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, 2000
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:
$8,655,331.
State the aggregate market value of the voting and non-voting
equity held by non-affiliates of the Registrant: As of June 5,
2000: $13,497,947*.
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-3,787,476 shares as of March 31, 2000.
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 $4.375, the last sales price of the
Registrant's common stock as of June 5, 2000, 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 DATATRACEr product
line of Ball Corporation. In February 1993, the Company acquired the
assets of NUSONICS, Inc., a manufacturer of ultrasonic flow meters and
analyzers. In December 1999, The Company acquired Automata
Instrumentation, Inc., a manufacturer and marketer of a line of
instruments for use in calibrating and verifying performance of
hemodialysis and proportioning equipment.
The Company presently markets the DATATRACEr and ELOGGr recording
systems which are used in various industrial applications; NUSONICSr
Concentration Analyzers, Pipeline Interface Detectors and Flow Meter
products which are used in various industrial applications; and two
product lines used in kidney dialysis [Dialysate Meters and the ECHO
Reprocessing Products]. 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 data logging
market; competition in the kidney dialysis 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 DATATRACEr 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. DATATRACEr 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. DATATRACEr
products are used in any industry where temperature, pressure or
humidity is critical to the manufacturing process, quality of the
product or where product temperature, pressure or humidity profiles
are required in a continuous or moving process environment.
DATATRACEr 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, temperature and humidity or temperature and
pressure 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
for temperature are sold with various probe configurations in three
temperature ranges: LoTempr which records temperatures from -40 F
to 185 F; Standard Tempr, which records temperatures from 50 F to
302 F; and HiTempr, 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. Utilizing the same electronics and FRB Tracer packaging, the
Company offers a humidity and temperature version of its FRB Tracer
product and a pressure and temperature version of its FRB Tracer
product.
The DATATRACEr Tracers can be placed completely inside a
container or process to provide true time and temperature or time,
temperature and humidity, or time, temperature and pressure 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.
DATATRACEr PC Interface
The DATATRACEr 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.
ELOGGr Dataloggers
The Company distributes the ELOGGr Datalogger product line in
North America. The ELOGGr line is similar in concept to the
DATATRACEr line, featuring different benefits to the end-user such as
longer battery life, extended memory and humidity logging in certain
models. Unlike the DATATRACEr products, the ELOGGr 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 ELOGGr 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 NUSONICSr
Sonic Flow Meters best serve applications where cleanliness,
resistance to corrosives or portability are required. Specific
applications where the NUSONICSr 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.
NUSONICSr 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.
Over the past three years, the ultrasonic flow meter market has
shifted preference to strap-on transducer flow meters and has become
highly price competitive. While the Company continues to sell its
flow meters for certain applications, demand for this product line has
contracted and the contribution of this product line has declined to
less than 5% of total revenues in fiscal 2000.
NUSONICSr 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. Following the end of the
current fiscal year, the Company introduced its new CP20 Analyzer.
Incorporating state-of-the-art electronic design and a new transducer
design, this product will offer advanced features, smaller size,
reduced manufacturing cost and simpler installation. In addition, the
Company also offers its Model 86, Model 87 (a laboratory model) and
the Model 88 Composition Meters.
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 3,000
clinics and hospital centers. Currently, there are over 250,000
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.
Dialysate Meters
Mesa's Dialysate Meters are instruments that are used to test
various parameters of the dialysis fluid (dialysate). 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 two
different meters. 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.
In December 1999, the Company acquired Automata Instrumentation,
Inc. and its line of Dialysate Meters. This line features the NEO-2,
Phoenix, Neo-Stat + and Hydra meters. The NEO-2 Meter, introduced in
October 1999, is a next generation meter that replaces the Company's
NEO-1 Meter and measures conductivity, pressure, temperature and pH.
The remaining meters are smaller sample meters utilizing a patented,
simple and unique syringe sampling system. With its ease of operation
and lower cost, this group of meters is usually utilized by the
medical staff of hemodialysis facilities.
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-$40, 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.
The Reuse Data Management (RDM) System
During fiscal 1999, the Company began marketing its Reuse Data
Management (RDM) System. The system consists of a custom database
management software package, computer system, barcode scanner and
label printer. The RDM System is stand alone, and is capable of
operating with any reuse method whether automated or manual.
Utilizing barcode technology, the RDM System automates much of the
data entry involved in the record keeping process of managing reuse,
and will provide record keeping and reporting to satisfy both patient
management and regulatory requirements.
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 DATATRACEr and ELOGGr product lines. For its NUSONICSr
product lines, a separate organization of manufacturers'
representatives is maintained. International sales are conducted
through over 50 distributors. During the fiscal year ended March 31,
2000, approximately 60% of sales have been domestic and 40% 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.
DATATRACEr and ELOGGr 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.
NUSONICSr 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, 2000, 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 material 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 Corporation. Companies with which Mesa's DATATRACEr and
ELOGGr instrumentation products compete include Testoterm, Inc. and
Rustrak Instruments. Companies with which Mesa's NUSONICSr 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 DATATRACEr and ELOGGr
products offer unique solutions to monitoring temperature or humidity
and temperature or pressure and temperature through a continuous
process or long-term transportation and warehousing applications.
Although there are other solutions to temperature, humidity and
pressure monitoring available, the DATATRACEr products offer a
miniaturized, self-contained, environmentally resistant, wireless
solution. NUSONICSr 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. NUSONICSr 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, 2000, the Company had a total of 49 employees, of
which 47 were full-time employees. Currently, eight persons are
employed for marketing, four for research and development, 30 for
manufacturing and quality assurance and seven for administration.
Additional Information
For the fiscal years ended March 31, 2000 and 1999, Mesa spent
approximately $281,651 and $236,769, 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 DATATRACEr
temperature recording devices and its NUSONICSr 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 80% utilized and the Company currently
utilizes only one shift.
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 on the Nasdaq National Market
under the symbol "MLAB". For the last two fiscal years, the high and
low last sales 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, 1998 6 1/8 5 1/8
September 30, 1998 5 3/16 4 1/8
December 31, 1998 4 3/4 3 7/8
March 31, 1999 5 7/16 4 3/16
Quarter Ended High Low
June 30, 1999 5 1/4 4 13/32
September 30, 1999 5 3/16 4 3/8
December 31, 1999 4 11/16 3 5/8
March 31, 2000 4 3/4 3 9/16
</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, 2000, there were approximately 1,500 record
and beneficial holders of Mesa's common stock.
(c) The Company has not declared or paid any dividends to date.
(d) During the fiscal year ended March 31, 2000, the Company did
not sell any equity securities that were not registered
under the Securities Act of 1933, as amended.
* On December 7, 1999, the Company purchased all of the outstanding
and issued stock of Automata Instrumentation, Inc. by the payment to
Linda V. Masano and Thomas Michael Masano of $4,100,000 cash and
100,000 unregistered shares of common stock. The issuance of the
foregoing securities was made without registration under the
Securities Act in reliance upon the exemption provided by Section 4
(2) of the Securities Act. No Underwriter was involved in the
distribution of these securities, and no commissions were paid in
connection therewith
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Results of Operations
Net Sales
Net sales for fiscal 2000 increased 7% from fiscal 1999. In real
dollars, net sales of $8,655,331 in fiscal 2000 increased $572,058
from $8,083,273 in 1999. Net sales increase in fiscal 2000 was due to
an increase in Medical sales resulting from the acquisition of
Automata Instrumentation, Inc. on December 7, 1999. Datatrace sales
increased slightly for the year showing a gain in international sales
which was mostly off-set by a decline in domestic sales. Nusonics
sales suffered a sharper decline during the year due to decreased
demand for its concentration analyzer products. During the first
quarter of fiscal 2001 the Company's new CP20 Concentration Analyzer
was introduced, which is expected to help reverse this trend.
Net sales increase in fiscal 1999 was due to increases in sales
of Medical and Datatrace products of 7% which were mostly off-set by a
14% decrease in Nusonics product sales. Net sales increased in fiscal
1998 by 2% and was attributable to increases in Medical and Datatrace
sales, while Nusonics product sales declined from the prior fiscal
year.
Cost of Sales
Cost of sales as a percent of net sales in fiscal 2000 increased
3.3% from fiscal 1999 to 36.2%. During fiscal 2000, the company
incurred higher than normal obsolescence charges as it adjusted its
flow meter product inventory. Fiscal 2000 was also impacted by the
addition of the Automata products to the overall sales mix. During
fiscal 1999, Medical costs increased 0.2%, Datatrace costs decreased
0.1% and Nusonics costs decreased 0.2% as a percent of sales. In
fiscal 1999, costs across all three product lines remained very stable
trending down in total just slightly from the previous year.
Selling, General and Administrative
Selling expenses decreased 6% from fiscal 1999 to fiscal 2000.
In real dollars, selling expenses decreased $88,105 to $1,294,020 in
fiscal 2000 from $1,382,125 in fiscal 1999. The decrease in selling
expenses in fiscal 2000 was due to decreases in Nusonics and Datatrace
selling expenses which were partially off-set by an increase in
Medical selling expenses, which was due to the increased expense
levels generated by addition of the Automata products. The increase
in selling expenses in fiscal 1999 was due to an increase in Datatrace
and Medical selling expenses, which were partially off-set by a
decrease in Nusonics selling expenses.
General and administrative expenses were $1,099,585 in fiscal
2000 and $849,096 in fiscal 1999, which represents a $250,489 or 30%
increase from fiscal 1999 to fiscal 2000. Increased costs in fiscal
2000 included approximately $100,000 of internal acquisition related costs,
$100,000 of amortization expenses and increased consulting. The
increase in general and administrative costs during fiscal 1999 was
due to increased compensation and communications costs.
Research and Development
Company sponsored research and development cost 281,651 in fiscal
2000 and $236,769 in fiscal 1999, which represents a 19% increase from
year to year. The increase in fiscal 2000 was due to higher
compensation costs for the year due to an increase in personnel later
in fiscal 1999. The decrease in research and development costs in
fiscal 1999 were due chiefly to decreased compensation costs.
Currently, the Company plans to dedicate more resources to the
internal development of new products beginning in fiscal 2001. For
this reason, research and development costs are expected to increase
as a percent of sales during the new fiscal year.
Net Income
Net income increased to $2,106,619 or $.55 per share on a diluted
basis in fiscal 2000 from $2,103,428 or $.50 per share on a diluted
basis in fiscal 1999. Fiscal 2000 profits increased slightly from
1999 levels, as higher revenues were off-set by acquisition related
expenses. Profits for the year also benefited from a one time gain
related to income tax savings on foreign sales. During fiscal 1999,
net income increased at a rate equal to the increase in net sales.
Liquidity and Capital Resources
On March 31, 2000, the Company had cash and short term
investments of $2,849,709. In addition, the Company had other current
assets totaling $4,486,352 and total current assets of $7,336,061.
Current liabilities of Mesa Laboratories, Inc. were $807,114 which
resulted in a current ratio of 9:1. For comparison purposes at March
31, 1999, Mesa had cash and short term investments of $6,675,417,
other current assets of $3,610,760, total current assets of
$10,286,177, current liabilities of $655,527 and a current ratio of
16:1.
Mesa has made net capital purchases of $52,980 during the past
fiscal year. On December 7, 1999 the Company acquired Automata
Instrumentation, Inc., utilizing $4,100,000 of its cash reserves.
The Company has instituted a program to repurchase up to 500,000
shares 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 canceled 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
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Mesa Laboratories, Inc.
Lakewood, Colorado
We have audited the accompanying balance sheets of Mesa Laboratories,
Inc. as of March 31, 2000 and 1999, and the related statements of
income, 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 audit
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, 2000 and 1999, and the results of
its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/S/Ehrhardt Keefe Steiner and Hottman
Ehrhardt Keefe Steiner & Hottman PC
June 14, 2000
Denver, Colorado
<TABLE>
MESA LABORATORIES, INC.
BALANCE SHEETS
<CAPTION>
ASSETS
March 31,
<S> 2000 1999
CURRENT ASSETS: <C> <C>
Cash and cash equivalents (Note 1) $ 2,849,709 $ 6,675,417
Accounts receivable (Note 1)-
trade, net of allowance for doubtful
accounts of $70,000 (2000) and
$33,000 (1999) 2,338,995 1,744,066
Other 46,808 -
Inventories (Notes 1 and 2) 1,961,055 1,741,815
Prepaid expenses 38,331 33,879
Deferred income taxes (Note 4) 101,163 91,000
TOTAL CURRENT ASSETS 7,336,061 10,286,177
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation of $1,307,628
(2000) and $1,160,061 (1999)
(Notes 1 and 3) 1,574,698 1,600,304
OTHER ASSETS (Note 1):
Intangible Assets, net of accumulated
amortization of $1,172,339 (2000) and
$948,052 (1999) 4,623,510 752,670
$13,534,269 $12,639,151
</TABLE>
See notes to financial statements.
<TABLE>
MESA LABORATORIES, INC.
BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY March 31,
<S> 2000 1999
CURRENT LIABILITIES: <C> <C>
Accounts payable, trade $ 171,974 $ 89,400
Accrued salaries and payroll taxes 323,349 300,976
Accrued warranty expense (Note 1) 25,000 15,000
Other accrued liabilities 172,108 180,879
Taxes payable 114,683 69,272
TOTAL CURRENT LIABILITIES 807,114 655,527
LONG TERM LIABILITIES:
Deferred income taxes (Note 4) 127,691 78,000
COMMITMENTS (Notes 6 and 7)
STOCKHOLDERS' EQUITY (Notes 5 and 7):
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, 3,787,476 (2000) and
4,035,183 (1999) 2,687,087 2,894,900
Retained earnings 9,912,377 9,010,724
12,599,464 11,905,624
$13,534,269 $12,639,151
</TABLE>
See notes to financial statements.
<TABLE>
MESA LABORATORIES, INC.
STATEMENTS OF INCOME
<CAPTION>
Year Ended March 31,
2000 1999
<S> <C> <C>
SALES (Notes 1 and 8) $ 8,655,331 $ 8,083,273
COST OF SALES 3,134,828 2,660,217
GROSS PROFIT 5,520,503 5,423,056
OPERATING EXPENSES:
Selling 1,294,020 1,382,125
General and administrative 1,099,585 849,096
Research and development (Note 1) 281,651 236,769
TOTAL OPERATING EXPENSES 2,675,256 2,467,990
OPERATING INCOME 2,845,247 2,955,066
INTEREST INCOME, NET AND OTHER 243,832 271,362
EARNINGS BEFORE INCOME TAXES 3,089,079 3,226,428
INCOME TAXES (Note 4) 982,460 1,123,000
NET INCOME $ 2,106,619 $ 2,103,428
NET INCOME PER SHARE - BASIC $ .55 $ .51
NET INCOME PER SHARE - DILUTED $ .55 $ .50
AVERAGE COMMON SHARES OUTSTANDING - BASIC 3,824,397 4,135,521
AVERAGE COMMON SHARES OUTSTANDING - DILUTED 3,840,865 4,172,398
</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, 1998 4,284,587 $ 3,352,009 $ 7,808,862 $11,160,871
Common stock issued for the
conversion of incentive
stock options net of
shares returned to Company
as payment 44,837 80,655 - 80,655
Purchase and retirement of
treasury stock
(Notes 5 and 7) (294,241) (537,764) (901,566)(1,439,330)
Net income for the year - - 2,103,428 2,103,428
BALANCE, March 31, 1999 4,035,183 2,894,900 9,010,724 11,905,624
Common stock issued for the
conversion of incentive
stock options net of
shares returned to Company
as payment 29,478 82,996 - 82,996
Common stock issued for
Acquisition of Automata
Instrumentation, Inc. 100,000 387,500 - 387,500
Purchase and retirement of
treasury stock
(Notes 5 and 7) (377,185) (678,309) (1,204,966)(1,883,275)
Net income for the year - - 2,106,619 2,106,619
BALANCE, March 31, 2000 3,787,476 $ 2,687,087 $ 9,912,377$12,599,464
</TABLE>
See notes to financial statements.
<TABLE>
MESA LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended March 31,
<S> 2000 1999
Cash flows from operating activities: <C> <C>
Net income $ 2,106,619 $ 2,103,428
Depreciation and amortization 332,590 235,872
Provision for bad debts 37,000 -
Provision for warranty reserve 1,000 -
Provision for inventory reserve (50,000) 5,000
Deferred income taxes 50,446 (3,000)
Change in assets and liabilities-
(Increase) decrease in accounts
receivable (315,062) 10,716
(Increase) decrease in inventories 252,192 148,458
(Increase) decrease in prepaid expenses 3,044 42,273
Increase (decrease) in accounts payable,
trade (49,233) 24,385
Increase (decrease) in accrued
liabilities (40,046) 86,921
Net cash provided by operating
activities 2,328,550 2,654,053
Cash flows from investing activities:
(Increase) decrease in investments - 2,048,199
Purchase of business (4,049,183) -
(Capital expenditures) (52,980) (26,257)
(Increase) decrease in intangibles (83,127) (871)
Net cash (used) provided by investing
activities (4,185,290) 2,021,071
Cash flow from financing activities:
Payment of line of credit (168,689) -
Net proceeds from issuance of stock 82,996 80,655
Common stock repurchases (1,883,275) (1,439,330)
Net cash (used)provided by financing
activities (1,968,968) (1,358,675)
Net increase (decrease) in cash and cash
equivalents (3,825,708) 3,316,449
Cash and cash equivalents at
beginning of year 6,675,417 3,358,968
Cash and cash equivalents at
end of year $ 2,849,709 $ 6,675,417
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 1,060,903 $ 1,056,340
Interest $ 9,060 $ -
Supplemental disclosure of non cash investing and financing
activities:
During fiscal 2000, the Company acquired a business for
$4,049,183 (net of $50,817 cash received) cash and $387,500 of
common stock (Note 9).
</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, debt instruments of the U.S. government and its
agencies 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, goodwill and covenants not to compete,
which were acquired in conjunction with the NUSONICS, Inc.
and DATATRACE asset purchases and the Automata acquisition.
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.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 - Basic earnings per share is calculated
using the average number of common shares outstanding.
Diluted earnings per share is computed on the basis of the
average number of common shares outstanding plus the effect
of outstanding stock options using the treasury stock method,
which totaled 16,468 and 36,877 additional shares in 2000 and
1999, respectively.
Valuation of Long-Lived Assets - The Company assesses
valuation of long-lived assets in accordance with Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. The Company periodically evaluates
the carrying value of long-lived assets to be held and used,
including goodwill and other intangible assets, when events
and circumstances warrant such a review. The carrying value
of a long-lived asset is considered impaired when the
anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value.
In that event, a loss is recognized based on the amount by
which the carrying value exceeds the fair market value of the
long-lived asset. Fair market value is determined primarily
using the anticipated cash flows discounted at a rate
commensurate with the risk involved.
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.
Advertising Costs - Advertising costs are expensed as
incurred. Advertising costs for the years ended March 31,
2000 and 1999 were $134,997 and $107,200, respectively.
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, 2000 because of the
relatively short maturity of these instruments.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31,
2000 1999
<S> <C> <C>
Raw materials $ 1,484,945 $ 1,430,632
Work-in-process 247,472 215,665
Finished goods 258,638 175,518
Less reserve (30,000) (80,000)
$ 1,961,055 $ 1,741,815
</TABLE>
Work-in-process and finished goods include raw materials,
direct labor and manufacturing overhead at March 31, 2000
and 1999.
3. Property, Plant and Equipment:
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
March 31,
2000 1999
<S> <C> <C>
Land $ 148,104 $ 148,104
Building 1,247,010 1,229,591
Manufacturing equipment 1,193,002 1,132,673
Computer equipment 220,942 176,457
Furniture and fixtures 73,268 63,009
Truck - 10,531
2,882,326 2,760,365
Less accumulated depreciation (1,307,628) (1,160,061)
$ 1,574,698 $ 1,600,304
</TABLE>
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, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
March 31,
<S> 2000 1999
Current tax provision: <C> <C>
Federal $ 824,850 $ 974,000
State 107,164 152,000
932,014 1,126,000
Deferred tax provision:
Federal 5,800 (2,100)
State 44,646 (900)
50,446 (3,000)
$ 982,460 $ 1,123,000
</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, 2000 and 1999 are as
follows:
<TABLE>
<CAPTION>
March 31,
2000 1999
<S> <C> <C>
Depreciation and amortization $ (127,691) $ (78,000)
Accrued vacation 40,091 30,800
Bad debt expense 27,482 12,800
Obsolete inventory 11,778 32,000
Warranty reserve 9,815 5,000
Other 8,397 8,400
Deferred service cost 3,600 2,000
Net deferred (liability)/asset $ (26,528) $ 13,000
</TABLE>
A reconciliation of the Company's income tax provision for
the years ended March 31, 2000 and 1999, and the amounts
computed by applying statutory rates to income before
income taxes is as follows:
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
March 31,
2000 1999
<S> <C> <C>
Income taxes at statutory rates $ 974,000 $ 1,033,200
State income taxes,
net of federal benefit 126,440 145,800
Foreign sales corporation
exemption (117,980) (56,000)
$ 982,460 $ 1,123,000
</TABLE>
5. Stock Repurchase:
The Company has announced a plan to repurchase up to
500,000 shares 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 cancelled and
repurchase of shares will be funded through existing cash
reserves.
6. Employee Benefit Plan:
The Company adopted a 401(k) plan effective January 1,
2000. Participation is voluntary and employees are
eligible to participate at age 21 and after six months of
employment with the Company. The Company matches 50% of
the employee's contribution up to 6% of the employees
salary.
A participant vests in the Company's contributions at a
rate of 25% per year, fully vesting at the end of the
participant's fourth year of service. The Company
contributed $10,197 to the Plan for the year ended March
31, 2000.
7. 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.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company has adopted incentive stock option plans for
the benefit of the Company's key employees, excluding its
outside directors. Under the terms of the plans, 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.
On October 3, 1996, the Company adopted a 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 October 21, 1999, the Company adopted a new stock
compensation plan. The purpose of the plan is to encourage
ownership of the Common Stock of the Company by certain
officers, directors, employees and certain advisors of the
Company in order to provide incentive to promote the
success and business of the Company. A total of 300,000
shares of Common Stock have been reserved for issuance
under the plan and are subject to terms as set by the
Compensation Committee of the Board of Directors at the
time of grant.
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following is a summary of options granted under the
plans:
<TABLE>
<CAPTION>
FY 1999
WEIGHTED -
AVG EXERCISE
<S> SHARES GRANT PRICE PRICE
Options outstanding at <C> <C> <C>
beginning of year 285,321 $2.19 - $7.70 $4.32
Options granted 74,700 $4.00 - $6.33 $5.07
Options cancelled (24,268) $2.75 - $7.00 $5.57
Options exercised (64,753) $2.19 - $2.75 $2.73
Options outstanding at
end of year 271,000 $2.25 - $7.70 $4.81
Options exercisable at
end of year 110,925 $2.25 - $7.70 $4.16
Shares available for
future option grant 178,874
</TABLE>
<TABLE>
<CAPTION>
FY 2000
WEIGHTED -
AVG EXERCISE
<S> SHARES GRANT PRICE PRICE
Options outstanding at <C> <C> <C>
beginning of year 271,000 $2.25 - $7.70 $4.81
Options granted 206,440 $3.75 - $5.50 $4.18
Options cancelled (71,400) $2.69 - $7.00 $4.23
Options exercised (69,188) $2.25 - $2.69 $2.63
Options outstanding at
end of year 336,852 $2.69 - $7.70 $5.05
Options exercisable at
end of year 98,983 $2.69 - $7.70 $5.74
Shares available for
future option grant 355,834
</TABLE>
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company 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 Company's stock
option plans been determined based on the fair value at the
grant date for awards in 2000 and 1999 consistent with the
provisions of SFAS No. 123, the Company's net earnings and
earnings per share would have been reduced to the pro forma
amount indicated below:
<TABLE>
<CAPTION>
March 31,
2000 1999
<S> <C> <C>
Net income - as reported $ 2,106,619 $ 2,103,428
Net income - pro forma $ 1,754,520 $ 1,955,637
Income per share - as reported $ .55 $ .50
Income per share - pro forma $ .46 $ .47
</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
approximately 30%; discount rate of 6.3% (2000) and 5.5%
(1999); and expected lives of 5 years.
8. International Sales:
For the past two fiscal years, the Company had foreign
sales as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999
<S> <C> <C>
Asia $ 1,012,443 $ 714,468
Europe 1,691,861 1,437,133
Other 758,125 1,005,574
$ 3,462,429 $ 3,157,175
</TABLE>
9. Acquisition of Assets:
On December 7, 1999, the Company acquired all of the common
stock of Automata Instrumentation, Inc. This transaction was
accounted for as a purchase. The terms of the acquisition
included a net cash payment of $4,049,183, and payment of 100,000
shares of Mesa Laboratories, Inc. Common Stock. Cash paid
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
includes $400,000 held in escrow to compensate the Company for
any undisclosed liabilities subsequently discovered. The
escrow funds were released to the former owners on June 7,
2000. In addition, the Company entered into two consulting
contracts with the former owners of Automata. The contracts
have an aggregate value of $300,000 to be paid monthly over
the next three years for services rendered. The results of
operations of Automata are included in the results of
operations of the Company from the date of acquisition.
The aggregate purchase price of the Company's acquisition has
been allocated to the assets and liabilities purchased based
on the fair market values on the date of acquisition, as
follows:
<TABLE>
<S> <C>
Inventories $ 421,432
Accounts receivable 363,675
Equipment 29,717
Prepaid expenses 7,496
Deferred income taxes 10,918
Accounts payable, trade (131,807)
Accrued liabilities (108,059)
Line of credit (168,689)
Subtotal 424,683
Goodwill acquired 3,812,000
Covenants not to compete 200,000
Subtotal 4,436,683
Common stock issued (387,500)
Cash paid, net $4,049,183
</TABLE>
The following table depicts the unaudited pro forma results
of the Company giving effect to the acquisition as if it
had occurred on April 1, 1998. The unaudited pro forma
information is not necessarily indicative of the results of
operations of the Company had this acquisition occurred at
the beginning of the years presented, nor is it necessarily
indicative of future results.
<TABLE>
<CAPTION>
March 31,
2000 1999
<S> <C> <C>
Revenue $10,750,673 $10,200,652
Net income $ 2,216,492 $ 1,794,534
Income per share - basic $ .58 $ .42
Income per share - diluted $ .58 $ .42
</TABLE>
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:
<TABLE>
<CAPTION>
Name and Address Age Office
Term
Expires(1)
<S> <C> <C> <C>
Luke R. Schmieder 57 President, Chief Executive 2000
12100 West Sixth Avenue Officer, Treasurer and
Lakewood, Colorado Director
Steven W. Peterson 43 Vice President-Finance, 2000
12100 West Sixth Avenue Chief Financial and Chief
Lakewood, Colorado Accounting Officer and
Secretary
Paul D. Duke 58 Vice President
2000
12100 West Sixth Avenue and Director
Lakewood, Colorado
Philip D. Quedenfeld (2) Director
12100 West Sixth Avenue
Lakewood, Colorado
H. Stuart Campbell 70 Director
2000
12100 West Sixth Avenue
Lakewood, Colorado
Michael T. Brooks 51 Director 2000
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.
(2) Mr. Quedenfeld passed away on June 3, 2000. His
successor has not yet been appointed.
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.
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.
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.
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
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, who passed
away on June 3, 2000, served as a director of the Company since
its inception in March 1982.
Michael T. Brooks, Director
Mr. Brooks received his Bachelor of Arts in History from
Ohio Wesleyan University in 1971. While pursuing a career in
fluid power, he received a Masters in Business from the
University of Denver in 1983. Mr. Brooks was an independent
manufacturer's representative from 1982 - 1985 at which time he
purchased an interest in Fiero Fluid Power which he presently
owns and operates. Fiero Fluid Power is a Rep/Distributor
selling pneumatic and instrumentation equipment. He has been a
director since October, 1998 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 ("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 and Vice President for
services rendered in all capacities during the fiscal years ended
March 31, 2000, March 31, 1999 and March 31, 1998. No other
executive officer received total annual salary and bonus for the
fiscal year ended March 31, 2000 in excess of $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name and Position Fiscal Year Salary Bonus(1) Options Granted Other Comp
<S> <C> <C> <C> <C> <C>
L. Schmieder, CEO 2000 $106,712 $20,064 8,000 $897
1999 $96,061 $18,436 4,000 -
1998 $92,019 $19,367 4,000 -
P. Duke,Vice President 2000 $69,619 $45,000 8,000 $585
1999 $61,386 $19,170 4,000 -
1998 $58,247 $28,676 4,000 -
</TABLE> ______
(1) 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, 2000 to the Company's Chief Executive Officer and
Vice President.
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Name Options Granted Percent of Total
Options Granted Exercise Expiration
<S> in Fiscal Year Price Date
Luke R. <C> <C> <C> <C>
Schmieder 8,000 4% $4.63 March 31, 2004-
Nov. 3,2009
Paul D.
Duke 8,000 4% $4.38 March 31, 2004-
Nov. 3,2009
</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.
No future grants will be made from this plan, and all previous
grants have been either exercised or cancelled as of March 31,
2000.
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, 1999, the Company's three outside directors were
granted options to purchase 4,000 shares of common stock at $5.00
per share. The Company's two inside directors each were granted
options to purchase 4,000 shares of common stock at a price of
$5.00 per share for Mr. Duke and at a price of $5.50 per share
for Mr. Schmieder. On November 4, 1999, the Company's three
outside directors were granted options to purchase 4,000 shares
of common stock at $3.75 per share. The Company's two inside
directors each were granted options to purchase 4,000 shares of
common stock at a price of $3.75 per share.
Currently, all outside directors 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.
On October 21, 1999, the Company adopted a new stock
compensation plan. The purpose of the plan is to encourage
ownership of the Common Stock of the Company by certain officers,
directors, employees and certain advisors of the Company in order
to provide incentive to promote the success and business of the
Company. A total of 300,000 shares of Common Stock have been
reserved for issuance under the plan and are subject to terms as
set by the Compensation Committee of the Board of Directors at the
time of grant.
As of March 31, 2000, options to purchase a total of 336,852
shares were outstanding, at exercise prices ranging from $2.69 to
$7.70 per share. Further, as of March 31, 2000, options to
purchase an aggregate of 355,834 shares remained available for
grant under the Company's stock option plans. The plan adopted
in September 1984 was terminated effective June 1, 1993. Options
were granted during the fiscal year ended March 31, 1998,
pursuant to the Company's incentive stock option plans, to each
of the Company's executive officers. Options to purchase 4,000
shares at $5.00 per share and 4,000 shares at $3.75 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 $5.50 per share and 4,000 shares at $3.75 per share.
Retirement Plan
The Company has adopted a 401(k) plan for the benefit of its
officers and employees. Subject to certain restrictions, a
participant may defer up to 15% of their gross compensation into
the plan. The Company currently matches up to 6% of the
participant's contribution at a rate of 50% of the contribution.
The plan also allows for additional contributions by the Company
at its discretion.
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, 2000,
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, 2000 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 438,767 (2) 11.6
Steven W. Peterson 68,950 (3) 1.8
Paul D. Duke 154,765 (4) 4.1
H. Stuart Campbell 66,000 (5) 1.7
Michael T. Brooks 3,700 (6) -
Philip D. Quedenfeld 173,870 (7)(9) 4.6
All officers and 906,052 (8) 23.6
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 10,000 shares which Mr. Schmieder has the right to
acquire within 60 days by exercise of stock options.
(3) Includes 11,750 shares which Mr. Peterson has the right to
acquire within 60 days by exercise of stock options.
(4) Includes 10,000 shares which Mr. Duke has the right to
acquire within 60 days by exercise of stock options.
(5) Includes 10,000 shares which Mr. Campbell has the right to
acquire within 60 days by exercise of stock options.
(6) Includes 2,500 shares which Mr. Brooks has the right to
acquire within 60 days by exercise of stock options.
(7) Includes 10,000 shares which Mr. Quedenfeld has the right to
acquire within 60 days by exercise of stock options.
(8) Includes 54,250 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.
(9) Mr. Quedenfeld passed away on June 3, 2000.
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 June 14, 2000, included in the
Registrant's Report on Form 10-KSB for the fiscal year
ended March 31, 2000.
(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.
(10)(i) Stock Purchase Agreement between Linda V. Masano
and Thomas Michael Masano (as sellers) and Mesa
Laboratories, Inc. (as Purchaser) dated as of December
7, 1999 - Incorporated by reference to the exhibit to
the report on form 8-K dated December 7, 1999, file
number 0-11740
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: 6/30/00 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. Schmeider President, CEO 6/30/00
Luke R. Schmieder Treasurer and Director
/S/Steven W. Peterson Vice President, Finance, CFO 6/30/00
Steven W. Peterson and CFA and
Secretary
/S/Paul D. Duke Vice President and Director 6/30/00
Paul D. Duke
/S/H. Stuart Campbell Director 6/30/00
H. Stuart Campbell
/S/Michael T. Brooks Director 6/30/00
Michael T. Brooks
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, 2000 of our
reports dated June 14, 2000 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, 2000.
/S/Ehrhardt Keefe Steiner & Hottman
Ehrhardt Keefe Steiner & Hottman PC
June 30, 2000
Denver, Colorado
[ARTICLE] 5
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 12-MOS 12-MOS
[FISCAL-YEAR-END] MAR-31-2000 MAR-31-1999
[PERIOD-END] MAR-31-2000 MAR-31-1999
[CASH] 2,849,709 6,675,417
[SECURITIES] 0 0
[RECEIVABLES] 2,408,995 1,774,066
[ALLOWANCES] 70,000 33,000
[INVENTORY] 1,961,055 1,741,815
[CURRENT-ASSETS] 7,336,061 10,286,177
[PP&E] 2,882,326 2,760,365
[DEPRECIATION] 1,307,628 1,160,061
[TOTAL-ASSETS] 13,534,269 12,639,151
<CURRENT-LIABILITIES 807,114 655,527
[BONDS] 0 0
<PREFERRED-MANDATORY 0 0
[PREFERRED] 0 0
[COMMON] 2,687,087 2,894,900
[OTHER-SE] 9,912,377 9,010,724
[TOTAL-LIABILITY-AND-EQUITY] 13,534,269 12,639,151
[SALES] 8,655,331 8,083,073
[TOTAL-REVENUES] 8,655,331 8,083,073
[CGS] 3,134,828 2,660,217
[TOTAL-COSTS] 5,180,084 5,128,207
[OTHER-EXPENSES] 0 0
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 0 0
[INCOME-PRETAX] 3,089,079 3,226,428
[INCOME-TAX] 982,460 1,123,000
[INCOME-CONTINUING] 982,460 1,123,000
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 2,106,619 2,103,428
[EPS-BASIC] .55 .51
[EPS-DILUTED] .55 .50
</TABLE>
