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, 2022~~September 30, 2023

☐

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 ~~5,346,174~~5,391,726 shares of the Issuer’s common stock, no par value, outstanding as of ~~February 1, 2023~~.October 30, 2023.

Table of Contents

Table of Contents

Part I. Financial Information		1

	Item 1. Financial Statements (unaudited)	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~~Stockholders’ Equity	4
	Condensed Consolidated Statements of ~~Stockholders’ Equity~~Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1514
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	2120
	Item 4. Controls and Procedures	2221

Part II. Other Information		2322

	Item 1. Legal Proceedings	2322
	Item 1A. Risk factors	2322
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2322
	Item 5. Other Information	22
	Item 6. Exhibits	2423
	Signatures	2524
	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)

(in thousands, except share amounts)

	*December 31,*			*March 31,*		*September 30,*			*March 31,*
	*2022*			*2022*		*2023*			*2023*
ASSETS
Current assets:
Cash and cash equivalents	$	26,101		$	49,346	$	35,617		$	32,910
Accounts receivable, less allowance for doubtful accounts of $758 and $630, respectively		42,395			41,224
Accounts receivable, less allowance for doubtful accounts of $979 and $849, respectively							36,340			42,551
Inventories		33,739			24,606		32,879			34,642
Prepaid expenses and other		11,950			9,142		12,826			8,872
Total current assets		114,185			124,318		117,662			118,975
Property, plant and equipment, net of accumulated depreciation of $19,708 and $17,726, respectively		28,263			28,620
Noncurrent assets:
Property, plant and equipment, net of accumulated depreciation of $21,324 and $19,768 respectively							28,574			28,149
Deferred tax asset		708			1,318		1,051			1,076
Other assets		10,572			11,830		8,953			10,373
Intangibles, net		223,447			250,117
Customer relationships, net							137,057			152,189
Intellectual property, net							43,416			46,400
Other intangibles, net							17,207			18,226
Goodwill		285,809			291,166		283,268			286,444
Total assets	$	662,984		$	707,369	$	637,188		$	661,832

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,288		$	7,897	$	4,810		$	6,134
Accrued payroll and benefits		8,134			14,717		8,353			9,433
Unearned revenues		14,584			13,830		14,316			15,694
Other accrued expenses		12,611			11,611		12,337			12,098
Total current liabilities		41,617			48,055		39,816			43,359
Noncurrent liabilities:
Deferred tax liability		36,946			39,224		33,437			34,028
Other long-term liabilities		8,172			7,924		5,443			7,693
Credit Facility		19,000			49,000		-			13,000
Convertible senior notes, net of discounts and debt issuance costs		170,044			169,365
Convertible senior notes, net of debt issuance costs							170,733			170,272
Total liabilities		275,779			313,568		249,429			268,352
Stockholders’ equity:
Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,341,890 and 5,265,627 shares, respectively		326,933			313,460
Common stock, no par value; 25,000,000 shares authorized; 5,391,726 and 5,369,466 shares issued and outstanding, respectively							337,869			332,076
Retained earnings		74,444			76,675		70,699			74,199
Accumulated other comprehensive (loss) income		(14,172	)		3,666
Accumulated other comprehensive (loss)							(20,809	)		(12,795	)
Total stockholders’ equity		387,205			393,801		387,759			393,480
Total liabilities and stockholders’ equity	$	662,984		$	707,369	$	637,188		$	661,832

See accompanying notes to Condensed Consolidated Financial Statements.

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Table of Contents

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 September 30,*						*Six Months Ended September 30,*
	*2022*		*2021*			*2022*			*2021*			*2023*			*2022*			*2023*			*2022*

Revenues	$	54,287	$	54,696		$	163,489		$	125,456		$	53,165		$	58,749		$	103,810		$	109,202
Cost of revenues		21,522		26,069			62,997			51,478			21,056			22,363			40,518			41,475
Gross profit		32,765		28,627			100,492			73,978			32,109			36,386			63,292			67,727
Operating expenses:
Operating expense:
Selling		8,437		8,958			27,660			18,459			9,650			9,200			18,626			19,223
General and administrative		16,129		17,017			54,543			40,119			17,526			18,202			35,586			38,414
Research and development		4,797		5,164			15,486			10,588			4,993			4,989			9,804			10,689
Total operating expenses		29,363		31,139			97,689			69,166
Operating income (loss)		3,402		(2,512	)		2,803			4,812
Nonoperating expense (income):
Interest expense and amortization of debt discount		1,162		1,018			3,390			2,647
Total operating expense													32,169			32,391			64,016			68,326
Operating (loss) income													(60	)		3,995			(724	)		(599	)
Nonoperating expense:
Interest expense and amortization of debt issuance costs													905			1,214			1,953			2,228
Other expense (income), net		324		(1,189	)		(475	)		(1,455	)		360			(603	)		(415	)		(799	)
Total nonoperating expense (income)		1,486		(171	)		2,915			1,192
Earnings (loss) before income taxes		1,916		(2,341	)		(112	)		3,620
Income tax provision (benefit)		1,465		(281	)		(431	)		(35	)
Net income (loss)	$	451	$	(2,060	)	$	319		$	3,655
Total nonoperating expense, net													1,265			611			1,538			1,429
(Loss) earnings before income taxes													(1,325	)		3,384			(2,262	)		(2,028	)
Income tax (benefit) expense													(95	)		2,078			(483	)		(1,896	)
Net (loss) income												$	(1,230	)	$	1,306		$	(1,779	)	$	(132	)

Earnings (loss) per share:
Net (loss) earnings per share:
Basic	$	0.08	$	(0.39	)	$	0.06		$	0.70		$	(0.23	)	$	0.25		$	(0.33	)	$	(0.02	)
Diluted	$	0.08	$	(0.39	)	$	0.06		$	0.69		$	(0.23	)	$	0.24		$	(0.33	)	$	(0.02	)

Weighted-average common shares outstanding:
Basic		5,339		5,233			5,312			5,199			5,387			5,323			5,379			5,298
Diluted		5,360		5,233			5,354			5,333			5,387			5,364			5,379			5,298

See accompanying notes to Condensed Consolidated Financial Statements.

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Table of Contents

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Comprehensive ~~Income~~ (Loss)

(unaudited)

(in thousands)

Three Months Ended December 31,

Nine Months Ended December 31,

2022

2021

2022

2021

Net income (loss)
$ 451 $ (2,060 ) $ 319 $ 3,655
Other comprehensive income (loss):

Foreign currency translation adjustments
11,345 (6,165 ) (17,838 ) (7,297 )
Comprehensive income (loss)
$ 11,796 $ (8,225 ) $ (17,519 ) $ (3,642 )

	*Three Months Ended September 30,*						*Six Months Ended September 30,*
	*2023*			*2022*			*2023*			*2022*

Net (loss) income	$	(1,230	)	$	1,306		$	(1,779	)	$	(132	)
Other comprehensive (loss):
Foreign currency translation adjustments		(1,353	)		(13,226	)		(8,014	)		(29,183	)
Comprehensive (loss)	$	(2,583	)	$	(11,920	)	$	(9,793	)	$	(29,315	)

See accompanying notes to Condensed Consolidated Financial Statements.

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Table of Contents

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(dollars in thousands, except per share data)

	*Common Stock*
	*Number of Shares*			*Amount*			*Retained Earnings*			AOCI*			*Total*
March 31, 2023		5,369,466		$	332,076		$	74,199		$	(12,795	)	$	393,480
Exercise of stock options and vesting of restricted stock units		20,074			52			-			-			52
Tax withholding on vesting of restricted stock units		(5,260	)		(712	)		-			-			(712	)
Dividends paid, $0.16 per share		-			-			(859	)		-			(859	)
Stock-based compensation expense		-			2,968			-			-			2,968
Foreign currency translation		-			-			-			(6,661	)		(6,661	)
Net (loss)		-			-			(549	)		-			(549	)
June 30, 2023		5,384,280		$	334,384		$	72,791		$	(19,456	)	$	387,719
Exercise of stock options and vesting of restricted stock units		7,464			304			-			-			304
Tax withholding on vesting of restricted stock units		(18	)		(2	)		-			-			(2	)
Dividends paid, $0.16 per share		-			-			(862	)		-			(862	)
Stock-based compensation expense		-			3,183			-			-			3,183
Foreign currency translation		-			-			-			(1,353	)		(1,353	)
Net (loss)		-			-			(1,230	)		-			(1,230	)
September 30, 2023		5,391,726		$	337,869		$	70,699		$	(20,809	)	$	387,759

	*Common Stock*
	*Number of Shares*			*Amount*			*Retained Earnings*			AOCI*			*Total*
March 31, 2022		5,265,627		$	313,460		$	76,675		$	3,666		$	393,801
Exercise of stock options and vesting of restricted stock units		31,690			1,438			-			-			1,438
Tax withholding on vesting of restricted stock units		(9	)		(2	)		-			-			(2	)
Dividends paid, $0.16 per share		-			-			(843	)		-			(843	)
Stock-based compensation expense		-			3,432			-			-			3,432
Foreign currency translation		-			-			-			(15,957	)		(15,957	)
Net (loss)		-			-			(1,438	)		-			(1,438	)
June 30, 2022		5,297,308		$	318,328		$	74,394		$	(12,291	)	$	380,431
Exercise of stock options and vesting of restricted stock units		42,014			2,778			-			-			2,778
Tax withholding on vesting of restricted stock units		(3,051	)		(572	)		-			-			(572	)
Dividends paid, $0.16 per share		-			-			(852	)		-			(852	)
Stock-based compensation expense		-			4,371			-			-			4,371
Foreign currency translation		-			-			-			(13,226	)		(13,226	)
Net income		-			-			1,306			-			1,306
September 30, 2022		5,336,271		$	324,905		$	74,848		$	(25,517	)	$	374,236

*Accumulated Other Comprehensive (Loss) Income.

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,

2022

2021

Cash flows from operating activities:

Net income
$ 319 $ 3,655
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
24,769 15,686
Stock-based compensation expense
9,859 7,939
Amortization of step-up in inventory basis
- 6,062
Other
(359 ) (504 )
Cash (used in) provided by changes in operating assets and liabilities:

Accounts receivable, net
(1,979 ) (2,258 )
Inventories
(9,191 ) 351
Prepaid expenses and other assets
(2,312 ) (1,933 )
Accounts payable
(1,339 ) 1,270
Accrued liabilities and taxes payable
(5,221 ) (1,403 )
Unearned revenues
918 1,056
Net cash provided by operating activities
15,464 29,921
Cash flows from investing activities:

Acquisitions, net of cash acquired
(4,950 ) (300,793 )
Purchases of property, plant and equipment
(3,518 ) (3,650 )
Net cash (used in) investing activities
(8,468 ) (304,443 )
Cash flows from financing activities:

Proceeds from the issuance of debt
- 70,000
Payments of debt
(30,000 ) (10,000 )
Dividends
(2,550 ) (2,495 )
Proceeds from the exercise of stock options
4,523 6,171
Payment of tax withholding obligation on vesting of restricted stock
(909 ) (819 )
Payments of contingent consideration
- (234 )
Net cash (used in) provided by financing activities
(28,936 ) 62,623
Effect of exchange rate changes on cash and cash equivalents
(1,305 ) (260 )
Net (decrease) in cash and cash equivalents
(23,245 ) (212,159 )
Cash and cash equivalents at beginning of period
49,346 263,865
Cash and cash equivalents at end of period
$ 26,101 $ 51,706

Supplemental non-cash activity:

Contingent consideration as part of an acquisition
$ 1,500 $ -

	*Six Months Ended September 30,*
	*2023*			*2022*
Cash flows from operating activities:
Net (loss)	$	(1,779	)	$	(132	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		16,230			16,189
Stock-based compensation expense		6,151			7,803
Non-cash interest and debt amortization		461			452
Other		1,137			(1,544	)
Cash from changes in operating assets and liabilities:
Accounts receivable, net		5,448			(2,657	)
Inventories		(184	)		(4,065	)
Prepaid expenses and other assets		(3,528	)		(3,052	)
Accounts payable		(1,307	)		243
Accrued liabilities and taxes payable		(1,743	)		(5,869	)
Unearned revenues		(1,171	)		378
Net cash provided by operating activities		19,715			7,746
Cash flows from investing activities:
Purchases of property, plant and equipment		(904	)		(1,864	)
Net cash (used in) investing activities		(904	)		(1,864	)
Cash flows from financing activities:
Payments of debt		(13,000	)		(22,000	)
Dividends		(1,721	)		(1,695	)
Proceeds from the exercise of stock options		356			4,216
Payment of tax withholding obligation on vesting of restricted stock		(714	)		(574	)
Net cash (used in) financing activities		(15,079	)		(20,053	)
Effect of exchange rate changes on cash and cash equivalents		(1,025	)		(2,798	)
Net increase (decrease) in cash and cash equivalents		2,707			(16,969	)
Cash and cash equivalents at beginning of period		32,910			49,346
Cash and cash equivalents at end of period	$	35,617		$	32,377

See accompanying notes to Condensed Consolidated Financial ~~Statements.~~

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~~Table of Contents~~

~~Mesa Laboratories, Inc.~~

~~Condensed Consolidated Statements of Stockholders’ Equity~~

~~(unaudited)~~

~~(dollars in thousands, except per share data)~~

Common Stock

Number of Shares

Amount

Retained Earnings

AOCI*

Total

March 31, 2022
5,265,627 $ 313,460 $ 76,675 $ 3,666 $ 393,801
Exercise of stock options and vesting of restricted stock units
31,690 1,438 - - 1,438
Tax withholding on vesting of restricted stock units
(9 ) (2 ) - - (2 )
Dividends paid, $0.16 per share
- - (843 ) - (843 )
Stock-based compensation expense
- 3,432 - - 3,432
Foreign currency translation
- - - (15,957 ) (15,957 )
Net (loss)
- - (1,438 ) - (1,438 )
June 30, 2022
5,297,308 $ 318,328 $ 74,394 $ (12,291 ) $ 380,431
Exercise of stock options and vesting of restricted stock units
42,014 2,778 - - 2,778
Tax withholding on vesting of restricted stock units
(3,051 ) (572 ) - - (572 )
Dividends paid, $0.16 per share
- - (852 ) - (852 )
Stock-based compensation expense
- 4,371 - - 4,371
Foreign currency translation
- - - (13,226 ) (13,226 )
Net income
- - 1,306 - 1,306
September 30, 2022
5,336,271 $ 324,905 $ 74,848 $ (25,517 ) $ 374,236
Exercise of stock options and vesting of restricted stock units
7,376 307 - - 307
Tax withholding on vesting of restricted stock units
(1,757 ) (335 ) - - (335 )
Dividends paid, $0.16 per share
- - (855 ) - (855 )
Stock-based compensation expense
- 2,056 - - 2,056
Foreign currency translation
- - - 11,345 11,345
Net income
- - 451 - 451
December 31, 2022
5,341,890 $ 326,933 $ 74,444 $ (14,172 ) $ 387,205

Common Stock

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 1,836 - - 1,836
Tax withholding on vesting of restricted stock units
(747 ) (747 )
Dividends paid, $0.16 per share
- - (824 ) - (824 )
Stock-based compensation expense
- 2,197 - - 2,197
Foreign currency translation
- - - 5,371 5,371
Cumulative adjustment due to adoption of ASU No. 2020-06
- (22,735 ) 5,683 - (17,052 )
Net income
- - 1,995 - 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 2,060 - - 2,060
Tax withholding on vesting of restricted stock units
(68 ) (68 )
Dividends paid, $0.16 per share
- - (834 ) - (834 )
Stock-based compensation expense
- 2,039 - - 2,039
Foreign currency translation
- - - (6,503 ) (6,503 )
Net income
- - 3,720 - 3,720
September 30, 2021
5,223,232 $ 302,234 $ 82,199 $ 14,984 $ 399,417
Exercise of stock options and vesting of restricted stock units
21,396 2,275 - - 2,275
Tax withholding on vesting of restricted stock units
(4 ) (4 )
Dividends paid, $0.16 per share
- - (837 ) - (837 )
Stock-based compensation expense
- 3,703 - - 3,703
Foreign currency translation
- - - (6,165 ) (6,165 )
Net (loss)
- - (2,060 ) - (2,060 )
December 31, 2021
5,244,628 $ 308,208 $ 79,302 $ 8,819 $ 396,329

*Accumulated Other Comprehensive (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”~~“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 of ~~December 31, 2022~~September 30, 2023, we managed our operations in four reportable segments, or divisions:

	●	Sterilization and Disinfection Control - manufactures and sells biological, cleaning, and chemical indicators used to assess the effectiveness of sterilization and disinfection processes in the pharmaceutical, medical device, hospital, and dental industries. The division also provides testing and laboratory services, mainly to the dental industry.
	●	Clinical Genomics - develops, manufactures and sells highly sensitive, low-cost, high-throughput genetic analysis tools ~~used by~~and related consumables and services that enable clinical labs to perform genomic ~~clinical~~ testing for a broad range of diagnostic and research applications in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics, and oncology related applications.
	●	~~Sterilization and Disinfection Control~~ - manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the hospital, 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.~~therapies, among other applications.

●

Calibration Solutions - develops, manufactures and sells quality control ~~and calibration~~ products ~~used~~using principles of advanced metrology to measure or calibrate ~~temperature, pressure, pH, humidity, and other~~critical chemical or physical parameters ~~for health~~in various dialysis, process monitoring, instrument monitoring, environmental monitoring, gas flow, environmental air quality, and ~~safety purposes,~~torque applications, primarily in ~~hospital,~~ medical device manufacturing, pharmaceutical manufacturing, laboratory, and ~~various laboratory~~hospital environments.

~~Non-reportable operating segments and unallocated~~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 the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. 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. We made no material changes to the application of our significant accounting policies that were disclosed in our Form 10-K. 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, ~~2022~~2023.

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

quarters, respectively.

Prior Period ~~Reclassification~~Reclassifications

Certain prior year amounts presented ~~for prior periods in Note~~ 3. ~~"Revenue Recognition" have been reclassified. Certain revenues related to the Biopharmaceutical Development division~~ have been reclassified ~~out of revenues from consumables and into revenues from hardware and services. Certain revenues related~~ to ~~the Clinical Genomics division have been reclassified out of revenues from hardware and into revenues from consumables. These~~conform with current presentation. The reclassifications have not resulted in any ~~change~~changes to consolidated or segment amounts reported in the ~~Condensed~~ Consolidated Financial Statements for ~~and~~any periods presented in this Form 10-Q.

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 judgment about the outcome of future events. The global business ~~and economic uncertainty resulting from supply chain challenges,~~environment continues to be impacted by cost pressure, the overall effects of ~~the current high inflation environment~~economic uncertainty on customers' purchasing patterns, high interest rates, and other factors. It is not possible to accurately predict the ~~novel coronavirus pandemic ("COVID-~~~~19"~~~~) has made~~future impact of such ~~estimates more difficult to calculate. Accordingly, actual~~events and circumstances. Actual results could differ from ~~those~~our estimates.

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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.

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Note 2. Significant Transactions

Acquisition of GKE

On October 14, 2023, we executed a purchase agreement to acquire 100% of the outstanding shares of GKE GmbH and SAL GmbH, and subject to applicable Chinese regulatory approvals, 100% of the outstanding shares of Beijing GKE Science & Technology Co. Ltd. (together, "GKE" or the "GKE acquisition"). GKE develops, manufactures and sells a highly competitive portfolio of chemical sterilization indicators to protect patient safety across global healthcare markets. GKE’s strength in chemical indicators and our Sterilization and Disinfection Control division’s strength in biologic indictors are complementary, as chemical and biologic indicators are used in the same sterility validation workflows. Additionally, GKE’s healthcare-focused commercial capabilities and geographic coverage greatly expand our reach within the healthcare markets.

Total cash consideration for the GKE acquisition was €85,000, net of cash and debt and subject to customary purchase price adjustments. Of the total acquisition price, €8,500 will be held back for a period of 18 months from the acquisition closing date as security against potential indemnification losses. An additional €5,000 of the acquisition price, net of cash and debt and subject to customary adjustments, specifically related to the purchase of Beijing GKE Science & Technology Co. Ltd., will be paid to the sellers upon satisfaction of applicable Chinese regulatory approvals. We funded the acquisition through a combination of cash on-hand and $65,000 borrowed under our line of credit (See Note 7. "Indebtedness"). We began operating GKE GmbH and SAL GmbH on October 16, 2023, on which date they will also be included as wholly owned subsidiaries in our consolidated financial statements. Due to the recent nature of the acquisition, our initial purchase price accounting is incomplete.

Belyntic GmbH

~~During the~~On ~~three~~ ~~months ended~~ ~~December 31,~~November 17, 2022, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business (“the Belyntic acquisition”) for $6,450, of which $4,950 was paid on the date of ~~acquisition and the remainder~~acquisition. The remaining $1,500 will be paid ~~upon approval of~~as patent applications ~~expected in the next~~ 36 ~~months.~~are approved. The business complements our existing peptide synthesis business, part of the Biopharmaceutical Development segment, by adding a new consumables line. The new PurePep® EasyClean products are a green chemistry solution to purify peptides.

During ~~the~~ ~~third~~ ~~quarter of~~ fiscal year 2023, we prepared a preliminary ~~analyses~~analysis of the valuation of net assets acquired in the Belyntic acquisition. ~~This~~During the six months ended September 30, 2023, based on a detailed financial analysis of the financial model, we recorded measurement period adjustments to reclassify amounts from intangible assets into goodwill. Our preliminary purchase price allocation is subject to further revision as more detailed analyses are ~~completed~~

~~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.

~~Fair Value of Net Assets Acquired~~

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the final valuation of Agena. We have made appropriate adjustments to deferred taxes and tax-related balances during the ~~three~~ ~~months ended~~ ~~December 31. 2022.~~

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

Life (in years)

Amount

Cash and cash equivalents
$ 7,544
Accounts receivable
11,100
Other current assets
25,480
Total current assets
44,124
Property, plant and equipment/noncurrent assets
15,832
Deferred tax asset
811
Intangible assets:

Goodwill
N/A 135,728
Customer relationships
12 103,800
Intellectual property
8 45,400
Tradenames
12 15,700
Total Assets acquired
$ 361,395
Accounts payable
2,174
Unearned revenues
2,713
Other current liabilities
11,052
Total current liabilities
15,939
Deferred tax liability
28,856
Other noncurrent liabilities
8,263
Total liabilities assumed
$ 53,058
Total purchase price, net of cash acquired
$ 300,793

~~Acquired Goodwill~~

Acquired goodwill of $135,728, all of which is allocated to the Clinical Genomics reportable segment, represents the value expected to arise from expanded market opportunities, expected synergies, and assembled workforce, ~~none~~ ~~of which qualify as amortizable intangible assets. The goodwill acquired is~~ ~~not~~ ~~deductible for income tax purposes.~~

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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 December 31,

Nine Months Ended December 31,

2022

2021

2022

2021

Pro forma total revenues
$ 54,287 $ 56,659 $ 163,489 $ 163,733
Pro forma net income (loss)
558 (8,426 ) 887 (3,989 )

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~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2022~~~~, the pro forma financial information excludes $145 and $768 of non-recurring acquisition-related expenses, respectively. 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.~~completed.

Note 3. Revenue ~~Recognition~~

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

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

Consumables are typically used on a one-time basis and require frequent replacement in our customers' operating cycles. Consumables such as reagents used for molecular and genetic analysis or solutions used for protein synthesis are critical to the ongoing use of our instruments. Consumables such as biological indicator test strips are used on a standalone basis.

We also offer maintenance, calibration, and testing service ~~and maintenance~~contracts. Under our service contracts ~~for our instruments, which~~ ~~may~~ ~~contain performance obligations satisfied: over time, such as an obligation to~~we perform ~~repairs or~~labor and replace parts ~~as needed~~on an as-needed basis over a ~~contractually-specified~~contractually specified period of ~~time; upon completion of a~~time, or perform specific, discrete ~~service, such as stand-alone maintenance services or discrete services within annual contracts; or, in many cases, both.~~services.

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

The following tables present disaggregated revenues for the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 and ~~2021~~September 30, 2022, respectively:

											*Three Months Ended September 30, 2023*
	*Three Months Ended December 31, 2022*										*Sterilization and Disinfection Control*		*Clinical Genomics*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
	*Clinical Genomics*		*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
Consumables	$	10,885	$	14,307	$	3,584	$	553	$	29,329	$	14,749	$	9,963	$	4,187	$	786	$	29,685
Hardware and Software		3,371		95		5,844		7,023		16,333		120		4,474		2,475		6,884		13,953
Services		1,329		1,881		2,218		3,197		8,625		2,211		1,112		2,545		3,659		9,527
Total Revenues	$	15,585	$	16,283	$	11,646	$	10,773	$	54,287	$	17,080	$	15,549	$	9,207	$	11,329	$	53,165

Three Months Ended December 31, 2021

Clinical Genomics*

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Total

Consumables
$ 10,221 $ 11,718 $ 4,099 $ 889 $ 26,927
Hardware and Software
4,407 250 6,100 6,978 17,735
Services
1,857 1,863 2,557 3,757 10,034
Total Revenues
$ 16,485 $ 13,831 $ 12,756 $ 11,624 $ 54,696

											*Three Months Ended September 30, 2022*
	*Nine Months Ended December 31, 2022*										*Sterilization and Disinfection Control*		*Clinical Genomics*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
	*Clinical Genomics*		*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
Consumables	$	34,815	$	41,239	$	11,248	$	2,272	$	89,574	$	14,704	$	12,399	$	4,000	$	865	$	31,968
Hardware and Software		9,349		619		16,656		18,696		45,320		218		4,394		5,988		5,980		16,580
Services		4,361		6,163		6,853		11,218		28,595		2,042		1,642		2,156		4,361		10,201
Total Revenues	$	48,525	$	48,021	$	34,757	$	32,186	$	163,489	$	16,964	$	18,435	$	12,144	$	11,206	$	58,749

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	*Nine Months Ended December 31, 2021*										*Six Months Ended September 30, 2023*
	Clinical Genomics*		*Sterilization and Disinfection Control*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*		*Sterilization and Disinfection Control*		*Clinical Genomics*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*
Consumables	$	10,221	$	36,579	$	11,588	$	2,701	$	61,089	$	28,456	$	18,732	$	8,673	$	1,295	$	57,156
Hardware and Software		4,407		495		14,435		20,608		39,945		201		7,901		5,166		13,962		27,230
Services		1,857		5,940		6,165		10,460		24,422		4,350		2,285		5,257		7,532		19,424
Total Revenues	$	16,485	$	43,014	$	32,188	$	33,769	$	125,456	$	33,007	$	28,918	$	19,096	$	22,789	$	103,810

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

	*Six Months Ended September 30, 2022*
	*Sterilization and Disinfection Control*		*Clinical Genomics*		*Biopharmaceutical Development*		*Calibration Solutions*		*Total*

Consumables	$	26,932	$	23,930	$	7,664	$	1,719	$	60,245
Hardware and Software		524		5,885		10,812		11,673		28,894
Services		4,282		3,125		4,635		8,021		20,063
Total Revenues	$	31,738	$	32,940	$	23,111	$	21,413	$	109,202

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

	*Three Months Ended December 31,*				*Nine Months Ended December 31,*				*Three Months Ended September 30,*				*Six Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*		*2023*		*2022*		*2023*		*2022*
United States	$	28,645	$	30,414	$	88,756	$	68,253	$	27,073	$	30,989	$	53,610	$	60,111
China		7,482		6,243		18,659		9,960		7,529		7,480		13,642		11,177
Other		18,160		18,039		56,074		47,243		18,563		20,280		36,558		37,914
Total revenues	$	54,287	$	54,696	$	163,489	$	125,456	$	53,165	$	58,749	$	103,810	$	109,202

Other than China, no foreign country ~~exceeds~~exceeded 10% of total ~~revenues.~~revenues for the three and six months ended September 30, 2023 and 2022.

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.

A summary of contract liabilities is as follows:

Contract liabilities as of March 31, 2022
$ 15,069
Prior year liabilities recognized in revenues during the nine months ended December 31, 2022
(7,927 )
Contract liabilities added during the nine months ended December 31, 2022, net of revenues recognized
9,091
Contract liabilities balance as of December 31, 2022
$ 16,233

Contract liabilities as of March 31, 2023	$	16,098
Prior year contract liabilities recognized in revenues during the six months ended September 30, 2023		(6,399	)
Contract liabilities added during the six months ended September 30, 2023, net of revenues recognized		4,934
Contract liabilities balance as of September 30, 2023	$	14,633

Contract liabilities primarily relate to service contracts with original expected service durations of 12 months or less and will be recognized to revenue over time as our performance obligations are satisfied.

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Note 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~~value; they are classified within Level 1 of the fair value hierarchy.

Historically, the financial instruments that subject us to the highest concentration of credit risk are cash and cash equivalents and accounts receivable. ~~It is our policy~~We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to ~~invest in highly liquid cash equivalent financial instruments with high credit ratings~~diversify and ~~to maintain low single issuer exposure (except U.S. treasuries).~~reduce risk of loss. Concentration of credit risk with respect to accounts receivable is limited to customers to ~~which~~whom we make significant sales. No customers accounted for more than 10% of total trade receivables as of September 30, 2023.

We ~~reserve~~record an allowance for potential ~~write-offs of~~uncollectible amounts against our 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.~~conditions. 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 amount of 1.375% convertible senior notes due August 15, 2025 (the "Notes"). We estimate the fair value of the Notes using Level 2 inputs 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~~was as follows:

December 31, 2022

March 31, 2022

Carrying Value

Fair Value (Level 2)

Carrying Value

Fair Value (Level 2)

Notes
$ 170,044 $ 157,191 $ 169,365 $ 185,438

	*September 30, 2023*				*March 31, 2023*
	*Carrying Value*		*Fair Value (Level 2)*		*Carrying Value*		*Fair Value (Level 2)*
Notes	$	170,733	$	155,681	$	170,272	$	161,072

~~Assets~~We are obligated to pay contingent consideration of $1,500 cash related to the Belyntic acquisition upon approval of pending patent applications. We estimate the fair value of the contingent consideration using a probability-weighted outcome analysis based on our expectations of patent approval, leveraging our historical experience and expert input, and we adjust the estimated fair value at each reporting period through earnings. The fair value of the contingent consideration was $1,180 as of September 30, 2023 and is recorded in other accrued expenses on the accompanying Condensed Consolidated Balance Sheets. The first subset of patents was granted by the European Patent Office effective October 18, 2023, and we anticipate approval of the remaining pending patents within one year of September 30, 2023.

Amounts recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a nonrecurring basis include ~~items~~the initial recognition and disclosure of most assets and liabilities purchased in business acquisitions and any related measurement period adjustments. Additionally, assets such as property and equipment, operating lease assets, goodwill, and other intangible ~~assets. These~~ assets are ~~measured at~~adjusted to fair value if determined to be impaired. ~~During~~We recorded no impairments during the three and sixmonths ended ~~December 31, 2022,~~ ~~in response to the loss of a significant customer, we used Level~~ 3September 30, 2023 inputs to test the recoverability of the Clinical Genomics division’s intangible asset group and evaluate the division’s goodwill for impairment in response to the loss of a significant customer. After considering all information available to us as of the date of testing, we concluded thator no2022 ~~impairment is indicated.~~. Fair values ~~preliminarily assigned to~~of such assets ~~acquired~~ and liabilities ~~assumed in the Belyntic acquisition were measured~~require measurement using Level 3 ~~inputs, and are subject to change.~~ inputs.

There were no transfers between the levels of the fair value hierarchy during the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 or ~~2021,~~2022.

Note 5. ~~respectively.~~Supplemental Balance Sheets Information

Inventories consisted of the following:

	*September 30, 2023*		*March 31, 2023*
Raw materials	$	20,203	$	20,064
Work in process		633		617
Finished goods		12,043		13,961
Total inventories	$	32,879	$	34,642

The decrease in inventories is primarily attributable to non-cash scrap expense and transfers of instruments to be used in our business from inventory to fixed assets, partially offset by inventory purchases to meet current production needs.

Prepaid expenses and other current assets consisted of the following:

	*September 30, 2023*		*March 31, 2023*
Prepaid expenses	$	3,494	$	2,498
Deposits		1,563		1,376
Prepaid income taxes		3,534		953
Other current assets		4,235		4,045
Total prepaid expenses and other	$	12,826	$	8,872

Accrued payroll and benefits consisted of the following:

	*September 30, 2023*		*March 31, 2023*
Bonus payable	$	3,317	$	4,461
Wages and paid-time-off payable		2,139		2,329
Payroll related taxes		1,854		1,982
Other benefits payable		1,043		661
Total accrued payroll and benefits	$	8,353	$	9,433

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~~Note~~ 5. ~~Supplemental Balance Sheets Information~~

~~Inventories consist~~Other accrued expenses consisted of the following:

December 31, 2022

March 31, 2022

Raw materials
$ 20,122 $ 14,172
Work in process
1,972 4,419
Finished goods
11,645 6,015
Total inventories
$ 33,739 $ 24,606

~~Prepaid expenses and other consist of the following:~~

December 31, 2022

March 31, 2022

Prepaid expenses
$ 3,450 $ 2,871
Deposits
1,702 1,410
Prepaid income taxes
3,352 2,536
Other current assets
3,446 2,325
Total prepaid expenses and other
$ 11,950 $ 9,142

~~Accrued payroll and benefits consist of the following:~~

December 31, 2022

March 31, 2022

Bonus payable
$ 2,714 $ 7,468
Wages and paid-time-off payable
2,926 3,677
Payroll related taxes
1,773 2,069
Other benefits payable
721 1,503
Total accrued payroll and benefits
$ 8,134 $ 14,717

	*September 30, 2023*		*March 31, 2023*
Accrued business taxes	$	6,079	$	5,941
Current operating lease liabilities		2,784		2,868
Income taxes payable		343		992
Other		3,131		2,297
Total other accrued expenses	$	12,337	$	12,098

Note 6. Goodwill and Intangible Assets, Net

Intangible assets, the significant majority of which are finite-lived, ~~consist~~consisted of the following:

	*December 31, 2022*							*March 31, 2022*							*September 30, 2023*							*March 31, 2023*
	*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*		*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*		*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*		*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*
Customer relationships	$	237,412	$	(80,627	)	$	156,785	$	244,157	$	(67,469	)	$	176,688	$	231,543	$	(94,486	)	$	137,057	$	238,247	$	(86,058	)	$	152,189
Intellectual property		65,871		(17,732	)		48,139		65,893		(12,620	)		53,273		66,576		(23,160	)		43,416		65,950		(19,550	)		46,400
Other intangibles		24,745		(6,222	)		18,523		25,350		(5,194	)		20,156		24,437		(7,230	)		17,207		24,793		(6,567	)		18,226
Total	$	328,028	$	(104,581	)	$	223,447	$	335,400	$	(85,283	)	$	250,117	$	322,556	$	(124,876	)	$	197,680	$	328,990	$	(112,175	)	$	216,815

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

	*Three Months Ended December 31,*				*Nine Months Ended December 31,*				*Three Months Ended September 30,*				*Six Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*		*2023*		*2022*		*2023*		*2022*
Amortization in cost of revenues	$	1,695	$	1,227	$	5,094	$	1,877	$	1,756	$	1,691	$	3,484	$	3,399
Amortization in general and administrative		5,452		4,695		16,479		11,618		5,429		5,415		10,921		11,027
Total	$	7,147	$	5,922	$	21,573	$	13,495	$	7,185	$	7,106	$	14,405	$	14,426

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

Remainder of 2023	7,250
2024	28,490
Remainder of 2024		$	13,803
2025	26,911		26,523
2026	26,149		25,765
2027	25,652		25,270
2028			24,825

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

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
(244 ) (297 ) (7,871 ) (32 ) (8,444 )
Goodwill related to Belyntic acquisition
- - 2,973 - 2,973
Measurement period adjustment - Agena acquisition
114 - - - 114
December 31, 2022
$ 135,784 $ 29,453 $ 83,367 $ 37,205 $ 285,809

	*Sterilization and Disinfection Control*			*Clinical Genomics*			*Biopharmaceutical Development*			*Calibration Solutions*			*Total*
March 31, 2023	$	29,559		$	135,811		$	83,857		$	37,217			286,444
Effect of foreign currency translation		(201	)		(180	)		(3,612	)		(24	)		(4,017	)
Measurement period adjustment - Belyntic Acquisition		-			-			841			-			841
September 30, 2023	$	29,358		$	135,631		$	81,086		$	37,193		$	283,268

Goodwill ~~acquired~~ in the Biopharmaceutical Development division ~~resulted from~~related to the Belyntic acquisition ~~and~~ is tax deductible.

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Note 7. Indebtedness

Credit Facility

~~We maintain~~As of September 30, 2023, we maintained afour-year senior credit facility (the “Credit Facility”) that ~~includes~~included 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. The Credit Facility 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. As of ~~December 31, 2022~~September 30, 2023, we had ~~$19,000~~no outstanding balances under the Credit Facility.

On ~~December 22, 2022,~~ ~~Mesa and the financial institutions amended the Credit Facility to replace references to the Eurodollar Rate with references to the Secured Overnight Financing Rate ("SOFR").~~

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

The financial covenants in the Credit Facility include a maximum leverage ratio of ~~5.0~~4.5 to 1.0 for the period ended ~~December 31, 2022~~September 30, 2023, 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, 2022~~September 30, 2023, we were in compliance with all covenants.

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

On October 5, 2023, we amended the terms of the Credit Facility to increase the maximum principal amount available to us from $75,000 to $125,000. On October 11, 2023, we borrowed $65,000 under the facility at a current interest rate of 6.9% to partially fund the acquisition of GKE. See Note 2. "Significant Transactions" for further information.

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Convertible Notes

On August 12, 2019, we issued an aggregate principal amount of $172,500 of 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.~~$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. The Notes are initially convertible, subject to certain conditions, 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.

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 and sixmonths ended ~~December 31, 2022~~September 30, 2023. As of ~~December 31, 2022~~September 30, 2023, the Notes ~~are~~were 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.~~Sheets. The if-converted value of the Notes did not exceed the principal balance as of ~~December 31, 2022~~September 30, 2023.

The net carrying amount of the Notes was as follows:

	*December 31, 2022*			*March 31, 2022*			*September 30, 2023*			*March 31, 2023*
Principal outstanding	$	172,500		$	172,500		$	172,500		$	172,500
Unamortized debt issuance costs		(2,456	)		(3,135	)		(1,767	)		(2,228	)
Net carrying value	$	170,044		$	169,365		$	170,733		$	170,272

We recognized interest expense on the Notes as follows:

	*Three Months Ended December 31,*				*Nine Months Ended December 31,*				*Three Months Ended September 30,*				*Six Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*		*2023*		*2022*		*2023*		*2022*
Coupon interest expense at 1.375%	$	593	$	593	$	1,779	$	1,779	$	593	$	593	$	1,186	$	1,186
Amortization of debt discounts and issuance costs		227		223		679		666
Amortization of debt issuance costs										231		227		461		452
Total interest and amortization of debt issuance costs	$	820	$	816	$	2,458	$	2,445	$	824	$	820	$	1,647	$	1,638

The effective interest rate on the notes is approximately 1.9%.

Note 8. Stockholders' Equity

Stock-Based Compensation

During the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023, we issued stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc. Amended and Restated 2021 Equity Incentive Plan (the "2021 Equity Plan"), which authorizes the issuance of ~~330~~660 shares of common stock to eligible participants.

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

	*Three Months Ended December 31,*					*Nine Months Ended December 31,*						*Three Months Ended September 30,*					*Six Months Ended September 30,*
	*2022*		*2021*			*2022*			*2021*			*2023*		*2022*			*2023*		*2022*
Stock-based compensation expense	$	2,056	$	3,703		$	9,859		$	7,939		$	3,183	$	4,371		$	6,151	$	7,803
Amount of income tax (benefit) recognized in earnings		226		(743	)		(1,855	)		(4,247	)
Amount of income tax expense (benefit) recognized in earnings													1,389		(89	)		517		(2,081	)
Stock-based compensation expense, net of tax	$	2,282	$	2,960		$	8,004		$	3,692		$	4,572	$	4,282		$	6,668	$	5,722

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.

The following is a summary of stock option award activity for the six months ended September 30, 2023:

	*Stock Options*
	*Shares Subject to Options*			*Weighted- Average Exercise Price per Share*		*Weighted-Average Remaining Contractual Life (Years)*		*Aggregate Intrinsic Value*
Outstanding as of March 31, 2023		163		$	200.62		3.3	$	1,643
Awards granted		53			131.67
Awards forfeited or expired		(15	)		213.22
Awards exercised		(2	)		132.40
Outstanding as of September 30, 2023		199		$	181.90		3.7	$	-

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

Stock Options

Shares Subject to Options

Weighted- Average Exercise Price per Share

Weighted-Average Remaining Contractual Life (Years)

Aggregate Intrinsic Value

Outstanding as of March 31, 2022
202 $ 167.14 2.9 $ 18,261
Awards granted
43 185.61
Awards forfeited or expired
(7 ) 225.12
Awards exercised
(45 ) 100.19
Outstanding as of December 31, 2022
193 $ 184.70 3.1 $ 3,406

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

The following is a summary of RSU and PSU award activity for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023:

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

Outstanding as of March 31, 2022⁽¹⁾
51 $ 252.86 55 $ 288.45
Awards granted⁽¹⁾
42 187.45 19 179.63
Performance adjustment⁽²⁾
- - 2 202.00
Awards forfeited
(8 ) 232.20 - -
Awards distributed⁽²⁾
(26 ) 250.81 (10 ) 202.00
Outstanding as of December 31, 2022⁽¹⁾
59 $ 210.44 66 $ 267.97

	*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*
Outstanding as of March 31, 2023⁽¹⁾		57		$	209.27		44	$	286.02
Awards granted⁽¹⁾		53			134.35		32		132.29
Awards forfeited		(3	)		179.82		-		-
Awards distributed		(25	)		208.33		-		-
Outstanding as of September 30, 2023⁽¹⁾		82		$	162.48		76	$	223.07

⁽¹⁾	Balances for PSUs are reflected at target.

⁽²⁾	~~During the~~ ~~nine~~ ~~months ended~~ ~~December 31, 2022,~~ ~~the fiscal year~~ ~~2020~~ ~~PSUs vested and were distributed at 126% of target, based on actual performance results and completion of service conditions.~~

~~The outstanding~~Outstanding time-based RSUs vest and settle in shares of our common stock on a one-for-one basis. ~~Substantially all~~The majority of the RSUs granted to employees during the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 vest in equal installments on the first, second, and third anniversary of the grant date. RSUs granted to certain executives during the six months ended September 30, 2023 vest in equal installments on September 1, 2024, June 21, 2025 and June 21, 2026. RSUs granted to non-employee directors during the six months ended September 30, 2023 vest one year from the grant date. We recognize the expense relating to RSUs, net of estimated forfeitures, on a straight-line basis over the vesting period.

We grant PSUs to certain key employees. The number of shares earned is determined at the end of each performance period based on Mesa's achievement of certain pre-defined targets defined in the related award agreement. PSUs vest upon completion of the service period described in the award ~~agreement and based on achievement of the performance targets described in the award agreements.~~agreement. We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the performance targets on a straight-line basis over the service period.

During the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023, the Compensation Committee of the Board of Directors created a plan to award 1932 PSUs at target (the "~~FY23~~FY24 PSUs") with a grant date fair value of $132.29 that are subject to ~~both~~ service, performance, and ~~performance~~market conditions to eligible employees. The ~~performance period for the~~ ~~FY23~~ ~~PSUs is from~~ ~~April 1, 2022~~ ~~until~~ ~~March 31, 2023~~ ~~and the~~ service period is from April 1, ~~2022~~2023 ~~until~~through June 21, 2026. The company performance conditions will be measured for the period from April 1, 2023 through March 31, ~~2025.~~ ~~Of the total~~ ~~FY23~~ ~~PSUs granted, 13 vest based on our achievement of specific performance criteria during fiscal year~~ ~~2023~~ ~~and they have a grant date fair value of $185.57. Based on actual performance through the~~ ~~nine~~ ~~months ended~~ ~~December 31, 2022,~~ ~~we reduced the number of awards expected to vest. 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 performance period and have a fair value of $166.21 per share as of~~ ~~December 31, 2022.~~2024. The quantity of shares that will be ~~issued~~earned based upon ~~vesting~~company performance 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.~~vest for performance. In addition, the number of PSUs earned based on company performance will be adjusted up or down by a maximum of 20% pursuant to a market-based measure of performance comparing Mesa’s share price to a peer group over the period from April 1, 2023 until March 31, 2026.

~~During fiscal year~~ ~~2022,~~ ~~we awarded 7 PSUs to key employees of Agena that are subject to both service and performance conditions. Based on actual performance through the period ended~~ ~~December 31, 2022,~~ ~~the awards are~~ ~~not~~ ~~expected to vest.~~

~~During fiscal year~~ ~~2022,~~ the Compensation Committee of the Board of Directors granted a special long-term equity award consisting of PSUs covering a target of 40 shares that is subject to both performance and service conditions to our Chief Executive Officer. Based on actual performance through the period ended ~~December 31, 2022,~~ ~~the award is estimated to vest at 93%.~~

~~During the~~ ~~three~~ ~~months ended~~ ~~December 31, 2022,~~ we adjusted our estimate of PSUs expected to vest under all outstanding plans based on actual results achieved through the performance period. We recorded a cumulative effect release of ($1,427) during the period ($1,127 net of tax as well as $0.21 per basic and diluted share for both the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~December 31, 2022),~~ ~~which is recorded in general and administrative and selling expense on our Condensed Consolidated Statements of Operations.~~

~~In the future, we expect non-cash stock based compensation expense to decrease approximately $392 per quarter as a result of our new estimate of performance share units expected to vest.~~

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Note 9. ~~Earnings~~Net (Loss) Earnings Per Share

Basic net (loss) earnings ~~(loss)~~ per share is computed by dividing net (loss) income ~~(loss)~~ by the weighted-average number of common shares outstanding during the reporting period. Diluted (loss) earnings ~~(loss)~~ per share (“diluted EPS”) is computed similarly to basic (loss) earnings ~~(loss)~~ per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Potentially dilutive securities include stock options and both time and performance based RSUs (collectively “stock awards”), as well as common shares underlying ~~the~~our 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 if they are antidilutive. Diluted EPS ~~considers~~does not consider 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.~~effect in such cases.

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 the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 and ~~December 31, 2021~~September 30, 2022..

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

	*Three Months Ended September 30,*					*Six Months Ended September 30,*
	*2023*			*2022*		*2023*			*2022*
Net (loss) income	$	(1,230	)	$	1,306	$	(1,779	)	$	(132	)
Weighted average outstanding shares of common stock		5,387			5,323		5,379			5,298
Dilutive effect of stock options		-			27		-			-
Dilutive effect of RSUs		-			14		-			-
Fully diluted shares		5,387			5,364		5,379			5,298

Basic (loss) earnings per share	$	(0.23	)	$	0.25	$	(0.33	)	$	(0.02	)
Diluted (loss) earnings per share	$	(0.23	)	$	0.24	$	(0.33	)	$	(0.02	)

Three Months Ended December 31,

Nine Months Ended December 31,

2022

2021

2022

2021

Net income (loss) available for shareholders
$ 451 $ (2,060 ) $ 319 $ 3,655
Weighted average outstanding shares of common stock
5,339 5,233 5,312 5,199
Dilutive effect of stock options
17 - 28 107
Dilutive effect of RSUs
4 - 14 27
Fully diluted shares
5,360 5,233 5,354 5,333

Basic earnings (loss) per share
$ 0.08 $ (0.39 ) $ 0.06 $ 0.70
Diluted earnings (loss) per share
$ 0.08 $ (0.39 ) $ 0.06 $ 0.69

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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 September 30,*				*Six Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*		*2023*		*2022*		*2023*		*2022*
Assumed conversion of the Notes		608		608		608		608		608		608		608		608
Stock awards that were anti-dilutive		176		285		159		38		282		154		255		328
Stock awards subject to performance conditions		49		40		51		18
Stock awards subject to performance and market conditions										43		60		41		52
Total stock awards excluded from diluted EPS		833		933		818		664		933		822		904		988

Note 10. 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. 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,~~they relate, changes in tax laws and foreign tax holidays, settlement with taxing authorities, and foreign currency fluctuations.

Our effective income tax rate was ~~76.5% and 384.8%~~21.4% for the ~~three~~ ~~and~~ ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 ~~, respectively, compared to 12.0%~~ and ~~(1.0%)~~93.5% for the ~~three~~ ~~and~~ ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The effective tax rate for ~~both~~ the ~~three~~ ~~and~~ ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 differed from the statutory federal rate of 21% primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions. The change in our effective tax rate for the ~~three~~ ~~and~~ ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 ~~was higher than~~compared to the ~~comparable~~ prior ~~year periods~~period is primarily due to lower windfall benefits on stock option ~~exercises and the vesting of restricted stock units and the effect of income in foreign jurisdictions.~~exercises.

Note 11. 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, 2022~~September 30, 2023, there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets.

As part of the Belyntic acquisition, we have agreed to pay ~~an additional~~ $1,500 to the sellers if contractually specified patents ~~related to the technology purchased~~ are issued. WeEffective October 18, 2023, a subset of the patents was issued by the European Patent Office, and we believe ~~that~~ it is probable ~~that~~ the remaining patents will be issued and we will pay the sellers in full within the next 3612 months. ~~The liability is recorded in other long-term liabilities on the accompanying Condensed Consolidated Balance Sheets.~~

~~Page~~

As part of the GKE acquisition consummated on 13October 14, 2023,

~~Table~~we will pay the sellers €8,500 of ~~Contents~~

the acquisition price 18 months following the acquisition date, pending adjustments for potential indemnification losses that may arise. We will pay the sellers an additional €5,000 of the acquisition price, net of cash and debt and subject to customary adjustments, upon satisfaction of Chinese regulatory approvals for the Beijing GKE Science & Technology Co. Ltd. portion of the acquisition.

Note 12. Segment Information

The following tables set forth our segment information:

	*Three Months Ended December 31,*					*Nine Months Ended December 31,*						*Three Months Ended September 30,*						*Six Months Ended September 30,*
	*2022*		*2021*			*2022*			*2021*			*2023*			*2022*			*2023*			*2022*
Revenues:
Sterilization and Disinfection Control												$	17,080		$	16,964		$	33,007		$	31,738
Clinical Genomics	$	15,585	$	16,485		$	48,525		$	16,485			15,549			18,435			28,918			32,940
Sterilization and Disinfection Control		16,283		13,831			48,021			43,014
Biopharmaceutical Development		11,646		12,756			34,757			32,188			9,207			12,144			19,096			23,111
Calibration Solutions		10,773		11,624			32,186			33,769			11,329			11,206			22,789			21,413
Total revenues (a)	$	54,287	$	54,696		$	163,489		$	125,456		$	53,165		$	58,749		$	103,810		$	109,202

Gross profit
Gross profit:
Sterilization and Disinfection Control												$	12,476		$	12,199		$	24,067		$	22,967
Clinical Genomics	$	8,045	$	3,924		$	26,535		$	3,924			7,727			10,641			14,455			18,490
Sterilization and Disinfection Control		11,614		9,945			34,581			31,859
Biopharmaceutical Development		7,359		8,768			21,993			20,061			5,509			7,557			11,942			14,634
Calibration Solutions		5,740		6,090			17,411			18,330			6,407			6,007			12,838			11,671
Reportable segment gross profit		32,758		28,727			100,520			74,174			32,119			36,404			63,302			67,762
Corporate and Other (b)		7		(100	)		(28	)		(196	)		(10	)		(18	)		(10	)		(35	)
Gross profit	$	32,765	$	28,627		$	100,492		$	73,978		$	32,109		$	36,386		$	63,292		$	67,727
Reconciling Items:
Operating expenses		29,363		31,139			97,689			69,166
Operating income (loss)		3,402		(2,512	)		2,803			4,812
Nonoperating expense (income), net		1,486		(171	)		2,915			1,192
Earnings (loss) before income taxes	$	1,916	$	(2,341	)	$	(112	)	$	3,620
Operating expense													32,169			32,391			64,016			68,326
Operating (loss) income													(60	)		3,995			(724	)		(599	)
Nonoperating expense, net													1,265			611			1,538			1,429
(Loss) earnings before income taxes												$	(1,325	)	$	3,384		$	(2,262	)	$	(2,028	)

^(a)

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

^(b)

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

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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,*		*September 30,*		*March 31,*
	*2022*		*2022*		*2023*		*2023*
Sterilization and Disinfection Control					$	3,889	$	3,492
Clinical Genomics	$	14,591	$	11,802		11,330		13,985
Sterilization and Disinfection Control		3,022		2,176
Biopharmaceutical Development		7,797		4,495		8,541		8,384
Calibration Solutions		8,329		6,133		9,119		8,781
Total inventories	$	33,739	$	24,606	$	32,879	$	34,642

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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 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 “seek,” “believe,” “may,” “intend,” “could,” “expect,” “anticipate,” “plan,” “target,” “estimate,” “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: our ability to successfully grow our business, including as a result of acquisitions; the ~~results~~effect that acquisitions have on 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, including as a result of competitive factors; conditions in the global economy and the particular markets we serve; 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, earnings, expenses, margins, tax rates, tax provisions, liquidity, cash flows, demand, and competition; the effects of additional actions taken to become more efficient or lower costs; supply chain challenges; cost pressures and the overall effects of the current high inflation environment on customers’ purchasing patterns; 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;~~laws and political developments; tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic, industry, and capital markets conditions, including rising interest rates and potential recessionary conditions; the timing of any of the foregoing; and assumptions underlying any of the 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~~2023 and 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.

Overview

We are a multinational manufacturer, developer, and seller of life science tools and 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~~as well as by independent distributors in these areas ~~as well as~~and throughout the rest of the world. We prefer markets in which we can establish a strong presence and achieve high gross profit margins.

As of ~~December 31, 2022,~~September 30, 2023, we managed our operations in four reportable segments, or divisions: ~~Clinical Genomics,~~ Sterilization and Disinfection Control, Clinical Genomics, Biopharmaceutical Development, and Calibration Solutions. Each of our divisions ~~are~~is described further in "Results of Operations" below. Unallocated corporate expenses and other business activities are reported within "Corporate and Other."

Corporate Strategy

We strive to create ~~shareholder~~stakeholder 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, in which the safety, quality, and efficacy of products is critical. By delivering the highest quality products possible, we are committed to protecting ~~people,~~ the ~~environment, and end products.~~communities we serve.

Organic Revenues Growth

Organic revenues growth is driven by the expansion of our customer base, increases in sales volumes, new product offerings, and price increases, and may be affected positively or negatively by 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. 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 with price increases effective January ~~1; however, as a result of high inflation in recent quarters, we implemented an additional mid-year price increase late in the second quarter of fiscal year 2023.~~1.

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Inorganic Growth - Acquisitions

During the third quarter of fiscal year 2023, we completed the Belyntic acquisition for an aggregate purchase price of $6,450. The acquisition provided a natural complement to our peptide synthesis business by adding a consumables product line.

During the third quarter of fiscal year 2022, we completed the acquisition of Agena for an aggregate net purchase price of $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 screenings for hereditary diseases, pharmacogenetics and oncology related applications. The acquisition of Agena 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. These acquisitions 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 ~~The~~ Mesa Way, which is our customer-centric, lean-based system for continuously improving and operating ~~a set of~~our 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~~Sustainably 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.

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 will continue to impact our overall gross profit.

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 and sustainably improve our products, our services, and ourselves, resulting in long-term value creation for our ~~shareholders.~~stakeholders.

General Trends

We are a global company, with multinational operations. During the three and ~~a significant portion~~six months ended September 30, 2023, approximately 49% and 48% of our revenues, respectively, were earned outside of the United States. Since we serve a number of industries across a variety of global markets, we may be affected by world-wide, regional, or industry-specific economic or political factors, trends and ~~expenses are denominated~~costs associated with a global labor force, and increasing regulation. However, our diversity in ~~currencies~~industry, geography, and product and service offerings may limit the impact of changes in specific industry trends or local economic changes in our consolidated operating results. We actively monitor trends affecting industries we operate in, including by monitoring key competitors and customers and by staying abreast of changes to local economies and how they may affect our operations.

Several challenging macroeconomic factors persisted during the second quarter of fiscal year 2024, including continued softening of discretionary capital asset purchases across the life sciences tools market, high interest rates, and high inflation, all of which contributed to the decline in our organic revenues growth year to date. On the other ~~than the U.S. dollar (“USD”). Exchanges rates have been volatile throughout our~~hand, supply chain disruptions, labor shortages and resulting manufacturing difficulties that impacted business operations in fiscal year 2023 largely abated during the six months ended September 30, 2023, which allowed us to largely maintain our gross profit margins as a percentage of revenues. Additionally, in response to weaker revenues, we worked to reduce operating expenses, taking steps to preserve our financial model. For example, we incurred approximately $350 in costs related to a reduction in force during the six months ended September 30, 2023; however, the reduction in force is expected to result in annual savings of approximately $2,000 starting in our fiscal third quarter. We continue to invest in growing the company organically and athrough further acquisitions, which helps us address the rapid pace of technological change in our served markets, further globalize our business, and be responsive to customers throughout the world. To that end, we completed the acquisition of GKE in October 2023. The results of GKE's operations and the benefits of the acquisition will be consolidated into our financial statements beginning in the third quarter of fiscal year 2024. Overall, our operating expenses, which include approximately $505 of one-time GKE acquisition costs, decreased during the three and six months ended September 30, 2023 compared to the same periods in the prior year, demonstrating that adjustments to our operations allowed us to largely preserve our financial model despite challenges in the macroeconomic environment.

A weakening or strengthening of foreign currencies against the ~~USD~~United States dollar ("USD") increases or decreases our reported revenues, ~~and~~ gross profit margins, ~~as well as impacting~~and operating expenses, and impacts the comparability of our results between periods. ~~Currency exchange rates negatively impacted~~Generally, the USD strengthening against major currencies adversely impacts our reported revenues, for the nine months ended December 31, 2022 as compared to the same period in the previous fiscal year. Any further strengthening of the USD against major currencies would adversely impact our reported revenues, but ~~would,~~ to a lesser extent, positively ~~impact~~impacts our reported ~~expenses for~~expenses; conversely, the ~~remainder of the fiscal year; conversely, any~~ weakening of the U.S. dollar against major currencies ~~would~~ positively ~~impact~~impacts our reported revenues but ~~would~~ negatively impacts our reported expenses. The ultimate impact ~~our expenses for the remainder of the fiscal year.~~

~~We have experienced, and expect~~ to ~~continue to experience, inflation impacting the cost of raw materials, labor, and freight,~~gross profit as a ~~result~~percentage of global macroeconomic trends, including government mandated actions in response to the Coronavirus pandemic (“COVID-19”) and the conflict between Russia and Ukraine. Our actions to mitigate the impact of supply chain disruptions and inflation, including pre-ordering components in higher than usual quantities, sourcing new vendors and increasing prices have been somewhat successful; however, raw materials shortages have at times impacted our Calibrations Solutions division, in particular.

We experienced disruptions to our business in China resulting from government mandated shut-downs and restrictions during our fiscal year 2023. Additionally, the Chinese government recently revoked many COVID-19 related restrictions and while these policy changes did not significantly impact our results of operations for our third fiscal quarter, it is possible that future quarters may be impacted. The impact of COVID-19 has negatively impacted commercial execution in different ways throughout fiscal year 2023, and in some cases, has limited sales of Clinical Genomics consumables to existing customers and instruments to new customers. 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 the pandemic's adverse impactrevenue depends on the ~~global economy, in-person collaboration and sales efforts, and our customers’ changed purchasing behaviors and confidence.~~

~~During the third quarter~~magnitude of fiscal year 2023, we were notified by Sema4 Holdings Corp. ("Sema4"), a customer of our Clinical Genomics division, that they are exiting the reproductive health screening business and as a result, they intend to significantly reduce the quantity of orders they place with uschanges in the future. Revenue from sales to Sema4 were approximately $8,200 during the first twelve months of our ownership of Agena. Following the notice, we evaluated our business operations and enacted several cost-cutting measures in the Clinical Genomics division, including a reduction-in-force, to preserve our financial model. These actions are expected to generate more than $4,000 in future annualized savings.foreign currencies.

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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 ~~decreased 1% and increased 30%~~ for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023 decreased 10% and 5%, respectively, largely due to softening demand for new capital equipment in the pharmaceutical markets, including lower demand for hardware sold by our Biopharmaceutical Development. Revenues also decreased compared to the corresponding prior year periods due to the fiscal year 2023 loss of Sema4, a significant customer in our Clinical Genomics business.

Although revenues were lower in the first two quarters of fiscal year 2024 compared to the prior year periods, gross profit as a percentage of revenues did not fall significantly due to our proactive cost containment efforts and favorable product mix. Modest gross profit percentage declines of 2% and 1%, respectively, for the three and six months ended September 30, 2023 compared to the same periods in the prior ~~year. The decrease in~~year are primarily due to lower revenues ~~for the three months ended December 31, 2022 was attributable~~on a partially fixed cost base, offset by our efforts to a 2.1% decline in organic revenues which resulted from both unfavorable changes in foreign currency rates and $1,500 of COVID-19 related revenues for the three months ended December 31, 2021. Revenues growth for the nine months ended December 31, 2022 was primarily attributable to the acquisition of Agena, and to a lesser extent, organic revenues growth of 3.5%.

Gross profit as a percentage of revenues increased seven and two percentage points for the three and nine months ended December 31, 2022, respectively, primarily as a result of the recognition of a $6,062 non-cash inventory step-up charge, as part of purchase accounting for the Agena acquisition during the three months ended December 31, 2021.preserve our financial model.

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, 2022		Three Months Ended December 31, 2021		Three Months Ended December 31, 2022			Three Months Ended December 31, 2021			Three Months Ended December 31, 2022			Three Months Ended December 31, 2021			Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Three Months Ended September 30, 2023			Three Months Ended September 30, 2022			Three Months Ended September 30, 2023			Three Months Ended September 30, 2022
Clinical Genomics (*)	$	15,585	$	16,485		(10.0	%)		N/A			52	%		24	%
Sterilization and Disinfection Control		16,283		13,831		17.7	%		5.8	%		71	%		72	%	$	17,080	$	16,964		0.7	%		20.9	%		73	%		72	%
Clinical Genomics																		15,549		18,435		(15.7	%)		N/A			50	%		58	%
Biopharmaceutical Development		11,646		12,756		(8.7	%)		46.4	%		63	%		69	%		9,207		12,144		(24.4	%)		15.0	%		60	%		62	%
Calibration Solutions		10,773		11,624		(7.3	%)		(6.1	%)		53	%		52	%		11,329		11,206		1.1	%		(0.4	%)		57	%		54	%
Mesa's reportable segments	$	54,287	$	54,696		(2.1	%)		11.8	%		60	%		53	%	$	53,165	$	58,749		(9.6	%)		12.5	%		60	%		62	%

Revenues

Organic Revenues Growth

Gross Profit as a % of Revenues

Nine Months Ended December 31, 2022

Nine Months Ended December 31, 2021

Nine Months Ended December 31, 2022

Nine Months Ended December 31, 2021

Nine Months Ended December 31, 2022

Nine Months Ended December 31, 2021

Clinical Genomics (*)
$ 48,525 $ 16,485 (10.0 %) N/A 55 % 24 %
Sterilization and Disinfection Control
48,021 43,014 11.6 % 14.1 % 72 % 74 %
Biopharmaceutical Development
34,757 32,188 8.0 % 35.3 % 63 % 62 %
Calibration Solutions
32,186 33,769 (4.7 %) (2.1 %) 54 % 54 %
Mesa's reportable segments
$ 163,489 $ 125,456 3.5 % 13.5 % 61 % 59 %
~~(*) Revenues in the Clinical Genomics division represent transactions subsequent to the Agena Acquisition on October 20, 2021.~~

Revenues

Organic Revenues Growth

Gross Profit as a % of Revenues

Six Months Ended September 30, 2023

Six Months Ended September 30, 2022

Six Months Ended September 30, 2023

Six Months Ended September 30, 2022

Six Months Ended September 30, 2023

Six Months Ended September 30, 2022

Sterilization and Disinfection Control
$ 33,007 $ 31,738 4.0 % 8.8 % 73 % 72 %
Clinical Genomics
28,918 32,940 (12.2 %) N/A 50 %
56
%
Biopharmaceutical Development
19,096 23,111 (17.8 %) 18.9 % 63 % 63 %
Calibration Solutions
22,789 21,413 6.4 % (3.3 %) 56 % 55 %
Mesa's reportable segments
$ 103,810 $ 109,202 (5.0 %) 7.8 % 61 % 62 %

Our unaudited condensed consolidated results of operations are as follows:

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

2022

2021

Change

2022

2021

Change

Revenues
$ 54,287 $ 54,696 (1 %) $ 163,489 $ 125,456 30 %
Gross profit
32,765 28,627 14 % 100,492 73,978 36 %
Operating expenses
29,363 31,139 (6 %) 97,689 69,166 41 %
Operating income (loss)
3,402 (2,512 ) (¤) 2,803 4,812 (42 %)
Net income (loss)
$ 451 $ (2,060 ) (¤) $ 319 $ 3,655 (91 %)
~~(¤) Not a meaningful comparison~~

Three Months Ended September 30,

Percentage

Six Months Ended September 30,

Percentage

2023

2022

Change

2023

2022

Change

Revenues
$ 53,165 $ 58,749 (10 %) $ 103,810 $ 109,202 (5 %)
Gross profit
32,109 36,386 (12 %) 63,292 67,727 (7 %)
Operating expense
32,169 32,391 (1 %) 64,016 68,326 (6 %)
Operating (loss) income
(60 ) 3,995 (102 %) (724 ) (599 ) 21 %
Net (loss) income
$ (1,230 ) $ 1,306 (194 %) $ (1,779 ) $ (132 ) 1,248 %

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Reportable Segments

Sterilization and Disinfection Control
The Sterilization and Disinfection Control Division manufactures and sells biological, cleaning, and chemical indicators used to assess the effectiveness of sterilization and disinfection processes in the pharmaceutical, medical device, hospital, and dental 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 September 30,

Percentage

Six Months Ended September 30,

Percentage

2023

2022

Change

2023

2022

Change

Revenues
$ 17,080 $ 16,964 1 % $ 33,007 $ 31,738 4 %
Gross profit
12,476 12,199 2 % 24,067 22,967 5 %
Gross profit as a % of revenues
73 % 72 % 1 % 73 % 72 % 1 %
Sterilization and Disinfection Control's revenues increased 1% and 4%, respectively, for the three and six months ended September 30, 2023 compared to the prior year periods. The modest revenue increases for the three and six months ended September 30, 2023 are attributable primarily to price, and to a lesser extent, volume increases against a difficult prior period comparison.
Sterilization and Disinfection Control's gross profit percentage increased 1% for the three and six months ended September 30, 2023 compared to the prior year periods primarily due to higher revenues on a partially fixed cost base.
Clinical Genomics
The Clinical Genomics division develops, manufactures and sells highly sensitive, low-cost, high-throughput genetic analysis tools ~~used by~~and related consumables and services that enable clinical labs to perform genomic ~~clinical~~ testing for a broad range of diagnostic and research applications in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics, and oncology related applications.

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

Three Months Ended September 30,

Percentage

Six Months Ended September 30,

Percentage

2022

2021

Change

2022

2021

Change

2023

2022

Change

2023

2022

Change

Revenues
$ 15,585 $ 16,485 (5 %) $ 48,525 $ 16,485 194 % $ 15,549 $ 18,435 (16 %) $ 28,918 $ 32,940 (12 %)
Gross profit
8,045 3,924 105 % 26,535 3,924 576 % 7,727 10,641 (27 %) 14,455 18,490 (22 %)
Gross profit as a % of revenues
52 % 24 % 28 % 55 % 24 % 31 % 50 % 58 % (8 %) 50 % 56 % (6 %)

Clinical Genomics revenues decreased 5%16% and 12%, respectively, for the three and six months ended ~~December 31, 2022~~September 30, 2023 compared to the ~~relevant~~ prior year ~~period,~~periods, primarily as a result of ~~a reduction in COVID-related~~the loss of revenues from Sema4 at the beginning of ~~$1,374 and adverse changes in foreign currency exchange rates, partially offset by a longer period of ownership of Agena in~~ the third quarter of fiscal year 2023. Excluding the loss of Sema4, revenues from our Clinical Genomics ~~revenues increased 194% for~~division would have been 3% lower during the ~~nine~~three months ended ~~December 31, 2022~~September 30, 2023 compared to the ~~relevant~~ prior year period, primarily due to ~~a significantly shorter period of ownership of Agena~~the fact that China earned unusually high revenues during the three months ended September 30, 2022 upon reopening from COVID lockdowns. Revenues would have been flat for the ~~nine~~six months ended ~~December 31, 2021. The~~September 30, 2023 compared to the prior year period, excluding the loss of Sema4 is expected to result in a significant reduction of anticipated revenues for this division in future quarters. However, our distribution partner Guangzhou Darui Biotechnology Co., Ltd. recently received China's National Medical Products Administration approval for a Class III in vitro diagnostics ("IVD") panel covering hereditary deafness. This is the first approved Class III IVD panel in China from our distribution partner program.
Sema4.

Gross profit percentage for the Clinical Genomics division ~~increased 28% and 31%~~decreased 8% for the three ~~and nine~~ months ended ~~December 31, 2022, respectively,~~September 30, 2023 and 6% for the six months ended September 30, 2023 compared to the ~~relevant~~ prior year periods, primarily due to lower revenues on a partially fixed cost base, and to a lesser extent, unfavorable product mix, particularly due to the ~~amortization~~loss of ~~a $6,062 inventory step-up required by purchase accounting in the third quarter of fiscal year 2022. We have taken actions to reduce our costs in this division which will help offset the loss of~~high-margin consumables revenues from Sema4.

~~Sterilization~~Although orders 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 processesrevenues in China have been fairly strong 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

2022

2021

Change

2022

2021

Change

Revenues
$ 16,283 $ 13,831 18 % $ 48,021 $ 43,014 12 %
Gross profit
11,614 9,945 17 % 34,581 31,859 9 %
Gross profit as a % of revenues
71 % 72 % (1 %) 72 % 74 % (2 %)
Sterilization and Disinfection Control revenues increased 18% and 12% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods, despite the USD strengthening against the euro. During the second and third quartersfirst half of fiscal year ~~2023,~~2024, we ~~added temporary~~believe that ongoing macroeconomic slowdowns beginning in China may negatively affect our reported revenues and ~~permanent manufacturing headcount at our Bozeman Montana facility, which enabled us to fulfill a higher volume of customer~~new orders ~~compared to~~in the ~~first quarter~~second half of fiscal year ~~2023. The three and nine months ended December 31, 2022 also benefited from favorable product mix and to a lesser extent, price increases.~~2024.

Sterilization and Disinfection Control's gross profit percentage decreased one and two percentage points for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods as a result of foreign currency fluctuations negatively impacting our reported revenues, increased labor and benefit costs, including the cost of temporary headcount, and increased freight 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 manufacture of biotherapeutic ~~drugs.~~therapies, among other applications.

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

Three Months Ended September 30,

Percentage

Six Months Ended September 30,

Percentage

2022

2021

Change

2022

2021

Change

2023

2022

Change

2023

2022

Change

Revenues
$ 11,646 $ 12,756 (9 %) $ 34,757 $ 32,188 8 % $ 9,207 $ 12,144 (24 %) $ 19,096 $ 23,111 (17 %)
Gross profit
7,359 8,768 (16 %) 21,993 20,061 10 % 5,509 7,557 (27 %) 11,942 14,634 (18 %)
Gross profit as a % of revenues
63 % 69 % (6 %) 63 % 62 % 1 % 60 % 62 % (2 %) 63 % 63 % - %

Biopharmaceutical Development revenues decreased 9%24% and 17% for the three and months ended ~~December 31, 2022~~September 30, 2023 compared to the ~~relevant~~ prior year period, primarily due to ~~unfavorable changes~~softening demand for capital equipment, partially offset by an increase in ~~foreign currency exchange rates. Additionally,~~revenues from consumables and services as well as price increases. Given the ~~division faced a difficult compare versus~~current economic landscape, we cannot predict whether hardware sales will increase substantially during the third quarter of our fiscal year, as we have seen in the past, as our customers approach the end of their annual budget cycles. Despite adverse macroeconomic factors, revenues from consumables and services have continued to grow during fiscal year 2024.
Gross profit percentage for the three and six months ended September 30, 2023 decreased 2% and remained flat, respectively, compared to the prior year periods. Revenues from consumables, which ~~reported an anomalous 46% revenues growth, partially offset by price increases.~~have slightly higher gross profit percentages than hardware in our Biopharmaceutical ~~Development revenues~~Division, have increased 8% for both the ~~nine~~three and six months ended ~~December 31, 2022 compared to~~September 30, 2023, and along with favorable product mix, this partially mitigated the ~~relevant prior year period primarily due to increased product adoption and price increases, partially offset by unfavorable changes in foreign currency exchange rates.~~impact of decreased hardware revenues.

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Biopharmaceutical Development's gross profit percentage decreased six percentage points for the three months ended December 31, 2022 compared to relevant prior year period as a result of foreign currency fluctuations negatively impacting our reported revenues and higher sales of peptide synthesis hardware at a lower gross profit percentage compared to the overall division margin percentages. Biopharmaceutical Development's gross profit percentage increased one percentage point for the nine months ended December 31, 2022 compared to the relevant prior year period as a result of higher revenues on a partially-fixed cost base, partially offset by unfavorable product mix and foreign currency fluctuations negatively impacting our reported revenues.
Calibration Solutions
The Calibration Solutions division ~~designs,~~develops, manufactures and ~~markets~~sells quality control ~~and calibration~~ products ~~used~~using principles of advanced metrology to measure or calibrate ~~temperature, pressure, pH, humidity, and other~~critical chemical or physical parameters ~~for health~~in various dialysis, process monitoring, instrument monitoring, environmental monitoring, gas flow, environmental air quality, and ~~safety purposes,~~torque applications, primarily in ~~hospital,~~ medical device manufacturing, pharmaceutical manufacturing, laboratory, and ~~laboratory~~hospital environments.

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

Three Months Ended September 30,

Percentage

Six Months Ended September 30,

Percentage

2022

2021

Change

2022

2021

Change

2023

2022

Change

2023

2022

Change

Revenues
$ 10,773 $ 11,624 (7 %) $ 32,186 $ 33,769 (5 %) $ 11,329 $ 11,206 1 % $ 22,789 $ 21,413 6 %
Gross profit
5,740 6,090 (6 %) 17,411 18,330 (5 %) 6,407 6,007 7 % 12,838 11,671 10 %
Gross profit as a % of revenues
53 % 52 % 1 % 54 % 54 % - % 57 % 54 % 3 % 56 % 55 % 1 %

Calibration Solutions revenues ~~decreased 7%~~increased 1% and 5%6%, respectively, for the three and ~~nine~~six months ended ~~December 31, 2022, respectively,~~September 30, 2023 compared to the ~~relevant~~ prior year periods, primarily ~~as a result~~due to the abatement of production difficulties and supply constraints ~~limiting~~that had limited our ability to manufacture ordered quantities of certain ~~products. Production difficulties continue to result in longer lead times for customer orders, which have negatively impacted~~products during the ~~timing of new orders; however, we anticipate that such difficulties will begin to abate in the fourth quarter~~first six months of fiscal year 2023. This abatement has allowed us to return to normal operations during fiscal year 2024, driving increased orders along with a modest reduction of past due backlog.

The Calibration ~~Solutions'~~Solutions division's gross profit percentage ~~was essentially flat~~increased 3% and 1% for the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023, respectively, compared to the ~~three~~prior year periods, primarily due to favorable product mix and ~~nine months ended December 31, 2021.~~increased revenues on a partially fixed cost base.

Operating ~~Expenses~~Expense
Operating ~~expenses~~expense decreased 6%1% and ~~increased 41%~~6%, respectively for the three and ~~nine~~ months ended ~~December 31, 2022, respectively,~~September 30, 2023 compared to the ~~relevant~~ prior year periods, primarily as a result of lower ~~personnel costs and~~stock-based compensation expense as the performance-based restricted stock units associated with the fiscal year 2022 acquisition of Agena ~~acquisition. Operating~~Bioscience, Inc. were no longer amortizing in fiscal year 2024, along with the timing of award grants in fiscal year 2024. Cost savings from our strategic cost containment activities following the loss of Sema4 also contributed to the decrease in operating expenses, ~~were favorably impacted~~partially offset by ~~the strengthening of the USD during the three and nine months ended December 31, 2022.~~ regular annual wage increases.

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 September 30,

Percentage

Six Months Ended September 30,

Percentage

2022

2021

Change

2022

2021

Change

2023

2022

Change

2023

2022

Change

Selling expense
$ 8,437 $ 8,958 (6 %) $ 27,660 $ 18,459 50 % $ 9,650 $ 9,200 5 % $ 18,626 $ 19,223 (3 %)
As a percentage of revenues
16 % 16 % - % 17 % 15 % 2 % 18 % 16 % 2 % 18 % 18 % - %

Selling expense for the three months ended ~~December 31, 2022 decreased 6%~~September 30, 2023 increased 5% compared to the ~~relevant~~prior year period, primarily as a result of our implementation of Salesforce in our Biopharmaceutical Development division and backfilling select open positions in our Biopharmaceutical Division. Selling expense for the six months ended September 30, 2023 decreased 3% compared to the prior year period, primarily as a result of lower commissions on lower revenues in fiscal year 2024, as well as other decreases in personnel ~~costs. Selling expense for~~costs realized from our proactive cost savings efforts initiated after the ~~nine months ended December 31, 2022 increased 50% compared to the relevant prior year period, primarily as a result~~loss of the Agena acquisition. Excluding Agena, selling expense increased 7% for the nine months ended December 31, 2022 primarily as a result of increased travel and tradeshow costs as we continued to resume in-person meetings and events, higher stock-based compensation expense, and higher professional services costs as we made improvements to our corporate website.Sema4.

General and Administrative
Labor costs, ~~including~~ non-cash stock-based compensation and non-cash 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 September 30,

Percentage

Six Months Ended September 30,

Percentage

2022

2021

Change

2022

2021

Change

2023

2022

Change

2023

2022

Change

General and administrative expense
$ 16,129 $ 17,017 (5 %) $ 54,543 $ 40,119 36 % $ 17,526 $ 18,202 (4 %) $ 35,586 $ 38,414 (7 %)
As a percentage of revenues
30 % 31 % (1 %) 33 % 32 % 1 % 33 % 31 % 2 % 34 % 35 % (1 %)

General and administrative expenses decreased 5%4% and 7%, respectively, for the three and six months ended ~~December 31, 2022~~September 30, 2023 compared to the ~~relevant~~ prior year ~~period,~~periods, primarily as a result ~~of reduced~~lower stock-based compensation expense, as we reduced the number of PSUs expected to vest. General and administrative expenses increased 36% for the nine months ended December 31, 2022 compared to the relevant prior year period, primarilywell as a result of the Agena acquisition, including intangible amortization expense of $7,321. Excluding Agena, general and administrative expense increased 8% for the nine months ended December 31, 2022, primarily as a result of higher stock-based compensation expense,lower professional services costs, partially offset by ~~lower intangible amortization expense as a result~~higher legal and other expenses related to the acquisition of ~~the strengthening of the USD.~~GKE.
~~Page 19~~

~~Table of Contents~~

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 September 30,

Percentage

Six Months Ended September 30,

Percentage

2022

2021

Change

2022

2021

Change

2023

2022

Change

2023

2022

Change

Research and development expense
$ 4,797 $ 5,164 (7 %) $ 15,486 $ 10,588 46 % $ 4,993 $ 4,989 - % $ 9,804 $ 10,689 (8 %)
As a percentage of revenues
9 % 9 % - % 9 % 8 % 1 % 9 % 8 % 1 % 9 % 10 % (1 %)

Research and development expenses ~~decreased 7%~~were flat for the three months ended ~~December 31, 2022~~September 30, 2023 compared to the ~~relevant~~ prior year ~~period, primarily as a result of lower personnel costs and the benefit of a strong USD on research and development costs in Europe.~~period. Research and development expenses ~~increased 46%~~decreased 8% for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 compared to the relevant prior year period, primarily due to the Agena acquisition. Excluding the impact of Agena, research and development costs for the nine months ended December 31, 2022 increased relative to the prior year period, primarily due to our cost containment efforts in fiscal year 2024 and the purchase of ~~in process~~in-process research and development technology ~~that we are further developing in order~~used to enhance ~~a product offering in our~~an existing Sterilization and Disinfection Control ~~division.~~division product offering during the first quarter of fiscal year 2023.

Nonoperating Expense, Net

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

2022

2021

Change

2022

2021

Change

Nonoperating expense (income)
$ 1,486 (171 ) (¤) $ 2,915 $ 1,192 145 %
~~(¤) Not a meaningful comparison~~

Three Months Ended September 30,

Percentage

Six Months Ended September 30,

Percentage

2023

2022

Change

2023

2022

Change

Nonoperating expense, net
$ 1,265 $ 611 107 % $ 1,538 $ 1,429 8 %

Nonoperating expense, net for the three ~~and nine~~ months ended ~~December 31, 2022~~September 30, 2023 is composed primarily of interest expense and amortization of the debt ~~discount~~issuance costs associated with the Notes and the Credit Facility as well as gains and losses on foreign currency transactions. Nonoperating expense was higher for the three and nine months ended December 31, 2022 compared to the relevant prior year periods due to interest expense on the Credit Facility, which had a weighted average balance
Page 18
Table of $36,839 during the nine months ended December 31, 2022 compared with a weighted average balance of $17,993 for the nine months ended December 31, 2021, partially offset by net foreign currency gains in the three and nine months ended December 31, 2021.
Contents

Income Taxes

Three Months Ended December 31,

Percentage

Nine Months Ended December 31,

Percentage

Three Months Ended September 30,

Percentage

Six Months Ended September 30,

Percentage

2022

2021

Change

2022

2021

Change

2023

2022

Change

2023

2022

Change

Income tax provision (benefit)
$ 1,465 $ (281 ) (621 %) $ (431 ) $ (35 ) 1,131 %
Income tax (benefit)
$ (95 ) $ 2,078 (105 %) $ (483 ) $ (1,896 ) (75 %)
Effective tax rate
76.5 % 12.0 % 64 % 384.8 % (1.0 %) 386 % 7.2 % 61.4 % (54 %) 21.4 % 93.5 % (72 %)

Our effective income tax rate was ~~76.5%~~7.2% and ~~384.8%~~21.4% for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, respectively, and ~~12.0%~~61.4% and ~~(1.0%)~~93.5% for the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, respectively. The effective tax rate for both the ~~nine~~three and six months ended ~~December 31, 2022~~September 30, 2023 differed from the statutory federal rate of 21% primarily due to ~~the~~ share-based payment awards for employees and the effect of income generated in foreign jurisdictions. The change in our effective tax rate for the ~~nine~~three and six months ended ~~December 31, 2022 was higher than~~September 30, 2023 compared to the ~~same period in fiscal~~prior year ~~2022~~periods is primarily due to ~~the share-based compensation and the effect of income in foreign jurisdictions.~~lower windfall benefits on stock option exercises.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

Net ~~Income~~ (Loss) Income
Net (loss) income ~~(loss)~~ varies with changes in revenues, gross profit, and operating ~~expenses~~expense (and included ~~$21,573~~$14,405 and ~~$9,859~~$6,151 of non-cash amortization of intangible assets acquired in business combinations and stock-based compensation expense, respectively, for the ~~nine~~six months ended ~~December 31, 2022)~~September 30, 2023).
Market-Based Awards
The performance-based restricted stock awards granted during the three and six months ended September 30, 2023 included a market-based component.

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 ~~the~~ Open Market Sale Agreement^SM, ~~described below,~~ working capital, and potential additional equity and debt offerings. We believe that cash flows from operating activities and potential cash provided by borrowings from our Credit Facility or funds from our Open Market Sale Agreement^SM, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled interest payments on debt, dividend payments, and anticipated capital expenditures. ~~We currently expect to~~At our option, we may settle the Notes in shares of our common stock ~~but we may re-finance the debt,~~or in cash, depending on conditions in the market and the share price of our common stock.

Our more significant uses of resources have historically included acquisitions, 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 ~~$72,568~~$77,846 and ~~$76,263~~$75,616 as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, respectively. As of ~~December 31, 2022,~~September 30, 2023, and March 31, ~~2022,~~2023, we had ~~$26,101~~$35,617 and ~~$49,346,~~$32,910, respectively, of cash and cash equivalents. ~~We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.~~

As of ~~December 31, 2022, $172,500 in~~September 30, 2023, Notes with an aggregate principal ~~Notes was~~amount of $172,500 were outstanding and ~~$19,000~~there was no outstanding balance under the Credit Facility. During the third quarter of fiscal year 2024, we amended our Credit Facility to increase the total principal amount available to us from $75,000 to $125,000. In October 2023, we borrowed $65,000 under our Credit Facility to partially fund the acquisition of GKE. At our current interest rate, we expect to incur interest expense of approximately $4,485 per year on borrowings of $65,000 under the Credit Facility.

In April 2022, we entered into an Open Market Sale Agreement^SM pursuant to which we may issue and sell, from time to time, shares of our common stock with an aggregate value of up to $150,000. We have not sold any shares under this agreement.

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, pursuing privately negotiated transactions, or otherwise. The amount of debt that may be retired, if any, could be ~~material and~~material. Retirement 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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~~Table of Contents~~
Dividends
We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share during each of the quarters ended June 30, ~~2022,~~2023 and September 30, ~~2022, and December 31, 2022,~~2023, as well as each quarter of fiscal year ~~2022.~~2023.

In ~~January~~October 2023, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on ~~March~~December 15, 2023, to shareholders of record at the close of business on ~~February 28,~~November 30, 2023.
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Cash Flows

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

Nine Months Ended December 31,

Six Months Ended September 30,

2022

2021

2023

2022

Net cash provided by operating activities
$ 15,464 $ 29,921 $ 19,715 $ 7,746
Net cash (used in) investing activities
(8,468 ) (304,443 ) (904 ) (1,864 )
Net cash (used in) provided by financing activities
(28,936 ) 62,623
Net cash (used in) financing activities
(15,079 ) (20,053 )

Cash flows from operating activities for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 provided ~~$15,464.~~$19,715. Net ~~income~~loss and non-cash adjustments totaled ~~$34,588~~$22,200 for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 compared to ~~$32,838~~$22,768 for the ~~nine~~six months ended ~~December 31, 2021. Adjustments to~~September 30, 2022. We generated $12,537 more cash from working capital ~~accounts used $16,207 more cash~~ in the ~~nine~~six months ended ~~December 31, 2022 as~~September 30, 2023 compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily due to ~~lower~~higher collections on trade receivables and ~~higher spend on~~lower inventory purchases, as we ~~built supplies~~were building safety stock during the six months ended September 30, 2023 to mitigate supply chain ~~risk.~~risks. Cash used in investing activities ~~was lower~~ for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 decreased compared to the ~~nine~~six months ended ~~December 31, 2021, due to the Agena acquisition during fiscal year~~September 30, 2022 ~~partially offset by the Belyntic acquisition in fiscal year 2023.~~as we purchased less capital equipment. Cash used by financing activities primarily resulted from ~~$30,000~~$13,000 repaid on our Credit Facility during the ~~nine~~six months ended ~~December 31,~~September 30, 2023 compared to $22,000 for the six months ended September 30, 2022.

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, ~~2022,~~2023, see our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022,~~2023, filed with the Securities and Exchange Commission on May ~~31, 2022.~~30, 2023.

On a consolidated basis, as of ~~December 31, 2022,~~September 30, 2023, we had contractual obligations for open purchase orders of approximately ~~$19,441~~$12,419 for routine purchases of supplies and inventory, which are payable in less than one year. ~~Open purchase orders have decreased, in part, due to our previously taken steps to mitigate risks in supply by increasing our stock of certain critical raw materials.~~

As part of the Belyntic acquisition, we ~~have~~ agreed to pay $1,500 to the sellers if contractually specified patents related to the technology purchased are issued. WeOne subset of the patents was approved by the European patent office effective October 18, 2023, and we believe ~~that~~ it is probable ~~that~~ the remaining patents will be issued and that we will pay the sellers in full within the next 3612 months. ~~The liability is recorded in other long-term liabilities~~
As part of the GKE acquisition consummated on October 14, 2023, we will pay the ~~accompanying Condensed Consolidated Balance Sheets.~~sellers €8,500 of the acquisition price 18 months following the acquisition date, pending adjustments for potential indemnification losses that may arise. We will pay the sellers an additional €5,000 of the acquisition price, net of cash and debt and subject to customary adjustments, upon satisfaction of applicable Chinese regulatory approvals for the Beijing GKE Science & Technology Co. Ltd. portion of the acquisition.

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, ~~2022,~~2023, in the Critical Accounting Policies and Estimates section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Although we believe that our estimates, assumptions, and judgements are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

~~Acquired Intangible Assets~~
During the three months ended December 31, 2022, in response to the loss of a significant customer, we used Level 3 inputs to test the recoverability of the Clinical Genomics division’s intangible asset group and evaluate the division’s goodwill response to the loss of a significant customer. After considering all information available to us as of the date of testing, we concluded that no impairment is indicated.
~~Fair values assigned to intangible assets acquired in the Belyntic acquisition were measured using Level 3 inputs.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~Our reporting currency is U.S. dollars,~~Foreign Currency Exchange Rates
We face exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than the functional currency of ~~each~~the applicable subsidiary. We also face translational exchange rate risk related to the translation of financial statements of our ~~material~~ foreign operations into U.S. dollars, our functional currency. Costs incurred and sales recorded by subsidiaries ~~is its respective local currency. Our operations include activities~~operating outside of the United States are translated into U.S. ~~and~~dollars using average exchange rates effective during the respective period. As a result, we ~~have currency risk on~~are exposed to movements in the ~~transactions in other~~exchange rates of various currencies ~~and translation adjustments resulting from the conversion of our international financial results into~~against the U.S. dollar. ~~We face~~Our Biopharmaceutical Development division is particularly susceptible to 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 Gyros Protein Technologies Holding AB, whichsince it incurs a substantial portion of its ~~business~~ expenses in Swedish Krona, while most of the division's revenue contracts are in U.S. dollars and euros. Therefore, when the ~~acquisition~~Swedish Krona strengthens or weakens against the U.S. dollar, operating profits are increased or decreased, respectively. The effect of ~~Agena, which conducts~~ a ~~portion of its business~~change in ~~euros and a portion in Chinese Yuan Renminbi. Fluctuations in~~currency exchange rates ~~have~~on our international subsidiaries' assets and ~~may continue to adversely affect our results~~liabilities is reflected in the accumulated other comprehensive income component of ~~operations, financial position, and cash flows. We do not hedge exposure to exchange rates.~~stockholders’ equity.

Interest Rates
Our Credit Facility bears interest at either a base rate or a SOFR rate plus an applicable spread. ~~Based~~We had no balance outstanding as of September 30, 2023; however, based on the ~~balance currently outstanding against our line of credit,~~most recently available interest rate and borrowings used to fund the GKE acquisition, we estimate that if interest rates increased ~~by 75 basis points,~~1 percentage point, we would incur approximately ~~$143~~$650 of additional interest expense per year.

Inflation Risk
Inflation generally impacts us by increasing our costs of labor, materials, and freight. The rates of inflation experienced in recent years have not had a significant impact on our financial statements as inflationary cost increases have been offset by annual price increases. However, any price increases imposed may lead to declines in sales volume if competitors do not similarly adjust prices. We cannot reasonably estimate our ability to successfully recover any impact of inflation cost increases into the future.
Other
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 Exchange 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, 2022,~~September 30, 2023, 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.
Prior Year Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As disclosed in Part II Item 9A. "Controls and Procedures" in our annual report on Form 10-K for the year ended March 31, 2023, during fiscal year 2023 we identified two material weaknesses in internal controls:
●
Fair Value Calculations - Management's review controls over fair value calculations including Management's preliminary valuation of the Belyntic Acquisition were insufficient. Specifically, Management failed to utilize resources with an appropriate level of knowledge and expertise in performing and reviewing the fair value calculations including the preliminary Belyntic valuation.
●
Goodwill Impairment Assessment - Management's review controls over the qualitative assessment of goodwill impairment were insufficient to identify potential impairment triggers.
Remediation Status for Material Weaknesses in Internal Control Over Financial Reporting
During the six months ended September 30, 2023 we implemented our previously-disclosed remediation plans:
●
Fair Value Calculations - We obtained the services of a knowledgeable third-party valuation specialist to perform the fair value calculations for the Belyntic acquisition.
●
Goodwill Impairment Assessment - Members of Management with requisite knowledge performed a formal quarterly analysis of potential impairment triggers.
As a result of our control activities, we have concluded that the material weaknesses above have been remediated as of September 30, 2023. We will continue to perform formal quarterly impairment trigger analyses in future periods. We will likewise continue to utilize a valuation specialist with the requisite knowledge to perform valuations for all future acquisitions of businesses, as such acquisitions occur.

Changes in Internal Control ~~over~~Over Financial Reporting

~~The Agena Acquisition was completed on October 20, 2021,~~Other than the remediation measures discussed above, during the three and ~~the financial results of Agena are included in our Condensed Consolidated Financial Statements as of March 31, 2022 and for the period then~~six months ended ~~and as of December 31, 2022 and for the nine months then ended. During the time since acquisition, we have assessed the control environment of Agena and made certain~~September 30, 2023 there were no changes to ~~Agena's~~our internal ~~controls~~control over financial reporting ~~including design changes~~(as defined in Rule 13a-15(f) under the Exchange Act) that ~~were required as we brought Agena onto~~have materially affected or are reasonably likely to materially affect our ~~enterprise resource planning tool. We now consider Agena to be included in the scope of our assessment of~~ internal ~~controls~~control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

See Note 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

During the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, there were no 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, ~~2022.~~2023.

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

Issuer Purchases of Equity Securities

The following table provides information about the Company's purchases of equity securities for the periods indicated:

Total Number of Shares Purchased(1)

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)

Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs

October 2022
- - - 162,486
November 2022
(1,757 ) 188.96 - 162,486
December 2022
- - - 162,486
Total
(1,757 ) 188.84 - 162,486

Total Number of Shares Purchased(1)

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)

Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs

July 2023
18 122.05 - 162,486
August 2023
- - - 162,486
September 2023
- - - 162,486
Total
18 122.05 - 162,486

⁽¹⁾
Shares purchased during the period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock awards during the period.

⁽²⁾
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; 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.

Item 5.Other Information
The following of our directors or officers entered into written plans for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) (each, a "trading arrangement") on the dates indicated:
Director John Schmieder entered into a trading arrangement on June 14, 2023. The trading arrangement was effective through September 15, 2023. The trading arrangement contemplated that Mr. Schmieder could sell up to 7,000 shares of Mesa Labs' common stock, subject to certain conditions.
Chief Financial Officer John Sakys entered into a trading arrangement on August 23, 2023. The trading arrangement is effective through April 2, 2024. The trading arrangement contemplates that Mr. Sakys may exercise up to 2,500 non-qualified stock options and sell the resulting 2,500 shares of Mesa Labs' common stock, subject to certain conditions.
Senior Vice President of Continuous Improvement Brian Archbold entered into a trading arrangement on September 14, 2023. The trading arrangement is effective through April 2, 2024. The trading arrangement contemplates that Mr. Archbold may exercise 710 non-qualified stock options and sell the resulting 710 shares of Mesa Labs' common stock, subject to certain conditions. The trading arrangement further contemplates that Mr. Archbold may sell an additional 1,500 shares of Mesa Labs' common stock, subject to certain conditions.
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Item 6. Exhibits

Exhibit No.
Description of Exhibit
3.1 Amended and Restated Articles of Incorporation ~~and Amendments to Articles~~ of ~~Incorporation~~Mesa Laboratories, Inc. (incorporated by reference from exhibit 3.1 to ~~Mesa Laboratories, Inc.~~’~~s report~~the Current Report on Form ~~10-Q~~8-K filed ~~on July 31, 2018~~August 25, 2023 (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+ Amendment No. 12 to Credit Agreement dated as of ~~December 22, 2022~~October 5, 2023 among the Company, the lenders party thereto, and JPMorgan Chase Bank, NA., as administrative agent.
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.*).

+ 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~~November 6, 2023 BY:
/s/ Gary M. Owens.
Gary M. Owens
Chief Executive Officer

DATED: ~~February~~November 6, 2023 BY:
/s/ John V. Sakys
John V. Sakys
Chief Financial Officer

Page 2524

Supplemental non-cash activity:
Contingent consideration as part of an acquisition		$	1,500			$	-

	*Life (in years)*		*Amount*
Cash and cash equivalents			$	7,544
Accounts receivable				11,100
Other current assets				25,480
Total current assets				44,124
Property, plant and equipment/noncurrent assets				15,832
Deferred tax asset				811
Intangible assets:
Goodwill		N/A		135,728
Customer relationships		12		103,800
Intellectual property		8		45,400
Tradenames		12		15,700
Total Assets acquired			$	361,395
Accounts payable				2,174
Unearned revenues				2,713
Other current liabilities				11,052
Total current liabilities				15,939
Deferred tax liability				28,856
Other noncurrent liabilities				8,263
Total liabilities assumed			$	53,058
Total purchase price, net of cash acquired			$	300,793

Contract liabilities as of March 31, 2022	$	15,069
Prior year liabilities recognized in revenues during the nine months ended December 31, 2022		(7,927	)
Contract liabilities added during the nine months ended December 31, 2022, net of revenues recognized		9,091
Contract liabilities balance as of December 31, 2022	$	16,233

	Three Months Ended December 31,					Percentage			Nine Months Ended December 31,				Percentage
	2022		2021			Change			2022		2021		Change
Revenues	$	54,287	$	54,696			(1	%)	$	163,489	$	125,456		30	%
Gross profit		32,765		28,627			14	%		100,492		73,978		36	%
Operating expenses		29,363		31,139			(6	%)		97,689		69,166		41	%
Operating income (loss)		3,402		(2,512	)		(¤)			2,803		4,812		(42	%)
Net income (loss)	$	451	$	(2,060	)		(¤)		$	319	$	3,655		(91	%)

	Three Months Ended September 30,					Percentage			Six Months Ended September 30,						Percentage
	2023			2022		Change			2023			2022			Change
Revenues	$	53,165		$	58,749		(10	%)	$	103,810		$	109,202			(5	%)
Gross profit		32,109			36,386		(12	%)		63,292			67,727			(7	%)
Operating expense		32,169			32,391		(1	%)		64,016			68,326			(6	%)
Operating (loss) income		(60	)		3,995		(102	%)		(724	)		(599	)		21	%
Net (loss) income	$	(1,230	)	$	1,306		(194	%)	$	(1,779	)	$	(132	)		1,248	%

	Total Number of Shares Purchased(1)			Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)		Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
October 2022		-			-		-		162,486
November 2022		(1,757	)		188.96		-		162,486
December 2022		-			-		-		162,486
Total		(1,757	)		188.84		-		162,486

	Total Number of Shares Purchased(1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)		Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
July 2023		18		122.05		-		162,486
August 2023		-		-		-		162,486
September 2023		-		-		-		162,486
Total		18		122.05		-		162,486

Exhibit No.	Description of Exhibit
3.1	Amended and Restated Articles of Incorporation ~~and Amendments to Articles~~ of ~~Incorporation~~Mesa Laboratories, Inc. (incorporated by reference from exhibit 3.1 to ~~Mesa Laboratories, Inc.~~’~~s report~~the Current Report on Form ~~10-Q~~8-K filed ~~on July 31, 2018~~August 25, 2023 (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+	Amendment No. 12 to Credit Agreement dated as of ~~December 22, 2022~~October 5, 2023 among the Company, the lenders party thereto, and JPMorgan Chase Bank, NA., as administrative agent.
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.*).

DATED: ~~February~~November 6, 2023	BY:	/s/ Gary M. Owens. Gary M. Owens Chief Executive Officer


DATED: ~~February~~November 6, 2023	BY:	/s/ John V. Sakys John V. Sakys Chief Financial Officer