U.S. 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
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
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: $7,774,050.
State the aggregate market value of the voting stock held by non-affiliates
of
the Registrant: As of May 31, 1997: $20,344,698*.
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--4,316,236 shares as of March 31, 1997.
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 $6.00, the last
sales
price of the Registrant's common stock as of May 31, 1997, such date being
within 60 days prior to the date of filing.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Introduction
Mesa Laboratories, 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 kidney dialysis [Western Meters and the ECHO Reprocessor]. The Company is
also performing research and development to expand the application of its
technology.
All statements other than statements of historical fact included in this
annual report regarding the Company's financial position and operating and
strategic initiatives and addressing industry developments are
forward-looking
statements. Where, in any forward-looking statement, the Company, or its
management, expresses an expectation or belief as to future results, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished. Factors
which could cause actual results to differ materially from those anticipated,
include but are not limited to general economic, financial and business
conditions; competition in the kidney dialysis market; competition in the
data
logging market; competition in the fluid measurement market; the business
abilities and judgement of personnel; the impacts of unusual items resulting
from ongoing evaluations of business strategies; and changes in business
strategy.
Mesa's executive offices are located at 12100 West Sixth Avenue,
Lakewood, Colorado 80228, telephone (303) 987-8000.
Data Logging
The world market for temperature sensors, indicators and recorders is
currently estimated at over $2 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 and humidity recording markets are highly segmented.
DATATRACE products have developed application niches within major
industry segments such as food processing, medical sterilization,
pharmaceutical processing, transportation, electronics, aerospace, storage
facilities and textile manufacturing. DATATRACE products are used in any
industry where temperature or humidity is critical to the manufacturing
process, quality of the product or where product temperature or humidity
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 or
temperature and humidity 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 deg F to 680 deg F and provide
both high accuracy and reliability. Currently, the Micropack Tracers for
temperature are sold with various probe configurations in three temperature
ranges: LoTemp, which records temperatures from -40 deg F to
185 deg F; Standard Temp, which records temperatures from 50 deg F to
302 deg F; and HiTemp, which records temperatures from 212 deg F to
680 deg 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. Utilizing the same electronics and FRB Tracer
packaging, the Company introduced a humidity and temperature version of its
FRB Tracer product in late March, 1997.
The DATATRACE Tracers can be placed completely inside a container or
process to provide true time and temperature or time, temperature and
humidity
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
wi
res 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 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 different grades of 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 2,700 clinics and hospital centers. Currently, there are
over 200,000 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 $15-$55, 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 80% 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, 1997, approximately 58% of sales have been
domestic and 42% 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, 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 or humidity 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, 1997, 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 or
humidity and temperature through a continuous process or long-term
transportation and warehousing applications. Although there are other
solutions to temperature and humidity monitoring available, the DATATRACE
products offer a miniaturized, self-contained, environmentally resistant,
wireless solution. 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, 1997, the Company had a total of 47 employees, of which 45
were full-time employees. Currently, 9 persons are employed for marketing, 4
for research and development, 28 for manufacturing and quality assurance and
6
for administration.
Additional Information
For the fiscal years ended March 31, 1997 and 1996, Mesa spent
approximately $253,661 and $294,826, 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.
<TABLE>
(a) Mesa's Common Stock is traded in 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:
<CAPTION>
Quarter Ended High Low
<S> <C> <C>
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
<CAPTION>
Quarter Ended High Low
<S> <C> <C>
June 30, 1996 10 5/8 6 3/8
September 30, 1996 8 7/8 6 1/4
December 31, 1996 7 1/8 5 3/8
March 31, 1997 6 5/8 5
</TABLE>
The Nasdaq National Market 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, 1997, there were approximately 2,500 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 1997 decreased 4% from fiscal 1996. In real
dollars, net sales of $7,774,050 in fiscal 1997 decreased $288,511 from
$8,062,561 in 1996. Net sales decrease in fiscal 1997 was due largely to
decreased international sales resulting from declines in European and South
American sales. Medical and Datatrace sales both increased during the fiscal
year while Nusonics sales declined from the prior fiscal year. Net sales
increases in fiscal 1996 were due largely to increased Nusonics sales
resulting from introduction of the CM800 Flow Meter, M88 Concentration
Analyzer and higher international sales.
Cost of Sales
Cost of sales as a percent of net sales in fiscal 1997 declined 0.6%
from
fiscal 1996 to 37.7%. During fiscal 1997, Medical costs increased 2.5% and
Datatrace costs decreased 6.4%, respectively, as a percent of sales while
Nusonics costs increased 6.5% as a percent of sales. For fiscal 1996, the
cost of Nusonics products increased 3.6% and Medical products decreased 4.4%,
respectively, while Datatrace products increased 3.3% as a percent of sales.
The decrease in Datatrace cost of sales in fiscal 1997 was due to
introduction
of a new electronic circuit, which greatly reduced the materials cost of the
product. The increase in Nusonics cost of sales in fiscal 1997 was due to an
increase in the ratio of domestic sales, while the increase in Medical was
attributable to a higher ratio of distributor 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.
Selling, General and Administrative
Selling expenses decreased 7% from fiscal 1996 to fiscal 1997. In real
dollars, selling expenses decreased $101,482 to $1,369,297 in fiscal 1997
from
$1,470,779 in fiscal 1996. The decrease in selling expenses in fiscal 1997
was due to reductions in Nusonics outside sales commissions for international
sales. The increase in selling expenses during fiscal 1996 was due to higher
outside sales commissions for Nusonics international sales.
General and administrative expenses were $715,215 in fiscal 1997 and
$806,897 in fiscal 1996, which represents a $91,682 or 11% decrease from
fiscal 1996 to fiscal 1997. The decrease in general and administrative costs
during fiscal 1997 was due to elimination of the one-time Nasdaq fees
incurred
in 1996 and reductions in facility related costs. 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.
Research and Development
Company sponsored research and development costs were $253,661 in fiscal
1997 and $294,826 in fiscal 1996, which represents a 14% decrease from year
to
year. Research and development costs decreased in fiscal 1997 due to lower
compensation and materials costs during the 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.
Net Income
Net income increased to $1,719,805 or $.39 per share in fiscal 1997 from
$1,623,959 or $.37 per share in fiscal 1996. The increase in net income was
due to a decrease in cost of goods sold combined with a decrease throughout
the operating expense categories during fiscal 1997. The increase in net
income during fiscal 1996 was due to increased revenues combined with a
decrease in research and development expenses.
Liquidity and Capital Resources
On March 31, 1997, the Company had cash and short term investments of
$3,867,549. In addition, the Company had other current assets totaling
$3,746,772 and total current assets of $7,614,321. Current liabilities of
Mesa Laboratories, Inc. were $575,473 which resulted in a current ratio of
13:1. For comparison purposes at March 31, 1996, Mesa Laboratories, Inc. had
cash and short term investments of $1,789,632, other current assets of
$4,321,516, total current assets of $6,111,148, current liabilities of
$695,756 and a current ratio of 9:1.
Mesa Laboratories, Inc. has made net capital purchases of $120,635
during
the past fiscal year.
The Company has announced its intention to repurchase up to 10% 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.
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, 1997 and 1996, 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, 1997 and 1996, 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 13, 1997
Denver, Colorado
<TABLE>
MESA LABORATORIES, INC.
BALANCE SHEETS
<CAPTION>
March 31,
1997 1996
<S>
<C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $3,867,549
$1,789,632
Accounts receivable (Note 1)-
Trade, net of allowance for doubtful accounts
of $29,000 (1997) and $50,000 (1996) 1,632,210
2,117,930
Other
25,880 16,513
Inventories (Notes 1 and 2) 1,963,572
2,006,773
Prepaid income
tax -
55,395
Prepaid expenses
31,710 35,070
Deferred income taxes (Note 4)
93,400 89,835
TOTAL CURRENT ASSETS 7,614,321 6,111,148
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $950,233 (1997) and
$841,949 (1996) (Notes 1 and 3) 1,589,895
1,577,544
OTHER ASSETS (Note 1):
Patents, net of accumulated amortization of
$317,260 (1997) and $251,539 (1996) 502,351
568,073
Trademarks, net of accumulated amortization of
$54,896 (1997) and $45,327 (1996) 207,061
212,630
Covenants not to compete, net of accumulated
amortization of $310,103 (1997) and $252,527
(1996)
264,899 322,474
Deposits and other assets
27,903 -
TOTAL OTHER ASSETS 1,002,214 1,103,177
$10,206,430 $8,791,869
</TABLE>
See notes to financial statements.
<TABLE>
MESA LABORATORIES, INC.
BALANCE SHEETS
<CAPTION>
March 31,
1997 1996
<S>
<C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $
46,282 $ 100,733
Accrued salaries and payroll taxes
237,361 289,643
Accrued warranty expense (Note 1)
40,000 33,000
Other accrued
liabilities
188,030 235,736
Taxes
payable
63,800 36,644
TOTAL CURRENT LIABILITIES 575,473
695,756
LONG TERM LIABILITIES:
Deferred income taxes (Note 4)
62,800 58,135
COMMITMENTS AND CONTINGENCY (Note 5)
STOCKHOLDERS' EQUITY (Note 6):
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,
4,316,236 shares (1997) and 4,314,157
shares
(1996)
3,426,979 3,450,141
Retained
earnings
6,141,178 4,587,837
9,568,157 8,037,978
$10,206,430 $8,791,869
</TABLE>
See notes to financial statements.
<TABLE>
MESA LABORATORIES, INC.
STATEMENTS OF INCOME
<CAPTION>
Year Ended March 31,
1997 1996
<S>
<C> <C>
SALES (Notes 1 and 7)
$7,774,050 $8,062,561
COST OF SALES
2,932,225 3,087,888
GROSS PROFIT
4,841,825 4,974,673
OPERATING EXPENSES:
Selling
1,369,297 1,470,779
General and administrative
715,215 806,897
Research and development (Note 1)
253,661 294,826
TOTAL OPERATING EXPENSES 2,338,173
2,572,502
OPERATING INCOME
2,503,652 2,402,171
INTEREST INCOME, NET AND OTHER 126,853 52,154
EARNINGS BEFORE INCOME TAXES 2,630,505 2,454,325
INCOME TAXES (Note 4)
910,700 830,366
NET INCOME
$1,719,805 $1,623,959
NET INCOME PER SHARE $
.39 $ .37
AVERAGE COMMON SHARES OUTSTANDING 4,466,128 4,366,057
</TABLE>
See notes to financial statements.
<TABLE>
MESA LABORATORIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Common
Stock Total
Number
of Retained Stockholders'
Shares
Amount Earnings Equity
<S> <C>
<C> <C> <C>
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 5 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
Common stock issued for the
conversion of incentive
stock options net of
shares returned to Company
as payment 46,779
72,596 - 72,596
Purchase and retirement of
treasury stock
(Notes 5 and 6) (44,700) (95,758)
(166,464) (262,222)
Net income for the year - -
1,719,805 1,719,805
BALANCE, March 31, 1997 4,316,236 $3,426,979 $6,141,178 $9,568,157
</TABLE>
See notes to financial statements.
<TABLE>
MESA LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended March 31,
1997 1996
<S>
<C> <C>
Cash flows from operating activities:
Net income
$1,719,805 $1,623,959
Depreciation and amortization
241,150 285,531
Provision for bad debts
(21,000) 10,000
Provision for warranty reserve
7,000 9,000
Provision for inventory reserve
(12,000) 10,000
Deferred income taxes
1,100 (24,535)
Change in assets and liabilities-
(Increase) decrease in accounts receivable 497,353
(432,954)
(Increase) decrease in inventories
55,201 15,865
(Increase) decrease in prepaid expenses
58,755 1,889
Increase (decrease) in accounts payable (54,451)
(17,970)
Increase (decrease) in accrued liabilities
(72,832) 189,054
Net cash provided by operating activities 2,420,081
1,669,839
Cash flows from investing activities:
(Capital expenditures) proceeds from sale of
property
(120,635) (419,144)
(Increase) decrease in intangibles
(4,000) 6,416
(Increase) in deposits and other assets
(27,903) -
Net cash (used) provided by investing activities (152,538)
(412,728)
Cash flow from financing activities:
Net proceeds from the issuance of common stock 72,596 160,424
Common stock repurchases (262,222)
(30,816)
Net Cash (used) provided by financing activities (189,626)
129,608
Net increase (decrease) in cash and cash equivalents 2,077,917 1,386,719
Cash and cash equivalents at beginning of year 1,789,632
402,913
Cash and cash equivalents at end of year $3,867,549
$1,789,632
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ -
$ -
Cash paid during the year for income taxes $ 822,700 $
823,645
</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 3).
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 & 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.
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.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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.
Fair Value of Financial Instruments - The carrying amount of financial
instruments including cash and cash equivalents, accounts receivable,
accounts
payable and accrued expenses approximated fair value as of March 31, 1997
because of the relatively short maturity of these instruments.
2. Inventories:
<TABLE>
Inventories consist of the following:
<CAPTION>
March
31,
1997 1996
<S> <C>
<C>
Raw materials $1,417,991 $1,475,717
Work-in-process 318,129 265,955
Finished goods 262,452 312,101
Less reserve (35,000)
(47,000)
$1,963,572
$2,006,773
</TABLE>
Work-in-process and finished goods include raw materials, direct labor and
manufacturing overhead at March 31, 1997 and 1996.
3. Property, Plant and Equipment:
<TABLE>
Property, plant and equipment consists of the following:
<CAPTION>
March
31,
1997
1996
<S> <C>
<C>
Land $ 148,104 $ 148,104
Building 1,117,317 1,101,393
Manufacturing equipment 1,063,600 1,013,754
Computer equipment 138,049 83,541
Furniture and fixtures 62,527 62,170
Truck 10,531
10,531
2,540,128
2,419,493
Less accumulated depreciation (950,233) (841,949)
$1,589,895
$1,577,544
</TABLE>
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
4. Income Taxes:
<TABLE>
The components of the provision for income taxes for the years ended March
31,
1997 and 1996 are as follows:
<CAPTION>
March 31,
1997 1996
<S>
<C> <C>
Current tax provision:
Federal $
787,700 $ 740,346
State
121,900 114,555
909,600 854,901
Deferred tax provision:
Federal
950 (21,250)
State
150 (3,285)
1,100 (24,535)
$
910,700 $ 830,366
</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, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
March 31,
1997 1996
<S>
<C> <C>
Depreciation and amortization $ (63,000) $
(63,145)
Accrued vacation
26,500 24,530
Bad debt expense
19,500 19,630
Obsolete inventory
19,500 18,455
Warranty reserve
15,700 8,395
Other
9,100 17,970
Deferred service cost
3,300 5,865
Net deferred asset $ 30,600 $
31,700
</TABLE>
A reconciliation of the Company's income tax provision for the years ended
March 31, 1997 and 1996, and the amounts computed by applying statutory rates
to income before income taxes is as follows:
<TABLE>
<CAPTION>
March 31,
1997 1996
<S>
<C> <C>
Income taxes at statutory rates $ 894,400 $ 834,470
State income taxes,
net of federal benefit
78,900 72,136
Foreign sales corporation exemption (62,800) (61,030)
Other
200 (15,210)
$
910,700 $ 830,366
</TABLE>
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
5.Commitments:
The Company has announced a plan to repurchase up to 10% 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 purchased will be used for general corporate purposes and
repurchase of shares will be funded through existing cash reserves.
6.Stockholders' Equity:
The State of Colorado has eliminated the ability of Colorado corporations to
retain treasury stock. As a result, the Company reduced common stock to its
average share value and further reduced retained earnings for the remainder
of
the cost of treasury stock acquired in each fiscal year.
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 October 3, 1996, the Company adopted a new nonqualified performance stock
option plan for the benefit of the Company's outside Directors. The plan
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)
<TABLE>
The following is a summary of options granted under the plans:
<CAPTION>
Number of Exercise
Options Price
<S>
<C> <C>
BALANCE outstanding March 31, 1995 385,950
Options granted
127,600 $2.75 - $4.38 a share
Options canceled
(69,700) $ .88 - $3.31 a share
Options exercised (116,445)
$ .69 - $3.31 a share
BALANCE outstanding March 31, 1996 327,405
Options granted
80,400 $5.63 - $7.70 a share
Options canceled
(12,700) $2.50 - $7.00 a share
Options exercised
(67,460) $2.19 - $3.31 a share
BALANCE outstanding March 31, 1997 327,645
</TABLE>
The Corporation has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. Had compensation cost for the Corporation's stock option
plans been determined based on the fair value at the grant date for awards in
1996 and 1997 consistent with the provisions of SFAS No. 123, the
Corporation's net earnings and earnings per share would have been reduced to
the pro forma amounted indicated below:
<TABLE>
<CAPTION>
March 31,
1997 1996
<S>
<C> <C>
Net income applicable to common
stockholders - as reported $1,719,805
$1,623,959
Net income applicable to common
stockholders - pro forma $1,481,769
$1,466,920
Income per share - as reported $ .39
$ .37
Income per share - pro forma $ .33
$ .34
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants: dividend yield of 0%; expected volatility of
30%; discount rate of 8.5%; and expected lives of 5 years.
7. International Sales:
<TABLE>
For the past two fiscal years, the Company had foreign sales as follows:
<CAPTION>
Year
Ended March 31,
1997 1996
<S>
<C> <C>
Asia $
910,953 $ 929,811
Europe
1,163,858 1,404,568
Other
1,166,721 1,367,990
$3,241,532 $3,702,369
</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.
<TABLE>
The names, addresses, ages and terms of office of the executive officers
and directors of the Company are:
<CAPTION>
Name and Address Age
Office Term Expires(1)
<S> <C>
<C> <C>
Luke R. Schmieder 54 President, Chief
Executive 1997
12100 West Sixth Avenue Officer, Treasurer and
Lakewood, Colorado Director
Steven W. Peterson 40 Vice
President-Finance, 1997
12100 West Sixth Avenue Chief Financial and Chief
Lakewood, Colorado Accounting Officer and
Secretary
Paul D. Duke 55 Vice
President 1997
12100 West Sixth Avenue and Director
Lakewood, Colorado
Philip D. Quedenfeld 66
Director 1997
12100 West Sixth Avenue
Lakewood, Colorado
G. Lee Southard, Ph.D. 60
Director 1997
12100 West Sixth Avenue
Lakewood, Colorado
H. Stuart Campbell 67
Director 1997
12100 West Sixth Avenue
Lakewood, Colorado
</TABLE>
(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
Offi
cer 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, 1997, March 31, 1996 and March 31, 1995. No other executive
officer
received total annual salary and bonus for the fiscal year ended March 31,
1997 in excess of $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation
Compensation
Name
and
All
Principal
Fiscal Options Other
Position Year Salary
Bonus(2) Granted Compensation
<S> <C> <C>
<C> <C> <C>
1997 $88,775
$14,000 4,000 -
Luke R. Schmieder, Chief 1996 $85,067 $30,000
5,000 -
Executive Officer 1995 $80,304 $11,000
5,000 $687 (1)
</TABLE>
_________
(1) This amount reflects the premium paid by the Company for a $100,000 term
life insurance
policy for the benefit of Mr. Schmieder.
(2) Reflects bonus earned in fiscal year, but paid in the following fiscal
year.
The following summary table sets forth information concerning grants of
stock options made
during the fiscal year ended March 31, 1997 to the Company's Chief Executive
Officer.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Percent of Total
Options Granted to
Employees in Fiscal
Name Options Granted Year
Exercise Price Expiration Date
<S> <C>
<C> <C> <C>
Luke R. Schmieder 4,000
5% $7.70 March 31, 2001
</TABLE>
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.
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 October 3, 1996, the Company adopted a new nonqualified performance
stock option plan
for the benefit of the Company's outside Directors. The plan 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.
On April 1, 1996, the Company's three outside directors were granted
options to purchase
4,000 shares of Common Stock at $7.00 per share. The Company's two inside
directors each were granted options to purchase 4,000 shares of Common Stock
at a price of $7.00 per share for Mr. Duke and at a price of $7.70 per share
for Mr. Schmieder.
Beginning in fiscal 1997, all outside directors received 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, 1997, options to purchase a total of 327,645 shares were
outstanding, at
exercise prices ranging from $2.19 to $7.70 per share. Further, as of March
31, 1997, options to
purchase an aggregate of 143,450 shares remained available for grant under the
latter two plans. The plan adopted in September 1984 was terminated effective
June 1, 1993. Options were granted during the fiscal year ended March 31,
1997, pursuant to the Company's incentive stock option plans, to each of the
Company's executive officers. Options to purchase 5,000 shares and 4,000
shares at $7.00 per share were granted to Mr. Steven W. Peterson, Vice
President-Finance and Mr. Paul Duke, Vice President, respectively. Mr. Luke
R. Schmieder, President, was granted options to purchase 4,000 shares at $7.70
per share.<PAGE>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, 1997, 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, 1997 except as set forth below.
<TABLE>
<CAPTION>
Amount
and Percentage of
Name of Beneficial Nature
of Class Benefi-
Owner(1) Beneficial
Owner cially Owned
<S>
<C> <C>
Luke R. Schmieder 476,117
(2) 11.0
Steven W. Peterson 64,825
(3) 1.5
Paul D. Duke 180,662
(4) 4.2
H. Stuart Campbell 57,000
(5) 1.3
Philip D. Quedenfeld 166,099
(6) 3.8
G. Lee Southard 80,000
(7) 1.8
All officers and 1,024,703
(8) 23.2
directors as a group
(6 in number)
</TABLE>
__________
(1) The business address for each person identified herein is 12100 West Sixth
Avenue,
Lakewood, Colorado 80228.
(2) Includes 16,000 shares which Mr. Schmieder has the right to acquire within
60 days by
exercise of stock options.
(3) Includes 19,250 shares which Mr. Peterson has the right to acquire within
60 days by exercise
of stock options.
(4) Includes 16,000 shares which Mr. Duke has the right to acquire within 60
days by exercise of
stock options.
(5) Includes 16,000 shares which Mr. Campbell has the right to acquire within
60 days by exercise
of stock options.
(6) Includes 16,000 shares which Mr. Quedenfeld has the right to acquire
within 60 days by
exercise of stock options.
(7) Includes 16,000 shares which Dr. Southard has the right to acquire within
60 days by exercise
of stock options.
(8) Includes 99,250 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, 333-02074 and 333-18161) of their report dated
May 13, 1997,
included in the Registrant's Report on Form 10-KSB for the
fiscal year ended March
31, 1997.
(27) Financial Data Schedule
(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.
<PAGE> 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: June 27, 1997 By:
/s/ Luke R. Schmieder
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
/s/ Luke R. Schmieder President, Chief Executive
Officer, June 27, 1997
Luke R. Schmieder Treasurer and Director
/s/ Steven W. Peterson Vice President, Finance, Chief
Financial June 27, 1997
Steven W. Peterson and Chief Accounting Officer and
Secretary
/s/ Paul D. Duke Vice President and
Director June 27, 1997
Paul D. Duke
/s/ Philip D. Quedenfeld Director
June 27, 1997
Philip D. Quedenfeld
/s/ G. Lee Southard
Director June 27,
1997
G. Lee Southard
/s/ H. Stuart Campbell
Director June 27,
1997
H. Stuart Campbell
<PAGE>EXHIBIT (23) (i)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Annual Report on Form
10-KSB under the
Securities Exchange Act of 1934 of Mesa Laboratories, Inc. for the year ended
March 31, 1997 of our reports dated May 13, 1997 and contained in registration
Statements NO. 33-89808, 333-02074 and 333-18161 of Mesa Laboratories, Inc. on
Form S-8 under the Securities Act of 1933 insofar as such reports relate to
the financial statements of Mesa Laboratories, Inc. for the year ended March
31, 1997.
Ehrhardt Keefe Steiner & Hottman PC
June 27, 1997
Denver, Colorado
