Note

Description of Business and

Summary of

Significant

Accounting Policies

Description of Business

In this quarterly report on Form

-Q, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company” or “Mesa.”

We pursue a strategy of focusing primarily on quality control products and services which are sold into niche markets that are driven by regulatory requirements. We prefer markets in which we can establish a strong presence and achieve high gross margins. As of

September

30,

2019

we are organized into

four

divisions, or segments. Our Sterilization and Disinfection Control Division manufactures and sells biological, cleaning, and chemical indicators. Biological, cleaning, and chemical indicators are used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. Our Instruments Division designs, manufactures, and markets quality control instruments and disposable products utilized in the healthcare, pharmaceutical, food and beverage, medical device, industrial hygiene, and environmental air sampling industries. Our Cold Chain Monitoring Division designs, develops, and markets systems which are used to monitor various environmental parameters such as temperature, humidity, and differential pressure to ensure that critical storage and processing conditions are maintained in hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies, and laboratory environments. Our Cold Chain Packaging Division, which we plan to exit

later than

March 31, 2020,

provides thermal packaging products such as coolers, boxes, insulation materials, and phase-change products to control temperature during the customer’s transport of their own products.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for a fair presentation 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 financial statements and related notes do

not

include all information and footnotes required by U.S. GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form

-K for the year ended

March 31, 2019

Acquisitions

April 2019,

we completed a business combination (the “IBP Acquisition”) whereby we acquired the common stock of IBP Medical GmbH, a company whose business manufactures medical meters used to test various parameters of dialysis fluid (dialysate), and the proper calibration and operation of a dialysis machine. During the

six

months ended

September

30,

2019,

we allocated the purchase price according to the fair value of assets acquired and liabilities assumed using information obtained during due diligence and through the use of financial and other information available to us. Fair value of the assets and liabilities acquired was determined using Level

inputs (unobservable inputs) based on a discounted cash flow method.

Recently Issued Accounting Pronouncements

June 2016,

the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")

No.

2016

13,

Financial Instruments -Credit Losses (Topic

316

): Measurement of Credit Losses on Financial Instruments,

as modified by ASU

No.

2018

19,

Codification Improvements to Topic

326,

Financial Instruments - Credit Losses,

which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This

may

result in earlier recognition of allowances for losses. The ASU is effective for public business entities for fiscal years beginning after

December 15, 2019,

with early adoption permitted. We have

not

yet completed our assessment of the impact of the new standard on our consolidated financial statements; however, we believe that the most notable impact of this ASU will relate to our processes around the assessment of the adequacy of our allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses.

July 2018,

the FASB issued ASU

2018

13,

Changes to the Disclosure Requirements for Fair Value Measurement

, which will remove, modify, and add disclosure requirements for fair value measurements to improve the overall usefulness of such disclosures. This guidance is effective for financial statements issued for fiscal years beginning after

December 15, 2019,

and interim periods within those fiscal years, with early adoption permitted for any removed or modified disclosure requirements. Transition is on a prospective basis for the new and modified disclosures, and on a retrospective basis for disclosures that have been eliminated. We do

not

intend to early adopt any portion of this disclosure guidance. We believe that the guidance will increase the amount of disclosure required in the event of a transaction conducted involving Level

assets, such as an impairment or an acquisition. We expect minimal impact on the consolidated financial statements and other fair value disclosures.

Recently

Adopted

Accounting Pronouncements

February 2016,

the FASB issued ASU

2016

02,

Leases

(Topic

842

)

. The pronouncement requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for all leases with terms greater than

months. The guidance also requires qualitative and quantitative disclosures designed to present financial statement users with the ability to assess the amount, timing, and uncertainty of cash flows arising from leases.

April 1, 2019,

we adopted ASU

2016

using the modified retrospective method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning

April 1, 2019

are presented under ASC

842,

while prior period amounts were

not

adjusted and continue to be reported in accordance with our historic accounting under topic

840,

Leases.

The standard had a material impact on our Condensed Consolidated Balance Sheets, but did

not

have a significant impact on our Condensed Consolidated Statements of Income or our Condensed Consolidated Statements of Cash Flows. The most significant impact was the recognition of the right-of-use ("ROU") assets and lease liabilities on our Condensed Consolidated Balance Sheets.

As part of adopting the new lease standard, we have made the following elections:

●

To carry forward the historical lease determination and classification conclusions as established under the old standard, and

not

reassess initial direct costs for existing leases;

●

Not

to apply the balance sheet recognition requirements of the new lease standard to leases with a term of

one

year or less (short-term leases); and

●

For all classes of underlying assets, to account for non-lease components of a contract separately from the lease component to which they are related.

As a result of the cumulative impact of adopting ASU

2016

02,

we recorded operating lease ROU assets of

$1,461

and operating lease liabilities of

$1,411

as of

April 1, 2019.

Our calculations were based on the present value of the future lease payments on the date of adoption. Refer to Note

Leases

for additional disclosures required by ASC

842.