form10ksb-033101
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, 2001
Commission File Number 0-11740
MESA LABORATORIES, INC.
(Name of small business issuer in its charter)
Colorado 84-0872291
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(State or other jurisdiction of (I.R.S. Employer Identifica-
incorporation or organization) tion Number)
12100 West Sixth Avenue Lakewood, Colorado 80228
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 987-8000
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No Par Value
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(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
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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: $9,099,963.
State the aggregate market value of the voting and non-voting equity held
by non-affiliates of the Registrant: As of June 1, 2001:
$12,870,319*.
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--3,493,560 shares as of June 1, 2001.
Documents incorporated by reference: none.
Transitional Small Business Disclosure Format: Yes ; No X .
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* 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
$5.05, the last sales price of the Registrant's common stock as of
June 1, 2001, 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(R)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 equipment.
The Company presently markets the DATATRACE(R)and ELOGG(R)recording
systems which are used in various industrial applications; NUSONICS(R)
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 discontinuance of the practice of
dialyzer reuse; 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(R)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(R)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(R)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.
DATATRACE(R)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(0)F to 680(0)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(R)which records temperatures from -40(0)F to
185(0)F; Standard Temp(R), which records temperatures from 50(0)F to 302(0)F;
and HiTemp(R), which records temperatures from 212(0)F to 680(0)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 DATATRACE(R)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.
DATATRACE(R)PC Interface
The DATATRACE(R)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(R)Dataloggers
The Company distributes the ELOGG(R)Datalogger product line in North
America. The ELOGG(R)line is similar in concept to the DATATRACE(R)line,
featuring different benefits to the end-user such as longer battery life,
extended memory and humidity logging in certain models. Unlike the
DATATRACE(R)products, the ELOGG(R)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(R)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(R)Sonic Flow
Meters best serve applications where cleanliness, resistance to
corrosives or portability are required. Specific applications where the
NUSONICS(R)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(R)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 four 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 2001.
NUSONICS(R)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. The CP20 Analyzer is the Company's newest
analyzer product. Incorporating state-of-the-art electronic design and a
new transducer design, this product offers 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 3,500 clinics and
hospital centers. Currently, there are over 275,000 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 patient care 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 DATATRACE(R)and ELOGG(R)product lines. For its NUSONICS(R)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, 2001, approximately
68% of sales have been domestic and 32% 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(R)and ELOGG(R)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(R) 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, 2001, one customer
represented approximately 13% of the Company's revenues. At March 31,
2001, this customer represented approximately 12% of the Company's
account receivable balance. 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 DATATRACE(R)and ELOGG(R)
instrumentation products compete include Kaye Instruments, Testoterm,
Inc. and Rustrak Instruments. Companies with which Mesa's NUSONICS(R)
products compete include Controlotron, Badger Meter, Rosemount, Great
Lakes Instruments 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(R)and ELOGG(R)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
DATATRACE(R)products offer a miniaturized, self-contained, environmentally
resistant, wireless solution. NUSONICS(R)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(R)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, 2001, the Company had a total of 52 employees, of
which 51 were full-time employees. Currently, nine persons are employed
for marketing, four for research and development, 32 for manufacturing
and quality assurance and seven for administration.
Additional Information
For the fiscal years ended March 31, 2001 and 2000, Mesa spent
approximately $308,166 and $281,651, 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(R)temperature
recording devices and its NUSONICS(R)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.
The Annual Meeting of Shareholders of Mesa Laboratories, Inc. was held on
January 18, 2001. Of the 3,653,015
Shares entitled to vote, 3,548,275 were represented either in person or
by proxy. Four Directors were elected to
serve until the next Annual Meeting of Shareholders.
The five directors elected were:
FOR WITHHELD
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Michael T. Brooks 3,304,077 244,198
H. Stuart Campbell 3,315,177 233,098
Paul D. Duke 3,317,477 230,798
Luke R. Schmieder 3,317,477 230,798
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(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:
Quarter Ended High Low
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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
Quarter Ended High Low
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June 30, 2000 6 1/4 4 3/16
September 30, 2000 7 5 1/4
December 31, 2000 6 3/4 5 3/8
March 31, 2001 6 1/2 5 1/8
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, 2001, 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, 2001, the Company did not sell
any equity securities that were not registered under the Securities
Act of 1933, as amended.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Results of Operations
Net Sales
Net sales for fiscal 2001 increased 5% from fiscal 2000. In real
dollars, net sales of $9,099,963 in fiscal 2001 increased $444,632 from
$8,655,331 in 2000. Net sales increase in fiscal 2001 was due to an
increase in sales resulting from the acquisition of Automata
Instrumentation, Inc. on December 7, 1999. This increase was off-set by
declines in Datatrace and Nusonics products. Sales of Datatrace products
declined over 20% during fiscal 2001. While the world wide market for
capital goods was weak, these products were significantly hurt by the
decrease in the value of the EURO in comparison to the Dollar, which made
the product more expensive in the European market during fiscal 2001.
The market in Japan was also softer for these products during the year
adding to the decline in international sales. The decline in Nusonics
products was almost identical to the decline in Datatrace products during
fiscal 2001, but reflects the declining investment in our flow meter
products.
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.
Cost of Sales
Cost of sales as a percent of net sales in fiscal 2001 increased
3.2% from fiscal 2000 to 39.4%. There were two main factors which
impacted this increase during fiscal 2001. Incorporation of the Automata
products into the sales mix for the full year had a slightly negative
impact on the Company's mix of product gross margins. The decline in
Datatrace product sales during the year had a further negative impact on
the Company's sales mix, since these products currently provide our
highest gross margin by product.
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.
Selling, General and Administrative
Selling costs decreased 12% from fiscal 2000 to 2001. In dollars,
selling costs declined $149,630 to $1,144,390 in fiscal 2001 from
$1,294,020 in fiscal 2000. The decrease in selling expense during fiscal
2001 was due chiefly to a reduction in outside commission expenses.
Decreases in sales of Datatrace and Nusonics products, which are sold
primarily through independent sales representatives, led to a significant
decrease in commissions. Increased medical product sales, which are
primarily sold though direct sales personnel, led to higher salesperson
commissions for the year, but these were partially off-set by lower
bonuses.
General and administrative expenses were $1,252,812 in fiscal 2001
and $1,099,585 in fiscal 2000, which represents a $153,227 or 14%
increase from fiscal 2000 to fiscal 2001. During fiscal 2001, increased
amortization expense was incurred due to the Automata acquisition in
fiscal 2000. The newly implemented 401 (k) plan also increased benefit
expenses. These costs were partially off-set by decreased acquisition
costs.
Selling costs 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 expenses,
which was due to the increased expense levels of the new Automata
products.
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 acquisition costs, $100,000 of amortization and
increased consulting.
Research and Development
Company sponsored research and development cost $308,166 in fiscal
2001 and $281,651 in fiscal 2000, which represents a 9% increase from
year to year. Increases in compensation and materials costs accounted
for the increase in expense during fiscal 2001. Current projects in
development include a new generation Datatrace instrument, enhancements
to the Datatrace user software and feasibility work on a new meter
product for the dialysis market.
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.
Net Income
Net income decreased to $1,832,268 or $.49 per share on a diluted
basis in fiscal 2001 from $2,106,619 or $.55 per share on a diluted basis
in fiscal 2000. The decrease in net income during fiscal 2001 was
partially due to the changes in product mix highlighted in the Cost of
Goods Sold section of this report. Additionally, increased charges
against accounts receivable, inventory and fixed assets were taken during
the year which are not expected to recur in fiscal 2002.
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.
Liquidity and Capital Resources
On March 31, 2001, the Company had cash and short term investments
of $2,316,769. In addition, the Company had other current assets
totaling $5,822,592 and total current assets of $8,139,361. Current
liabilities of Mesa Laboratories, Inc. were $860,715 which resulted in a
current ratio of 9:1. For comparison purposes at March 31, 2000, Mesa
had cash and short term investments of $2,849,709, other current assets
of $4,486,352, total current assets of $7,336,061, current liabilities of
$807,114 and a current ratio of 9:1.
Mesa has made capital acquisitions of $80,053 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.
MESA LABORATORIES, INC.
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, 2001 and 2000, 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 auditing standards generally
accepted in the United States of America. 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, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended, in conformity
with auditing standards generally accepted in the United States of
America.
/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
May 10, 2001
Denver, Colorado
BALANCE SHEETS
March 31,
---------------------------
2001 2000
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............. $ 2,316,769 $ 2,849,709
Accounts receivable -
trade, net of allowance for doubtful
accounts of $50,000 (2001) and
$70,000 (2000) .................... 3,232,706 2,338,995
Other ............................... 53,631 46,808
Inventories ........................... 2,402,847 1,961,055
Prepaid expenses ...................... 27,508 38,331
Deferred income taxes ................. 105,900 101,163
----------- -----------
TOTAL CURRENT ASSETS .................. 8,139,361 7,336,061
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation of $1,397,991
(2001) and $1,307,628 (2000) ......... 1,471,662 1,574,698
OTHER ASSETS:
Intangible Assets, net of accumulated
amortization of $1,587,907 (2001) and
$1,172,339 (2000) ................... 4,207,942 4,623,510
----------- -----------
$13,818,965 $13,534,269
=========== ===========
See notes to financial statements.
BALANCE SHEETS
March 31,
---------------------------
2001 2000
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade .............. $ 353,519 $ 171,974
Accrued salaries and payroll taxes ... 267,964 323,349
Accrued warranty expense ............. 12,000 25,000
Other accrued liabilities ............ 96,771 172,108
Taxes payable ........................ 130,461 114,683
----------- -----------
TOTAL CURRENT LIABILITIES ............ 860,715 807,114
LONG TERM LIABILITIES:
Deferred income taxes ................ 25,292 127,691
COMMITMENTS
STOCKHOLDERS' EQUITY:
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, 3,542,160 (2001)
and 3,787,476 (2000) ............... 2,165,549 2,687,087
Retained earnings .................... 10,767,409 9,912,377
----------- -----------
12,932,958 12,599,464
----------- -----------
$13,818,965 $13,534,269
=========== ===========
See notes to financial statements.
STATEMENTS OF INCOME
Year Ended March 31,
----------------------------
2001 2000
----------- -----------
SALES ..................................... $ 9,099,963 $ 8,655,331
COST OF SALES ............................. 3,588,266 3,134,828
----------- -----------
GROSS PROFIT .............................. 5,511,697 5,520,503
----------- -----------
OPERATING EXPENSES:
Selling ................................. 1,144,390 1,294,020
General and administrative .............. 1,252,812
1,099,585
Research and development ................ 308,166 281,651
----------- -----------
TOTAL OPERATING EXPENSES .................. 2,705,368 2,675,256
----------- -----------
OPERATING INCOME .......................... 2,806,329 2,845,247
INTEREST INCOME ........................... 146,474 243,832
OTHER EXPENSE ............................. (75,511) --
----------- -----------
EARNINGS BEFORE INCOME TAXES .............. 2,877,292 3,089,079
INCOME TAXES .............................. 1,045,024 982,460
----------- -----------
NET INCOME ................................ $ 1,832,268 $ 2,106,619
=========== ===========
NET INCOME PER SHARE - BASIC .............. $ .50 $ .55
=========== ===========
NET INCOME PER SHARE - DILUTED ............ $ .49 $ .55
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING - BASIC . 3,694,356 3,824,397
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING - DILUTED 3,722,317 3,840,865
=========== ===========
See notes to financial statements.
STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock
----------------------------- Total
Number of Retained Stockholders'
Shares Amount Earnings Equity
----------- ----------- ------------- -----------
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 ........... (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
Common stock issued for the
conversion of incentive
stock options net of
shares returned to Company
as payment ............... 29,135 42,608 -- 42,608
Purchase and retirement of
treasury stock ........... (274,451) (564,146) (977,236) (1,541,382)
Net income for the year .... -- -- 1,832,268 1,832,268
----------- ----------- ------------- -----------
BALANCE, March 31, 2001 .... 3,542,160 $ 2,165,549 $ 10,767,409 $ 12,932,958
=========== =========== ============= ===========
See notes to financial statements.
STATEMENTS OF CASH FLOWS
Years Ended March 31,
----------------------------
2001 2000
----------- -----------
Cash flows from operating activities:
Net income ........................ $ 1,832,268 $ 2,106,619
Depreciation and amortization ..... 521,686 332,590
Loss on disposal of assets ........ 76,971 --
Provision for bad debts ........... (20,000) 37,000
Provision for warranty reserve .... (13,000) 1,000
Provision for inventory reserve ... 60,000 (50,000)
Deferred income taxes ............. (107,136) 50,446
Change in assets and liabilities-
(Increase) decrease in accounts
receivable ..................... (880,534) (315,062)
(Increase) decrease in inventories (501,792) 252,192
(Increase) decrease in prepaid
expenses ....................... 10,823 3,044
Increase (decrease) in accounts
payable, trade ................. 181,545 (49,233)
Increase (decrease) in accrued
liabilities .................... (114,944) (40,046)
----------- -----------
Net cash provided by operating
activities .................... 1,045,887 2,328,550
----------- -----------
Cash flows from investing activities:
Purchase of business .............. -- (4,049,183)
(Capital expenditures) ............ (80,053) (52,980)
(Increase) decrease in intangibles -- (83,127)
----------- -----------
Net cash (used) provided by
investing activities .......... (80,053) (4,185,290)
----------- -----------
Cash flow from financing activities:
Payment of line of credit ......... -- (168,689)
Net proceeds from issuance of stock 42,608 82,996
Common stock repurchases .......... (1,541,382) (1,883,275)
----------- -----------
Net cash (used)provided by
financing activities ......... (1,498,774) (1,968,968)
----------- -----------
Net increase (decrease) in cash and
cash equivalents .................. (532,940) (3,825,708)
Cash and cash equivalents at
beginning of year ................. 2,849,709 6,675,417
----------- -----------
Cash and cash equivalents at
end of year ....................... $ 2,316,769 $ 2,849,709
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 1,142,500 $ 1,060,903
=========== ===========
Interest ... $ 1,459 $ 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.
See notes to financial statements.
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.
During the fiscal year ended March 31, 2001, one customer
represented approximately 13% of the Company's revenues. At March
31, 2001, this customer represented approximately 12% of the
Company's account receivable balance.
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.
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.
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.
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 27,961 and 16,468
additional shares in 2001 and 2000, 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, 2001 and 2000 were
$103,824 and $134,997, 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, 2001 because of the
relatively short maturity of these instruments.
Recently Issued Accounting Pronouncements - In June 1998, June 1999 and
June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of Effective Date of FASB
Statement No. 133" and SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities an amendment of FASB Statement
No. 133." These statements establish accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the balance sheet
as either an asset or liability measured at its fair value. These
statements require that changes in the fair value of the derivative be
recognized currently in earnings unless specific hedge accounting
criteria are met. SFAS No. 133 is effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000. This statement currently
has no impact on the financial statements of the Company, as the Company
does not hold any derivative instruments or participate in any hedging
activities.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin ("SAB") 101, which if amended, will become
effective for financial statements no later than the fourth quarter for
fiscal years beginning after December 15, 1999, which provides guidance
on applying generally accepted accounting principles to selected revenue
recognition issues. Management believes that the Company's revenue
recognition policies are in accordance with SAB 101.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting
for Certain Transactions Involving Stock Compensation" ("FIN 44"), which
was effective July 1, 2000, except that certain conclusions in this
Interpretation, which cover specific events that occur after either
December 15, 1998 or January 12, 2000 are recognized on a prospective
basis from July 1, 2000. This interpretation clarifies the application
of APB Opinion 25 for certain issues related to stock issued to employees.
2. Inventories:
Inventories consist of the following:
March 31,
--------------------------
2001 2000
----------- ------------
Raw materials $ 1,962,241 $ 1,484,945
Work-in-process 298,470 247,472
Finished goods 232,136 258,638
Less reserve (90,000) (30,000)
----------- -----------
$ 2,402,847 $ 1,961,055
=========== ===========
Work-in-process and finished goods include raw materials,
direct labor and manufacturing overhead at March 31, 2001 and
2000.
3. Property, Plant and Equipment:
Property, plant and equipment consist of the following:
March 31,
--------------------------
2001 2000
----------- ------------
Land $ 148,104 $ 148,104
Building 1,247,010 1,247,010
Manufacturing equipment 1,166,885 1,193,002
Computer equipment 234,386 220,942
Furniture and fixtures 73,268 73,268
----------- -----------
2,869,653 2,882,326
Less accumulated depreciation (1,397,991) (1,307,628)
----------- -----------
$ 1,471,662 $ 1,574,698
=========== ===========
4. Income Taxes:
The components of the provision for income taxes for the
years ended March 31, 2001 and 2000 are as follows:
March 31,
-------------------------
2001 2000
----------- -----------
Current tax provision:
Federal $ 1,019,683 $ 824,850
State 132,477 107,164
----------- -----------
1,152,160 932,014
----------- -----------
Deferred tax provision:
Federal (12,318) 5,800
State (94,818) 44,646
----------- -----------
(107,136) 50,446
----------- -----------
$1,045,024 $ 982,460
=========== ===========
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, 2001 and
2000 are as follows:
March 31,
--------------------------
2001 2000
----------- ------------
Depreciation and amortization $ (25,292) $ (127,691)
Accrued vacation 44,158 40,091
Bad debt expense 17,000 27,482
Obsolete inventory 30,600 11,778
Warranty reserve 4,080 9,815
Other 7,272 8,397
Deferred service cost 2,790 3,600
----------- -----------
Net deferred (liability)/asset $ 80,608 $ (26,528)
=========== ===========
A reconciliation of the Company's income tax provision for the
years ended March 31, 2001 and 2000, and the amounts computed by
applying statutory rates to income before income taxes is as
follows:
March 31,
--------------------------
2001 2000
----------- ------------
Income taxes at statutory rates $ 1,012,400 $ 974,000
State income taxes,
net of federal benefit 148,224 126,440
Foreign sales corporation
exemption (115,600) (117,980)
----------- -----------
$ 1,045,024 $ 982,460
=========== ===========
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 fiscal 2000, and $44,583 for fiscal 2001.
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.
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.
The following is a summary of options granted under the
plans:
FY 2000
---------------------------------------------
WEIGHTED -
AVG EXERCISE
SHARES GRANT PRICE PRICE
Options outstanding at
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
FY 2001
---------------------------------------------
WEIGHTED -
AVG EXERCISE
SHARES GRANT PRICE PRICE
Options outstanding at
beginning of year .. 336,852 $2.69 - $7.70 $ 5.05
Options granted ...... 91,400 $4.56 - $5.50 $ 5.29
Options cancelled .... (103,952) $2.69 - $7.70 $ 5.67
Options exercised .... (16,300) $2.69 - $5.00 $ 3.94
--------
Options outstanding at
end of year ........ 308,000 $3.75 - $7.00 $ 4.97
========
Options exercisable at
end of year ........ 105,600 $3.75 - $7.00 $ 4.84
Shares available for
future option grant . 343,834
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 2001 and 2000 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:
March 31,
--------------------------
2001 2000
----------- ------------
Net income - as reported $ 1,832,268 $ 2,106,619
Net income - pro forma $ 1,641,487 $ 1,754,520
Income per share - as reported $ .49 $ .55
Income per share - pro forma $ .44 $ .46
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% (2001) and 6.3% (2000); and expected lives
of 5 years.
8. International Sales:
For the past two fiscal years, the Company had foreign
sales as follows:
Year Ended March 31,
--------------------------
2001 2000
----------- ------------
Asia $ 959,493 $ 1,012,443
Europe 1,181,205 1,691,861
Other 802,517 758,125
----------- -----------
$ 2,943,215 $ 3,462,429
=========== ===========
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, payment of 100,000 shares of Mesa
Laboratories, Inc. Common Stock. Cash paid 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. 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:
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
===========
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.
March 31,
2000
------------
Revenue $10,750,673
Net income $ 2,216,492
Income per share - basic $ .58
Income per share - diluted $ .58
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The names, addresses, ages and terms of office of the executive
officers and directors of the Company are:
Name and Address Age Office Term Expires (1)
Luke R. Schmieder 58 President, Chief Executive 2001
12100 West Sixth Avenue Officer, Treasurer and
Lakewood, Colorado Director
Steven W. Peterson 44 Vice President-Finance, 2001
12100 West Sixth Avenue Chief Financial and Chief
Lakewood, Colorado Accounting Officer and
Secretary
Paul D. Duke 59 Vice President 2001
12100 West Sixth Avenue and Director
Lakewood, Colorado
H. Stuart Campbell 71 Director 2001
12100 West Sixth Avenue
Lakewood, Colorado
Michael T. Brooks 52 Director 2001
12100 West Sixth Avenue
Lakewood, Colorado
(1) The term of office of each officer of the Company is at the
discretion of the Board of Directors.
Luke R. Schmieder, President, Chief Executive Officer, Treasurer and
Director
Mr. Schmieder attended Ohio State University and Ohio University
taking courses in mechanical engineering and business management. Mr.
Schmieder was employed from 1970 to 1977 by Cobe Laboratories, Inc.
(manufacturer of dialysis and cardiovascular equipment and supplies) as a
designer and process controller on various projects. From 1977 to 1982,
Mr. Schmieder served as president and principal of a consulting company
for product and process development primarily in the medical field. Mr.
Schmieder has served as president and a director of the Company since its
inception in March 1982.
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). 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.
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 toss. 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 for services rendered in all capacities during
the fiscal years ended March 31, 2001, March 31, 2000 and March 31,
1999. No other executive officer received total annual salary and bonus
for the fiscal year ended March 31, 2001 in excess of $100,000.
SUMMARY COMPENSATION TABLE
Name and Principal Position Fiscal Year Salary Bonus(1) Options Granted Other Comp
L. Schmieder, CEO 2001 $106,867 $ 10,400 4,000 $ 3,150
2000 $106,712 $ 20,064 8,000 $ 897
1999 $ 96,061 $ 18,436 4,000 --
--------
(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, 2001
to the Company's Chief Executive Officer.
Option Grants in Last Fiscal Year
---------------------------------
Percent of Total
Options Options Granted Exercise Expiration
Name Granted in Fiscal Year Price Date
---- ------- -------------- ----- ----
L. Schmieder 4,000 4% $5.50 June
26, 2010
Compensation of Directors
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 June 26, 2000, the Company's two outside directors were granted
options to purchase 4,000 shares of common stock at $5.50 per share. The
Company's two inside directors each were granted options to purchase
4,000 shares of common stock at a price of $5.50 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, 2001, options to purchase a total of 308,000 shares
were outstanding, at exercise prices ranging from $3.75 to $7.00 per
share. Further, as of March 31, 2001, options to purchase an aggregate
of 343,834 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, 2001, pursuant to the Company's incentive stock option
plans, to each of the Company's executive officers. Options to purchase
6,000 shares at $5.50 per share were granted to Mr. Steven W. Peterson,
Vice President-Finance. Mr. Luke R. Schmieder, President, and Mr. Paul
D. Duke, Vice President, were granted options to purchase 4,000 shares at
$5.50 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, 2001(unless
otherwise noted), 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, 2001
except as set forth below.
Amount and Percentage of
Name of Beneficial Nature of Class Benefi-
Owner Beneficial Owner cially Owned
--------------------- ---------------- -----------------
Luke R. Schmieder (1) 405,967 (2) 11.4
Steven W. Peterson (1) 62,700 (3) 1.8
Paul D. Duke (1) 151,765 (4) 4.3
H. Stuart Campbell (1) 67,000 (5) 1.9
Michael T. Brooks (1) 9,200 (6) -
FMR Corp. (9) 288,100 (7) 8.1
All officers and 696,632 (8) 19.4
directors as a group (5 in number)
(1) The business address is 12100 West Sixth Avenue, Lakewood, Colorado
80228.
(2) Includes 7,000 shares which Mr. Schmieder has the right to acquire
within 60 days by exercise of stock options.
(3) Includes 7,750 shares which Mr. Peterson has the right to acquire
within 60 days by exercise of stock options.
(4) Includes 7,000 shares which Mr. Duke has the right to acquire
within 60 days by exercise of stock options.
(5) Includes 11,000 shares which Mr. Campbell has the right to acquire
within 60 days by exercise of stock options.
(6) Includes 7,000 shares which Mr. Brooks has the right to acquire
within 60 days by exercise of stock options.
(7) Based upon information set forth in schedule 13G filed by FMR Corp.
with the Securities and Exchange Commission dated February 14,
2001. Fidelity Management & Research Company ("Fidelity"), a
wholly-owned subsidiary of FMR Corp., is the beneficial owner of
288,100 shares as a result of acting as investment advisor to
several investment companies. The ownership by one investment
company, Fidelity Low-Priced Stock Fund, amounted to 288,100
shares. Mr. Edward C. Johnson 3d, FMR Corp., through its control
of Fidelity, and the aforementioned investment companies each has
the power to dispose of the 288,100 shares.
(8) Includes 39,750 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) The business address is 82 Devonshire Street, Boston, MA 02109.
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.
(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.
(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 10, 2001, included in the
Registrant's Report on Form 10-KSB for the fiscal year ended March 31,
2001.
(b) Reports on Form 8-K. During the last quarter of the period
---------------------
covered by this report, the Registrant did not file any
Report on Form 8-K.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MESA LABORATORIES, INC.
Registrant
Date: June 29, 2001 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 29, 2001
---------------------------- Treasurer and Director
Luke R. Schmieder
/s/Steven W. Peterson Vice President, Finance, Chief
---------------------------- Financial June 29, 2001
Steven W. Peterson and Chief Accounting Officer and
Secretary
/s/Paul D. Duke Vice President and Director June 29, 2001
----------------------------
Paul D. Duke
/s/H. Stuart Campbell Director June 29, 2001
----------------------------
H. Stuart Campbell
/s/Michael T. Brooks Director June 29, 2001
----------------------------
Michael T. Brooks