Note

Stock-B

ased Compensation

During the

nine

months ended

December 31, 2018,

we granted restricted stock units (“RSUs”) on

17,458

shares of our common stock to eligible employees. The weighted average grant date fair value of the RSUs was

$154.91

per share. The RSUs generally vest in equal installments on the anniversary of the grant date over a period of

five

years. During the

nine

months ended

December 31, 2018,

2,000

RSUs vested, and

1,445

RSUs were forfeited or cancelled.

During the

nine

months ended

December 31, 2018,

we awarded

11,385

performance share units (“PSUs”) that are subject to both service and performance conditions to eligible employees. The PSUs had a grant date fair value of

$192.99

per share and vest both based on our achievement of specific performance criteria for the

three

-year period from

April 1, 2018

through

March 31, 2021,

as well as continued service through

June 15, 2021.

The quantity of shares that will be issued upon vesting will range from

percent to

400

percent of the targeted number of shares; if the defined minimum targets are

not

met, then

shares will vest. During the

nine

months ended

December 31, 2018,

1,050

PSUs were forfeited.

During the

nine

months ended

December 31, 2018,

we granted non-qualified stock options (“NQSOs”) on

25,544

shares of common stock to eligible employees. The weighted-average grant date fair value of the NQSOs was

$53.93

per share with a weighted average exercise price of

$144.65

per share based on the closing price of the common stock on the date of grant. The NQSOs generally vest in equal installments on the anniversary of the grant date over a period of

five

years.

Amounts recognized in the condensed consolidated financial statements related to stock-based compensation are as follows:

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018			2017		2018			2017
Stock-based compensation expense	$	695		$	438	$	2,424		$	1,423
Amount of income tax (benefit) expense recognized in earnings		(160	)		99		(1,018	)		(893	)
Stock-based compensation, net of tax	$	535		$	537	$	1,406		$	530
Benefit to earnings per share
Basic	$	0.14		$	0.14	$	0.37		$	0.14
Diluted		0.13			0.14		0.35			0.14

Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying condensed consolidated statements of operations.

The following is a summary of stock option and non-vested stock award activity for the

nine

months ended

December 31, 2018 (

shares in thousands):

	Stock Options					Non-Vested Stock Awards
	Number of Shares			Weighted- Average Exercise Price per Share		Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at March 31, 2018		458		$	86.38		9		$	125.68
Awards granted		26			144.65		29			169.94
Awards forfeited or expired		(36	)		98.91		(3	)		171.51
Awards exercised or vested		(58	)		69.75		(2	)		163.47
Outstanding as of December 31, 2018		390		$	91.58		33		$	128.04

Exercisable at December 31, 2018		151

We issue shares in connection with stock-based compensation pursuant to the Mesa Laboratories, Inc.

2014

Equity Plan (the

“2014

Equity Plan”). For the purposes of counting the shares remaining as available under the

2014

Incentive Plan, each share issuable pursuant to outstanding full value awards, such as RSUs and PSUs, counts as

five

shares issued, whereas each share underlying a stock option counts as

one

share issued. Under the

2014

Equity Plan,

1,100,000

shares of common stock have been authorized and reserved for eligible participants, of which

611,504

shares were available for future grants as of

December 31, 2018.