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Table of Contents

United States

Securities and Exchange Commission

Washington, D.C. 20549

F ORM 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

or

| ☐ | 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 shares of the Issuer’s common stock, no par value, outstanding as of February 1, 2023.

Table of Contents

Table of Contents

Part I. Financial Information | 1
| Item 1. Financial Statements | 1
| Condensed Consolidated Balance Sheets | 1
| Condensed Consolidated Statements of Operations | 2
| Condensed Consolidated Statements of Comprehensive (Loss) Income | 3
| Condensed Consolidated Statements of Cash Flows | 4
| Condensed Consolidated Statements of Stockholders’ Equity | 5
| Notes to Condensed Consolidated Financial Statements | 6
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15
| Item 3. Quantitative and Qualitative Disclosures about Market Risk | 21
| Item 4. Controls and Procedures | 22
Part II. Other Information | 23
| Item 1. Legal Proceedings | 23
| Item 1A. Risk factors | 23
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 23
| Item 6. Exhibits | 24
| Signatures | 25
| 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

M esa Laboratories, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share amounts)

|  | December 31, |  |  | March 31, |
|  | 2022 |  |  | 2022 |
ASSETS |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 26,101 |  |  | $ | 49,346 |
Accounts receivable, less allowance for doubtful accounts of $758 and $630, respectively |  |  | 42,395 |  |  |  | 41,224 |
Inventories |  |  | 33,739 |  |  |  | 24,606 |
Prepaid expenses and other |  |  | 11,950 |  |  |  | 9,142 |
Total current assets |  |  | 114,185 |  |  |  | 124,318 |
Property, plant and equipment, net of accumulated depreciation of $19,708 and $17,726, respectively |  |  | 28,263 |  |  |  | 28,620 |
Deferred tax asset |  |  | 708 |  |  |  | 1,318 |
Other assets |  |  | 10,572 |  |  |  | 11,830 |
Intangibles, net |  |  | 223,447 |  |  |  | 250,117 |
Goodwill |  |  | 285,809 |  |  |  | 291,166 |
Total assets |  | $ | 662,984 |  |  | $ | 707,369 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable |  | $ | 6,288 |  |  | $ | 7,897 |
Accrued payroll and benefits |  |  | 8,134 |  |  |  | 14,717 |
Unearned revenues |  |  | 14,584 |  |  |  | 13,830 |
Other accrued expenses |  |  | 12,611 |  |  |  | 11,611 |
Total current liabilities |  |  | 41,617 |  |  |  | 48,055 |
Deferred tax liability |  |  | 36,946 |  |  |  | 39,224 |
Other long-term liabilities |  |  | 8,172 |  |  |  | 7,924 |
Credit Facility |  |  | 19,000 |  |  |  | 49,000 |
Convertible senior notes, net of discounts and debt issuance costs |  |  | 170,044 |  |  |  | 169,365 |
Total liabilities |  |  | 275,779 |  |  |  | 313,568 |
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 |
Retained earnings |  |  | 74,444 |  |  |  | 76,675 |
Accumulated other comprehensive (loss) income |  |  | (14,172 | ) |  |  | 3,666 |
Total stockholders’ equity |  |  | 387,205 |  |  |  | 393,801 |
Total liabilities and stockholders’ equity |  | $ | 662,984 |  |  | $ | 707,369 |

See accompanying notes to Condensed C onsolidated Fi nancial Statements.

Page 1

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, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues |  | $ | 54,287 |  |  | $ | 54,696 |  |  | $ | 163,489 |  |  | $ | 125,456 |
Cost of revenues |  |  | 21,522 |  |  |  | 26,069 |  |  |  | 62,997 |  |  |  | 51,478 |
Gross profit |  |  | 32,765 |  |  |  | 28,627 |  |  |  | 100,492 |  |  |  | 73,978 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling |  |  | 8,437 |  |  |  | 8,958 |  |  |  | 27,660 |  |  |  | 18,459 |
General and administrative |  |  | 16,129 |  |  |  | 17,017 |  |  |  | 54,543 |  |  |  | 40,119 |
Research and development |  |  | 4,797 |  |  |  | 5,164 |  |  |  | 15,486 |  |  |  | 10,588 |
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 |
Other expense (income), net |  |  | 324 |  |  |  | (1,189 | ) |  |  | (475 | ) |  |  | (1,455 | )
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 |
Earnings (loss) per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.08 |  |  | $ | (0.39 | ) |  | $ | 0.06 |  |  | $ | 0.70 |
Diluted |  | $ | 0.08 |  |  | $ | (0.39 | ) |  | $ | 0.06 |  |  | $ | 0.69 |
Weighted-average common shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 5,339 |  |  |  | 5,233 |  |  |  | 5,312 |  |  |  | 5,199 |
Diluted |  |  | 5,360 |  |  |  | 5,233 |  |  |  | 5,354 |  |  |  | 5,333 |

See accompanying notes to Condensed Consolidated Financial Statements.

Page 2

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 | )

See accompanying notes to Condensed Consolidated Financial Statements.

Page 3

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M esa 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 |  |  | $ | - |

See accompanying notes to Condensed C onsolidated Fin ancial Statements.

Page 4

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” 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, we managed our operations in four reportable segments, or divisions:

| ● | Clinical Genomics - develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by clinical labs to perform genomic clinical testing 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.

| ● | Calibration Solutions - develops, manufactures, and sells quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other chemical or physical parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and various laboratory environments.

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

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with 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.

Our fiscal year ends on March 31. References in this Quarterly Report to a particular “year” or “year-end” mean our fiscal year, references to the first quarter of 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.

Prior Period Reclassification

Certain 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 reclassifications have not resulted in any change to the Condensed Consolidated Financial Statements for and 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 business and economic uncertainty resulting from supply chain challenges, cost pressure, the overall effects of the current high inflation environment on customers' purchasing patterns, and the novel coronavirus pandemic ("COVID-19") has made such estimates more difficult to calculate. Accordingly, actual results could differ from those 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.

Note 2. Significant Transactions

Belyntic GmbH

During the three months ended December 31, 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 will be paid upon approval of patent applications expected in the next 36 months. The business complements our existing peptide synthesis business, part of the Biopharmaceutical Development segment, by adding a new consumables line. During the third quarter of fiscal year 2023, we prepared a preliminary analyses of the valuation of net assets acquired in the Belyntic acquisition. This preliminary purchase price allocation is subject to 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.

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

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 months ended December 31, 2022 and 2021, respectively:

|  | Three Months Ended December 31, 2022 |
|  | Clinical Genomics |  |  | Sterilization and Disinfection Control |  |  | Biopharmaceutical Development |  |  | Calibration Solutions |  |  | Total |
Consumables |  | $ | 10,885 |  |  | $ | 14,307 |  |  | $ | 3,584 |  |  | $ | 553 |  |  | $ | 29,329 |
Hardware and Software |  |  | 3,371 |  |  |  | 95 |  |  |  | 5,844 |  |  |  | 7,023 |  |  |  | 16,333 |
Services |  |  | 1,329 |  |  |  | 1,881 |  |  |  | 2,218 |  |  |  | 3,197 |  |  |  | 8,625 |
Total Revenues |  | $ | 15,585 |  |  | $ | 16,283 |  |  | $ | 11,646 |  |  | $ | 10,773 |  |  | $ | 54,287 |

|  | 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 |

|  | Nine Months Ended December 31, 2022 |
|  | Clinical Genomics |  |  | Sterilization and Disinfection Control |  |  | Biopharmaceutical Development |  |  | Calibration Solutions |  |  | Total |
Consumables |  | $ | 34,815 |  |  | $ | 41,239 |  |  | $ | 11,248 |  |  | $ | 2,272 |  |  | $ | 89,574 |
Hardware and Software |  |  | 9,349 |  |  |  | 619 |  |  |  | 16,656 |  |  |  | 18,696 |  |  |  | 45,320 |
Services |  |  | 4,361 |  |  |  | 6,163 |  |  |  | 6,853 |  |  |  | 11,218 |  |  |  | 28,595 |
Total Revenues |  | $ | 48,525 |  |  | $ | 48,021 |  |  | $ | 34,757 |  |  | $ | 32,186 |  |  | $ | 163,489 |

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|  | Nine Months Ended December 31, 2021 |
|  | Clinical Genomics* |  |  | Sterilization and Disinfection Control |  |  | Biopharmaceutical Development |  |  | Calibration Solutions |  |  | Total |
Consumables |  | $ | 10,221 |  |  | $ | 36,579 |  |  | $ | 11,588 |  |  | $ | 2,701 |  |  | $ | 61,089 |
Hardware and Software |  |  | 4,407 |  |  |  | 495 |  |  |  | 14,435 |  |  |  | 20,608 |  |  |  | 39,945 |
Services |  |  | 1,857 |  |  |  | 5,940 |  |  |  | 6,165 |  |  |  | 10,460 |  |  |  | 24,422 |
Total Revenues |  | $ | 16,485 |  |  | $ | 43,014 |  |  | $ | 32,188 |  |  | $ | 33,769 |  |  | $ | 125,456 |

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

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, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
United States |  | $ | 28,645 |  |  | $ | 30,414 |  |  | $ | 88,756 |  |  | $ | 68,253 |
China |  |  | 7,482 |  |  |  | 6,243 |  |  |  | 18,659 |  |  |  | 9,960 |
Other |  |  | 18,160 |  |  |  | 18,039 |  |  |  | 56,074 |  |  |  | 47,243 |
Total revenues |  | $ | 54,287 |  |  | $ | 54,696 |  |  | $ | 163,489 |  |  | $ | 125,456 |

Other than China, no foreign country exceeds 10% of total revenues.

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 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.

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

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

|  | 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 |

Assets recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired. 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 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 that no impairment is indicated. Fair values preliminarily assigned to assets acquired and liabilities assumed in the Belyntic acquisition were measured using Level 3 inputs, and are subject to change. There were no transfers between the levels of the fair value hierarchy during the three and nine months ended December 31, 2022 or 2021, respectively.

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Note 5. Supplemental Balance Sheets Information

Inventories consist 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 |

Note 6. Goodwill and Intangible Assets, Net

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

|  | December 31, 2022 |  |  | March 31, 2022 |
|  | 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 |
Intellectual property |  |  | 65,871 |  |  |  | (17,732 | ) |  |  | 48,139 |  |  |  | 65,893 |  |  |  | (12,620 | ) |  |  | 53,273 |
Other intangibles |  |  | 24,745 |  |  |  | (6,222 | ) |  |  | 18,523 |  |  |  | 25,350 |  |  |  | (5,194 | ) |  |  | 20,156 |
Total |  | $ | 328,028 |  |  | $ | (104,581 | ) |  | $ | 223,447 |  |  | $ | 335,400 |  |  | $ | (85,283 | ) |  | $ | 250,117 |

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, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Amortization in cost of revenues |  | $ | 1,695 |  |  | $ | 1,227 |  |  | $ | 5,094 |  |  | $ | 1,877 |
Amortization in general and administrative |  |  | 5,452 |  |  |  | 4,695 |  |  |  | 16,479 |  |  |  | 11,618 |
Total |  | $ | 7,147 |  |  | $ | 5,922 |  |  | $ | 21,573 |  |  | $ | 13,495 |

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

Remainder of 2023 |  | 7,250 |
2024 |  | 28,490 |
2025 |  | 26,911 |
2026 |  | 26,149 |
2027 |  | 25,652 |

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 |

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

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Note 7. Indebtedness

Credit Facility

We maintain a senior credit facility (the “Credit Facility”) that includes 1) a revolving credit facility in an aggregate principal amount of up to $75,000, 2) a swingline loan in an aggregate principal amount not exceeding $5,000, and 3) letters of credit in an aggregate stated amount not exceeding $2,500. 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, we had $19,000 outstanding 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 to 1.0 for the period ended December 31, 2022, 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, we were in compliance with all covenants.

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. 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.

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 months ended December 31, 2022. As of December 31, 2022, the Notes are classified as a long-term liability on our Condensed Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period. The if-converted value of the Notes did not exceed the principal balance as of December 31, 2022.

The net carrying amount of the Notes was as follows:

|  | December 31, 2022 |  |  | March 31, 2022 |
Principal outstanding |  | $ | 172,500 |  |  | $ | 172,500 |
Unamortized debt issuance costs |  |  | (2,456 | ) |  |  | (3,135 | )
Net carrying value |  | $ | 170,044 |  |  | $ | 169,365 |

We recognized interest expense on the Notes as follows:

|  | Three Months Ended December 31, |  |  | Nine Months Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Coupon interest expense at 1.375% |  | $ | 593 |  |  | $ | 593 |  |  | $ | 1,779 |  |  | $ | 1,779 |
Amortization of debt discounts and issuance costs |  |  | 227 |  |  |  | 223 |  |  |  | 679 |  |  |  | 666 |
Total interest and amortization of debt issuance costs |  | $ | 820 |  |  | $ | 816 |  |  | $ | 2,458 |  |  | $ | 2,445 |

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

Note 8. Stockholders' Equity

Stock-Based Compensation

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

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

|  | Three Months Ended December 31, |  |  | Nine Months Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Stock-based compensation expense |  | $ | 2,056 |  |  | $ | 3,703 |  |  | $ | 9,859 |  |  | $ | 7,939 |
Amount of income tax (benefit) recognized in earnings |  |  | 226 |  |  |  | (743 | ) |  |  | (1,855 | ) |  |  | (4,247 | )
Stock-based compensation expense, net of tax |  | $ | 2,282 |  |  | $ | 2,960 |  |  | $ | 8,004 |  |  | $ | 3,692 |

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

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The following is a summary of stock option award activity for the nine 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 months ended December 31, 2022 vest in equal installments on the first, second, and third anniversary of the grant date.

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

|  | 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 |

(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 time-based RSUs vest and settle in shares of our common stock on a one-for-one basis. Substantially all of the RSUs granted during the nine months ended December 31, 2022 vest in equal installments on the first, second, and third anniversary of the grant date. We recognize the expense relating to RSUs, net of estimated forfeitures, on a straight-line basis over the vesting period.

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. 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 months ended December 31, 2022, the Compensation Committee of the Board of Directors created a plan to award 19 PSUs at target (the "FY23 PSUs") that are subject to both service and performance 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 until 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. The quantity of shares that will be issued upon vesting will range from 0% to 200% of the targeted number of shares; if the defined minimum targets are not met, then no shares will vest.

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 (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share (“diluted EPS”) is computed similarly to basic 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 Notes. Stock awards are excluded from the calculation of diluted EPS if they are subject to performance conditions that have not yet been achieved or are antidilutive. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would then have an antidilutive effect.

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 months ended December 31, 2022 and December 31, 2021.

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

|  | 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 |

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

|  | Three Months Ended December 31, |  |  | Nine Months Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Assumed conversion of the Notes |  |  | 608 |  |  |  | 608 |  |  |  | 608 |  |  |  | 608 |
Stock awards that were anti-dilutive |  |  | 176 |  |  |  | 285 |  |  |  | 159 |  |  |  | 38 |
Stock awards subject to performance conditions |  |  | 49 |  |  |  | 40 |  |  |  | 51 |  |  |  | 18 |
Total stock awards excluded from diluted EPS |  |  | 833 |  |  |  | 933 |  |  |  | 818 |  |  |  | 664 |

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, 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% for the three and nine months ended December 31, 2022, respectively, compared to 12.0% and (1.0%) for the three and nine months ended December 31, 2021. The effective tax rate for both the three and nine months ended December 31, 2022 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 effective tax rate for the three and nine months ended December 31, 2022 was higher than the comparable prior year periods 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.

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, 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. We believe that it is probable that the patents will be issued and we will pay the sellers in full within the next 36 months. The liability is recorded in other long-term liabilities on the accompanying Condensed Consolidated Balance Sheets.

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Note 12. S egment Information

The following tables set forth our segment information:

|  | Three Months Ended December 31, |  |  | Nine Months Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Clinical Genomics |  | $ | 15,585 |  |  | $ | 16,485 |  |  | $ | 48,525 |  |  | $ | 16,485 |
Sterilization and Disinfection Control |  |  | 16,283 |  |  |  | 13,831 |  |  |  | 48,021 |  |  |  | 43,014 |
Biopharmaceutical Development |  |  | 11,646 |  |  |  | 12,756 |  |  |  | 34,757 |  |  |  | 32,188 |
Calibration Solutions |  |  | 10,773 |  |  |  | 11,624 |  |  |  | 32,186 |  |  |  | 33,769 |
Total revenues (a) |  | $ | 54,287 |  |  | $ | 54,696 |  |  | $ | 163,489 |  |  | $ | 125,456 |
Gross profit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Clinical Genomics |  | $ | 8,045 |  |  | $ | 3,924 |  |  | $ | 26,535 |  |  | $ | 3,924 |
Sterilization and Disinfection Control |  |  | 11,614 |  |  |  | 9,945 |  |  |  | 34,581 |  |  |  | 31,859 |
Biopharmaceutical Development |  |  | 7,359 |  |  |  | 8,768 |  |  |  | 21,993 |  |  |  | 20,061 |
Calibration Solutions |  |  | 5,740 |  |  |  | 6,090 |  |  |  | 17,411 |  |  |  | 18,330 |
Reportable segment gross profit |  |  | 32,758 |  |  |  | 28,727 |  |  |  | 100,520 |  |  |  | 74,174 |
Corporate and Other (b) |  |  | 7 |  |  |  | (100 | ) |  |  | (28 | ) |  |  | (196 | )
Gross profit |  | $ | 32,765 |  |  | $ | 28,627 |  |  | $ | 100,492 |  |  | $ | 73,978 |
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 |

| (a) | Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

| (b) | Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

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

|  | December 31, |  |  | March 31, |
|  | 2022 |  |  | 2022 |
Clinical Genomics |  | $ | 14,591 |  |  | $ | 11,802 |
Sterilization and Disinfection Control |  |  | 3,022 |  |  |  | 2,176 |
Biopharmaceutical Development |  |  | 7,797 |  |  |  | 4,495 |
Calibration Solutions |  |  | 8,329 |  |  |  | 6,133 |
Total inventories |  | $ | 33,739 |  |  | $ | 24,606 |

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

(Dollars in thousands, except per share amounts)

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position; potential impairment of future earnings; anticipated effects of, and future actions to be taken in response to, the COVID-19 pandemic; results of acquisitions; management’s strategy, plans and objectives for future operations or acquisitions, product development and sales; product research and development; regulatory 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 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; 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 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 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, we managed our operations in four reportable segments, or divisions: Clinical Genomics, Sterilization and Disinfection Control, Biopharmaceutical Development, and Calibration Solutions. Each of our divisions are described further in "Results of Operations" below.

Corporate Strategy

We strive to create shareholder value and further our purpose of Protecting the Vulnerable® by growing our business both organically and through acquisitions, by improving our operating efficiency, and by continuing to hire, develop and retain top talent. As a business, we commit to our purpose of Protecting the Vulnerable® every day by taking a customer-focused approach to developing, building, and delivering our products. We serve a broad set of industries, in particular the pharmaceutical, healthcare services, and medical device verticals, 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.

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.

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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 Mesa Way, which is our customer-centric, lean-based system for continuously improving and operating a set of high-margin, niche businesses. The Mesa Way is focused on: Measuring What Matters using our customers' perspective and setting high standards for performance; Empowering Teams to improve operationally and exceed customer expectations; Steadily Improving using lean-based tools designed to help us identify the root cause of opportunities and prioritize the biggest opportunities; and Always Learning so that performance continuously improves.

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

General Trends

We are a global company, and a significant portion of our revenues and expenses are denominated in currencies other than the U.S. dollar (“USD”). Exchanges rates have been volatile throughout our fiscal year 2023 and a weakening or strengthening of foreign currencies against the USD increases or decreases our revenues and gross profit margins as well as impacting the comparability of our results between periods. Currency exchange rates negatively impacted 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 our reported expenses for the remainder of the fiscal year; conversely, any weakening of the U.S. dollar against major currencies would positively impact our reported revenues but would negatively 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, as a result 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 impact on the global economy, in-person collaboration and sales efforts, and our customers’ changed purchasing behaviors and confidence.

During the third quarter 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 us 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.

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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 months ended December 31, 2022, respectively, as compared to the same periods in the prior year. The decrease in revenues for the three months ended December 31, 2022 was attributable 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.

Results by reportable segment are as follows:

|  | 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 |
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 | %
Biopharmaceutical Development |  |  | 11,646 |  |  |  | 12,756 |  |  |  | (8.7 | %) |  |  | 46.4 | % |  |  | 63 | % |  |  | 69 | %
Calibration Solutions |  |  | 10,773 |  |  |  | 11,624 |  |  |  | (7.3 | %) |  |  | (6.1 | %) |  |  | 53 | % |  |  | 52 | %
Mesa's reportable segments |  | $ | 54,287 |  |  | $ | 54,696 |  |  |  | (2.1 | %) |  |  | 11.8 | % |  |  | 60 | % |  |  | 53 | %

|  | 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.

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

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Reportable Segments

Clinical Genomics

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

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
Revenues |  | $ | 15,585 |  |  | $ | 16,485 |  |  |  | (5 | %) |  | $ | 48,525 |  |  | $ | 16,485 |  |  |  | 194 | %
Gross profit |  |  | 8,045 |  |  |  | 3,924 |  |  |  | 105 | % |  |  | 26,535 |  |  |  | 3,924 |  |  |  | 576 | %
Gross profit as a % of revenues |  |  | 52 | % |  |  | 24 | % |  |  | 28 | % |  |  | 55 | % |  |  | 24 | % |  |  | 31 | %

Clinical Genomics revenues decreased 5% for the three months ended December 31, 2022 compared to the relevant prior year period, primarily as a result of a reduction in COVID-related revenues 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. Clinical Genomics revenues increased 194% for the nine months ended December 31, 2022 compared to the relevant prior year period due to a significantly shorter period of ownership of Agena for the nine months ended December 31, 2021. 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.

Gross profit percentage for the Clinical Genomics division increased 28% and 31% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods due to the amortization 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 revenues from Sema4.

Sterilization and Disinfection Control

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

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 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 quarters of fiscal year 2023, we added temporary and permanent manufacturing headcount at our Bozeman Montana facility, which enabled us to fulfill a higher volume of customer orders compared to the first quarter 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.

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.

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
Revenues |  | $ | 11,646 |  |  | $ | 12,756 |  |  |  | (9 | %) |  | $ | 34,757 |  |  | $ | 32,188 |  |  |  | 8 | %
Gross profit |  |  | 7,359 |  |  |  | 8,768 |  |  |  | (16 | %) |  |  | 21,993 |  |  |  | 20,061 |  |  |  | 10 | %
Gross profit as a % of revenues |  |  | 63 | % |  |  | 69 | % |  |  | (6 | %) |  |  | 63 | % |  |  | 62 | % |  |  | 1 | %

Biopharmaceutical Development revenues decreased 9% for the three months ended December 31, 2022 compared to the relevant prior year period, primarily due to unfavorable changes in foreign currency exchange rates. Additionally, the division faced a difficult compare versus the prior year, which reported an anomalous 46% revenues growth, partially offset by price increases. Biopharmaceutical Development revenues increased 8% for the nine months ended December 31, 2022 compared to the relevant prior year period primarily due to increased product adoption and price increases, partially offset by unfavorable changes in foreign currency exchange rates.

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

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
Revenues |  | $ | 10,773 |  |  | $ | 11,624 |  |  |  | (7 | %) |  | $ | 32,186 |  |  | $ | 33,769 |  |  |  | (5 | %)
Gross profit |  |  | 5,740 |  |  |  | 6,090 |  |  |  | (6 | %) |  |  | 17,411 |  |  |  | 18,330 |  |  |  | (5 | %)
Gross profit as a % of revenues |  |  | 53 | % |  |  | 52 | % |  |  | 1 | % |  |  | 54 | % |  |  | 54 | % |  |  | - | %

Calibration Solutions revenues decreased 7% and 5% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods, primarily as a result of supply constraints limiting 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 the timing of new orders; however, we anticipate that such difficulties will begin to abate in the fourth quarter of fiscal year 2023.

Calibration Solutions' gross profit percentage was essentially flat for the three and nine months ended December 31, 2022 compared to the three and nine months ended December 31, 2021.

Operating Expenses

Operating expenses decreased 6% and increased 41% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods, primarily as a result of lower personnel costs and the Agena acquisition. Operating expenses were favorably impacted by the strengthening of the USD during the three and nine months ended December 31, 2022.

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 |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
Selling expense |  | $ | 8,437 |  |  | $ | 8,958 |  |  |  | (6 | %) |  | $ | 27,660 |  |  | $ | 18,459 |  |  |  | 50 | %
As a percentage of revenues |  |  | 16 | % |  |  | 16 | % |  |  | - | % |  |  | 17 | % |  |  | 15 | % |  |  | 2 | %

Selling expense for the three months ended December 31, 2022 decreased 6% compared to the relevant prior year period, primarily as a result of lower personnel costs. Selling expense for the nine months ended December 31, 2022 increased 50% compared to the relevant prior year period, primarily as a result 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.

General and Administrative

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

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
General and administrative expense |  | $ | 16,129 |  |  | $ | 17,017 |  |  |  | (5 | %) |  | $ | 54,543 |  |  | $ | 40,119 |  |  |  | 36 | %
As a percentage of revenues |  |  | 30 | % |  |  | 31 | % |  |  | (1 | %) |  |  | 33 | % |  |  | 32 | % |  |  | 1 | %

General and administrative expenses decreased 5% for the three months ended December 31, 2022 compared to the relevant prior year period, primarily as a result of reduced 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, primarily 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, partially offset by lower intangible amortization expense as a result of the strengthening of the USD.

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Research and Development

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

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
Research and development expense |  | $ | 4,797 |  |  | $ | 5,164 |  |  |  | (7 | %) |  | $ | 15,486 |  |  | $ | 10,588 |  |  |  | 46 | %
As a percentage of revenues |  |  | 9 | % |  |  | 9 | % |  |  | - | % |  |  | 9 | % |  |  | 8 | % |  |  | 1 | %

Research and development expenses decreased 7% for the three months ended December 31, 2022 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. Research and development expenses increased 46% for the nine months ended December 31, 2022 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 our purchase of in process research and development technology that we are further developing in order to enhance a product offering in our Sterilization and Disinfection Control division.

Nonoperating Expense

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
Nonoperating expense (income) |  | $ | 1,486 |  |  |  | (171 | ) |  |  | (¤) |  |  | $ | 2,915 |  |  | $ | 1,192 |  |  |  | 145 | %

(¤) Not a meaningful comparison

Nonoperating expense for the three and nine months ended December 31, 2022 is composed primarily of interest expense and amortization of the debt discount 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 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.

Income Taxes

|  | Three Months Ended December 31, |  |  | Percentage |  |  | Nine Months Ended December 31, |  |  | Percentage |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  | 2021 |  |  | Change |
Income tax provision (benefit) |  | $ | 1,465 |  |  | $ | (281 | ) |  |  | (621 | %) |  | $ | (431 | ) |  | $ | (35 | ) |  |  | 1,131 | %
Effective tax rate |  |  | 76.5 | % |  |  | 12.0 | % |  |  | 64 | % |  |  | 384.8 | % |  |  | (1.0 | %) |  |  | 386 | %

Our effective income tax rate was 76.5% and 384.8% for the three and nine months ended December 31, 2022, respectively, and 12.0% and (1.0%) for the three and nine months ended December 31, 2021, respectively. The effective tax rate for the nine months ended December 31, 2022 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 effective tax rate for the nine months ended December 31, 2022 was higher than the same period in fiscal year 2022 primarily due to the share-based compensation and the effect of income in foreign jurisdictions.

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)

Net income (loss) varies with changes in revenues, gross profit, and operating expenses (and included $21,573 and $9,859 of non-cash amortization of intangible assets acquired in business combinations and stock-based compensation expense, respectively, for the nine months ended December 31, 2022).

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 AgreementSM, 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 AgreementSM, 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 settle the Notes in shares of our common stock, but we may re-finance the debt, depending on conditions in the market and the share price of our common stock.

Our more significant uses of resources have historically included acquisitions, 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 and $76,263 as of December 31, 2022 and March 31, 2022, respectively. As of December 31, 2022, and March 31, 2022, we had $26,101 and $49,346, 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 aggregate principal Notes was outstanding and $19,000 was outstanding under the Credit Facility.

In April 2022, we entered into an Open Market Sale AgreementSM 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 routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require that we obtain additional capital, assume additional third-party debt or incur other long-term obligations. We believe that we have the ability to issue more equity or debt in the future in order to finance our acquisition and investment activities; however, additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all.

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

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Dividends

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

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

Cash Flows

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

|  | Nine Months Ended December 31, |
|  | 2022 |  |  | 2021 |
Net cash provided by operating activities |  | $ | 15,464 |  |  | $ | 29,921 |
Net cash (used in) investing activities |  |  | (8,468 | ) |  |  | (304,443 | )
Net cash (used in) provided by financing activities |  |  | (28,936 | ) |  |  | 62,623 |

Cash flows from operating activities for the nine months ended December 31, 2022 provided $15,464. Net income and non-cash adjustments totaled $34,588 for the nine months ended December 31, 2022 compared to $32,838 for the nine months ended December 31, 2021. Adjustments to working capital accounts used $16,207 more cash in the nine months ended December 31, 2022 as compared to the nine months ended December 31, 2021, primarily due to lower collections on trade receivables and higher spend on inventory as we built supplies to mitigate supply chain risk. Cash used in investing activities was lower for the nine months ended December 31, 2022 compared to the nine months ended December 31, 2021, due to the Agena acquisition during fiscal year 2022, partially offset by the Belyntic acquisition in fiscal year 2023. Cash used by financing activities primarily resulted from $30,000 repaid on our Credit Facility during the nine months ended December 31, 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, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission on May 31, 2022.

On a consolidated basis, as of December 31, 2022, we had contractual obligations for open purchase orders of approximately $19,441 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. We believe that it is probable that the patents will be issued and we will pay the sellers in full within the next 36 months. The liability is recorded in other long-term liabilities on the accompanying Condensed Consolidated Balance Sheets.

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, 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.

I tem 3. Quantitative and Qualitative Disclosures a bout Market Risk

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

Our Credit Facility bears interest at either a base rate or a SOFR rate, plus an applicable spread. Based on the balance currently outstanding against our line of credit, if interest rates increased by 75 basis points, we would incur approximately $143 of additional interest expense per year.

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

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the 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, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

The Agena Acquisition was completed on October 20, 2021, and the financial results of Agena are included in our Condensed Consolidated Financial Statements as of March 31, 2022 and for the period then 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 changes to Agena's internal controls over financial reporting, including design changes that were required as we brought Agena onto our enterprise resource planning tool. We now consider Agena to be included in the scope of our assessment of internal controls 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 months ended December 31, 2022, 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.

I tem 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 |

| (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.

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Item 6. Exhibits

Exhibit No. | Description of Exhibit
3.1 | Articles of Incorporation and Amendments to Articles of Incorporation (incorporated by reference from exhibit 3.1 to Mesa Laboratories, Inc.’s report on Form 10-Q filed on July 31, 2018 (Commission File Number: 000-11740)).
3.2 | Amended and Restated Bylaws of Mesa Laboratories, Inc. (incorporated by reference from exhibit 3.1 to the Current Report on Form 8-K filed on May 10, 2019 (Commission File Number: 000-11740)).
10.1+ | Amendment No. 1 to Credit Agreement dated as of December 22, 2022 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 6, 2023 | BY: | /s/ Gary M. Owens. Gary M. Owens Chief Executive Officer
DATED: February 6, 2023 | BY: | /s/ John V. Sakys John V. Sakys Chief Financial Officer

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