Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

Bio-Techne Corporation and Subsidiaries (in thousands, except per share data)

	Year Ended June 30,
	2021			2020			2019

Net sales	$	931,032		$	738,691		$	714,006
Cost of sales		298,182			255,497			240,515
Gross margin		632,850			483,194			473,491

Operating expenses:
Selling, general and administrative		324,951			260,583			264,359
Research and development		70,603			65,192			62,413
Total operating expenses		395,554			325,775			326,772
Operating income		237,296			157,419			146,719

Other income (expense):
Interest expense		(13,952	)		(19,197	)		(21,705	)
Interest income		473			605			569
Other non-operating income (expense), net		(75,642	)		137,650			(13,568	)
Total other income (expense), net		(89,121	)		119,058			(34,704	)
Earnings before income taxes		148,175			276,477			112,015
Income taxes (benefit)		8,590			47,181			15,943
Net earnings, including noncontrolling interest		139,585			229,296			96,072
Net earnings (loss) attributable to noncontrolling interest		(825	)		-			-
Net earnings attributable to Bio-Techne		140,410			229,296			96,072
Other comprehensive income (loss):
Foreign currency translation adjustments		32,951			(9,963	)		(4,487	)
Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts disclosed in Note 8.		7,060			(3,715	)		(9,537	)
Other comprehensive income (loss)		40,011			(13,678	)		(14,024	)
Other comprehensive income (loss) attributable to noncontrolling interest		103			-			-
		39,908			(13,678	)		(14,024	)
Comprehensive income attributable to Bio-Techne	$	180,318			215,618		$	82,048

Earnings per share:
Basic	$	3.62		$	6.00		$	2.54
Diluted	$	3.47		$	5.82		$	2.47

Weighted average common shares outstanding:
Basic		38,747			38,201			37,781
Diluted		40,483			39,401			38,892

See Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS

Bio-Techne Corporation and Subsidiaries (in thousands, except share and per share data)

	June 30,
	2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	199,091		$	146,625
Short-term available-for-sale investments		32,463			124,268
Accounts receivable, less allowance for doubtful accounts of $1,229 and $775, respectively		145,385			122,534
Inventories		116,748			103,152
Other current assets		16,919			24,341
Total current assets		510,606			520,920

Property and equipment, net		207,907			176,829
Right of use asset		73,834			71,465
Goodwill		843,067			728,308
Intangible assets, net		615,968			516,545
Other assets		11,575			13,522
Total assets	$	2,262,957		$	2,027,589
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable	$	29,384		$	23,090
Salaries, wages and related accruals		51,294			31,087
Accrued expenses		15,282			9,093
Contract liabilities		18,995			13,049
Income taxes payable		5,336			2,376
Operating lease liabilities - current		11,602			9,535
Contingent consideration payable		4,000			5,938
Current portion of long-term debt obligations		12,500			12,500
Other current liabilities		3,891			-
Total current liabilities		152,284			106,668

Deferred income taxes		93,125			101,090
Long-term debt obligations		328,827			344,243
Long-term contingent consideration payable		25,400			199
Operating lease liabilities		67,625			67,248
Other long-term liabilities		24,462			26,949
Bio-Techne's shareholders' equity:

Undesignated capital stock, no par; authorized 5,000,000 shares; none issued or outstanding		-			-
Common stock, par value $.01 a share; authorized 100,000,000 shares; issued and outstanding 38,955,484 and 38,453,046 shares, respectively		390			385
Additional paid-in capital		534,411			420,536
Retained earnings		1,085,461			1,057,470
Accumulated other comprehensive loss		(57,291	)		(97,199	)
Total Bio-Techne shareholders' equity		1,562,971			1,381,192
Noncontrolling interest		8,263			-
Total shareholders' equity		1,571,234			1,381,192
Total liabilities and shareholders’ equity	$	2,262,957		$	2,027,589

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Bio-Techne Corporation and Subsidiaries (in thousands)

	Common Stock						Additional Paid-in			Retained			Accumulated Other Comprehensive				Noncontrolling Interest
	Shares			Amount			Capital			Earnings			Income(Loss)						Total

Balances at June 30, 2018		37,608		$	376		$	246,568		$	876,931		$	(44,814	)	$	-		$	1,079,061
Cumulative effect adjustments due to adoption of new accounting standards and other											25,276			(24,682	)					594
Net earnings											96,072									96,072
Other comprehensive income (loss)														(14,024	)					(14,024	)
Share repurchases		(95	)		(1	)					(15,404	)								(15,405	)
Common stock issued for exercise of options		382			4			36,272												36,276
Common stock issued for restricted stock awards		29			-						(2,575	)								(2,575	)
Cash dividends											(48,366	)								(48,364	)
Stock-based compensation expense								31,775												31,775
Common stock issued to employee stock purchase plan		10			-			1,676												1,676
Employee stock purchase plan expense								505												505
Balances at June 30, 2019		37,934		$	379		$	316,797		$	931,934		$	(83,521	)	$	-		$	1,165,589
Cumulative effect adjustments due to adoption of new accounting standards and other											(879	)								(879	)
Net earnings											229,296									229,296
Other comprehensive income (loss)														(13,678	)					(13,678	)
Share repurchases		(279	)		(3	)					(50,109	)								(50,112	)
Surrender and retirement of stock to exercise option		(2	)		-			(400	)											(400	)
Common stock issued for exercise of options		730			7			69,461			(1,642	)								67,826
Common stock issued for restricted stock awards		56			1			(1	)		(2,229	)								(2,228	)
Cash dividends											(48,902	)								(48,902	)
Stock-based compensation expense								31,932												31,932
Common stock issued to employee stock purchase plan		14			-			2,312												2,312
Employee stock purchase plan expense								435												435
Balances at June 30, 2020		38,453		$	385		$	420,536		$	1,057,470		$	(97,199	)	$	-		$	1,381,192
Cumulative effect adjustments due to adoption of new accounting standards and other											(276	)								(276	)
Non-controlling interest in Eminence																	8,985			8,985
Net earnings											140,410						(825	)		139,585
Other comprehensive income (loss)														39,908			103			40,011
Share repurchases		(120	)		(1	)					(43,177	)								(43,178	)
Common stock issued for exercise of options		573			6			62,102			(12,287	)								49,821
Common stock issued for restricted stock awards		38			0			(0	)		(7,057	)								(7,057	)
Cash dividends											(49,622	)								(49,622	)
Stock-based compensation expense								48,065												48,065
Common stock issued to employee stock purchase plan		11			0			2,791												2,791
Employee stock purchase plan expense								917												917
Balances at June 30, 2021		38,955		$	390		$	534,411		$	1,085,461		$	(57,291	)	$	8,263		$	1,571,234

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Bio-Techne Corporation and Subsidiaries (in thousands)

	Year Ended June 30,
	2021			2020			2019
Cash flows from operating activities:
Net earnings, including non-controlling interest	$	139,585		$	229,296		$	96,072
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		87,747			82,737			78,171
Costs recognized on sale of acquired inventory		1,565			-			3,739
Deferred income taxes		(27,431	)		13,130			(13,582	)
Stock-based compensation expense		48,982			32,367			32,280
Fair value adjustment to contingent consideration payable		5,300			(905	)		(2,000	)
Contingent consideration payments		(337	)		(958	)		-
(Gain) Loss on investment, net		-			-			(3,702	)
Fair value adjustment on available for sale investments		67,879			(137,527	)		16,067
Leases, net		75			225			-
Gain on escrow settlement		-			(7,170	)		-
Other operating activity		(464	)		(732	)		2,325
Change in operating assets and liabilities, net of acquisitions:
Trade accounts and other receivables		(15,549	)		6,556			(15,000	)
Inventories		(7,140	)		(14,861	)		(13,647	)
Prepaid expenses		(1,101	)		(2,605	)		(698	)
Trade accounts payable and accrued expenses		19,091			10,343			6,101
Salaries, wages and related accruals		20,536			2,552			5,013
Income taxes payable		13,426			(7,231	)		(9,520	)
Net cash provided by operating activities		352,164			205,217			181,619

Cash flows from investing activities:
Proceeds from sale and maturities of available-for-sale investments		66,377			147,120			21,579
Purchase of available-for-sale investments		(39,684	)		(70,187	)		(43,475	)
Additions to property and equipment		(44,301	)		(51,744	)		(25,411	)
Acquisitions, net of cash acquired		(225,352	)		-			(289,492	)
Investment in unconsolidated entity, net		(556	)		1,906			-
Other investing activities		-			-			-
Net cash provided by (used in) investing activities		(243,516	)		27,095			(336,799	)

Cash flows from financing activities:
Cash dividends		(49,622	)		(48,902	)		(48,364	)
Proceeds from stock option exercises		65,092			70,983			37,950
Re-purchases of common stock		(43,178	)		(50,112	)		(15,405	)
Borrowings under line-of-credit agreement		256,000			40,000			580,000
Payments on line-of-credit		(271,500	)		(188,500	)		(413,500	)
Contingent consideration payments		-			(3,400	)		-
Other financing activities		(19,343	)		(3,872	)		(6,297	)
Net cash provided by (used in) financing activities		(62,551	)		(183,802	)		134,384

Effect of exchange rate changes on cash and cash equivalents		6,369			(2,771	)		(308	)
Net change in cash and cash equivalents		52,466			45,739			(21,104	)
Cash and cash equivalents at beginning of year		146,625			100,886			121,990
Cash and cash equivalents at end of year	$	199,091		$	146,625		$	100,886

See Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bio-Techne Corporation and Subsidiaries

Years ended June 30, 2021, 2020 and 2019

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

Description of business: Bio-Techne and its subsidiaries, collectively doing business as Bio-Techne Corporation (the Company), develop, manufacture and sell life science reagents, instruments and services for the research and clinical diagnostic markets worldwide. With our deep product portfolio and application expertise, we sell integral components of scientific investigations into biological processes and molecular diagnostics, revealing the nature, diagnosis, etiology and progression of specific diseases. Our products aid in drug discovery efforts and provide the means for accurate clinical tests and diagnoses.

Use of estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates include the valuation of accounts receivable, available-for-sale investments, inventory, intangible assets, contingent consideration, stock-based compensation and income taxes. Actual results could differ from these estimates.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The Company consolidated our partial acquisition of Eminence in our consolidated financial statements on a one month lag. Refer to Note 4 for additional discussion regarding Eminence.

Translation of foreign financial statements: Assets and liabilities of the Company's foreign operations are translated at year-end rates of exchange and the resulting gains and losses arising from the translation of net assets located outside the U.S. are recorded as other comprehensive income (loss) on the consolidated statements of earnings and comprehensive income. The cumulative translation adjustment is a component of accumulated other comprehensive loss on the consolidated balance sheets. Foreign statements of earnings are translated at the average rate of exchange for the year. Foreign currency transaction gains and losses are included in other non-operating expense in the consolidated statements of earnings and comprehensive income.

Revenue recognition: The Company adopted ASC 606 - Revenue from Contracts with Customers on July 1, 2018 using the modified retrospective transition approach. ASC 606 provides revenue recognition guidance for any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets, unless those contracts are within the scope of other accounting standards. The core principle of ASC 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Refer to Note 2 for additional information regarding our revenue recognition policy under ASC 606.

Research and development: Research and development expenditures are expensed as incurred. Development activities generally relate to creating new products, improving or creating variations of existing products, or modifying existing products to meet new applications.

Advertising costs: Advertising expenses were $4.7 million, $4.2 million, and $4.1 million for fiscal 2021, 2020, and 2019 respectively. The Company expenses advertising expenses as incurred.

Income taxes: The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized to record the income tax effect of temporary differences between the tax basis and financial reporting basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Tax positions taken or expected to be taken in a tax return are recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Refer to Note 11 for additional information regarding income taxes.

Comprehensive income: Comprehensive income includes charges and credits to shareholders' equity that are not the result of transactions with shareholders. Our total comprehensive income consists of net income, unrealized gains and losses on cash flow hedges, and foreign currency translation adjustments. The items of comprehensive income, with the exception of net income, are included in accumulated other comprehensive loss in the consolidated balance sheets and statements of shareholders' equity.

Cash and cash equivalents: Cash and cash equivalents include cash on hand and highly-liquid investments with original maturities of three months or less.

Available-for-sale investments: Available-for-sale investments consist of debt instruments with original maturities of generally three months to six months and equity securities. Available-for-sale investments are recorded based on trade-date. The Company considers all of its marketable securities available-for-sale and reports them at fair value. Unrealized gains and losses on available-for-sale securities are included within other income (expense) in accordance with ASU 2018-02, which the Company adopted on July 1, 2018.

Trade accounts receivable and allowances: Trade accounts receivable are initially recorded at the invoiced amount upon the sale of goods or services to customers, and they do not bear interest. They are stated net of allowances for doubtful accounts, which represent estimated losses resulting from the inability of customers to make the required payments. The Company adopted ASU 2016-13 on July 1, 2020, which reflects the expected credit losses on financial instruments within its scope, including trade receivables. When determining the allowances for doubtful accounts, we take several factors into consideration, including the overall composition of accounts receivable aging, our prior history of accounts receivable write-offs, the type of customer and our day-to-day knowledge of specific customers. Changes in the allowances for doubtful accounts are included in selling, general and administrative (SG&A) expense in our consolidated statements of earnings and comprehensive income. The point at which uncollected accounts are written off varies by type of customer. The Company does not have material long-term customer receivables. Refer to the Recently Adopted Accounting Pronouncements section of Note 1 for further details.

Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The Company regularly reviews inventory on hand for slow-moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration.

For certain proteins, antibodies, and chemically based manufactured products, the Company produces larger batches of established products than current sales requirements due to economies of scale through a highly controlled manufacturing process. Accordingly, the manufacturing process for these products has and will continue to produce quantities in excess of forecasted usage. The Company forecasts usage for its products based on several factors including historical demand, current market dynamics, and technological advances. The Company forecasts product usage on an individual product level for a period that is consistent with our ability to reasonably forecast inventory usage for that product. There have been no material changes to the Company’s estimates of the net realizable value for excess and obsolete inventory or other types of inventory reserves and inventory cost adjustments in the fiscal years presented. Additionally, current and historical reserves recorded to reduce the cost of inventory to its net realizable value become part of the new cost basis for the inventory item in accordance with ASC 330 - Inventory.

Property and equipment: Property and equipment are recorded at cost. Equipment is depreciated using the straight-line method over an estimated useful life of 3 to 5 years. Buildings, building improvements and leasehold improvements are amortized over estimated useful lives of 5 to 40 years.

Contingent Consideration: Contingent Consideration relates to the potential payment for an acquisition that is contingent upon the achievement of the acquired business meeting certain product development milestones and/or certain financial performance milestones. The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be transferred. For potential payments related to financial performance milestones, we use a real option model in calculating the fair value of the contingent consideration liabilities. The assumptions utilized in the calculation based on financial performance milestones include projected revenue and/or EBITDA amounts, volatility and discount rates. For potential payments related to product development milestones, we estimated the fair value based on the probability of achievement of such milestones. The assumptions utilized in the calculation of the acquisition date fair value include probability of success and the discount rates. Contingent consideration involves certain assumptions requiring significant judgment and actual results may differ from assumed and estimated amounts. Contingent consideration is remeasured each reporting period, and subsequent changes in fair value, including accretion for the passage of time, are recognized within selling, general and administrative in the consolidated statement of earnings and comprehensive income.

Intangible assets: Intangible assets are stated at historical cost less accumulated amortization. Amortization expense is generally determined on the straight-line basis over periods ranging from 1 year to 20 years. Each reporting period, we evaluate the remaining useful lives of our amortizable intangibles to determine whether events or circumstances warrant a revision to the remaining period of amortization. If our estimate of an asset's remaining useful life is revised, the remaining carrying amount of the asset is amortized prospectively over the revised remaining useful life.

In conjunction with the Asuragen acquisition that occurred in fiscal year 2021, the Company reassessed the useful life of a tradename from a previous acquisition due to the planned integration and cobranding strategy developed with the most recent transaction. As a result, the Company accelerated the amortization of the trade name to be consistent with the life used for the Asuragen trade name. The accelerated amortization resulted in a $1.4 million impact in fiscal 2021, a $5.7 million impact in fiscal years 2022 through 2025, and a $4.3 impact in fiscal year 2026.

In fiscal year 2020, the Company accelerated the amortization of a certain trade name based on the Company's planned integration of the products under that acquired trade name into a legacy brand. The accelerated amortization resulted in $1.3 million in additional amortization expense in fiscal 2020 and $0.6 million in fiscal 2021.

Impairment of long-lived assets and amortizable intangibles: We evaluate the recoverability of property, plant, equipment and amortizable intangibles whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable. Such circumstances could include, but are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used or in its physical condition, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset. We compare the carrying amount of the asset to the estimated undiscounted future cash flows associated with it. If the sum of the expected future net cash flows is less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds the fair value of the asset. As quoted market prices are not available for the majority of our assets, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows.

The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. No other triggering events were identified and no impairments were recorded for property, plant, and equipment or amortizable intangibles during fiscal years 2019, 2020, and 2021.

Impairment of goodwill: We evaluate the carrying value of goodwill during the fourth quarter each year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. Such circumstances could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, (3) an adverse action or assessment by a regulator, or (4) an adverse change in market conditions that are indicative of a decline in the fair value of the assets.

To analyze goodwill for impairment, we must assign our goodwill to individual reporting units. Identification of reporting units includes an analysis of the components that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and the availability of discrete financial information. Components of an operating segment are aggregated to form one reporting unit if the components have similar economic characteristics. We periodically review our reporting units to ensure that they continue to reflect the manner in which we operate our business. The Company had five reporting units for our 2021, 2020, and 2019 goodwill impairment assessment performed on April 1 of each of the respective fiscal years, the date of our annual goodwill impairment assessment. Further, the Company elected April 1 as the annual goodwill impairment assessment date for the Asuragen acquisition, acquired on April 6, 2021.

2021 Goodwill Impairment Analyses

In completing our 2021 annual goodwill impairment analyses, we elected to perform a quantitative assessment for all of our reporting units. A quantitative assessment involves comparing the carrying value of the reporting unit, including goodwill, to its estimated fair value. Carrying value is based on the assets and liabilities associated with the operations of the reporting unit, which often requires the allocation of shared or corporate items among reporting units. In accordance with ASU 2017-04, a goodwill impairment charge is recorded for the amount by which the carrying value of a reporting unit exceeds the fair value of the reporting unit. In determining the fair values of our reporting units, we utilized the income approach. The income approach is a valuation technique under which we estimated future cash flows using the reporting unit’s financial forecast from the perspective of an unrelated market participant. Using historical trending and internal forecasting techniques, we projected revenue and applied our fixed and variable cost experience rates to the projected revenue to arrive at the future cash flows. A terminal value was then applied to the projected cash flow stream. Future estimated cash flows were discounted to their present value to calculate the estimated fair value. The discount rate used was the value- weighted average of our estimated cost of capital derived using both known and estimated customary market metrics. In determining the estimated fair value of a reporting unit, we were required to estimate a number of factors, including projected operating results, terminal growth rates, economic conditions, anticipated future cash flows, the discount rate and the allocation of shared or corporate items.

The result of our quantitative assessment indicated that all of the reporting units had a substantial amount of headroom as of April 1, 2021. This impairment assessment is sensitive to changes in forecasted cash flows, as well as our selected discount rate. Changes in the reporting unit’s results, forecast assumptions and estimates could materially affect the estimation of the fair value of the reporting units. The Company did not identify any triggering events after our annual goodwill impairment through June 30, 2021, the date of our consolidated balance sheet, that would require an additional goodwill impairment assessment to be performed.

2020 Goodwill Impairment Analyses

The Company elected to perform a quantitative assessment for all of our reporting units in our 2020 goodwill impairment analysis. The quantitative assessment completed utilized a consistent process and methodology to the 2021 goodwill impairment assessment. The result of our quantitative assessment, where we compared the discounted cash flows of each reporting unit to its carrying value, indicated that all of the reporting units had a substantial amount of headroom as of April 1, 2020. This impairment assessment is sensitive to changes in forecasted cash flows, as well as our selected discount rate. Changes in the reporting unit’s results, forecast assumptions and estimates could materially affect the estimation of the fair value of the reporting units. The Company did not identify any triggering events after our annual goodwill impairment through June 30, 2020, the date of our consolidated balance sheet, that would require an additional goodwill impairment assessment to be performed.

2019 Goodwill Impairment Analyses

At the beginning of the quarter ended March 31, 2019, the Company realigned the management of certain business processes between reporting units within the same segment. A goodwill allocation was performed between the impacted reporting units based on the relative fair value of the processes realigned. In conjunction with the realignment, a quantitative goodwill impairment assessment was performed both prior to and subsequent to the realignment. The quantitative assessment indicated that all of the impacted reporting units had substantial headroom both prior to and subsequent to the realignment.

Because our quantitative analysis performed as of January 1, 2019 included all of our reporting units, except for Exosome a recent acquisition that was a separate reporting unit that was not impacted by the business process realignment, the summation of the calculated reporting units’ fair values combined with the fair value of the Exosome acquisition, was compared to our consolidated fair value, as indicated by our market capitalization, to evaluate the reasonableness of our calculations.

The quantitative assessments completed as of January 1, 2019 indicated that all tested reporting units had a substantial amount of headroom. Changes in the reporting unit’s results, forecast assumptions and estimates could materially affect the estimation of the fair value of the reporting units.

In conducting our annual goodwill impairment test on April 1, we elected to perform a qualitative assessment to determine whether changes in events or circumstances since our most recent quantitative test for goodwill impairment indicated that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Based on its annual analysis, the Company determined there was no indication of impairment of goodwill. Further, no triggering events or items beyond the realignment discussed above were identified in the year ended June 30, 2019 that would require an additional goodwill impairment assessment beyond our required annual goodwill impairment assessment.

Other Significant Accounting Policies

The following table includes a reference to additional significant accounting policies that are described in other notes to the financial statements, including the note number:

Policy		Note
Fair value measurements			5
Earnings per share			9
Share-based compensation			10
Operating segments			12

Recently Adopted Accounting Pronouncements

In February 2016_,_ the FASB issued ASU 2016-02_,_ Leases (Topic 842), which amends the existing guidance to require lessees to recognize lease assets and lease liabilities from operating leases on the balance sheet. The FASB has issued narrow codification improvements to Leases (Topic 842) through ASU No. 2018-10 and ASU 2019-01. Additionally, the FASB issued ASU 2018-11, allowing an entity to elect a transition method where they do not recast prior periods presented in the financial statements in the period of adoption. The Company has elected the transition method allowed for under ASU 2018-11 when adopting Leases (Topic 842). The Company adopted the standard effective July 1, 2019 and correspondingly recorded incremental operating lease liabilities of $80.6 million, a right-of-use lease asset of $79.5 million, retained earnings of $0.8 million and a deferred tax adjustment of $0.3 million. Additionally, the Company reclassified $4.0 million of deferred rent recorded within accrued expenses under ASC 840 - Leases into operating lease liabilities upon adoption of Topic 842. In adopting ASC 842, the Company elected the package of available practical expedients and to use hindsight in determining the lease term for all existing leases. Further, as part of our adoption of ASC 842, the Company also made the accounting policy elections to not capitalize short term leases (defined as a lease with a lease term that is less than 12 months) and to combine lease and non-lease components for all asset classes in determining the lease payments. Refer to Note 7 for additional information on leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendment in this update replaced the previous incurred loss impairment methodology with a methodology that reflects expected credit losses on financial instruments within its scope, including trade and loan receivables and available-for-sale debt securities. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. The Company adopted this standard on July 1, 2020 using a modified retrospective transition approach with a cumulative impact of $0.3 million to retained earnings. The adoption of this ASU did not have a material impact on the Company's financial statements as the Company's primary financial instruments impacted by the ASU were trade accounts receivable, where we have high historical and expected future collections due to the length of receivables and the credit quality of our customers.

In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the new standard. The Company adopted this standard on a prospective basis on July 1, 2020. Accordingly, as of July 1, 2020, the Company will record eligible costs to be capitalized within prepaid assets or other non-current assets depending on the nature of the duration of the asset.

In March 2020_,_ the FASB issued ASU No. 2020-04_,_ Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021 issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. These ASUs provide expedients and exceptions to existing guidance on contract modifications and hedge accounting that is optional to facilitate the market transition from a reference rate, including LIBOR which is being phased out in 2021_,_ to a new reference rate. The provisions of the ASUs impact contract modifications and other changes that occur while LIBOR is phased out. The Company adopted the optional relief guidance provided within these ASUs in the fourth quarter of fiscal 2021 and continues to monitor its debt and derivative instruments that utilize LIBOR as the reference rate. The adoption of the standard did not impact our financial results for fiscal 2021.

Note 2****. Revenue Recognition:

Consumables revenues consist of single-use products and are recognized at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment. Instruments revenues typically consist of longer-lived assets that, for the substantial majority of sales, are recognized at a point in time in a manner similar to consumables. Service revenues consist of extended warranty contracts, post contract support (“PCS”), and custom development projects that are recognized over time as either the customers receive and consume the benefits of such services simultaneously or the underlying asset being developed has no alternative use for the Company at contract inception and the Company has an enforceable right to payment for the portion of the performance completed. Service revenues also include laboratory services recognized at a point in time. Prior to fiscal year 2021, the Company has not recognized revenue upon completion of the performance obligation for laboratory services, but rather upon cash receipt, which was subsequent to the performance obligation being satisfied. The Company accounted for these services based on cash receipts as we did not have significant historical experience collecting payments from Medicare or other insurance providers and considered the variable consideration for such services to be constrained as it would not be probable that a significant amount of revenue would not need to be reversed in future periods for the services provided. Given Medicare coverage for our laboratory services became effective on December 1, 2019, the Company considered that it had sufficient data to estimate variable consideration as of July 1, 2020 for laboratory services that are reimbursed by Medicare. The amount of cash received in fiscal year 2021 for laboratory services reimbursed by Medicare that were performed prior to July 1, 2020 was approximately $0.5 million. The Company continues to record revenue based on cash receipts for laboratory services not reimbursed by Medicare, as the variable consideration remains constrained. We recognize royalty revenues in the period the sales occur using third party evidence. The Company elected the "right to invoice" practical expedient based on the Company's right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

The Company elected the exemption to not disclose the unfulfilled performance obligations for contracts with an original length of one year or less and the exemption to exclude future performance obligations that are accounted under the sales-based or usage-based royalty guidance. The Company's unfulfilled performance obligations for contracts with an original length greater than one year were not material as of June 30, 2021 and June 30, 2020.

Contracts with customers that contain instruments may include multiple performance obligations. For these contracts, the Company allocates the contract’s transaction price to each performance obligation on a relative standalone selling price basis. Allocation of the transaction price is determined at the contracts’ inception.

Payment terms for shipments to end-users are generally net 30 days. Payment terms for distributor shipments may range from 30 to 90 days. Service arrangements commonly call for payments in advance of performing the work (e.g. extended warranty and service contracts), upon completion of the service (e.g. custom development manufacturing) or a mix of both.

Contract assets include revenues recognized in advance of billings. Contract assets are included within other current assets in the accompanying balance sheet as the amount of time expected to lapse until the company's right to consideration becomes unconditional is less than one year. We elected the practical expedient allowing us to expense contract costs that would otherwise be capitalized and amortized over the contract period. Contract assets as of June 30, 2021 are not material.

Contract liabilities include billings in excess of revenues recognized, such as those resulting from customer advances and deposits and unearned revenue on warranty contracts. Contract liabilities as of June 30, 2021 and June 30, 2020 were approximately $20.0 million and $14.2 million, respectively. Contract liabilities as of June 30, 2020 subsequently recognized as revenue during the year ended June 30, 2021 were approximately $10.6 million. Contract liabilities in excess of one year are included in Other long-term liabilities on the balance sheet.

Any claims for credit or return of goods must be made within 10 days of receipt. Revenues are reduced to reflect estimated credits and returns. Although the amounts recorded for these revenue deductions are dependent on estimates and assumptions, historically our adjustments to actual results have not been material.

Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related shipping and handling costs are reflected in cost of products. We have elected the practical expedient that allows us to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost, and we accrue costs of shipping and handling when the related revenue is recognized.

The following tables present our disaggregated revenue for the periods presented.

Revenue by type is as follows:

	Year ended June 30,
	2021		2020		2019
Consumables	$	751,985	$	602,642	$	588,979
Instruments		93,782		71,462		67,538
Services		66,416		47,459		38,050
Total product and services revenue, net		912,183	$	721,563		694,567
Royalty revenues		18,849		17,128		19,439
Total revenues, net	$	931,032	$	738,691	$	714,006

Revenue by geography is as follows:

	Year Ended June 30,
	2021		2020		2019
Net sales:
United States	$	502,080	$	404,407	$	391,191
EMEA, excluding U.K.		204,264		155,289		155,821
U.K.		40,945		30,411		34,975
APAC, excluding Greater China		69,013		60,362		52,913
Greater China		87,556		68,792		57,799
Rest of world		27,174		19,430		21,307
Total external sales	$	931,032	$	738,691	$	714,006

Note 3. Supplemental Balance Sheet and Cash Flow Information:

Available-For-Sale Investments:

The fair value of the Company's available-for-sale equity investments as of June 30, 2021 and June 30, 2020 were $20.0 million and $87.8 million, respectively. The decrease was due to year-over-year decrease in the stock price of CCXI, which was $13.39 per share at June 30, 2021 compared to $57.54 per share at June 30, 2020. The amortized cost basis of the Company's investment in CCXI was $6.6 million and $6.6 million as of June 30, 2021 and 2020, respectively. The Company's available-for-sale debt securities as of June 30, 2021 and June 30, 2020 were $12.5 million and $36.4 million, respectively. The decrease is due to the timing of debt maturities and cash balances at the balance sheet date.

Inventories:

Inventories consist of (in thousands):

	June 30,
	2021		2020

Raw materials	$	55,096	$	51,530
Finished goods(1)		67,108		56,268
Inventories, net	$	122,204	$	107,798

(1) Finished goods inventory of $5,456 and $4,646 is included within other long-term assets in the June 30, 2021 and June 30, 2020 Balance Sheets, respectively, as it forecasted to be sold after the 12 months subsequent to the consolidated balance sheet date.

Property and Equipment:

Property and equipment consist of (in thousands):

	June 30,
	2021			2020
Cost:
Land	$	8,612		$	8,516
Buildings and improvements		190,661			184,430
Machinery, equipment and other		198,483			153,704
Property and equipment		397,756			346,650
Accumulated depreciation and amortization		(189,849	)		(169,821	)
Property and equipment, net	$	207,907		$	176,829

Intangibles assets were comprised of the following (in thousands):

					June 30,
	Useful Life (years)				2021			2020

Developed technology		9	-	15	$	552,160		$	434,653
Trade names		2	-	20		147,640			146,713
Customer relationships		7	-	16		232,493			211,750
Patents			10			2,926			2,475
Other intangibles(1)		5	-	15		6,316			-
Definite-lived intangible assets						941,535			795,591
Accumulated amortization						(348,267	)		(279,046	)
Definite-lived intangibles assets, net						593,268			516,545
In process research and development						22,700			-
Total intangible assets, net					$	615,968		$	516,545

(1) Increase in other intangibles assets is primarily due to $5.0 million recognized in intangible assets in the first quarter of fiscal 2021 for certain third party patented technology acquired.

Changes to the carrying amount of net intangible assets consist of (in thousands):

	June 30,
	2021			2020

Beginning balance	$	516,545		$	579,429
Acquisitions (Note 4)		153,311			-
Other additions		5,912			311
Amortization expense		(64,940	)		(61,095	)
Currency translation		5,140			(2,100	)
Ending balance	$	615,968		$	516,545

Amortization expense related to developed technologies included in cost of sales was $36.5 million, $34.5 million, and $33.3 million in fiscal 2021, 2020, and 2019, respectively. Amortization expense related to trade names, customer relationships, non-compete agreements, and patents included in selling, general and administrative expense was $28.4 million, $26.6 million, and $25.4 million, in fiscal 2021, 2020, and 2019 respectively.

The estimated future amortization expense for intangible assets as of June 30, 2021, excluding any possible future amortization associated with acquired IPR&D which has not met technological feasibility, is as follows (in thousands):

2022	$	74,482
2023		72,649
2024		69,780
2025		66,523
2026		62,739
Thereafter		247,095
Total	$	593,268

Changes in goodwill by segment and in total consist of (in thousands):

	Protein Sciences			Diagnostics & Genomics			Total
June 30, 2019	$	377,407		$	355,260		$	732,667
Acquisitions (Note 4)		(326	)		-			(326	)
Currency Translation		(4,000	)		(31	)		(4,031	)
June 30, 2020	$	373,081		$	355,229		$	728,310
Acquisitions (Note 4)		7,848			94,970			102,818
Currency translation		11,788			151			11,939
June 30, 2021	$	392,717		$	450,350		$	843,067

Supplemental Cash Flow Information:

Supplemental cash flow information was as follows (in thousands):

	Year Ended June 30,
	2021		2020			2019
Income taxes paid	$	20,952	$	41,992		$	36,814
Interest paid		13,576		18,615			21,497
Non-cash activities:
Acquisition-related liabilities(1)		23,600		(2,105	)		12,600
Other intangibles(2)		4,000		-			-

(1) Consists of holdback payments due at future dates and liabilities for contingent consideration. Amounts disclosed above represent the total non-cash change in the liability from the prior fiscal year. Further information regarding liabilities for contingent consideration can be found in Notes 4 and 5. (2) $4.0 million of the third party patented technology acquired in fiscal 2021 was a non-cash activity within the consolidated statement of cash flows as a cash payment was not made within the fiscal year ended June 30, 2021.

Note 4****. Acquisitions:

We periodically complete business combinations that align with our business strategy. Acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and that the results of operations of each acquired business be included in our consolidated statements of comprehensive income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred.

2021 Acquisitions

Eminence Biotechnology

On October 20, 2020, the Company acquired 47.6% of the outstanding equity shares of Changzhou Eminence Biotechnology Co., Ltd. (Eminence) for approximately $9.8 million, net of cash acquired. The fair value of the noncontrolling interest of $9.0 million included in the consolidated balance sheet was a non-cash activity within the statement of cash flows. Eminence is considered a variable interest entity as it is an early stage biotechnology company that required additional funding through a subsequent equity investment, which was used to fund Eminence’s expansion and GMP manufacturing capabilities within China. On April 2, 2021, the Company invested approximately $6 million of additional funding into Eminence, increasing our percentage of outstanding equity shares to 57.4%. The Company was considered the primary beneficiary at the time of initial acquisition given the Company was the largest shareholder coupled with its ability to exercise significant influence over the entity. As of June 30, 2021, the Company’s investment at risk is limited to its $15.8 million in investments.

As Eminence met the criteria for consolidation, the transaction was accounted for in accordance with ASC 805, Business Combinations. In applying ASC 805 to the transaction, the Company has elected to include Eminence in our consolidated financial statements on a one month lag.

The goodwill recorded as result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The fair value of the noncontrolling interest in Eminence was calculated utilizing cash flow projections discounted to the acquisition date and control premiums calculated using market data. Acquired goodwill is not deductible for income tax purposes. The business became part of the Protein Sciences reportable segment in the second quarter of fiscal year 2021.

The allocation of purchase consideration related to Eminence was completed in the fourth quarter of fiscal year 2021. The fair values of the assets acquired and liabilities assumed at acquisition date and the updated final amounts as of June 30, 2021 are as follows (in thousands):

	Preliminary Allocation at Acquisition Date		Adjustments to Fair Value			Final Allocation at June 30, 2021
Current assets, net of cash	$	3,145	$	-		$	3,145
Equipment and other long-term assets		1,639		-			1,639
Intangible assets:
Developed technology		6,778		-			6,778
Customer relationships		2,133		-			2,133
Goodwill		8,811		(963	)		7,848
Total assets acquired		22,506		(963	)		21,543
Liabilities		1,436		-			1,436
Deferred income taxes, net		2,320		(963	)		1,357
Net assets acquired	$	18,750	$	-		$	18,750

Cash paid, net of cash acquired		9,765		-			9,765
Fair value of noncontrolling interest in Eminence		8,985		-			8,985
Net assets acquired	$	18,750	$	-		$	18,750

As summarized in the table, there were adjustments totaling $1.0 million to goodwill during the measurement period. These adjustments relate to refinements within our deferred tax amounts based on factors existing on the acquisition date.

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology and customer relationships was based on management's preliminary forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed technology is estimated to be 13 years. Amortization expense related to customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be 10 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the calculation of acquired NOLs.

Asuragen, Inc.

On April 6, 2021, the Company acquired all of the ownership interests of Asuragen, Inc. for approximately $216 million, net of cash acquired, plus contingent consideration of up to $105.0 million, subject to certain revenue thresholds. The Asuragen acquisition adds a leading portfolio of best in-class molecular diagnostic and research products, including genetic screening, oncology testing kits, molecular controls, a GMP compliant manufacturing facility, and a CLIA-certified laboratory. The transaction was accounted for in accordance with ASC 805, Business Combinations. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’ product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Diagnostics and Genomics operating segment in the fourth quarter of fiscal year 2021.

The allocation of purchase consideration related to Asuragen Inc is considered preliminary with provisional amounts primarily rel ated to goodwill and income tax assessment of acquired net operating losses. The Company expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations in fiscal year 2021 were approximately $7.1 million and $ 3.4 million, respectively. The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date and at June 30, 2021 are as follows (in thousands):

	Preliminary allocation at acquisition date and at June 30, 2021
Current assets, net of cash	$	10,422
Equipment and other long-term assets		3,762
Intangible assets:
Developed technology		107,000
In-process research and development		22,700
Customer relationships		11,700
Tradenames		2,000
Non-competition agreement		1,000
Goodwill		94,970
Total assets acquired		253,554

Liabilities		4,003
Deferred income taxes, net		15,664
Net assets acquired	$	233,887

Cash paid, net of cash acquired		215,587
Contingent consideration payable		18,300
Net assets acquired	$	233,887

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology, in-process research and development, and customer relationships was based on management's preliminary forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed technology is estimated to be 14 years. Amortization expense related to customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be 16 years. The amount recorded for tradenames and the non-competition agreement is being amortized with the expense reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for tradenames and the non-competition agreement is estimated to be 5 years and 3 years, respectively. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the preliminary calculation of acquired NOLs.

2019 Acquisitions

Quad Technologies

On July 2, 2018, the Company acquired QT Holdings Corporation (Quad) for approximately $20.5 million, net of cash acquired, plus contingent consideration of up to $51.0 million, subject to certain product development milestones and revenue thresholds. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Protein Sciences operating segment in the first quarter of fiscal year 2019. Purchase accounting was finalized during fiscal 2019.

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology was estimated based on management's forecasted cash inflows and outflows using a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology asset is being amortized with the expense reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for the developed technology intangible assets acquired in fiscal 2019 is 14 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for our calculation of acquired net operating losses (NOLs).

Exosome Diagnostics

On August 1, 2018, the Company acquired Exosome Diagnostics, Inc. (ExosomeDx) for approximately $251.6 million, net of cash acquired, plus contingent consideration of up to $325.0 million, subject to certain EBITA thresholds. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Diagnostics and Genomics operating segment in the first quarter of fiscal year 2019. Purchase accounting was finalized during fiscal 2019.

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology, trade names, and customer relationships was based on management's forecasted cash inflows and outflows and using either a relief-from-royalty or a multiperiod excess earnings method to calculate the fair value of assets purchased. The developed technology asset is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. Amortization expense related to trade names, and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2019 are 15 years for developed technology and trade names, and 14 years for customer relationships. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the calculation of acquired NOLs.

Note: As part of the ExosomeDx acquisition, a certain amount of the cash payment was held in escrow. As part of the finalization of the outstanding amounts held in escrow, the Company recognized a gain of $7.2 million during fiscal year 2020 related to returned proceeds and a relief of any future contingent payments as described in Note 5. The gain was recorded within selling, general, and administrative costs in the Consolidated Statement of Comprehensive Income.

B-MoGen Biotechnologies

On June 4, 2019, the Company acquired the remaining interest in B-MoGen Biotechnologies Inc. (B-MoGen) for approximately $17.5 million, net of cash acquired, plus contingent consideration of up to $38.0 million, subject to certain product development milestones and revenue thresholds. The Company previously held an investment of $1.4 million in B-MoGen and recognized a gain of approximately $3.7 million on the transaction within other non-operating income fiscal year 2019 in the consolidated statements of earnings and comprehensive income, which represented the adjustment of our historical investment to its fair value.

The goodwill recorded as result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Protein Sciences segment in the fourth quarter of fiscal year 2019. Purchase accounting remained opened as disclosed in our prior year 10-K/A for working capital adjustments and our income tax assessment of acquired net operating losses (NOLs) with the completion of the stub period tax returns. Our purchase accounting was finalized in fiscal 2020 with an immaterial adjustment of $0.3 million to deferred tax amounts and goodwill.

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology was estimated based on management's forecasted cash inflows and outflows and using a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology asset is being amortized with the expense reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for the developed technology intangible asset acquired in fiscal 2019 is 14 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the calculation of acquired NOLs.

	B-MoGen Biotechnologies		Exosome Diagnostics		Quad Technologies
Current assets, net of cash	$	504	$	2,611	$	36
Equipment and other long-term assets		269		2,212		228
Intangible assets:
Developed technology		14,000		105,000		12,256
Trade name		-		58,000		-
Customer relationships		400		2,300		-
Goodwill		16,131		105,362		14,481
Total assets acquired		31,304		275,485		27,001

Liabilities		211		3,716		296
Deferred income taxes, net		3,051		16,346		943
Net assets acquired	$	28,042	$	255,423	$	25,762

Cash paid, net of cash acquired		17,448		251,623		20,462
Additional consideration(1)		10,594		3,800		5,300
Net assets acquired	$	28,042	$	255,423	$	25,762

(1)Additional consideration for the B-MoGen acquisition includes a previously held investment of $1.4 million and a gain of approximately $3.7 million recorded on the transaction. The remaining additional consideration for B-MoGen, ExosomeDx, and Quad relate to the opening balance sheet value of contingent consideration.

Tangible assets acquired, net of liabilities assumed, were stated at fair value at the date of acquisition based on management's assessment. The purchase price allocated to developed technology, trade names, non-compete agreements and customer relationships was based on management's forecasted cash inflows and outflows and using a relief-from-royalty and multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology is being amortized with the expense reflected in cost of good sold in the Consolidated Statements of Earnings and Comprehensive Income. Amortization expense related to trade names, the non-compete agreement and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statements of Earnings and Comprehensive Income. The deferred income tax liability represents the estimated future impact of adjustments for the cost to be recognized upon the sale of acquired inventory that was written up to fair value and intangible asset amortization, both of which are not deductible for income tax purposes, and the future tax benefit of net operating loss and tax credit carryforwards which will be deductible by the Company in future periods.

Note 5. Fair Value Measurements:

The Company’s financial instruments include cash and cash equivalents, available for sale investments, accounts receivable, accounts payable, contingent consideration obligations, derivative instruments, and long-term debt.

Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. This standard also establishes a hierarchy for inputs used in measuring fair value. This standard maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available in the circumstances.

The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable for the asset or liability and their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 may also include certain investment securities for which there is limited market activity or a decrease in the observability of market pricing for the investments, such that the determination of fair value requires significant judgment or estimation.

The following tables provide information by level for financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Total carrying value as of		Fair Value Measurements Using Inputs Considered as
	June 30, 2021		Level 1		Level 2		Level 3
Assets
Equity securities (1)	$	19,963	$	18,581	$	1,382	$	-
Certificates of deposit (2)		12,500		12,500		-		-
Derivative instruments - cash flow hedges		275		-		275		-
Total Assets	$	32,738	$	31,081	$	1,657	$	-

Liabilities
Contingent consideration	$	29,400	$	-	$	-	$	29,400
Derivative instruments - cash flow hedges		8,376		-		8,376		-
Total Liabilities	$	37,776	$	-	$	8,376	$	29,400

	Total carrying value as of		Fair Value Measurements Using Inputs Considered as
	June 30, 2020		Level 1		Level 2		Level 3
Assets
Equity securities (1)	$	87,842	$	79,846	$	7,996	$	-
Certificates of deposit (2)		36,426		36,426		-		-
Total Assets	$	124,268	$	116,272	$	7,996	$	-

Liabilities
Contingent consideration		6,137	$	-		-		6,137
Derivative instruments - cash flow hedges		17,331		-		17,331		-
Total Liabilities	$	23,468	$	-	$	17,331	$	6,137

	(1) Included in available-for-sale investments on the balance sheet. The cost basis in the Company's investment in CCXI at June 30, 2021 and June 30, 2020 was $6.6 million and $6.6 million respectively. The Company has a warrant to purchase additional CCXI equity shares which was valued at $1.4 million as of June 30, 2021. The fair value of the warrant as of June 30, 2020 was $8.0 million
	(2) Included in available-for-sale investments on the balance sheet. The certificate of deposits have contractual maturity dates within one year.

(1) Included in available-for-sale investments on the balance sheet. The cost basis in the Company's investment in CCXI at June 30, 2021 and June 30, 2020 was $6.6 million and $6.6 million respectively. The Company has a warrant to purchase additional CCXI equity shares which was valued at $1.4 million as of June 30, 2021. The fair value of the warrant as of June 30, 2020 was $8.0 million

(2) Included in available-for-sale investments on the balance sheet. The certificate of deposits have contractual maturity dates within one year.

Fair value measurements of available for sale securities

Available for sale securities excluding warrants are measured at fair value using quoted market prices in active markets for identical assets and are therefore classified as Level 1 assets. The Company's warrant to purchase additional shares at a specified future price was valued using a Black-Scholes model with observable inputs in active markets and therefore was classified as a Level 2 asset.

Fair value measurements of derivative instruments

In October 2018_,_ the Company entered into forward starting swaps designated as cash flow hedges on outstanding debt. The forward starting swaps reduce the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s long-term debt described in Note 6 to that of a fixed interest rate. Accordingly, as part of the forward starting swaps, the Company exchanges, at specified intervals, the difference between floating and fixed interest amounts based on an initial $380 million of notional principal amount. The notional amount decreased by $100 million in October 2020 and will further decrease by $80 million in October 2021 and $200 million in October 2022. In June 2020, the Company de-designated $80 million of the notional amount set to expire in October 2020. The net loss associated with the June 2020 de-designated portion of the derivative instrument was not reclassified into earnings based on the amount of probable variable interest payments to occur within a two month time period of the forecasted hedged transaction. In December 2020, the Company de-designated an additional $80 million of notional amount set to expire in October 2021. During fiscal year 2021, the Company recorded a loss in other non-operating income related to variable interest debt payments in certain months on a portion of the de-designated derivative that is not expected to occur. The remaining variable interest payments for the portion of the de-designated derivative were considered probable of occurring and therefore remain in accumulated other comprehensive income as of June 30, 2021. The fair value of the portion of the de-designated derivative was $0.8 million as of June 30, 2021, which is recorded within short-term liabilities on the Consolidated Balance Sheet. The fair value of the designated derivative instrument is $7.6 million as of June 30, 2021 and is recorded within other long-term liabilities on the Consolidated Balance Sheet.

In May 2021, the Company entered into a new forward starting swap designated as a cash flow hedge on forecasted debt. The forward starting swap reduces the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s forecasted variable interest long-term debt to that of a fixed interest rate. Accordingly, as part of the forward starting swap, the Company exchanges, at specified intervals, the difference between floating and fixed interest amounts based on $200 million of notional principal amount. The effective date of the swap is November 2022 with the full swap maturing in November 2025. The fair value of the derivative instrument was $0.3 million as of June 30, 2021 which is recorded within other long-term assets on the Consolidated Balance Sheet.

Changes in the fair value of the designated hedged instrument are reported as a component of other comprehensive income and reclassified into interest expense over the corresponding term of the cash flow hedge. The Company reclassified $8.6 million to interest expense, $0.5 million to non-operating income for the portion of de-designated variable payments considered probable to not occur, and related tax benefits of $2.1 million during the fiscal year ended June 30, 2021 relating to the cash flow hedge entered into in October 2018. No amounts were reclassified relating to the cash flow hedge entered into in May 2021 as they will be recorded within the effective period of the cash flow hedge.

The Company reclassified $3.5 million, net of taxes, to interest expense during the fiscal year ended June 30, 2020. The change in the fair value of the de-designated notional hedged amount was not material as of June 30, 2020. The instruments were valued using observable market inputs in active markets and therefore are classified as Level 2 liabilities.

The Company did not reclassify any amounts out of other comprehensive income into interest expense during the fiscal year ended June 30, 2019.

Fair value measurements of contingent consideration

The Company has $29.4 million, which is the fair value, of contingent consideration related to the Asuragen, Quad, and B-MoGen acquisitions. The Company is required to make contingent consideration payments of up to $105.0 million, $51.0 million, and $38.0 million, respectively, as part of these acquisition agreements. The contingent agreement with Asuragen was based on achieving certain revenue thresholds, the contingent agreement with Quad is based on meeting certain product development milestones and revenue thresholds, and the contingent agreement with B-MoGen is based on meeting certain product development milestones and revenue thresholds. The preliminary fair value of the liabilities for the Asuragen acquisition was $18.3 million as discussed in Note 4. The preliminary fair value of the revenue milestone payments was determined using a Monte Carlo simulation-based model discounted to present value. Assumptions used in these calculations are units sold, expected revenue, expected expenses, discount rate, and various probability factors.

During the fourth quarter of fiscal 2020, the Company's obligation for potential contingent consideration payments related to the ExosomeDx acquisition were relieved as part of the Company's escrow settlement with the former shareholders of ExosomeDx. As the result of this settlement, the Company reversed an accrual for the fair value of the contingent liability at the date of settlement.

The ultimate settlement of contingent consideration liabilities for the Asuragen, Quad, and B-Mogen acquisitions could deviate from current estimates based on the actual results of the financial measures described above. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for these acquisitions is included in general and administrative expense.

The following table presents a reconciliation of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

	June 30,
	2021			2020

Fair value at the beginning of period	$	6,137		$	12,600
Purchase price contingent consideration (Note 4)		18,300			-
Payments		(337	)		(4,358	)
Gain on escrow settlement		-			(1,200	)
Change in fair value of contingent consideration		5,300			(905	)
Contingent consideration payable	$	29,400		$	6,137

Fair value measurements of other financial instruments – The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate fair value.

Cash and cash equivalents, certificates of deposit, accounts receivable, and accounts payable – The carrying amounts reported in the consolidated balance sheets approximate fair value because of the short-term nature of these items.

Long-term debt – The carrying amounts reported in the consolidated balance sheets for the amount drawn on our line-of-credit facility and long-term debt approximates fair value because our interest rate is variable and reflects current market rates.

Note 6****. Debt and Other Financing Arrangements:

On August 1, 2018, the Company entered into a new uncollateralized revolving line-of-credit and term loan governed by a Credit Agreement (the Credit Agreement). The Credit Agreement provides for a revolving credit facility of $600.0 million, which can be increased by an additional $200.0 million subject to certain conditions, and a term loan of $250.0 million. Borrowings under the Credit Agreement may be used for working capital and expenditures of the Company and its subsidiaries, including financing permitted acquisitions. Borrowings under the Credit Agreement bear interest at a variable rate. The current outstanding debt is based on the Eurodollar Loans term for which the interest rate is calculated as the sum of LIBOR plus an applicable margin. The applicable margin is determined for the total leverage ratio of the Company and updated on a quarterly basis. The annualized fee for any unused portion of the credit facility is currently 12.5 basis points. The Company has recorded $12.5 million of our outstanding borrowings under the Credit Agreement as a current liability in our Consolidated Balance sheet, which represents our required quarterly debt payments to be made in fiscal year 2022.

The Credit Agreement matures on August 1, 2023 and contains customary restrictive and financial covenants and customary events of default. At the closing on August 1, 2018 the company borrowed $250.0 million under the term loan and $330.0 million under the revolving credit facility. As of June 30, 2021 and 2020, the outstanding balance under the Credit Agreement was $341 million and $357 million respectively.

Note 7. Leases:

As a lessee, the company leases offices, labs, and manufacturing facilities, as well as vehicles, copiers, and other equipment. The Company adopted ASU No. 2016-02 and related standards (collectively ASC 842, Leases), which replaced previous lease accounting guidance, on July 1, 2019.

The Company recognizes operating lease expense on a straight-line basis over the lease term. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is the Company’s incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region. During fiscal year 2021, the Company recognized $3.6 million in variable lease expense in the Consolidated Statements of Earnings and Comprehensive Income. During fiscal year 2021, the Company also recognized $32.5 million relating to fixed lease expense in the Consolidated Statements of Earnings and Comprehensive Income.

The following table summarizes the balance sheet classification of the Company’s operating leases, amounts of right of use assets and lease liabilities, the weighted average remaining lease term, and the weighted average discount rate for the Company’s operating leases (asset and liability amounts are in thousands):

	Balance Sheet Classification	As of: June 30, 2021
Operating leases:
Operating lease right of use assets(1)	Right of Use Asset	$	73,834

Current operating lease liabilities(1)	Operating lease liabilities current	$	11,602
Noncurrent operating lease liabilities(1)	Operating lease liabilities		67,625
Total operating lease liabilities		$	79,227

Weighted average remaining lease term (in years):			7.97

Weighted average discount rate:			3.93	%

(1) The right of use asset, current operating lease liabilities, and noncurrent lease liabilities on the Consolidated Balance Sheet exclude a definitive agreement entered into by the Company in June 2021 for a 25,000 square foot facility in Dublin, Ireland for the next 25 years with annual rental impact of $0.3 million. The lease will commence during fiscal 2022 after construction is completed by the landlord. As the lease has not commenced as of June 30, 2021, the related asset and liability were not recorded.

The following table summarizes the cash paid for amounts included in the measurement of operating lease liabilities and right of use assets obtained in exchange for new operating lease liabilities for the year ended _June 30, 2021 (_in thousands):

	For the year ended June 30, 2021
Cash amounts paid on operating lease liabilities(1)	$	13,492

Right of use assets obtained in exchange for lease liabilities		12,144

(1) Total cash paid for the Company's operating leases during the year ended June 30, 2021 include cash amounts paid on operating lease liabilities and variable lease expenses. Cash flow impacts from right of use assets and lease liabilities are presented net on the cash flow statement in changes in other operating activity.

The following table summarizes payments by date for the Company’s operating leases, which is then reconciled to our total lease obligation (in thousands):

	June 30, 2021 Operating Leases
2022	$	14,349
2023		13,371
2024		11,840
2025		10,780
2026		10,120
Thereafter		32,331
Total	$	92,791
Less: Amounts representing interest		13,564
Total lease obligations		79,227

Certain leases include one or more options to renew, with terms that extend the lease term up to five years. The Company includes option to renew the lease as part of the right of use lease asset and liability when it is reasonably certain the Company will exercise the option. In addition, certain leases contain fair value purchase and termination options with an associated penalty. In general, the Company is not reasonably certain to exercise such options.

Note 8. Supplemental Equity and Accumulated Other Comprehensive Income (loss):

Supplemental Equity

The Company has declared cash dividends per share of $1.28 in each of the full fiscal years ended June 30, 2021, June 30, 2020, and June 30, 2019. During the years ended June 30, 2021 and June 30, 2020, the Company repurchased 120,000 shares at an average share price of $359.81 and _2_79,381 shares at an average share price of $179.37, respectively. The Company's accounting policy is to record the portion of share repurchases in excess of the par value entirely in retained earnings. During fiscal year 2021, 2020 and 2019, the amounts within the Consolidated Statements of Shareholders' Equity for the surrender and retirement of stock to exercise options due to net settlement stock options exercises were not material.

Accumulated Other Comprehensive Income (loss)

Changes in accumulated other comprehensive income (loss) attributable to Bio-Techne, net of tax, are summarized as follows (in thousands):

	Unrealized Gains (Losses) on Available- for-Sale Investments			Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Derivatives Instruments			Total
Balance June 30, 2018	$	24,682		$	(69,496	)	$	-		$	(44,814	)
Cumulative effect adjustment for adoption for ASU 2018-02		2,371			-			-			2,371
Cumulative effect adjustment for adoption for ASU 2016-01		(27,053	)		-			-			(27,053	)
Other comprehensive income (loss) before reclassifications		-			(4,487	)		(9,537	)		(14,024	)
Balance June 30, 2019	$	-		$	(73,983	)	$	(9,537	)	$	(83,521	)
Other comprehensive income (loss) before reclassifications		-			(9,963	)		(7,179	)		(17,142	)
Reclassification from loss on derivatives to interest expense, net of taxes		-			-			3,464			3,464
Balance June 30, 2020	$	-		$	(83,946	)	$	(13,253	)	$	(97,199	)
Other comprehensive income (loss) before reclassifications(2)		-			32,848			100			32,948
Reclassification from loss on derivatives to interest expense, net of taxes(1)		-			-			6,960			6,960
Balance June 30, 2021	$	-		$	(51,098	)	$	(6,193	)	$	(57,291	)

(1) Gains (losses) on the interest swap will be reclassified into interest expense as payments on the derivative agreement are made. The Company reclassified $8,598 to interest expense and $512 to non-operating income relating to variable interest payments that were probable not to occur as further discussed in Note 5 for the fiscal year ended June 30, 2021. The Company also recorded a related tax benefit of $2,150 during fiscal 2021. The Company had deferred tax benefits of $1,908 and $4,058 included in the accumulated other comprehensive income loss as of June 30, 2021 and June 30, 2020_,_ respectively.

(2) Other comprehensive income related to foreign currency translation adjustments in the table above includes the amount attributable to Bio-Techne and excludes the $103 attributable to the non-controlling interest in Eminence.

Note 9. Earnings Per Share:

The following table reflects the calculation of basic and diluted earnings per share (in thousands, except per share amounts):

	Year Ended June 30,
	2021			2020			2019
Earnings per share – basic:
Net earnings, including noncontrolling interest		139,585			229,296			96,072
Less net earnings attributable to noncontrolling interest		(825	)		-			-
Net income	$	140,410		$	229,296		$	96,072
Income allocated to participating securities		(86	)		(224	)		(105	)
Income available to common shareholders	$	140,324		$	229,072		$	95,967
Weighted-average shares outstanding – basic		38,747			38,201			37,781
Earnings per share – basic	$	3.62		$	6.00		$	2.54

Earnings per share – diluted:
Net income	$	140,410		$	229,296		$	96,072
Income allocated to participating securities		(86	)		(224	)		(105	)
Income available to common shareholders	$	140,324		$	229,072		$	95,967
Weighted-average shares outstanding – basic		38,747			38,201			37,781
Dilutive effect of stock options and restricted stock units		1,736			1,200			1,111
Weighted-average common shares outstanding – diluted		40,483			39,401			38,892
Earnings per share – diluted	$	3.47		$	5.82		$	2.47

Basic net income per common share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares of our stock result from dilutive common stock options and restricted stock units. We use the treasury stock method to calculate the weighted-average shares used in the diluted earnings per share computation. Under the treasury stock method, the proceeds from exercise of an option, the amount of compensation cost, if any, for future service that we have not yet recognized, and the amount of estimated tax benefits that would be recorded in paid-in capital, if any, when the option is exercised are assumed to be used to repurchase shares in the current period.

The dilutive effect of stock options in the above table excludes all options for which the aggregate exercise proceeds exceeded the average market price for the period. The number of potentially dilutive option shares excluded from the calculation was 0.6 million, 0.9 million, and 1.3 million for the fiscal years ended June 30, 2021, 2020 and 2019, respectively.

Note 10. Share-based Compensation and Other Benefit Plans:

The cost of employee services received in exchange for the award of equity instruments is based on the fair value of the award at the date of grant. Compensation cost is recognized using a straight-line method over the vesting period and is net of estimated forfeitures. Stock option exercises and stock awards are satisfied through the issuance of new shares.

Equity incentive plan: The Company's Second Amended and Restated 2010 Equity Incentive Plan (the Second A&R 2010 Plan) provides for the granting of incentive and nonqualified stock options, restricted stock, restricted stock units, performance shares, performance units and stock appreciation rights. There were 7.5 million shares of common stock authorized for grant under the Second A&R 2010 Plan. In October 2020, the shareholders approved an amended and restated incentive plan - the 2020 Equity Incentive Plan. The maximum aggregate number of shares of common stock reserved and available for awards under the Amended Plan is 2,484,202 shares, which includes an additional 1,300,000 shares authorized by the 2020 Equity Incentive Plan. Shares issued after the shareholder meeting are issued under the 2020 Equity Incentive Plan. At June 30, 2021, there were 1.1 million shares of common stock available for grant under the 2020 Equity Incentive Plan. The maximum term of incentive options granted under the 2020 Equity Incentive Plan is ten years. The 2020 Equity Incentive Plan replaced the Company's second A&R 2010 Plan, which had previously amended and restated the Company's Amended and Restate 2010 Equity Incentive Plan (the A&R 2010 Plan). The A&R 2010 Plan had previously replaced the Company's 1998 Nonqualified Stock Option Plan (the 1998 Plan). The Second A&R 2010 Plan and the 1998 Plan (collectively, the Plans) are administered by the Board of Directors and its Executive Compensation Committee, which determine the persons who are to receive awards under the Plans, the number of shares subject to each award and the term and exercise price of each award. The number of shares of common stock subject to outstanding awards as of June 30, 2021 under the 2020 Equity Incentive Plan were 3.7 million.

The fair values of options granted under the Plans were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used:

	Year Ended June 30,
	2021				2020				2019

Dividend yield			0.24%				0.67%				0.74%
Expected volatility		25%	-	30%		22%	-	24%		20%	-	23%
Risk-free interest rates		0.2%	-	0.7%		1.3%	-	1.9%		2.5%	-	3.0%
Expected lives (years)			4.4				4.0				4.1

The dividend yield is based on the Company's historical annual cash dividend divided by the market value of the Company's common stock. The expected annualized volatility is based on the Company's historical stock price over a period equivalent to the expected life of the option granted. The risk-free interest rate is based on U.S. Treasury constant maturity interest rates with a term consistent with the expected life of the options granted.

Stock option activity under the Plans for the three years ended June 30, 2021, consists of the following (shares in thousands):

			Weighted Average Exercise Price		Aggregate Intrinsic Value (millions)

Outstanding at June 30, 2018	3,452		$	105.17
Granted	917			173.89
Forfeited	(330	)		129.93
Exercised	(383	)		95.29
Outstanding at June 30, 2019	3,656		$	121.16
Granted	752			190.80
Forfeited	(56	)		95.97
Exercised	(743	)		157.45
Outstanding at June 30, 2020	3,609		$	140.28
Granted	763			277.75
Forfeited	(28	)		214.33
Exercised	(627	)		112.53
Outstanding at June 30, 2021	3,717		$	172.63	$	1,031.9	4.1

Exercisable at June 30, 2019:	1,467			98.70
Exercisable at June 30, 2020:	1,564			112.60
Exercisable at June 30, 2021:	1,764			126.44	$	571.3	3.0

The weighted average fair value of options granted during fiscal 2021, 2020, and 2019 was $59.75, $37.01, and $34.66 respectively. The total intrinsic value of options exercised during fiscal 2021, 2020, and 2019 were $145.6 million, $99.3 million, and $159.0 million, respectively. The total fair value of options vested during fiscal 2021, 2020, and 2019 were $70.5 million, $71.1 million, and $31.7 million, respectively.

Restricted common stock activity under the Plans for the three years ended June 30, 2021, consists of the following (units in thousands):

			Weighted Average Grant Date Fair Value
Unvested at June 30, 2018	35		$	117.39
Granted	15			177.93
Vested	(20	)		116.76
Forfeited	-			-
Unvested at June 30, 2019	30		$	147.94
Granted	15			193.48
Vested	(18	)		142.12
Forfeited	-			-
Unvested at June 30, 2020	28		$	177.20
Granted	12			264.73
Vested	(17	)		171.64
Forfeited	-			-
Unvested at June 30, 2021	23		$	226.07	6.07

The total fair value of restricted shares that vested was $2.8 million for fiscal 2021, $2.5 million for fiscal 2020, and $2.3 million for fiscal 2019.

Restricted stock unit activity under the Plans for the three years ended June 30, 2021, consists of the following (units in thousands):

			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2018	148		$	117.95
Granted	56			170.96
Vested	(28	)		110.86
Forfeited	(36	)		143.72
Outstanding at June 30, 2019	139		$	134.17
Granted	31			192.08
Vested	(51	)		111.07
Forfeited	(3	)		155.60
Outstanding at June 30, 2020	116		$	159.25
Granted	31			300.78
Vested	(51	)		130.18
Forfeited	-			-
Outstanding at June 30, 2021	96		$	220.53	5.36

The total fair value of restricted stock units that vested was $6.7 million for fiscal 2021, $5.7 million for fiscal 2020, and $3.1 million for fiscal 2019. The restricted stock units vest over a three-year period.

Stock-based compensation cost, inclusive of payroll taxes, of $46.4 million, $32.4 million, and $32.3 million was included in selling, general and administrative expense in fiscal 2021, 2020 and 2019, respectively. Additionally, stock-based compensation costs, inclusive of payroll taxes, of $1.6 million was included in cost of goods sold in 2021. As of June 30, 2021, there was $37.1 million of unrecognized compensation cost related to non-vested stock options, non-vested restricted stock units and non-vested restricted stock which will be expensed in fiscal 2022 through 2024 using a 4.6% forfeiture rate. The weighted average period over which the compensation cost is expected to be recognized is 2.1 years.

Employee stock purchase plan: In fiscal year 2015, the Company established the Bio-Techne Corporation 2014 Employee Stock Purchase Plan (ESPP), which was approved by the Company's shareholders on October 30, 2014, and which is designed to comply with IRS provisions governing employee stock purchase plans. 200,000 shares were allocated to the ESPP. The Company recorded expense of $0.9 million, $0.4 million, and $0.5 million for the ESPP in fiscal 2021, 2020, and 2019, respectively.

Profit sharing and savings plans: The Company has profit sharing and savings plans for its U.S. employees, which conform to IRS provisions for 401(k) plans. The Company makes matching contributions to the Plan. The Company has recorded an expense for contributions to the plans of $3.4 million, $3.2 million, and $2.8 million for the years ended June 30, 2021, 2020, and 2019, respectively. The Company operates defined contribution pension plans for its U.K. employees. The Company has recorded an expense for contributions to the plans of $1.6 million for year ended June 30, 2021 and $1.4 million for each of the years ended June 30, 2020 and 2019.

Performance incentive programs: In fiscal 2021, under certain employment agreements, a Management Incentive Plan, and a business incentive plan, available to executive officers, certain management personnel, and certain other professional employees, the Company recorded cash bonuses of $21.1 million, granted options for 762,761 shares of common stock, issued 11,803 restricted common shares and 30,823 restricted stock units. In fiscal 2020 and fiscal 2019, the Company recorded cash bonuses of $10.5 million and $9.3 million, granted options for 751,499 and 618,898 shares of common stock, and issued 15,398 and 11,279 restricted common stock shares and 30,858 and 25,903 restricted stock, respectively.

Note 11. Income Taxes:

Income before income taxes was comprised of the following (in thousands):

	Year Ended June 30,
	2021		2020		2019
Domestic	$	95,662	$	245,365	$	64,081
Foreign		52,513		31,112		47,934
Income before income taxes	$	148,175	$	276,477	$	112,015

The provision for income taxes consisted of the following (in thousands):

	Year Ended June 30,
	2021			2020			2019
Taxes on income consist of:
Currently tax provision:
Federal	$	15,179		$	18,976		$	16,090
State		6,681			6,018			544
Foreign		14,743			8,580			13,329
Total current tax provision		36,603			33,574			29,963
Deferred tax provision:
Federal		(20,812	)		14,074			(6,903	)
State		(4,962	)		2,055			(3,977	)
Foreign		(2,239	)		(2,522	)		(3,142	)
Total deferred tax provision		(28,013	)		13,607			(14,021	)
Total income tax provision	$	8,590		$	47,181		$	15,943

The Company’s effective income tax rate for fiscal 2021 was 5.8% vs 17.1% in the prior year. The change in the effective tax rate for fiscal 2021 and 2020 was driven by changes in net discrete tax benefits of $28.1 million and $19.4 million for fiscal year 2021 and 2020, respectively.

The Company's effective income tax rate for fiscal 2020 was 17.1% for fiscal 2020 vs 14.2% in the prior year. The change in the effective tax rate for fiscal 2020 and 2019 were driven by the changes in the net discrete tax benefits $19.4 million and $12.7 million, respectively.

The Company's discrete tax benefits in fiscal 2021 primarily related to share-based compensation excess tax benefits of $28.1 million.

The Company's discrete tax benefits in fiscal 2020 primarily related to share-based compensation excess tax benefits of $17.7 million.

The Company's discrete tax benefits in fiscal 2019 primarily related to share-based compensation excess tax benefits of $7.2 million, $3.2 million related to fiscal 2019 acquisitions, and $2.0 million for tax refunds relating to certain state apportionments.

The Company continues to monitor newly enacted regulations, clarifications, and changes in guidance the Tax Cuts and Jobs Act “Tax Act”, which was enacted on December 22, 2017. The Company recognizes changes in legislation in the period enacted, which may have a material impact on our effective tax rate in future periods.

The following is a reconciliation of the federal tax calculated at the statutory rate of to the actual income taxes provided:

	Year Ended June 30,
	2021			2020			2019

Income tax expense at federal statutory rate		21.0	%		21.0	%		21.0	%
State income taxes, net of federal benefit		0.6			2.3			(1.5	)
Research and development tax credit		(1.8	)		(0.7	)		(1.6	)
Contingent consideration adjustment		0.8			(0.2	)		(0.4	)
Foreign tax rate differences		0.8			(0.2	)		0.2
Option exercises		(16.9	)		(5.7	)		(5.8	)
U.S. taxation of foreign earnings		(0.1	)		0.9			3.7
Foreign derived intangible income		(5.1	)		(0.9	)		(2.0	)
Executive compensation limitations		6.5			1.6			0.4
Other, net		0.0			(1.0	)		0.2
Effective tax rate		5.8	%		17.1	%		14.2	%

Deferred taxes on the Consolidated Balance Sheets consisted of the following temporary differences (in thousands):

	June 30
	2021			2020

Inventory	$	6,730		$	7,769
Net operating loss carryovers		31,345			25,707
Tax credit carryovers		14,486			9,568
Excess tax basis in equity investments		2,429			2,423
Deferred compensation		11,108			10,755
Derivative - cash flow hedge		1,908			4,058
Lease liability		17,016			16,256
Other		8,526			4,340
Valuation allowance		(6,665	)		(7,523	)
Deferred tax assets		86,883			73,353

Net unrealized gain on available-for-sale investments		(3,159	)		(19,102	)
Intangible asset amortization		(150,765	)		(128,279	)
Depreciation		(9,099	)		(10,764	)
Right of use asset		(15,868	)		(15,118	)
Other		(1,117	)		(1,180	)
Deferred tax liabilities		(180,008	)		(174,443	)
Net deferred tax liabilities	$	(93,125	)	$	(101,090	)

A deferred tax valuation allowance is required when it is more likely than not that all or a portion of deferred tax assets will not be realized. The valuation allowance as of June 30, 20__21 was $6.7 million compared to $7.5 million in the prior year.

As of June 30, 2021, the $6.7 million valuation allowance relates to certain foreign and state tax net operating loss and state credit carryforwards that existed at the date the Company acquired Quad, ExosomeDx, ACD, Novus, ProteinSimple and CyVek as well as immaterial amounts generated after the acquisitions. The Company believes it is more likely than not that these tax carryovers will not be realized.

As of June 30, 2021, the Company has federal operating loss carryforwards of approximately $92.1 million and state operating loss carryforwards of $129.6 million from its acquisitions of Asuragen (refer to note 4), Quad, ExosomeDx, ACD, ProteinSimple and CyVek, which are not limited under IRC Section 382. As of June 30, 2021, the Company has foreign net operating loss carryforwards of $13.9 million. The net operating loss carryforwards expire between fiscal 2022 and 2036. The Company has a deferred tax asset of $26.6 million, net of the valuation allowance discussed above, related to the net operating loss carryovers. As of June 30, 2021, the Company has federal and state tax credit carryforwards of $10.1 million and $4.4 million, respectively. The federal tax credit carryforwards expire between 2028 and 2038. The majority of the state credit carryforwards have no expiry date. The Company has a deferred tax asset of $12.6 million, net of the valuation allowance discussed above, related to the tax credit carryovers.

The Company has not recognized a deferred tax liability for unremitted foreign earnings of approximately $223 million from its foreign operations because its subsidiaries have invested or will invest the undistributed earnings indefinitely. The transition tax included as part of the Tax Act resulted in the previously untaxed foreign earnings being included in the federal and state fiscal 2018 taxable income. The one-time transition tax was based on certain foreign earnings for which earnings have been previously indefinitely reinvested as well as the amount of earnings held in cash and other specified assets. No additional income taxes have been provided for cumulative unremitted foreign earnings as at this time our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. If there are policy changes, we would record applicable taxes at that time.

We continue to analyze our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which include local country withholding tax and potential U.S. state taxation. In addition, we anticipate that further guidance from the IRS and US Treasury related to the Tax Act could impact the amount of any related taxes. Therefore, it is not practical to estimate the amount of the deferred income tax liabilities related to investments in these foreign subsidiaries.

The following is a reconciliation of the beginning and ending balance of unrecognized tax benefits (in thousands):

	Year Ended June 30,
	2021			2020			2019
Beginning balance	$	4,297		$	5,032		$	1,947
Additions due to acquisitions		-			-			900
Additions for tax positions of prior year		4,038			306			2,185
Decrease in unrecognized tax benefits for prior year positions		(778	)		(1,041	)		-
Settlements		(286	)		-			-
Ending balances	$	7,271		$	4,297		$	5,032

Included in the balance of unrecognized tax benefits at June 30, 2021 are potential benefits of $5.2 million that, if recognized, would affect the effective tax rate on income from continuing operations. The amount of interest and penalties recognized on the balance sheet as of June 30, 2021 is not material. The Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase in the next twelve months. It is reasonably possible that the unrecognized tax benefits may decrease by $2.6 million as a result of ongoing discussions with the German tax authorities regarding a historical local matter. The Company files income tax returns in the U.S. federal and certain state tax jurisdictions, and several jurisdictions outside the U.S. The Company's federal returns are subject to tax assessment for 2017 and subsequent years. State and foreign income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

Note 12. Segment Information:

The Company operates under two operating segments, Protein Sciences and Diagnostics and Genomics.

The Company's Protein Sciences segment is comprised of the reagent solutions and analytical solutions. These businesses manufacture consumables used for conducting laboratory experiments by both industry and academic scientists within the biotechnology and biomedical life science fields. No customer in the Protein Sciences segment accounted for more than 10% of the segment’s net sales for the years ended June 30, 2021, 2020, and 2019.

The Company's Diagnostics and Genomics segment is comprised of diagnostics reagents, genomics, and our Exosome and Asuragen acquisitions. Diagnostics reagents develops and manufactures a range of controls and calibrators used with diagnostic equipment and as proficiency testing tools, as well as other reagents incorporated into diagnostic kits. Genomics, Exosome, and Asuragen consists of Genomics and Exosome products and sells a portfolio of clinical molecular diagnostic oncology assays, as well as tissue-based in-situ hybridization assays for research in clinical use. No customer in the Diagnostics and Genomics segment accounted for more than 10% of the segment’s net sales for the fiscal years ended June 30, 2021, 2020, and 2019.

There are no concentrations of business transacted with a particular customer or supplier or concentrations of revenue from a particular product or geographic area that would severely impact the Company in the near term.

Following is financial information relating to the operating segments (in thousands):

	Year Ended June 30,
	2021			2020			2019
Net sales:
Protein Sciences	$	704,564		$	555,352		$	543,159
Diagnostics and Genomics		227,744			184,549			171,674
Intersegment		(1,276	)		(1,210	)		(827	)
Consolidated net sales	$	931,032		$	738,691		$	714,006

Operating Income:
Protein Sciences	$	328,837		$	234,929		$	240,919
Diagnostics and Genomics		38,425			14,965			10,079
Segment operating income		367,262			249,894			250,998
Costs recognized upon sale of acquired inventory		(1,565	)		-			(3,739	)
Amortization of acquired intangible assets		(64,239	)		(60,865	)		(58,550	)
Gain on escrow settlement		-			7,169			-
Acquisition related expenses		(7,114	)		(416	)		(2,282	)
Restructuring costs		(142	)		(87	)		-
Stock-based compensation, inclusive of employer taxes		(51,846	)		(34,262	)		(33,057	)
Corporate general, selling and administrative expenses		(5,060	)		(4,015	)		(6,651	)
Consolidated operating income	$	237,296		$	157,419		$	146,719

The Company has some integrated facilities that serve multiple segments. As such, asset and capital expenditure information by operating segment has not been provided and is not available, since the Company does not produce or utilize such information internally. In addition, although depreciation and amortization expense is a component of each operating segment’s operating results, it is not discretely identifiable.

The Company has disclosed sales by geographic area based on the location of the customer or distributor in Note 2. The Company has disclosed dis-aggregated product and service revenue by consumables, instruments, and services in Note 2. The Company considers total instrument and total service revenue to represent similar groups of products in the fiscal years presented. The Company considered our consumables sold in the Protein Sciences and Diagnostics and Genomics segments to represent different groups of products and therefore have separately disclosed the related consumables revenue (in thousands) :

	Year Ended June 30,
	2021		2020		2019
Consumables revenue - Protein Sciences	$	557,037	$	431,052	$	430,655
Consumables revenue - Diagnostics and Genomics		194,948		171,590		158,324
Total consumable revenue	$	751,985	$	602,642	$	588,979

The following is financial information relating to geographic areas (in thousands):

	Year ended June 30,
Long-lived assets:	2021		2020
United States and Canada	$	190,501	$	162,039
Europe		13,949		13,120
Asia		3,457		1,670
Total long-lived assets	$	207,907	$	176,829
Intangible assets:
United States and Canada	$	594,512	$	499,875
Europe		9,369		12,349
Asia		12,087		4,321
Total intangible assets	$	615,968	$	516,545

Long-lived assets are comprised of land, buildings and improvements and equipment, net of accumulated depreciation and other assets.

Note 13. Subsequent Events:

None

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Bio-Techne Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Bio-Techne Corporation and subsidiaries (the Company) as of June 30, 2021 and 2020, the related consolidated statements of earnings and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended June 30, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 25, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of July 1, 2019, due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842) and related amendments.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill impairment analysis for the Exosome reporting unit

As discussed in Note 1 to the consolidated financial statements, the goodwill balance as of June 30, 2021 was $843.1 million, of which $105.4 million related to the Exosome reporting unit. The Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of a reporting unit likely exceeds its fair value. This involves estimating the fair value of the reporting units using a discounted cash flow model.

We identified the evaluation of the goodwill impairment analysis for the Exosome reporting unit as a critical audit matter. There was a high degree of subjectivity in applying and evaluating certain key assumptions used in the discounted cash flow model to estimate the fair value of the Exosome reporting unit. Specifically, the revenue growth rates and the discount rate were challenging to test as they represented subjective determinations of future market and economic conditions. Changes to those assumptions could have had a significant effect on the Company’s assessment of the fair value of the Exosome reporting unit.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the goodwill impairment process. This included controls related to the Company’s determination of the estimated fair value of the Exosome reporting unit, including controls related to the development of the assumptions for the revenue growth rates and discount rate. We performed sensitivity analyses over the revenue growth rate and discount rate assumptions to assess their impact on the Company’s determination that the fair value of the Exosome reporting unit exceeded its carrying value. We evaluated the reasonableness of the Company’s forecasted revenue growth rates for the Exosome reporting unit by comparing the growth rate assumptions to industry related third-party data. We also compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rate used in the valuation, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities.

Fair value measurement of the developed technology and in-process research and development intangible assets acquired in the Asuragen acquisition

As discussed in Note 4 to the consolidated financial statements, the Company acquired Asuragen, Inc. (Asuragen) in April 2021, for total consideration of $233.9 million, net of cash acquired. As a result of the acquisition, the Company recognized intangible assets of $144.4 million, including developed technology of $107.0 million and in-process research and development (IPR&D) of $22.7 million.

We identified the assessment of the fair value measurement of the acquired developed technology and IPR&D as a critical audit matter. There was a high degree of subjectivity in applying and evaluating certain key assumptions used to estimate the fair value of the acquired developed technology and IPR&D. Specifically, the revenue growth rates and the discount rates were challenging to test as they represented subjective determinations of future market and economic conditions. Changes to those assumptions could have had a significant effect on the determination of the fair value measurements.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the assumptions for the revenue growth rates and discount rates. We performed sensitivity analyses over the revenue growth rates to assess the impact of changes in those assumptions on the Company’s determination of the fair value of the developed technology and IPR&D. We evaluated the reasonableness of the Company’s forecasted revenue growth rates used to determine forecasted revenues by comparing them to historical results and industry related third-party data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

	●	evaluating the discount rates used by the Company by comparing them against discount rate ranges that were independently developed using publicly available market data for comparable entities

	●	testing the estimate of the fair value of the intangible assets acquired using the Company’s cash flow forecasts and discount rates, and comparing the results to the Company’s fair value estimates.

Initial fair value measurement of the contingent consideration liability related to the Asuragen acquisition

As discussed in Note 4 to the consolidated financial statements, the initial fair value of the contingent consideration liability for the Asuragen acquisition was $18.3 million. The contingent consideration liability is recorded at fair value and remeasured each reporting period, with a maximum payout of $105.0 million upon achievement of certain revenue targets through calendar year 2023.

We identified the assessment of the initial fair value measurement of the contingent consideration liability as a critical audit matter. There was a high degree of subjectivity in applying and evaluating certain key assumptions used to estimate the initial fair value of the contingent consideration liability. Specifically, the revenue growth rates, volatility, and discount rate were challenging to test as they represented subjective determinations of future market and economic conditions. Changes to those assumptions could have had a significant effect on the determination of the initial fair value of the contingent consideration liability.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the assumptions for the revenue growth rates, volatility, and discount rate. We performed sensitivity analyses over the future revenue growth rates to assess the impact of changes in those assumptions on the Company’s determination of the initial fair value of the contingent consideration liability. We evaluated the reasonableness of the Company’s forecasted revenue growth rates used to determine forecasted revenues by comparing them to historical results and industry related third-party data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

	●	evaluating the Company’s volatility and discount rate, by comparing the Company’s inputs to the volatility and the discount rate to publicly available market data for comparable entities, and assessing the resulting volatility and discount rate

	●	testing the estimate of the initial fair value of the contingent consideration liability using the Company’s forecasted revenues, volatility, and the discount rate, and comparing the results to the Company’s initial fair value estimate.

/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

Minneapolis, Minnesota August 25, 2021

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors Bio-Techne Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Bio-Techne Corporation and subsidiaries’ (the Company) internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission_._ In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of June 30, 2021 and 2020, the related consolidated statements of earnings and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2021,and the related notes (collectively, the consolidated financial statements), and our report dated August 25, 2021 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Asuragen, Inc. and a controlling interest in Eminence Biotechnology during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2021, Eminence Biotechnology and Asuragen, Inc.’s internal control over financial reporting associated with 12.0% of total assets and 0.8% of total revenues included in the consolidated financial statements of the Company as of and for the year ended June 30, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Eminence Biotechnology and Asuragen, Inc.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Minneapolis, Minnesota August 25, 2021

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