US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
Commission File Number 0-11740
MESA LABORATORIES, INC.
(Name of small business issuer in its charter)
Colorado 84-0872291
(State or other jurisdiction of (I.R.S. Employer Identifica-
incorporation or organization) tion Number)
12100 West Sixth Avenue
Lakewood, Colorado 80228
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number: (303) 987-8000
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No Par Value
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Check if disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year:
$8,062,561.
State the aggregate market value of the voting stock held by non-
affiliates of the Registrant: As of May 31, 1996: $30,239,190*.
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: No
Par Value Common Stock--4,314,157 shares as of March 31, 1996.
Documents incorporated by reference: none.
Transitional Small Business Disclosure Format: Yes ; No X .
* The aggregate market value was determined by multiplying the
number of outstanding shares (excluding those shares held of
record by officers, directors and greater than five percent
shareholders) by $9.00, the last sales price of the Registrant's
common stock as of May 31, 1996, such date being within 60 days
prior to the date of filing.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Introduction
Mesa Laboratories, Inc. (formerly Mesa Medical Inc.)
(hereinafter referred to as the "Company" or "Mesa") was
incorporated as a Colorado corporation on March 26, 1982. The
Company designs, develops, acquires, manufactures and markets
instruments and systems utilized in connection with industrial
applications and hemodialysis therapy. In August 1984, the
Company acquired Western Laboratories Corp., a manufacturer and
marketer of a line of instruments for use in calibrating
hemodialysis proportioning equipment. In June 1989, the Company
acquired the DATATRACE product line of Ball Corporation. In
February 1993, the Company acquired the assets of NUSONICS, Inc.,
a manufacturer of ultrasonic flow meters and analyzers.
The Company presently markets the DATATRACE and ELOGG
recording systems which are used in various industrial
applications; NUSONICS Concentration Analyzers, Pipeline
Interface Detectors and Flow Meter products which are used in
various industrial applications; and two product lines used in
dialysis [Western Meters and the ECHO Reprocessor]. The Company
is also performing research and development to expand the
application of its technology.
Mesa's executive offices are located at 12100 West Sixth
Avenue, Lakewood, Colorado 80228, telephone (303) 987-8000.
Temperature Recording
The world market for temperature sensors, indicators and
recorders is currently estimated at $1.8-2.1 billion and is
projected to grow at an annual rate of 4-6% over the next several
years. The electronics-based thermal sensor market to which
DATATRACE products belong currently exceeds $100 million and is
expected to expand at a rate of between 9% and 11%.
The temperature recording market is highly segmented.
DATATRACE products have developed application niches within
major industry segments such as food processing, pharmaceutical
processing, transportation, electronics, aerospace, storage
facilities and textile manufacturing. DATATRACE products are
used in any industry where temperature is critical to the
manufacturing process, quality of the product or where product
temperature profiles are required in a continuous or moving
process environment.
DATATRACE Micropack Tracers, FRB Tracers and Flatpack Tracers
The Micropack Tracer utilizes the latest advances in
microcircuitry, power supply and sensor technologies. The
instrument is computer based and can be programmed by the user to
take and store up to 1,000 temperature readings. A lithium
battery is utilized so that the device is completely self-
contained and requires no external wires or cables. The devices
operate at temperatures from - 40 F to 680 F and provide both
high accuracy and reliability. Currently, the Micropack Tracers
are sold with various probe configurations in three temperature
ranges: LoTemp, which records temperatures from -40 F to 185 F;
Standard Temp, which records temperatures from 50 F to 302 F;
and HiTemp, which records temperatures from 212 F to 680 F.
The Flatpack Tracer provides the customer with a flat profile
instrument in addition to the round Micropack Tracer. The
Flatpack Tracer is offered in the same temperature ranges and
probe configurations as the Micropack Tracer. Offering the same
features but slightly larger than the Micropack Tracer, the FRB
Tracer provides users with the ability to replace batteries at
their facility, lowering operating cost and down time for factory
replacement of the battery.
The DATATRACE Tracers can be placed completely inside a
container or process to provide true time and temperature
profiles of manufacturing processes, transportation systems and
storage facilities. Optional probe configurations and
attachments allow the Tracers to be adapted to a wide variety of
applications. By eliminating the need for wires or cable
connections, the Tracer greatly reduces set up time while
increasing measurement reliability.
DATATRACE PC Interface
The DATATRACE product line also includes a PC Interface
Module and system software for user programming of the Tracer
instruments for graphics software and displaying and analyzing
results. Programming and retrieval of data from the Tracer is
achieved by placing the instrument in the PC Interface Module
which is linked to a personal computer. The system's software is
menu driven, allowing the operator to quickly and easily program
start time and date, sample intervals and run ID. Programming can
be accomplished within fifteen seconds by the operator. After a
process run, data is retrieved by returning the Tracer to the PC
Interface Module and following the menu instructions.
ELOGG Dataloggers
The Company distributes the ELOGG Datalogger product line
in North America. The ELOGG line is similar in concept to the
DATATRACE line, featuring different benefits to the end-user
such as longer battery life, extended memory and humidity logging
in certain models. Unlike the DATATRACE products, the ELOGG is
a larger device which is not as environmentally resistant and is
ideally suited for long-term monitoring applications, such as
transportation and warehousing. The ELOGG line also features a
PC Interface Module and software for user programming.
Sonic Fluid Measurement
The Company's sonic fluid measurement product line consists
of two major segments: Sonic Flow Meters and Concentration
Monitors. While the total market for flow meters is very large,
the NUSONICS Sonic Flow Meters best serve applications where
cleanliness, resistance to corrosives or portability are
required. Specific applications where the NUSONICS products are
particularly well suited include water treatment, chemical
processing and heating, ventilation and air conditioning (HVAC)
applications.
The Concentration Monitor segment of the product line
consists of Pipeline Interface Detectors and Concentration
Analyzers. The Pipeline Interface Detector serves a smaller
market niche while the Concentration Analyzers serve a wider
variety of industry application, such as chemical and food
processing, pharmaceutical processing and polymerization
processes.
NUSONICS Sonic Flow Meters
The Sonic Flow Meter line is a range of products which are
suited to various measurement applications. Introduced during
fiscal 1995, the Model CM800 Sonic Flow Meter is the Company's
main wetted transducer meter. With transducers that are mounted
through the pipe wall and in contact with the material flowing
through the pipe, it is the most accurate type of ultrasonic flow
meter. The Model 90 Sonic Flow Meter features strap-on
transducers and is sold in portable and fixed process versions.
This product offers flexibility and portability for measuring
flow and is totally noninvasive, measuring flow rates through the
pipe wall. The Company offers flow measurement products directed
toward the heating, ventilation and air conditioning (HVAC)
market. The Balance Master Meter is a hand-held portable meter
which quickly plugs into specialized flow stations with window
seal ports. This meter allows the plant engineer to quickly read
and adjust flow within a building. The CM800 Flow Meter utilizes
the same window seal flow stations as the Balance Master to
provide continuous flow monitoring for use in energy management
systems. In addition, the Company markets doppler flow meters in
both permanent and strap-on transducer models. Unlike the
transit-time technology that the Company's other flow products
utilize to measure clean fluids with dissolved solids, the
doppler technology is utilized when the fluids to be measured
contain either suspended solids or entrained gases.
NUSONICS Sonic Concentration Analyzers
Liquid composition can be determined by measuring sound
velocity. Since the sound velocity of any liquid is unique, the
relationship between sound velocity, liquid composition and temperature is
different for every liquid. Once the relationship is known, sound velocity
can be used to monitor changes in liquid composition, often with much
greater precision than can be realized with other measuring devices.
Composition Analyzers are marketed to various industrial
users and are currently used to monitor more than 250 different materials.
On a real time basis, the analyzer will monitor the composition of
materials for process control of blending operations or for tracking the
progress of polymerization processes. This product line is currently led by
the Model 86 Composition Monitor. In addition, the Company also offers
Model 87 (a laboratory model) and the new Model 88 (which provides new
signal processing technology).
Based on the same technology as the Composition Analyzers,
the Company also markets Pipeline Interface Detectors to the petroleum
pipeline industry. This instrument is used to monitor the interface of
similar materials in a pipeline, such as leaded and unleaded fuel. By
detecting these interfaces, the pipeline operator can accurately perform
switching operations within the pipeline system.
Kidney Hemodialysis Treatment
Patients with kidney failure (known as end stage renal
disease, or ESRD) require the removal of toxic waste products and excess
water through artificial means. This process needs to be performed three
times per week and is most often accomplished through the use of hemodialysis.
Hemodialysis requires the treatment to be conducted on a
dialysis machine through the use of a disposable cartridge known as a
dialyzer. Blood is brought extracorporally to the dialysis machine for
control and monitoring and passes through the dialyzer where waste products
and excess water are removed. This treatment generally lasts three to four
hours and is conducted three times per week. These hemodialysis procedures
are performed in kidney dialysis centers, hospitals and in the home. The
bulk of the treatments are conducted in over 2,000 clinics and hospital
centers. Currently, there are over 100,000 patients in the U.S. undergoing
dialysis therapy.
In addition to the reimbursement policies of the United
States Government and state agencies, the Company's revenues from its
dialysis products can be expected to be dependent upon the policies of
insurance companies and kidney foundations.
Western Meters
Mesa's Western Meters are instruments that are used to test
various parameters of the dialysis fluid (dialysate). The meter line
consists of five different meters. Each measures some combination of
temperature, pressure, pH and conductivity to ensure that the dialysate has
the proper constituency to promote the transfer of waste products from the
blood to the dialysate. The meters are used to check the conductivity and
other variables of the dialysate before the dialysis process begins.
The meters provide a digital readout that the patient, physician or
technician uses to verify that the dialysis unit is working within
prescribed limits.
The Company's Western Meter product line consists of several
different meters. Model 81 is a digital meter which measures conductivity
only and is used primarily by home dialysis patients. Models 80C and 80BC
measure both conductivity and temperature and are also designed for use by
home dialysis patients. Model 90BC is used by dialysis centers and
measures conductivity, temperature and pressure. Model 90DX, the most
advanced Western Meter, measures conductivity, temperature, pressure and pH.
Model 90DX is microprocessor-based and features improved accuracy and user
convenience and field calibration capabilities.
The ECHO MM-1000 Dialyzer Reprocessor
Dialyzer reuse is a procedure in which a patient's dialyzer
is cleaned, performance tested and disinfected before it is reused by the
same patient. The approximate cost of the dialyzer is $10-$50, and each
patient requires approximately 156 dialyzers annually if no reuse is
employed. Although the Company has not conducted a scientific market
survey, it estimates that more than 70% of the hemodialysis patients being
treated in centers are involved with reuse programs.
The ECHO MM-1000 Dialyzer Reprocessor is a fully automated
dialyzer reuse machine for which the Company received permission to market
from the FDA in June 1982. It automatically cleans, rinses, tests and
delivers disinfectants to dialyzers after dialysis therapy, thereby
allowing the dialyzer cartridges to be reused rather than disposed of after
each use. It is designed to accommodate virtually all manual reprocessing
procedures in use today and can be programmed to automate them without
extensive modification or rework. Manual procedures have been used to
reprocess dialyzers effectively for over 30 years and are the basis of most
automated systems in use today. Additionally, the system can be programmed
to use prescribed chemicals. The ECHO System is totally self-contained,
aside from water and chemicals, and requires no user adjustments.
Manufacturing
The Company assembles its manufactured products at its facility in
Lakewood, Colorado. The Company's manufacturing consists primarily of
assembling and testing materials and component parts purchased from others.
Most of the materials and components used in the Company's
product lines are available from a number of different suppliers.
Mesa generally maintains multiple sources of supplies for most items but is
dependent on a single source for certain items. Mesa believes that
alternative sources could be developed, if required, for present single
supply sources. Although the Company's dependence on these single supply
sources may involve a degree of risk, to date, Mesa has been able to acquire
sufficient stock to meet its production schedules.
Marketing and Distribution
The Company's domestic sales of its dialysis products are
generated by its in-house marketing staff while the Company maintains an
organization of independent manufacturers' representatives to distribute
its DATATRACE and ELOGG product lines. For its NUSONICS product lines, a
separate organization of manufacturers' representatives is maintained while
a distributor network is being used for the Company's HVAC product
line. International sales are conducted through over 50 distributors.
During the fiscal year ended March 31, 1996, approximately 54% of sales
have been domestic and 46% have been international, to countries throughout
Europe, Africa, Australia, Asia and South America, as well as Canada and
Mexico.
Sales promotions include attendance by Mesa representatives
at conventions and the continuation of direct mail campaigns and
trade journal advertising in industry related publications.
Customers of Mesa's dialysis products primarily include
dialysis centers and dialysis equipment manufacturers. The primary emphasis
of the Company's marketing effort is to offer quality products to the
healthcare market which will aid in cost containment and improved patient
well-being.
DATATRACE and ELOGG customers include numerous industrial
users who utilize the products within a variety of manufacturing,
transportation and storage applications. The emphasis of the Company's
marketing effort is to offer a quality product that provides a unique and
flexible solution to monitoring temperature without interfering with the
processing, transportation or storage of the product.
NUSONICS customers include various industries such as water
treatment, manufacturing, HVAC and petroleum product transportation. The
Company's marketing efforts are focused on offering flow measurement and
concentration monitoring in difficult environments where noninvasive
monitoring techniques are required.
During the fiscal year ended March 31, 1996, no single
customer accounted for 10% or more of the Company's revenues. The Company
does not believe that it is dependent upon a single customer or a few
customers, whose loss would have a long term adverse effect upon the
Company's business.
Competition
Mesa competes with major medical and instrumentation
companies as well as a number of smaller companies, many of which are well
established, with substantially greater capital resources and larger
research and development facilities. Furthermore, many of these companies
have an established product line and a significant operating history.
Accordingly, the Company may be at a competitive disadvantage due to such
factors as its limited resources and limited marketing and distribution
network.
Companies with which Mesa's medical products compete include
Minntech Corp. and Automata, Inc. Companies with which Mesa's DATATRACE and
ELOGG instrumentation products compete include Testoterm, Inc. and Rustrak
Instruments. Companies with which Mesa's NUSONICS products compete include
Controlotron, Badger Meter and Panametrics.
In the area of dialyzer reuse, management believes that the
availability of an automated reprocessing system which
consistently cleans, rinses and disinfects dialyzers, as well as tests them
for physical performance and leaks, can dramatically alter the reuse
patterns. Mesa believes that it is the largest supplier of meters used to
calibrate hemodialysis equipment, although it has not conducted independent
market surveys. The DATATRACE and ELOGG products offer unique solutions to
monitoring temperature through a continuous process or long-term
transportation and warehousing applications. Although there are
other solutions to temperature monitoring available, the DATATRACE products
offer a miniaturized, self-contained, environmentally resistant, wireless
solution to temperature recording. NUSONICS products offer solutions to
monitoring of clean fluids as well as highly corrosive materials, which are
either noninvasive or do not disturb the flow of the product
through the pipe. NUSONICS products also offer a unique solution to
monitoring variations in a fluid's concentration as the fluid passes
through a pipeline into or out of a process.
Government Regulation
Medical devices marketed by Mesa are subject to the
provisions of the Federal Food, Drug and Cosmetic Act, as amended by the
Medical Device Amendments of 1976 (hereinafter referred to as the "Act").
A medical device which was not marketed prior to May 28, 1976, or is not
substantially equivalent to a device marketed prior to that date, may not
be marketed until certain data is filed with the FDA and the FDA has
affirmatively determined that such data justifies marketing under
conditions specified by the FDA. A medical device is defined by the Act as
an instrument which (1) is intended for use in the diagnosis or
the treatment of disease, or is intended to affect the structure of any
function of the human body; (2) does not achieve its intended purpose
through chemical action; and (3) is not dependent upon being metabolized
for the achievement of its principal intended purpose. The Act requires
any company proposing to market a medical device to notify the FDA of its
intention at least ninety days before doing so, and in such
notification must advise the FDA as to whether the device is substantially
equivalent to a device marketed prior to May 28, 1976. As of the date
hereof, the Company has received permission from the FDA to market all of
its medical products.
Mesa's medical products are subject to FDA regulations and
inspections, which may be time-consuming and costly. This
includes on-going compliance with the FDA's current Good Manufacturing
Practices regulations which require, among other things, the systematic
control of manufacture, packaging and storage of products intended for
human use. Failure to comply with these practices renders the product
adulterated and could subject the Company to an interruption of manufacture
and sale of its medical products and possible regulatory action by the FDA.
The manufacture and sale of medical devices is also
regulated by some states. Although there is substantial overlap between
state regulations and the regulations of the FDA, some state laws may
apply. Mesa, however, does not anticipate that complying with state
regulations will create any significant problems. Foreign countries also
have laws regulating medical devices sold in those countries.
Employees
At March 31, 1996, the Company had a total of 45 employees,
of which 44 were full-time employees. Currently, 10 persons are employed
for marketing, 5 for research and development, 25 for manufacturing and
quality assurance and 5 for administration.
Additional Information
For the fiscal years ended March 31, 1996 and 1995, Mesa
spent approximately $294,826 and $358,481, respectively, on
Company-sponsored research and development activities.
Compliance with federal, state and local provisions which
have been enacted regarding the discharge of materials into the environment
or otherwise relating to the protection of the environment has not had, and
is not expected to have, any adverse effect upon capital expenditures,
earnings or the competitive position of the Company. Mesa is not presently
a party to any litigation or administrative proceedings with respect to its
compliance with such environmental standards. In addition, the
Company does not anticipate being required to expend any capital funds in
the near future for environmental protection in connection with its
operations.
The Company has been issued patents for its DATATRACE
temperature recording devices and its NUSONICS sonic flow measurement and
sonic concentration monitoring products. Failure to obtain patent
protection on the Company's remaining products may have a substantially
adverse effect upon the Company since there can be no assurance that other
companies will not develop functionally similar products, placing the
Company at a competitive disadvantage. Further, there can be no assurance
that patent protection will afford protection against competitors with
similar inventions, nor can there be any assurance that the patents will
not be infringed or designed around by others. Moreover, it may be costly
to pursue and to prosecute patent infringement actions against others and
such actions could interfere with the business of the Company.
ITEM 2. DESCRIPTION OF PROPERTY.
Mesa owns its 39,616 square foot facility at 12100 W. 6th
Avenue, Lakewood, Colorado 80228. All manufacturing, warehouse,
marketing, research and administrative functions are based at this location.
The facility is approximately 60% utilized and should provide adequate
capacity for continued expansion.
The Company does not invest in, and has not adopted any
policy with respect to investments in, real estate or interests in real
estate, real estate mortgages or securities of or interests in persons
primarily engaged in real estate activities. It is not the Company's
policy to acquire assets primarily for possible capital gain or primarily
for income.
ITEM 3. LEGAL PROCEEDINGS.
No material legal proceedings to which the Company is a
party or to which any of its property is the subject are pending and no such
proceedings are known by the Company to be contemplated. The Company is
not presently a party to any litigation or administrative proceedings with
respect to its compliance with federal, state and local provisions which
have been enacted regarding the discharge of materials into the
environment or otherwise relating to the protection of the environment and
no such proceedings are known by the Company to be contemplated. No legal
actions are contemplated nor judgments entered against any officer or
director of the Company concerning any matter involving the business of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders, through
the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Mesa's Common Stock is traded in the over-the-counter
market on the Nasdaq National Market under the symbol "MLAB". For the last
two fiscal years, the high and low closing bid prices of the Company's
Common Stock as reported to the Company by the National Association of
Securities Dealers, Inc. were as follows:
<TABLE>
<CAPTION>
Quarter Ended: High Low
<S> <C> <C>
June 30, 1994 2 15/16 2 1/16
September 30, 1994 2 3/4 2 7/16
December 31, 1994 2 3/4 2 3/8
March 31, 1995 2 9/16 2 1/4
Quarter Ended: High Low
June 30, 1995 3 3/4 2 1/2
September 30, 1995 4 1/4 3 1/4
December 31, 1995 4 5/8 3 5/8
March 31, 1996 8 3/8 4 1/4
</TABLE>
The over-the-counter quotations set forth herein reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may
not represent actual transactions.
(b) As of March 31, 1996, there were approximately 2,000
record and beneficial holders of Mesa's Common Stock.
(c) The Company has not declared or paid any dividends to
date.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
Results of Operations
Net Sales
Net sales for fiscal 1996 increased 22% from fiscal 1995.
In real dollars, net sales of $8,062,561 in fiscal 1996 increased
$1,458,958 from $6,603,603 in 1995. Net sales increases in fiscal 1996 were
due largely to increased Nusonics sales resulting from introduction of the
CM800 Flow Meter and M88 Concentration Analyzer and higher international
sales.
Medical and Datatrace sales during the fiscal year also increased
from the prior fiscal year. Net sales increases in fiscal 1995 were due
largely to increased Datatrace sales resulting from introduction of the FRB
Tracer and higher international sales.
Cost of Sales
Cost of sales as a percent of net sales in fiscal 1996 were
unchanged from fiscal 1995 at 38.3%. During fiscal 1996, Medical costs
decreased 4.4% and Datatrace costs increased 3.3%, respectively, as a
percent of sales while Nusonics costs increased 3.6% as a percent of sales.
For fiscal 1995, the cost of Nusonics products increased 1.5% and Medical
products increased 4.7%, respectively, while Datatrace products decreased
0.6% as a percent of sales. In fiscal 1996, the increase in Datatrace and
Nusonics cost of sales was due to increased allocation of production
support costs, while Medical costs were decreased by the same change in
allocations. The increase in Datatrace cost of sales in fiscal 1995 was
due to a higher ratio of Tracer units to PC Interface units and increased
sales of distributed products.
Selling, General and Administrative
Selling expenses increased 20% from fiscal 1995 to fiscal
1996. In real dollars, selling expenses increased $249,633 to $1,470,779 in
fiscal 1996 from $1,221,146 in fiscal 1995. The increase in selling
expenses during fiscal 1996 was due to higher outside sales commissions for
Nusonics international sales. The decrease in selling expenses in fiscal
1995 was due to reductions in Nusonics expenses during the second half of
the fiscal year.
General and administrative expenses were $806,897 in fiscal
1996 and $684,294 in fiscal 1995, which represents a $122,603 or 18%
increase from fiscal 1995 to fiscal 1996. Increased general and
administrative costs during fiscal 1996 were due to increased compensation,
costs associated with the move of the Company's facilities and fees
associated with the Company's change of listing to the Nasdaq National
Market. The increase in general and administrative costs during fiscal
1995 was due to increased amortization, shareholder relations expense and
increased compensation costs.
Research and Development
Company sponsored research and development costs were $294,826 in fiscal 96
and $358,481 in fiscal 1995, which represents an 18% decrease from year to
year. Costs during fiscal 1996 declined due to reductions in compensation
costs during the second half of the fiscal year following the retirement of
the Company's Director of Research and Development.
Anticipated staff increases in fiscal 1997 are expected to
increase costs in the current year. Research and development costs
decreased in fiscal 1995 due to reductions in redundant costs while the
Company maintained facilities in Colorado and its newly acquired Nusonics
operation in Oklahoma.
Net Income
Net income increased to $1,623,959 or $.37 per share in
fiscal 1996 from $1,235,714 or $.29 per share in fiscal 1995. The increase
in net income was due to an increase in revenues combined with a decrease
in research and development costs during fiscal 1996. The increase in net
income during fiscal 1995 was due to increased revenues combined with
decreases in selling and research and development expenses.
Liquidity and Capital Resources
On March 31, 1996, the Company had cash and short term
investments of $1,789,632. In addition, the Company had other current
assets totaling $4,321,516 and total current assets of $6,111,148. Current
liabilities of Mesa Laboratories, Inc. were $695,756 which resulted in a
current ratio of 9:1. For comparison purposes at March 31, 1995, Mesa
Laboratories, Inc. had cash and short term investments of $402,913, other
current assets of $3,909,296, total current assets of $4,312,209, current
liabilities of $515,672 and a current ratio of 8:1.
Mesa Laboratories, Inc. has made net capital purchases of
$419,144 during the past fiscal year which included renovations to its newly
acquired facility in Lakewood, Colorado for $315,862. The purchase and
renovation of the facility was made with the Company's existing cash reserve.
During the first quarter of fiscal 1995, the Company
announced its intention to repurchase up to 5% of its outstanding common
stock. Under the plan, the shares may be purchased from time to time in the
open market at prevailing prices or in negotiated transactions off the
market. Shares purchased will be used for general corporate purposes and
repurchases will be made with existing cash reserves. At March 31, 1996,
the Company had purchased an aggregate of 172,220 shares of its common
stock at a cost of $434,095. In the fourth quarter of fiscal 1996, the
Company authorized the repurchase of an additional 5% of its outstanding
shares under the same terms as the existing plan.
The Company anticipates that it will be able to meet the
needs of its current operations through internally generated cash flow
during the next fiscal year. In addition, the Company does not believe
that any segment of its business has been significantly impacted during the
past three years by cost inflation.
ITEM 7. FINANCIAL STATEMENTS.
TABLE OF CONTENTS
Independent Auditors' Report
Financial Statements:
Balance Sheets
Statements of Income
Statement of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
Audit Committee
Mesa Laboratories, Inc.
Lakewood, Colorado
We have audited the accompanying balance sheets of Mesa
Laboratories, Inc. as of March 31, 1996 and 1995, and the related statements
of operations, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Mesa Laboratories, Inc. as of March 31, 1996 and 1995, and the results of
its operations and its cash flows for the years then ended, in conformity
with generally accepted accounting principles.
Ehrhardt Keefe Steiner & Hottman PC
May 2, 1996
Denver, Colorado
<TABLE>
<CAPTION>
MESA LABORATORIES, INC.
BALANCE SHEETS
ASSETS March 31,
<S> 1996 1995
CURRENT ASSETS: <C> <C>
Cash and cash equivalents (Note 1) $1,789,632 $402,913
Accounts receivable-
Trade, net of allowance for
doubtful accounts of $50,000
(1996) and $40,000 (1995) 2,117,930 1,710,989
Other 16,513 500
Inventories (Notes 1 and 2) 2,006,773 2,032,638
Prepaid income tax 55,395 53,530
Prepaid expenses 35,070 38,824
Deferred income taxes (Note 4) 89,835 72,815
TOTAL CURRENT ASSETS 6,111,148 4,312,209
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation
of $841,949 (1996) and $757,350
(1995) (Notes 1 and 7) 1,577,544 1,311,243
OTHER ASSETS (Note 1):
Patents, net of accumulated
amortization of $251,539 (1996)
and $185,817 (1995) 568,073 633,796
Trademarks, net of accumulated
amortization of $45,327 (1996)
and $35,937 (1995) 212,630 220,470
Covenants not to compete, net of
accumulated amortization of
$252,527 (1996) and $194,951
(1995) 322,474 380,051
Deposits and other assets - 7,964
TOTAL OTHER ASSETS 1,103,177 1,242,281
$8,791,869 $6,865,733
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
MESA LABORATORIES, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY March 31,
<S> 1996 1995
CURRENT LIABILITIES: <C> <C>
Accounts payable, trade $ 100,733 $ 118,703
Accrued salaries and payroll taxes 289,643 219,144
Accrued warranty expense (Note 1) 33,000 24,000
Other accrued liabilities 235,736 134,223
Property taxes payable 36,644 19,602
TOTAL CURRENT LIABILITIES 695,756 515,672
LONG TERM LIABILITIES:
Deferred income taxes (Note 4) 58,135 65,650
COMMITMENTS AND CONTINGENCY (Note 6)
STOCKHOLDERS' EQUITY (Note 3):
Preferred stock, no par value;
Authorized 1,000,000 shares;
none issued - -
Common stock, no par value;
authorized 8,000,000 shares;
issued and outstanding, 4,314,157
shares (1996) and 4,233,761
shares (1995) 3,450,141 3,045,532
Retained earnings 4,587,837 3,238,879
8,037,978 6,284,411
$8,791,869 $6,865,733
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
MESA LABORATORIES, INC.
STATEMENTS OF INCOME
Year Ended March 31,
1996 1995
<S> <C> <C>
SALES (Notes 1 and 5) $8,062,561 $6,603,603
COST OF SALES 3,087,888 2,526,406
GROSS PROFIT 4,974,673 4,077,197
OPERATING EXPENSES:
Selling 1,470,779 1,221,146
General and administrative 806,897 684,294
Research and development (Note 1) 294,826 358,481
TOTAL OPERATING EXPENSES 2,572,502 2,263,921
OPERATING INCOME 2,402,171 1,813,276
INTEREST INCOME, NET AND OTHER 52,154 44,438
EARNINGS BEFORE INCOME TAXES 2,454,325 1,857,714
INCOME TAXES (Note 4) 830,366 622,000
NET INCOME $1,623,959 $1,235,714
NET INCOME PER SHARE $ .37 $ .29
AVERAGE COMMON SHARES OUTSTANDING 4,366,057 4,329,889
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
MESA LABORATORIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Total
Number of Retained Stockholders'
Shares Amount Earnings Equity
<S>
BALANCE, <C> <C> <C> <C>
March 31, 1994 4,363,732 $3,441,112 $2,003,165 $5,444,277
Common stock issued
for the conversion
of incentive stock
options net of
shares returned to
company as payment 31,749 7,699 - 7,699
Shares repurchased
by company (Notes
3 and 6) (161,720) (403,279) - (403,279)
Net income for
the year - - 1,235,714 1,235,714
BALANCE,
March 31, 1995 4,233,761 3,045,532 3,238,879 6,284,411
Common stock issued
for the conversion
of incentive stock
options net of
shares returned to
company as payment 90,896 160,424 - 160,424
Purchase and
retirement of
treasury stock
(Notes 3 and 6) (10,500) 244,185 (275,001) (30,816)
Net income for
the year - - 1,623,959 1,623,959
BALANCE,
March 31, 1996 4,314,157 $3,450,141 $ 4,587,837 $8,037,978
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
MESA LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
Year Ended March 31, <S> 1996 1995
Cash flows from operating activities:<C> <C>
Net income $1,623,959 $1,235,714
Depreciation and amortization 285,531 263,357
Provision for bad debts 10,000 -
Provision for warranty reserve 9,000 (4,000)
Provision for inventory reserve 10,000 17,000
Deferred income taxes (24,535) 45,307
Change in assets and liabilities-
(Increase) decrease in accounts
receivable (432,954) (193,087)
(Increase) decrease in inventories 15,865 (342,478)
(Increase) decrease in prepaid
expenses 1,889 (46,346)
Increase (decrease) in accounts
payable (17,970) 59,817
Increase (decrease) in accrued
liabilities 189,054 (143,897)
Net cash provided by operating
activities 1,669,839 891,387
Cash flows from investing activities:
(Capital expenditures), proceeds
from sale of property (419,144) (987,455)
(Increase) decrease in other
assets, net 6,416 (5,807)
Net cash (used) by investing
activities (412,728) (993,262)
Cash flow from financing activities:
Net proceeds from the issuance of
common stock 160,424 7,699
Increase (decrease) in notes
payable - (22,874)
Common stock repurchases (30,816) (403,279)
Net cash (used) provided by
financing activities 129,608 (418,454)
Net increase (decrease) in cash
and cash equivalents 1,386,719 (520,329)
Cash and cash equivalents at
beginning of year 402,913 923,242
Cash and cash equivalents at
end of year $1,789,632 $ 402,913
Supplemental disclosures of cash flow information:
Cash paid during the year
for interest $ - $ 2,261
Cash paid during the year
for income taxes $ 823,645 $ 708,100
</TABLE>
See notes to financial statements.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
General - Mesa Laboratories, Inc. was incorporated under the laws
of the State of Colorado on March 26, 1982, for the purpose of
designing, manufacturing and marketing electronic instruments and supplies.
Concentration of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk consist of
money market funds and accounts receivable. The Company invests primarily
all of its excess cash in money market funds administered by reputable
financial institutions, U.S. Treasuries and grants credit to its customers
who are located throughout the United States and several foreign
countries. To reduce credit risk, the Company periodically evaluates the
money market fund administrators and performs credit analysis of customers
and monitors their financial condition. Additionally, the Company maintains
cash balances in bank deposit accounts which, at times, may exceed federally
insured limits. The Company has not experienced any losses in
such accounts.
Cash Equivalents - Cash equivalents include all highly liquid
investments with an original maturity of three months or less.
Inventories - Inventories are stated at the lower of cost or
market, using the first-in, first-out method (FIFO) to determine cost (see
Note 2).
Property, Plant and Equipment - Property, plant and equipment is
stated at acquisition cost. Depreciation and amortization is provided using
the straight-line method over the estimated useful lives of three to
thirty-nine years (Note 7).
Intangible Assets - Intangible assets are comprised of patents,
trademarks and covenants not to compete, which were acquired in conjunction
with the NUSONICS, Inc. and DATATRACE asset purchases. These costs are
being amortized on the straight-line basis over contractual and estimated
useful lives ranging from three to forty years.
Revenue Recognition - The Company recognizes revenues at the time
products are shipped.
Research and Development Costs - Costs related to research and
development efforts on existing or potential products are expensed as
incurred.
Accrued Warranty Expense - The Company provides limited product
warranty on its products and, accordingly, accrues an estimate of the
related warranty expense at the time of sale.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Earnings Per Share - Net income per common share is based on the
weighted average number of shares outstanding during the period, including
common share equivalents.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Long-Lived Assets - The Company adopted Statement of Financial
Accounting Standards No. 121 - Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of which is effective for
fiscal years beginning after December 15, 1995. This Statement establishes
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and
for long-lived assets and certain identifiable intangibles to be disposed of.
The adoption of this standard did not have a material impact on the
financial statements.
2. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31,
1996 1995
<S> <C> <C>
Raw materials $1,475,717 $1,597,765
Work-in-process 265,955 255,011
Finished goods 312,101 216,862
Less reserve (47,000) (37,000)
$2,006,773 $2,032,638
</TABLE>
Work-in-process and finished goods include raw materials, direct
labor and manufacturing overhead at March 31, 1996 and 1995.
3. Stockholders' Equity:
The State of Colorado has eliminated the ability of Colorado
corporations to retain treasury stock. As a result, the Company was
required to modify its stockholders' equity section of the balance sheet.
The change did not have any impact on the total stockholders' equity but
did reduce common stock to its average share value and further reduced
retained earnings for the remainder of the cost of treasury stock.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company has adopted two incentive stock option plans for the
benefit of the Company's key employees, excluding its outside directors.
Under the terms of the plan, options are granted at an amount not less than
100% of the bid price of the underlying shares at the date of grant. The
options are exercisable for a term of five years and, during such term, may
be exercised as follows: 25% after each year, and 100% anytime after the
fourth year until the end of the fifth year.
The Company has approved a nonqualified performance stock option
plan for the benefit of the directors of the Company. The Plan provides
that each director of the Company serving as a director as of the first day
after the end of the Company's fiscal year shall be granted the option to
purchase 5,000 shares of common stock, provided that the Company has
achieved a net after-tax profit for the immediately prior fiscal year then
ended. Under the terms of the plan the options are 100% exercisable anytime
after the first year until the end of the fifth year. The purchase price of
the common stock will be equal to 100% of the closing bid price of the
common stock on the over-the-counter market on the date of grant.
On March 25, 1996, the Board of Directors adopted a new
nonqualified performance stock option plan for the benefit of the Company's
outside Directors. The plan, which is subject to shareholder approval,
provides that the outside Directors will receive grants to be determined
and approved by the Company's inside directors and not to exceed 20,000
options per year per director. Under the terms of the plan, the options are
exercisable for a term of ten years and, during such term are
exercisable as follows: 25% after each year, and 100% anytime after the
fourth year until the end of the tenth year. The purchase price of the
common stock will be equal to 100% of the closing bid price of the common
stock on the over-the-counter market on the date of grant.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following is a summary of options granted under the
plans:
<TABLE>
<CAPTION>
Number of Exercise
Options Price
<S> <C> <C>
BALANCE outstanding
March 31, 1994 367,475
Options granted 115,700 $2.25-$2.75 a share
Options cancelled (60,975) $ .88-$3.31 a share
Options exercised (36,250) $ .31-$ .88 a share
BALANCE outstanding
March 31, 1995 385,950
Options granted 127,600 $2.75-$4.38 a share
Options cancelled (69,700) $ .88-$3.31 a share
Options exercised (116,445) $ .69-$3.31 a share
BALANCE outstanding
March 31, 1996 327,405
</TABLE>
Statement of Financial Accounting Standards No. 123 (SFAS 123) -
Accounting for Stock-Based Compensation is effective for employee
compensation plans for fiscal years that begin after December 15, 1995. This
Statement establishes financial accounting and reporting standards for
stock-based employee compensation plans, including stock purchase plans,
stock options, restricted stock and stock appreciation rights. Management
believes the adoption of this standard will not have a material impact on
the financial statements.
SFAS 123 is effective for nonemployee compensation plans for
transactions entered into after December 15, 1995. There were no options
issued to nonemployees subsequent to December 15, 1995; therefore, no stock
based compensation has been recorded in the accompanying financial statements.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
4. Income Taxes:
The components of the provision for income taxes for the years
ended March 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
March 31,
<S> 1996 1995
Current tax provision: <C> <C>
Federal $ 740,346 $ 498,770
State 114,555 77,930
854,901 576,700
Deferred tax provision:
Federal (21,250) 39,500
State (3,285) 5,800
(24,535) 45,300
$ 830,366 $ 622,000
</TABLE>
Deferred taxes result from temporary differences in the
recognition of income and expenses for financial and income tax reporting
purposes and differences between the fair value of assets acquired in
business combinations accounted for as a purchase and their tax bases. The
components of net deferred tax assets and liabilities as of March 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
March 31,
1996 1995
<S> <C> <C>
Depreciation $ (58,135) $ (65,650)
Accrued vacation 24,530 24,520
Bad debt expense 19,630 15,600
Obsolete inventory 18,455 14,430
Warranty reserve 8,395 9,360
Other 17,970 5,020
Deferred service cost 5,865 3,885
Net deferred asset $ 31,700 $ 7,165
</TABLE>
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
A reconciliation of the Company's income tax provision for the
years ended March 31, 1996 and 1995, and the amounts computed by applying
statutory rates to income before income taxes is as follows:
<TABLE>
<CAPTION>
March 31,
1996
1995 <S> <C> <C>
Income taxes at statutory rates $ 834,470 $
631,715
State income taxes,
net of federal benefit 72,136
51,435
Foreign sales corporation exemption (61,030)
(33,515)
Other (15,210)
(27,635)
$ 830,366 $
622,000
5. International Sales:
For the past two fiscal years, the Company had foreign sales as
follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended March
31,
1996
1995
<S> <C> <C>
Asia $ 929,811 $
750,846
Europe 1,404,568
1,113,172
Other 1,367,990
446,202
$3,702,369
$2,310,220
</TABLE>
6. Commitments:
During fiscal 1995, the Company announced a plan to repurchase up
to 5% of
its outstanding common stock. Under the plan, shares may be
purchased from
time to time in the open market at prevailing prices or in
negotiated
transactions off the market. Shares repurchased will be used for
general
corporate purposes and repurchase of shares will be funded
through existing
cash reserves. At March 31, 1996, the Company had repurchased an
aggregate
of 172,220 shares of its common stock at a total purchase price
of $434,095
which included 20,000 shares repurchased from a Director of the
Company.
During fiscal 1996, the Company approved a plan to repurchase up
to an
additional 5% of its outstanding common stock. The terms of the
plan are
essentially the same as the plan adopted in fiscal 1995. At
March 31,
1996, the Company had not repurchased any shares under this plan.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
7. Property, Plant and Equipment:
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
March
31,
1996
1995<S> <C> <C>
Land $ 148,104 $
148,104
Building 1,101,393
853,774
Manufacturing equipment 1,013,754
927,272
Computer equipment 83,541
67,578
Furniture and fixtures 62,170
61,334
Truck 10,531
10,531
2,419,493
2,068,593
Less accummulated depreciation (841,949)
(757,350)
$1,577,544
$1,311,243
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The names, addresses, ages and terms of office of the
executive
officers and directors of the Company are:
Name and Address Age Office Term
Expires(1)
Luke R. Schmieder 53 President, Chief Executive
1996
12100 West Sixth Avenue Officer, Treasurer and
Lakewood, Colorado Director
Steven W. Peterson 39 Vice President-Finance,
1996
12100 West Sixth Avenue Chief Financial and Chief
Lakewood, Colorado Accounting Officer and
Secretary
Paul D. Duke 54 Vice President
1996
12100 West Sixth Avenue and Director
Lakewood, Colorado
Philip D. Quedenfeld 65 Director
1996
12100 West Sixth Avenue
Lakewood, Colorado
G. Lee Southard, Ph.D. 59 Director
1996
12100 West Sixth Avenue
Lakewood, Colorado
H. Stuart Campbell 66 Director
1996
12100 West Sixth Avenue
Lakewood, Colorado
(1) The term of office of each officer of the Company is at the
discretion
of the Board of Directors.
Luke R. Schmieder, President, Chief Executive Officer, Treasurer
and
Director
Mr. Schmieder attended Ohio State University and Ohio
University
taking courses in mechanical engineering and business management.
Mr.
Schmieder was employed from 1970 to 1977 by Cobe Laboratories,
Inc.
(manufacturer of dialysis and cardiovascular equipment and
supplies) as a
designer and process controller on various projects. From 1977
to 1982,
Mr. Schmieder served as president and principal of a consulting
company for
product and process development primarily in the medical field.
Mr.
Schmieder has served as president and a director of the Company
since its
inception in March 1982. Mr. Schmieder devotes his full working
time to the
affairs of the Company.
Steven W. Peterson, Vice President-Finance, Chief Financial and
Chief
Accounting Officer and Secretary
Mr. Peterson received his Bachelor of Arts degree in
accounting from
Lewis University in 1979. He was employed as an accountant and
senior
accountant by Valleylab, Inc. (a manufacturer of electrosurgical
and IV
infusion equipment) from 1980 to 1983. From 1983 to 1985, he was
employed
as assistant controller by Marquest Medical Products, Inc. (a
manufacturer
of disposable medical products). Mr. Peterson joined the Company
in
February 1985 as Controller and has served as an executive
officer of the
Company since June 1990. Mr. Peterson devotes his full working
time to the
affairs of the Company.
Paul D. Duke, Vice President and Director
Mr. Duke received his initial medical training while on
active duty
with the United States Navy and while attending the University of
Alabama.
Mr. Duke was employed from 1965 to 1969 by the University of
Alabama
Medical Center as chief hemodialysis technician and was employed
by Cobe
Laboratories, Inc. from 1969 to 1973 as field service and
training
technician. From 1973 to 1979, he served in various capacities
for Cordis
Dow Corporation (manufacturer of pacemakers and hemodialysis
equipment and
supplies), including sales, product management, European training
manager
and national service manager. From 1980 to 1982, Mr. Duke served
as
proprietor and president of a consulting company specializing in
medical
marketing, sales, service and training. Mr. Duke has served as
vice
president and a director of the Company since its inception in
1982. Mr.
Duke devotes his full working time to the affairs of the Company.
H. Stuart Campbell, Director
Mr. Campbell received his Bachelor of Science degree from
Cornell
University in 1951. From 1960 through September 1982, Mr.
Campbell served
in various capacities for Johnson & Johnson and Ethicon, Inc., a
domestic
subsidiary of Johnson & Johnson. From 1977 through September
1982, he was
a Company Group Chairman with Johnson & Johnson and served as
Chief
Executive Officer and Chairman of the Board of Directors of eight
major
corporate subsidiaries. Mr. Campbell currently owns and serves
as an
officer of Highland Packaging Labs, Inc., Somerville, New Jersey
(contract
packaging business). He also serves as a director of Isomedix,
Inc.,
Whippany, New Jersey (contract irradiation processing and medical
product
sterilization), as a director of Atrix Laboratories, Inc.
(pharmaceutical
and contract research and development company) and as chairman of
Biomatrix, Inc., Ridgefield, New Jersey (biomaterials
manufacturer). Mr.
Campbell has served as a director of the Company since May 1983
and devotes
such time as is necessary to the affairs of the Company.
Philip D. Quedenfeld, Director
Mr. Quedenfeld received his Bachelor of Arts degree in
English from
Lake Forest University in 1954. At the time of his retirement in
1993, he
was employed as manager of a Sears Department Store. He also
served in
numerous marketing and advertising positions with Sears at both
the
headquarters and field levels for more than 30 years. Mr.
Quedenfeld has
served as a director of the Company since its inception in March
1982 and
devotes such time as is necessary to the affairs of the Company.
G. Lee Southard, Ph.D., Director
Dr. Southard received his Bachelor of Science degree in
chemistry from
the Virginia Military Institute in 1959, his Master of Science
degree in
chemistry from George Washington University in 1962 and his Ph.D.
degree in
organic chemistry from the University of North Carolina in 1965.
From 1967
to 1976, Dr. Southard was the head of cosmetic research for Eli
Lilly and
Company (pharmaceutical manufacturer). Thereafter, until 1979,
he served
as the director of exploratory research for Johnson & Johnson
Products,
Inc. (manufacturer of medical and health care products). From
1979 to
January 1982, Dr. Southard served as President of Southard
Research
Associates, a research management consulting firm in North
Brunswick, New
Jersey. Dr. Southard served as Vice-President of Research of
Vipont
Pharmaceutical, Inc. from 1982 through August 1987. Dr. Southard
currently
serves as President and a director of Atrix Laboratories, Inc.
(pharmaceutical and contract research and development company).
Dr.
Southard has served as a director of the Company since May 1983
and devotes
such time as is necessary to the affairs of the Company.
Based solely upon a review of Forms 3 and 4 and amendments
thereto
furnished to the Company pursuant to 240.16a-3(e) during its
most recent
fiscal year and Forms 5 and amendments thereto furnished to the
Company
with respect to its most recent fiscal year, and any written
representation
from the reporting person (as hereinafter defined) that no Form 5
is
required, the Company is not aware of any person who, at any time
during
the fiscal year, was a director, officer, beneficial owner of
more than ten
percent of any class of equity securities of the Company
registered
pursuant to Section 12 of the Exchange Act, or any other person
subject to
Section 16 of the Exchange Act with respect to the Company
because of the
requirements of Section 30 of the Investment Company Act or
Section 17 of
the Public Utility Holding Company Act ("reporting person"), that
failed to
file on a timely basis, as disclosed in the above Forms, reports
required
by Section 16(a) of the Exchange Act during the most recent
fiscal year or
prior fiscal years.
ITEM 10. EXECUTIVE COMPENSATION.
The following table, and its accompanying explanatory
footnotes,
includes annual and long-term compensation information on the
Company's
Chief Executive Officer for services rendered in all capacities
during the
fiscal years ended March 31, 1996, March 31, 1995 and March 31,
1994. No
executive officer received total annual salary and bonus for the
fiscal
year ended March 31, 1996 in excess of $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation
Long Term
Compensation
Name and
Principal
Position
Fiscal
Year
Salary
Bonus
Options
Granted
All
Other
Compensation
Luke R.
Schmieder,
Chief
Executive
Officer
1996
$85,067
$11,000
5,000
- -
1995
$80,304
$10,030
5,000
$687 (1)
1994
$77,908
$2,902
5,000
$620 (1)
__________
(1) This amount reflects the premium paid by the Company for a
$100,000
term life insurance policy for the benefit of Mr. Schmieder.
The following summary table sets forth information
concerning grants
of stock options made during the fiscal year ended March 31, 1996
to the
Company's Chief Executive Officer.
Option Grants in Last Fiscal Year
Name
Options
Granted
Percent of
Total
Options
Granted to
Employees
in Fiscal
Year
Exercise
Price
Expiration
Date
Luke R.
Schmieder
5,000
4%
$2.75
March 31,
2000
Compensation of Directors
The Company has adopted a nonqualified performance stock
option plan,
approved by the shareholders of the Company in October 1991, for
the
benefit of the directors of the Company. The plan provides that
each
director of the Company serving as a director as of the first day
after the
end of the Company's fiscal year shall be granted the option to
purchase
5,000 shares of Common Stock, provided that the Company has
achieved a net
after-tax profit for the immediately prior fiscal year then
ended. The
purchase price of the Common Stock will be equal to the fair
market value
of the Common Stock on the date of grant. The date of grant is
the first
business day in the month following the end of the Company's most
recently
completed fiscal year. The fair market value is an amount equal
to 100% of
the closing bid price of the Common Stock on the over-the-counter
market on
the date of grant.
On April 1, 1995, each of the five current directors of the
Company
was granted, for the fiscal year ended March 31, 1995, options to
purchase
5,000 shares of Common Stock at $2.75 per share.
The options are granted for a term of up to five years and
may be
exercised at any time after one year from the date of grant until
the end
of the fifth year from the date of grant. Any optionee may pay
the
exercise price by delivering shares of Common Stock with a value
equal to
the exercise price. The Company has reserved 150,000 shares of
its
authorized but unissued Common Stock for possible issuance
pursuant to the
plan.
On March 25, 1996, the Board of Directors adopted a new
nonqualified
performance stock option plan for the benefit of the Company's
outside
Directors. The plan, which is subject to shareholder approval,
provides
that the outside Directors will receive grants to be determined
and
approved by the Company's inside directors and not to exceed
20,000 options
per year per director. Under the terms of the plan, the options
are
exercisable for a term of ten years, and during such term are
exercisable
as follows: 25% after each year, and 100% anytime after the
fourth year
until the end of the tenth year. The purchase price of the common
stock
will be equal to 100% of the closing bid price of the common
stock on the
over-the-counter market on the date of grant.
Beginning in fiscal 1997, all outside directors will receive
cash
compensation of $500 for each Board of Directors meeting attended
in
person.
Incentive Stock Option Plans
The Company has adopted three incentive stock option plans,
approved
by the shareholders of the Company in September 1984, October
1989 and
November 1993, respectively, for the benefit of the Company's
employees.
The plans are administered by the non-participating members of
the Board of
Directors, who select the optionees and determine the terms and
conditions
of the stock option grant. The exercise price for options granted
under the
plans cannot be less than the fair market value of the stock at
the date of
grant or 110% of such fair market value with respect to options
granted to
any optionee who holds more than 10% of the Company's Common
Stock.
Options are not exercisable until one year after the date of
grant and
expire five years after the date of grant. All outstanding
options are
subject to vesting provisions whereby they become exercisable
over a four-
year period. The plans authorize options to purchase up to
200,000,
300,000 and 300,000 shares of Common Stock, respectively.
As of March 31, 1996, options to purchase a total of 327,405
shares
were outstanding, at exercise prices ranging from $2.19 to $4.38
per share.
Further, as of March 31, 1996, options to purchase an aggregate
of 201,000
shares remained available for grant under the latter two plans.
The plan
adopted in September 1984 was terminated effective June 1, 1993.
No
options were granted during the fiscal year ended March 31, 1996,
pursuant
to the Company's incentive stock option plans, to any of the
Company's
executive officers other than options to purchase 8,000 shares at
$2.75 per
share which were granted to Steven W. Peterson, Vice President-
Finance,
Chief Financial and Chief Accounting Officer and Secretary of the
Company.
Retirement Plan
No retirement, pension or profit sharing program has been
adopted by
the Company. The Company may offer stock bonuses, profit sharing
or
pension plans to key employees or executive officers of the
Company in such
amounts and upon such conditions as the Board of Directors may in
its sole
discretion determine.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the number of shares of the
Company's
Common Stock owned beneficially as of March 31, 1996, by each
person known
by the Company to have owned beneficially more than five percent
of such
shares then outstanding, by each officer and director of the
Company and by
all of the Company's officers and directors as a group. This
information
gives effect to securities deemed outstanding pursuant to Rule
13d-3(d)(1)
under the Securities Exchange Act of 1934, as amended. As far as
is known
to management of the Company, no person owns beneficially more
than five
percent of the outstanding shares of Common Stock as of March 31,
1996
except as set forth below.
Amount and
Percentage of
Name of Beneficial Nature of Class
Benefi-
Owner(1) Beneficial Owner cially
Owned
Luke R. Schmieder 516,517 (2)
11.9
Steven W. Peterson 61,715 (3)
1.4
Paul D. Duke 182,774 (4)
4.2
H. Stuart Campbell 56,000 (5)
1.3
Philip D. Quedenfeld 176,241 (6)
4.1
G. Lee Southard 79,000 (7)
1.8
All officers and 1,072,247 (8)
24.2
directors as a group
(6 in number)
__________
(1) The business address for each person identified herein is
12100 West
Sixth Avenue, Lakewood, Colorado 80228.
(2) Includes 20,000 shares which Mr. Schmieder has the right to
acquire
within 60 days by exercise of stock options.
(3) Includes 18,000 shares which Mr. Peterson has the right to
acquire
within 60 days by exercise of stock options.
(4) Includes 20,000 shares which Mr. Duke has the right to
acquire within
60 days by exercise of stock options.
(5) Includes 20,000 shares which Mr. Campbell has the right to
acquire
within 60 days by exercise of stock options.
(6) Includes 20,000 shares which Mr. Quedenfeld has the right to
acquire
within 60 days by exercise of stock options.
(7) Includes 20,000 shares which Dr. Southard has the right to
acquire
within 60 days by exercise of stock options.
(8) Includes 118,000 shares which the officers and directors of
the
Company as a group have the right to acquire within 60 days by
exercise of
stock options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
(3)(i) Articles of Incorporation and Articles of Amendment and
Bylaws of
Registrant -incorporated by reference to the Exhibits to the
Registration
Statement on Form S-18, file number 2-88647-D, filed December 21,
1983.
(3)(ii) Articles of Amendment of Registrant - incorporated by
reference
to the Exhibit to the Report on Form 10-K for the fiscal year
ended March
31, 1988.
(3)(iii) Articles of Amendment of Registrant dated October 4,
1990 -
incorporated by reference to the Exhibit to the Report on Form
10-K for the
fiscal year ended March 31, 1991.
(3)(iv) Articles of Amendment of Registrant dated October 20,
1992 -
incorporated by reference to the Exhibit to the Report on Form
10-KSB for
the fiscal year ended March 31, 1993.
(23)(i) Consent of Ehrhardt Keefe Steiner & Hottman PC,
independent
public accountants, to the incorporation by reference in the
Registration
Statements on Form S-8 (file numbers 33-89808 and 333-02074) of
their
report dated May 2, 1996, included in the Registrant's Report on
Form 10-
KSB for the fiscal year ended March 31, 1996.
(b) Reports on Form 8-K. During the last quarter of the period
covered by
this report, the Registrant did not file any Report on Form 8-K.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MESA LABORATORIES,
INC.
Registrant
Date: By:
Luke R. Schmieder,
President
In accordance with the Exchange Act, this report has been
signed below
by the following persons on behalf of the registrant and in the
capacities
and on the dates indicated.
Name Title
Date
President, Chief Executive Officer,
Luke R. Schmieder Treasurer and Director
Vice President, Finance, Chief Financial
Steven W. Peterson and Chief Accounting Officer and
Secretary
Vice President and Director
Paul D. Duke
Director
Philip D. Quedenfeld
Director
G. Lee Southard
Director
H. Stuart Campbell
