agena. This exclusion is in accordance with the Securities and Exchange Commission’s general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition.

~~During the second quarter of fiscal year 2022, we implemented a new human resources information and payroll system, which is considered to be a key system as part of our~~ internal controls over financial reporting. We continued to integrate the software with our processes, systems, and controls in the third quarter of fiscal year 2022. There were no other changes during the quarter ended December 31, 2021 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

See Note ~~10.~~11. “Commitments and Contingencies” within Item 1. Financial Statements for information regarding any legal proceedings in which we may be involved.

Item 1A. Risk factors

~~We are dependent on our~~~~suppliers to deliver components, and a shortage of and increasing prices of components have and could continue to disrupt our production and delay order fulfillment.~~

Products we sell are made of components, including electronic components, glass, plastics, and packaging that we source globally from suppliers who, in turn, source components from their suppliers. If there is a shortage of a key component in our supply chain, and the component cannot be easily sourced from a different supplier, the shortage may disrupt our production which may, in turn, delay order fulfillment. We are experiencing long lead times, and in some cases, difficulty obtaining components from our existing suppliers, which has resulted in delayed order fulfillment to varying degrees in our divisions, especially the Calibration Solutions, Biopharmaceutical Development, and Clinical Genomics divisions. In addition, costs for components and transportation costs have increased, which may reduce our gross profit margins unless and until we are able to pass the cost increases along to our customers. There are several reasons for the supply chain disruptions to components that we rely on to manufacture our products, including: increased demand for other products that use the same components as those we purchase, manufacturing shut-downs during the past 18 months that reduced production of components, obsolescence of materials we have historically purchased, labor issues, and long lead times for raw materials used in the production of components. A continued shortage of components or other key materials that comprise the components could cause a significant disruption to our production schedule and have a substantial adverse effect on our financial condition or results of operations.

~~Additional risks related to our supply chain include those in our fiscal year 2021 Form 10-K risk factors, “~~We face numerous manufacturing and supply chain risks. In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies.”

During the ~~third~~first quarter of fiscal year ~~2022,~~2023, there were no ~~other~~ material changes from the risk factors described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended March 31, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 7, 2005, our Board of Directors adopted a share repurchase plan which allows for the repurchase of up to 300,000 of our common shares, of which 162,486 have been purchased to date; however, no shares have been purchased under the plan in the last three fiscal years. This plan will continue until the maximum is reached or the plan is terminated by further action of the Board of Directors. During the three months ended ~~December 31, 2021, 18~~June 30, 2022, 2,187 shares with a weighted average price paid per share of ~~$310.87~~$188.67 were retained by the Company to settle employee withholding tax liabilities.

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Item 6. Exhibits

Exhibit No.	Description of Exhibit
3.1	Articles of Incorporation and Amendments to Articles of Incorporation (incorporated by reference from exhibit 3.1 to Mesa Laboratories, Inc.’s report on Form 10-Q filed on July 31, 2018 (Commission File Number: 000-11740)).
3.2	Amended and Restated Bylaws of Mesa Laboratories, Inc. (incorporated by reference from exhibit 3.1 to the Current Report on Form 8-K filed on May 10, 2019 (Commission File Number: 000-11740)).
10.1 α+	Form of 2023 Performance Share Unit Agreement, issued under the 2021 Equity Plan
31.1+	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2+	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS+	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH+	Inline XBRL Taxonomy Extension Schema Document.
101.CAL+	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	Inline XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB+	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104+	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

α Indicates a compensatory arrangement

+ Filed herewith

* Furnished herewith

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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.

MESA LABORATORIES, INC.

(Registrant)

DATED: ~~February 3,~~August 4, 2022	BY:	/s/ Gary M. Owens. Gary M. Owens Chief Executive Officer


DATED: ~~February 3,~~August 4, 2022	BY:	/s/ John V. Sakys John V. Sakys Chief Financial Officer

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Contract liabilities as of March 31, 2021	$	8,994
Prior year liabilities recognized in revenues during the nine months ended December 31, 2021		(5,387	)
Contract liabilities added during the nine months ended December 31, 2021, net of revenues recognized		10,201
Contract liabilities balance as of December 31, 2021	$	13,808

	*December 31, 2021*		*March 31, 2021*
Accrued business taxes	$	6,289	$	6,397
Current operating lease liabilities		2,733		1,023
Interest payable		918		303
Warranty		606		253
Accrued professional services		547		473
Other		1,394		1,496
Total other accrued expenses	$	12,487	$	9,945