** **

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

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** **

**FORM 10-K**

 

**(Mark  one)**

 

| **x**                                              | **ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF  1934**      |
|----------------------------------------------------|----------------------------------------------------------------------------------------------------|
|                                               |                                                                                               |
| **For the  fiscal year ended March 31, 2009** |
|                                               |                                                                                               |
| **o**                                              | **TRANSITION  REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITES EXCHANGE ACT OF  1934** |

 

**For the transition period from                       to                       **

 

**Commission File No: 0-11740**

 

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**MESA LABORATORIES, INC.**

(Exact name of registrant asspecified in its charter)

 

| **Colorado**                             | ** ** | **84-0872291**         |
|------------------------------------------|------------|------------------------|
| (State or other jurisdiction of          |       | (I.R.S. Employer       |
| Incorporation or organization)           |       | Identification number) |
| ** **                               | ** ** | ** **             |
| **12100 West 6****th**                   | ** ** | ** **             |
| **Lakewood, Colorado**                   | ** ** | **80228**              |
| (Address of principal executive offices) |       | (Zip Code)             |

 

Registrant’s telephone number,including area code: **(303) 987-8000**

 

Securities registered under Section 12(b) of the Act:

 

| **Title of each class**    | ** ** | **Name of each exchange on which registered** |
|----------------------------|------------|-----------------------------------------------|
| Common Stock, no par value |       | NASDAQ                                        |

 

Securities registered under Section 12(g) of the Act: **None**

 

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.YES o  NO x

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act.YES o  NO x

 

Indicate by check mark whether the registrant (1) has filed allreports to be filed by Section13 or 15(d) of the Securities Exchange Actof 1934 during the proceeding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. YES x  NO o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (Section 232.405 of the chapter) during the preceding 12months (or for such shorter period that the registrant was required to submitand post such files).  YES o NO o

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of the Form 10-K orany amendment to this Form 10-K.  x

 

Indicate by check mark whether the registrant is a large acceleratedfiler, and accelerated filer, a non-accelerated filer or a smaller reportingcompany. See definitions of  “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (check one):

 
| Large accelerated filer o                     | Accelerated filer o         |
|-----------------------------------------------|-----------------------------|
| Non-accelerated filer o                       | Smaller reporting company x |
| (Do not check if a smaller reporting company) |                        |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).YES  o NO x

 

The aggregate market value, as of May, 31 2009, of the common stock(based on the average of the bid and asked prices of the shares on NASDAQ) ofMesa Laboratories Inc. held by non-affiliates (assuming, for this purpose, thatall directors, officers and owners of 5% or more of the registrant’s commonstock are deemed affiliates) was approximately $38,229,840.

 

The number of outstanding shares of the common stock as of May 31,2009 was 3,186,966.

 

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the 2009 Annual Meeting of Shareholders

Part III information is incorporated by reference from the ProxyStatement

 

 

 

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**Cautionary Statement**

 

All statements other than statements of historical fact included inthis annual report regarding the Company’s financial position and operating andstrategic initiatives and addressing industry developments are forward-lookingstatements.  Where, in anyforward-looking statement, the Company, or its management, expresses anexpectation or belief as to future results, such expectation or belief isexpressed in good faith and believed to have a reasonable basis, but there canbe no assurance that the statement of expectation or belief will result or beachieved or accomplished.  Factors whichcould cause actual results to differ materially from those anticipated, includebut are not limited to general economic, financial and business conditions;competition in the Company’s markets; the business abilities and judgment ofpersonnel; the impacts of unusual items resulting from ongoing evaluations ofbusiness strategies; and changes in business strategy.

 

Mesa’s executive offices are located at 12100 West Sixth Avenue,Lakewood, Colorado 80228, telephone (303) 987-8000.

 

**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, manufacturesand markets instruments and disposable products utilized in connection withindustrial applications and healthcare. For industrial applications, which includes pharmaceutical, food,medical devices, and petrochemical, the Company presently markets theDATATRACE® data logging systems, NUSONICS® Concentration Analyzers, PipelineInterface Detectors and Flow Meter products and RAVEN Biological Indicators.For healthcare applications, the Company markets Dialysate Meters used inkidney dialysis and RAVEN Biological Indicators, which are used by hospitalsand dental offices to assure sterility. The Company is continually performing research and development to expandthe application of its technology.

 

DATATRACE® Data Loggers

 

TheDATATRACE products are self-contained, wireless, high precision, data loggersthat are used in critical manufacturing, quality control, and transportationapplications.  They are used to measuretemperature, humidity and pressure inside a process or inside a product duringmanufacturing.  In addition, theDATATRACE products can be used to validate the proper operation of laboratoryor manufacturing equipment, either during its installation or for annualre-certifications.  The product line consistsof individual data loggers, PC interface software and various accessories.  A customer typically purchases a large numberof data loggers along with a single PC interface and the software package.Specifically, the customer can purchase either the wireless Micropack III(MPIII) data loggers or the Micropack Radio Frequency (MPRF) transmitting dataloggers. Both DataTrace models work with the Data Trace Radio Frequency (DTRF)software package.

 

Inpractice, using the PC interface, the user programs the loggers to collectenvironmental data at a pre-determined interval, places the data loggers in theproduct or process, and then in the case of the MPIII model retrieves the dataloggers and reads the data into a PC after placing them in the interface orwith the MPRF models is continuously collecting the data via radio frequencytransmissions.  After this, the user canprepare tabular and graphical reports using the DTRF software.

 

The MPIII line is muchsmaller, has improved hardware compared to previous DataTrace loggers, has

 

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embedded software, includesa rapid optical interface, and operates over a wide temperature range. The MPRFmodels include all the features and performance improvements of the MPIIIversion and adds the capability to transmit data to a PC in real time throughthe proprietary DTLinc RF network.  Theability to view process or validation data instantly saves valuable time, andit can prevent costly processing mistakes. The DataTrace RF system allows theuser to see results immediately and make appropriate decisions as necessary.

 

Whilethere are a variety of different types of wireless data loggers available onthe market, there are only a few that are rated as “intrinsically safe” and canoperate at elevated temperatures, like the DATATRACE products.  These are important differentiating factorsfor the DATATRACE products in the marketplace, and consequently, they are usedby companies to control their most critical processes.  Due to their higher accuracy and precision,along with the importance of the processes they are used to control, animportant component of the DATATRACE product line is the calibration servicethat is provided by Mesa.  Typically,each DATATRACE data logger is calibrated by Mesa’s calibration laboratory priorto shipment and then annually, for a re-certification fee, to verify itsaccuracy.  For instance, the MPRFtemperature data loggers have an operating range of  —80 oC to +400 oC and can be calibrated to an accuracy of +/- 0.1oC over a portion of thisrange.  This allows the DATATRACE loggersto be used to conduct quality control on critical processes, such assterilization, one of the most important applications.

 

RAVENBiological Indicators

 

In May 2006, the Company acquired Raven Biological Laboratories, Inc.of Omaha, Nebraska.  The RAVEN productline consists of Biological Indicators (BI) and Chemical Indicators (CI) usedto assess the effectiveness of sterilization processes, including steam, gas(such as ethylene oxide), and radiation. BI’s consist of resistant spores of certain microorganisms which areapplied on a convenient substrate.  Thespores are well characterized in terms of numbers and resistance tosterilization.  In use, the BI is exposedto a sterilization process and then tested to determine the presence ofsurviving organisms.  RAVEN’s line of BI’sincludes both spore strips, which require post-processing transfer to a growthmedia, self-contained products which have the growth media already pre-packagedin crushable ampoules, industrial use BI’s, and culture media.  CI’s are similar to BI’s, except that achemical change (generally determined by color) is used to assess the exposureto sterilization conditions.  BI’s and CI’sare often used together to monitor processes. RAVEN products are used to validate equipment and monitor theeffectiveness of a process in any industrial or healthcare setting which usessterilization.  Key markets for RAVENinclude healthcare such as dental offices and hospitals, and industrial such asmedical device and pharmaceutical manufacturing.

 

In addition to Biological and Chemical Indicators, the Company offersContract and Testing Services to industrial companies for the development ofsterilization processes.  These testingservices include organism identification, population verification,sterilization process development and custom BI production.

 

The RAVEN Biological Indicators are distinguished in the marketplace bytheir high level of quality, consistency and flexibility.  A variety of different formats allows theRAVEN BI to be used in many different types of processes and products.  For instance, the simple spore strips are usedmost often in the small table-top steam sterilizers in dental offices, while amore complex self-contained BI such as the ProTest, may be used by a medicaldevice manufacturer to assure the sterility in a complex ethylene oxidesterilization process.  In either case,the number of spores contained on the carrier and the resistance of the sporesto the sterilization process must be well characterized in order to accuratelyassess the effectiveness of sterilization. During manufacturing, extensive quality control steps are used to insurethat the microorganism spores are well characterized and their resistance isknown following placement on the target carrier.  The RAVEN products are registered medicaldevices manufactured under ISO 13485 controlled processes.  They are developed and used according to theguidelines developed under the auspices of the Association for the Advancementof Medical Instrumentation (AAMI), which are adopted as the worldwide standardunder theInternationalStandards Organization (ISO).

 

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Recently the Company has expanded its product line adding two (2) specializedbiological indicator products. One of these products, ProTest BI Test Pack, isa significant addition to RAVEN’s offering for the domestic healthcare(hospital) market. It allows the user to immediately release certain types ofsterilized materials saving the user time and money. A second product added inearly 2007, ProAMP with Negative Controls, provides industrial (pharmaceuticaland medical device) users with a unique and previously unseen option forsterilization monitoring and the effects of steam sterilization on theinterpretation of a self-contained biological indicator. Having printedNegative Controls, the user can not only monitor their sterilization processesbut also see the effects their process has on BIs themselves.

 

MEDICALHEMODIALYSIS PRODUCTS

 

Patients with kidney failure (known as end stage renal disease, orESRD) require the removal of toxic waste products and excess water throughartificial means.  This process isgenerally performed three times per week and is most often accomplished throughthe use of hemodialysis.

 

Hemodialysis requires the treatment to be conducted on a dialysismachine through the use of a disposable cartridge known as a dialyzer.  Blood is brought extra corporally to thedialysis machine for control and monitoring and passes through the dialyzerwhere waste products and excess water are removed.  This treatment generally lasts three to fourhours.  While these hemodialysisprocedures can be conducted in home, the bulk of the treatments are conductedin over 4,500 clinics and hospital centers in the U.S.  Currently, there are over 300,000 patients inthe U.S. undergoing dialysis therapy.

 

In addition to the reimbursement policies of the United States Governmentand state agencies, the Company’s revenues from its dialysis products can beexpected to be dependent upon the policies of insurance companies and kidneyfoundations.

 

DialysateMeters

 

Mesa’s Dialysate Meters are instruments that are used to test variousparameters of the dialysis fluid (dialysate), and the proper calibration andoperation of the dialysis machine.  Eachmeasures some combination of temperature, pressure, pH and conductivity toensure that the dialysate has the proper composition to promote the transfer ofwaste products from the blood to the dialysate. The meters provide a digitalreadout that the patient, physician or technician uses to verify that thedialysis machine is working within prescribed limits and delivering theproperly prepared dialysate.

 

The Company manufactures two styles of Dialysate Meters; those designedfor use by dialysis machine manufacturers and Biomedical Technicians and thoseused primarily by dialysis nurses or patient care technicians.  The meters for technicians include the ModelsNEO-2 and the newer 90XL.  These metersare characterized by exceptional accuracy, stability, and flexibility and areused by the industry as the primary standard for the calibration of dialysismachines. The newest 90XL meter has four independent measurement channels,allowing the user to easily perform testing and calibration of multipledialysis machines in a clinic or on the manufacturing floor.

 

The 90XL meter has been well received by the marketplace and alreadyholds a dominant position in comparison to unit sales of the NEO-2. Mesaanticipates that the marketplace will want to gradually phase out of the NEO-2meters and further adopt the 90XL.

 

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The dialysis meters designed for use by dialysis nurses are knownprimarily for their ease of use and include the pHoenix, Hydra, and NEO-STAT+models.  Incorporating a patented,built-in syringe sampling system, these meters are used as the final qualitycontrol check on the dialysate just prior to starting a treatment.  Their design allows the nurse to quickly andeasily draw a small sample of the dialysate into the meter for measurement, andmanagement believes that they have become the most popular meter in thepoint-of care testing in dialysis clinics. The pHoenix meter is the newestmeter Mesa has introduced to the marketplace and is the leading seller by farof the three (3) hand held meter choices.

 

In addition to the dialysate meters, the Company markets a line ofcalibration standard solutions for use in dialysis clinics for calibration andtesting.  These standard solutions areregularly consumed by the dialysis clinics and this, along with calibrationservices, represents a recurring revenue stream for the Medical product line.

 

NUSONICSPRODUCTS

 

The Company’s sonic fluid measurement product line consists of twomajor components: Sonic Flow Meters and Concentration Monitors.  While the total market for flow meters isvery large, the NUSONICS® Sonic Flow Meters best serve applications wherecleanliness and resistance to corrosives are required.  Specific applications where the NUSONICS®products are particularly well suited include water treatment, chemicalprocessing and heating ventilation and air conditioning (HVAC) applications.  The Concentration Monitor component of theproduct line consists of Pipeline Interface Detectors and ConcentrationAnalyzers.  The Pipeline InterfaceDetector serves a smaller market niche while the Concentration Analyzers servea wider variety of industry application, such as chemical, food, pharmaceuticaland polymerization processes.

 

The NUSONICS products have been subject to strong competition in themarketplace in recent years primarily from larger, well established processcontrol companies.  Consequently, salesof NUSONICS products have decreased and currently represent less than 4% of theCompany’s total revenue.  Today, mostsales are made to existing NUSONICS customers who are replacing or adding totheir current infrastructure.

 

Manufacturing

 

The Company assembles its products at its facilities in Lakewood,Colorado and Omaha, Nebraska.  TheCompany’s electronic products are manufactured primarily by assembling productsfrom purchased components and testing the final products prior to release.  The RAVEN products are manufactured bygrowing microbiological spores from raw materials, assembling the finishedproducts through a series of process steps, and testing the finished BiologicalIndicators using established quality control tests.

 

Most of the materialsand components used in the Company’s product lines are available from a numberof different suppliers.  Mesa generallymaintains multiple sources of suppliers for most items but is dependent on asingle source for certain items.  Mesabelieves that alternative sources could be developed, if required, for presentsingle supply sources.  Although theCompany’s dependence on these single supply sources may involve a degree ofrisk, to date, Mesa has been able to acquire sufficient stock to meet itsproduction requirements.

 

Marketingand Distribution

 

The Company’s domestic sales of its MEDICAL and DATATRACE products aregenerated by its direct salesand marketing staff, while outside the U.S., a number of distributorsare utilized.  The Company’s RAVENproducts are distributed both directly, through a sales and marketing staff toend users and through a series of distributors both domestically and outsidethe U.S.  International sales for allproducts are conducted through over 100 distributors.  During the fiscal year ended March 31,2009, approximately 72% of sales have been domestic and 28% have beeninternational to countries throughout Europe, Africa, Australia, Asia and SouthAmerica, as well as Canada and Mexico.

 

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Sales promotions include attendance by Mesa representatives at tradeshows, direct mail campaigns, internet advertising and other digital forms ofadvertising.

 

Customers of Mesa’s MEDICAL products primarily include dialysis centersand dialysis equipment manufacturers. The primary emphasis of the Company’s marketing effort is to offerquality products to the healthcare market which will aid in cost containmentand improved patient well-being.

 

DATATRACE® customers include numerous industrial users in the food,pharmaceutical and medical device markets who utilize the products within avariety of manufacturing, quality control and validation applications. Theemphasis of the Company’s marketing effort is to offer a quality product thatprovides a unique and flexible solution to monitoring temperature, pressure orhumidity without interfering with the processing of the product.

 

RAVEN customers include various companies providing sterility assurancetesting to the dental office market, hospitals, contract sterilizing servicesand various industrial users involved in pharmaceutical and medical devicemanufacturing.  The Company’s marketingfocuses on providing high quality test products in a variety of differentformats, which minimize incubation and test result time.

 

NUSONICS® customers include various industries such as water treatment,manufacturing, HVAC and petroleum product transportation.  The Company’s marketing efforts are focusedon offering flow measurement and concentration monitoring in difficultenvironments where noninvasive monitoring techniques are required.

 

During the fiscal year ended March 31, 2009, one customerrepresented approximately 14% of the Company’s revenues and approximately 12%of the Company’s accounts receivable balance. During the fiscal year ended March 31, 2008, one customerrepresented approximately 13% of the Company’s revenues and approximately 12%of the Company’s accounts receivable balance.

 

Competition

 

Mesa competes with major medical and instrumentation companies as wellas a number of smaller companies, many of which are well established, withsubstantially greater capital resources and larger research and developmentcapabilities.  Furthermore, many of thesecompanies have an established product line and a significant operatinghistory.  Accordingly, the Company may beat a competitive disadvantage due to such factors as its limited resources andlimited marketing and distribution network.

 

Companies with which Mesa’s dialysis products compete include Myron LCompany and IBP Medical GmbH.  Companieswith which Mesa’s DATATRACE® data logger products compete include GE Kaye,Ellab and TMI Orion.  Companies withwhich RAVEN’s biological indicator products compete include 3M, SGM andSteris.  Companies with which Mesa’sNUSONICS® products compete include Controlotron, Badger Meter, Rosemount, andGE Panametrics.

 

GovernmentRegulation

 

Medical devices marketed by Mesa are subject to the provisions of theFederal Food, Drug and Cosmetic Act, as amended by the Medical DeviceAmendments of 1976 (hereinafter referred to as the “Act”).  A medical device which was not marketed priorto May 28, 1976, or is not substantially equivalent to a device marketedprior to that date, may not be marketed until certain data is filed with theFDA and the FDA has affirmatively determined that such data justifies marketingunder conditions specified by the FDA.  Amedical device is defined by the Act as an instrument which (1) isintended for use in the diagnosis or the treatment of disease, or is intendedto affect the structure of any function of the human body; (2) does notachieve its intended purpose through chemical action; and (3) is notdependent upon being

 

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metabolizedfor the achievement of its principal intended purpose.  The Act requires any company proposing tomarket a medical device to notify the FDA of its intention at least ninety daysbefore doing so, and in such notification must advise the FDA as to whether thedevice is substantially equivalent to a device marketed prior to May 28,1976.  As of the date hereof, the Companyhas received permission from the FDA to market all of its products requiringsuch permission.

 

Some of Mesa’s 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 GoodManufacturing Practices regulations which require, among other things, thesystematic control of manufacture, packaging and storage of products intendedfor human use.  Failure to comply withthese practices renders the product adulterated and could subject the Companyto an interruption of manufacture and sale of its medical products and possibleregulatory action by the FDA.

 

The manufacture and sale of medical devices is also regulated by somestates.  Although there is substantialoverlap between state regulations and the regulations of the FDA, some statelaws may apply.  Mesa, however, does notanticipate that complying with state regulations will create any significantproblems.  Foreign countries also havelaws regulating medical devices sold in those countries, which may cause us toexpend additional resources on compliance.

 

Employees

 

On March 31, 2009, the Company had a total of 111 employees, ofwhich 108 were full-time employees. Currently, 24 persons are employed formarketing and sales, six for research and development, 70 for manufacturing andquality assurance and 11 for administration.

 

AdditionalInformation

 

For the fiscal years ended March 31, 2009 and 2008, Mesa spent$636,000 and $532,000, respectively, on Company-sponsored research anddevelopment activities.

 

Compliance with federal, state and local provisions which have beenenacted regarding the discharge of materials into the environment or otherwiserelating to the protection of the environment has not had, and is not expectedto have, any adverse effect upon capital expenditures, earnings or thecompetitive position of the Company. Mesa is not presently a party to any litigation or administrativeproceedings with respect to its compliance with such environmentalstandards.  In addition, the Company doesnot anticipate being required to expend any significant capital funds in thenear future for environmental protection in connection with its operations.

 

The Company has been issued patents for its DATATRACE® temperaturerecording devices, its NUSONICS® sonic flow measurement and sonic concentrationmonitoring products and its pHoenix, Hydra and NeoStat+ dialysis meters and itsRAVEN biological indicators.  Several ofthese patents have now expired.  Failureto obtain patent protection on the Company’s remaining products may have asubstantially adverse effect upon the Company since there can be no assurancethat other companies will not develop functionally similar products, placingthe Company at a competitive disadvantage. Further, there can be no assurance that patent protection will affordprotection againstcompetitorswith similar inventions, nor can there be any assurance that the patents willnot be infringed or designed around by others. Moreover, it may be costly to pursue and to prosecute patentinfringement actions against others, and such actions could interfere with thebusiness of the Company.

 

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**Item  1A.  RISK FACTORS**

 

***We face intense competition****.*

 

The markets for some of our current and potential products areintensely competitive.  We facecompetition from companies that possess both larger sales forces and morecapital resources.  In addition, thereare growing numbers of competitors for certain of our products.

 

***Technological change could render our productsobsolete or non-competitive.***

 

The market for  the Company’sproducts and services are characterized by rapid and substantial technologicalchanges and swiftly evolving industry standards. As industry standards evolverapidly, the Company may be required to develop new and competitive products tomaintain or increase revenue. A competitive product requires substantialplanning, design, development, and testing at the technological, product andmanufacturing process stages.  TheCompany can provide no assurance that its products will remain competitive in arapidly changing environment. In addition, regulations and industry acceptanceof new technologies may decelerate or eliminate meaningful revenue.

 

***Acquisition of businesses could potentiallydecrease profit margins and decrease net income.***

 

The Company maintains its growth strategy through product developmentand business and technology acquisition. Businesses acquired by the Company mayprovide marginal profitability or prove to be unprofitable. Additional risksinclude the competition among prospective buyers, the potential loss of keyemployees or clients of the acquired company, and the reallocation of capitalfrom ongoing operating processes.

 

***We may be unable to effectively protect ourintellectual property.***

 

Our ability to compete effectively depends in part on developing andmaintaining the proprietary aspects of our technology and processes.  We cannot assure you that the patents we haveobtained, or any patents we may obtain, will provide any competitive advantagesfor our products.  We also cannot assureyou that those patents will not be successfully challenged, invalidated orcircumvented in the future.  In addition,we cannot assure you that competitors, many of which have substantial resourcesand have made substantial investments in competing technologies, have notalready applied for or obtained, or will not seek to apply for or obtain,patents that will prevent, limit or interfere with our ability to make, use andsell our products either in the United States or in international markets.  Patent applications are maintained in secrecyfor a period after filing.  We may not beaware of all of the patents and patent applications potentially adverse to ourinterests.

 

***We may have product liability claims.***

 

Our products involve a risk of product liability claims.  Although we maintain product liabilityinsurance at coverage levels which we believe are adequate, there is noassurance that, if we were to incur substantial liability for product liabilityclaims, insurance would provide adequate coverage against such liability.

 

***Our company faces challenges in complying withcertain sections of the Sarbanes-Oxley Act.***

 

Like many smaller public companies, our Company faces challenges incomplying with the internal control requirements (Section 404) of theSarbanes-Oxley Act.  Under currentframeworks, compliance in areas such as separation of duties, informationsystem controls, etc. may prove problematic for a smaller company with limitedhuman resources.  Our Company may also beforced to incur significant expense in order to comply with the law undercurrent control frameworks and deadlines for implementation.

 

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***Changing accounting regulations may affectoperating results****.*

 

Our operating results may be adversely affected by new laws andaccounting regulations that have either been recently enacted or which areunder consideration, including costs associated with implementation of Section 404of the Sarbanes-Oxley Act.

 

***Our operating results may fluctuate****.*

 

Our results of operations may fluctuate significantly from quarter toquarter based on numerous factors including the following:

*              the introduction of new products;

*              the level of market acceptance ofour products;

*              achievement of research anddevelopment milestones;

*              timing of the receipt of ordersfrom, and product shipment to major customers;

*              timing of expenditures;

*              variation in capital spendingtrends of our customers;

*              timing of the expensing ofemployee stock options;

*              delays in educating and trainingour distributors and representatives sales forces;

*              manufacturing or supply delays;

*              product returns;

*              receipt of necessary regulatoryapproval;

*              costs associated with implementingand maintaining compliance with the Sarbanes-Oxley Act;

*              costs associated with expansion ofthe Company’s direct sales capabilities; and

*              changes in key components by ourvendors.

 

***Changing Industry Trends May Affect OperatingResults.***

 

Various changes within the industries we serve may limit future demandfor our products and may include the following:

*                                         changes in dialysisreimbursements;

*                                         increased availability ofdonated organs; and

*                                         mergers within the dialysisprovider industry have made the Company more dependent upon fewer largecustomers for its sales in this industry;

*                                         price competition for keyproducts; and

*                                         increased competition.

 

***Our growth depends on introducing new products andthe efforts of third party distributors.***

 

Our growth depends on the acceptance of our products in themarketplace, the penetration achieved by thecompanies which we sell to, and rely on, todistribute and represent our products, and our ability to introduce new andinnovative products that meet the needs of the various markets we serve.  There can be no assurance that we will beable to continue to introduce new and innovative products or that the productswe introduce, or have introduced, will be widely accepted by the marketplace,or that the companies which we contract with to distribute and represent ourproducts will continue to successfully penetrate our various markets.  Our failure to continue to introduce newproducts or gain wide spread acceptance of our products would adversely affectour operations.

 

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***We depend on attracting new distributors andrepresentatives for our products****.*

 

In order to successfully commercialize our products in new markets, wewill need to enter into distribution arrangements with companies that cansuccessfully distribute and represent our products into various markets.

 

***Our products are extensively regulated which coulddelay product introduction or halt sales****.*

 

The process of obtaining and maintaining required regulatory approvalsis lengthy, expensive and uncertain. Although we have not experienced any substantial regulatory delays todate, there is no assurance that delays will not occur in the future, whichcould have a significant adverse effect on our ability to introduce newproducts on a timely basis.  Regulatoryagencies periodically inspect our manufacturing facilities to ascertaincompliance with “good manufacturing practices” and can subject approvedproducts to additional testing and surveillance programs.  Failure to comply with applicable regulatoryrequirements can, among other things, result in fines, suspension of regulatoryapprovals, product recalls, operating restrictions and criminal penalties.  While we believe that we are currently incompliance, if we fail to comply with regulatory requirements, it could have anadverse effect on our results of operations and financial condition.

 

**Item  1B.  Unresolved Staff Comments**

 

None

 

**ITEM 2.  PROPERTIES**

 

Mesa owns its 39,616 square foot facility at 12100 W. 6th Avenue,Lakewood, Colorado 80228.  All Datatrace,Medical and Nusonics manufacturing, warehouse, marketing, research and generalcorporate administrative functions are based at this location.  The facility is approximately 80% utilizedand the Company currently utilizes only one shift.  The Company also owns an approximately 28,000square foot facility at 8607 Park Drive, Omaha, Nebraska 68127.  All RAVEN product manufacturing, warehouse,marketing, research and administrative functions are based at this location.  The facility is currently 95% utilized andthe Company currently utilizes only one shift.

 

The Company does not invest in, and has not adopted any policy withrespect to investments in, real estate or interests in real estate, real estatemortgages or securities of or interests in persons primarily engaged in realestate activities.  It is not theCompany’s policy to acquire assets primarily for possible capital gain orprimarily for income.

 

**ITEM 3.  LEGAL PROCEEDINGS**

 

No material legal proceedings to which the Company is a party or towhich any of its property is the subject are pending, and no such proceedingsare known by the Company to be contemplated. The Company is not presently a party to any litigation or administrativeproceedings with respect to its compliance with federal, state and local provisionswhich have been enacted regarding the discharge of materials into theenvironment or otherwise relating tothe protection of theenvironment and no such proceedings are known by the Company to becontemplated.  No legal actions arecontemplated nor judgments entered against any officer or director of theCompany concerning any matter involving the business of the Company.

 

**ITEM 4.  SUBMISSION OF MATTERS TOA VOTE OF SECURITY HOLDERS**

 

No matter was submitted during the fourth quarter of the fiscal yearcovered by this report to a vote of security holders through the solicitationof proxies or otherwise.

 

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#### **PART II**

#### ** **

**ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALLBUSINESS ISSUER PURCHASES OF EQUITY SECURITIES**

 

(a)                                  Mesa’s commonstock is traded on the Nasdaq Global Market under the symbol “MLAB”.  For the last two fiscal years, the high andlow sales prices of the Company’s common stock as reported to the Company byNasdaq were as follows:

 
| **Quarter Ended**       | ** ** | **High** | ** ** | **Low** | ** ** | **Dividend** | ** ** |
|-------------------------|------------|----------|------------|---------|------------|--------------|------------|
| June 30, 2007      |       | $        | 27.00      |    | $          | 18.15        |       | $ | .08 |   |
| September 30, 2007 |       | $        | 26.25      |    | $          | 19.19        |       | $ | .08 |   |
| December 31, 2007  |       | $        | 27.00      |    | $          | 17.90        |       | $ | .10 |   |
| March 31, 2008     |       | $        | 26.75      |    | $          | 20.00        |       | $ | .10 |   |
|                    |       |     |       |    |       |         |       |
| June 30, 2008      |       | $        | 24.40      |    | $          | 19.95        |       | $ | .10 |   |
| September 30, 2008 |       | $        | 24.65      |    | $          | 20.43        |       | $ | .10 |   |
| December 31, 2008  |       | $        | 22.55      |    | $          | 16.26        |       | $ | .10 |   |
| March 31, 2009     |       | $        | 20.25      |    | $          | 14.55        |       | $ | .10 |   |

 

The Nasdaq Global Market quotations set forth herein reflectinter-dealer prices, without retail mark-up, mark-down, or commission and maynot represent actual transactions.

 

(b)                               As of March 31,2009, there were approximately 1200 record and beneficial holders of Mesa’scommon stock.

(c)                                During thefiscal year ended March 31, 2009, the Company did not sell any equitysecurities that were not registered under the Securities Act of 1933, asamended.

(d)                               We made thefollowing repurchases of our common stock, by month, within the fourth quarterof the fiscal year covered by this report:

 
| ** **                   | ** ** | ** **    | ** ** | ** **     | ** ** | **Total Share Purchased**    | ** ** | **Remaining Shares** | ** ** |
|------------------------------|------------|---------------|------------|----------------|------------|------------------------------|------------|----------------------|------------|
| ** **                   | ** ** | **Shares**    | ** ** | **Avg. price** | ** ** | **as Part of Publicly** | ** ** | **to Purchase**      | ** ** |
| ** **                   | ** ** | **Purchased** | ** ** | **Paid**       | ** ** | **Announced Plan**           | ** ** | **Under Plan**       | ** ** |
| January 1- 31, 2009     |       | 165           |       | $              | 17.44      |                         | 114,135    |                 | 185,865    |   |
| February 1- 28,2009     |       | 291           |       | $              | 17.55      |                         | 114,426    |                 | 185,574    |   |
| March 1 – 31, 2009 |       | 1,206         |       | $              | 15.12      |                         | 115,632    |                 | 184,368    |   |
| Total Fourth Quarter         |       | 1,662         |       | $              | 15.77      |                         |       |                 |       |   |

 

On November 7, 2005, the Board of Directors of Mesa Laboratories, Inc.adopted a share repurchase plan which allows for the repurchase of up 300,000of the Company’s common shares.  Thisplan will continue until the maximum is reached or the plan is terminated byfurther action of the Board.

 

Forinformation regarding securities authorized for issuance under our equitycompensation plans, please see Footnote 9 to the Financial Statements.

 

11

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Equity Compensation Plan Information as of March 31,2009

 
| **Plan Category**                                           | ** ** | **No. of  securities to be  Issued upon exercise of  Outstanding options** | ** ** | **Weighted-average  exercise price of  outstanding options** | ** ** | **Number  of securities  remaining for future  issuance under plan** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
|                                                        |       |                                                                            |       |                                                         |       |                                                                 |       |
| Equity compensation plans approved by security  holders     |       | 358,725                                                                         |       | $                                                            | 16.68      |                                                                 | 306,715    |   |
|                                                        |       |                                                                            |       |                                                         |       |                                                                 |       |
| Equity compensation plans not approved by security  holders |       | —                                                                          |       | —                                                       |       | —                                                               |       |
|                                                        |       |                                                                            |       |                                                         |       |                                                                 |       |
| Total                                                       |       | 358,725                                                                         |       | $                                                            | 16.68      |                                                                 | 306,715    |   |

 

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**ITEM 6. SELECTED FINANCIAL DATA**

 

The following table sets forth the Company’s selected historicalfinancial data for each of the five years in the period ended March 31. Theselected historical financial data set forth below has been derived from ouraudited consolidated financial statements included elsewhere in this annualreport on Form 10-K. This information should be read in conjunction with“Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and our audited consolidated financial statements and related notesincluded elsewhere in this annual report on Form 10-K.

 
| **(Dollars  in thousands, except EPS)** | ** ** | **2009**   | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|-----------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **Operational  Data**                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net Sales                               |       | $          | 21,536     |       | $          | 19,558     |       | $          | 17,242     |       | $          | 11,583 |   | $ | 10,041 |   |
| Gross Profit                            |       | $          | 13,817     |       | $          | 12,858     |       | $          | 10,895     |       | $          | 7,437 |   | $ | 6,320 |   |
| Gross Margin                            |       | 64         | %          | 66         | %          | 63         | %          | 64         | %          | 63         | %          |
| Operating Income                        |       | $          | 7,608      |       | $          | 7,061      |       | $          | 5,659      |       | $          | 4,110 |   | $ | 3,475 |   |
| Operating Margin                        |       | 35         | %          | 36         | %          | 33         | %          | 35         | %          | 35         | %          |
| Net Profit                              |       | $          | 4,790      |       | $          | 4,610      |       | $          | 3,958      |       | $          | 2,805 |   | $ | 2,312 |   |
| Net Profit Margin                       |       | 22         | %          | 24         | %          | 23         | %          | 24         | %          | 23         | %          |
| Earnings Per Diluted Share              |       | $          | 1.48       |       | $          | 1.41       |       | $          | 1.22       |       | $          | .92 |   | $ | .74 |   |
| **Financial  Position Data**            |       |       |       |       |       |       |       |       |       |       |       |
| Cash and Investments                    |       | $          | 9,111      |       | $          | 5,770      |       | $          | 3,346      |       | $          | 5,711 |   | $ | 6,882 |   |
| Trade Receivables (net)                 |       | $          | 4,307      |       | $          | 3,875      |       | $          | 3,817      |       | $          | 2,425 |   | $ | 1,972 |   |
| Inventory (net)                         |       | $          | 4,499      |       | $          | 4,020      |       | $          | 3,297      |       | $          | 2,374 |   | $ | 1,941 |   |
| Current Assets                          |       | $          | 18,593     |       | $          | 14,411     |       | $          | 10,842     |       | $          | 10,955 |   | $ | 11,123 |   |
| Working Capital                         |       | $          | 17,109     |       | $          | 12,824     |       | $          | 9,373      |       | $          | 9,753 |   | $ | 10,141 |   |
| Current Ratio                           |       | 13:1       |       | 9:1        |       | 7:1        |       | 9:1        |       | 11:1       |       |
| Total Assets                            |       | $          | 29,614     |       | $          | 25,533     |       | $          | 22,354     |       | $          | 16,450 |   | $ | 16,596 |   |
| Current Liabilities                     |       | $          | 1,484      |       | $          | 1,587      |       | $          | 1,469      |       | $          | 1,202 |   | $ | 982 |   |
| Total Liabilities                       |       | $          | 2,012      |       | $          | 1,794      |       | $          | 1,631      |       | $          | 1,531 |   | $ | 1,217 |   |
| Total Stockholders’ Equity         |       | $          | 27,602     |       | $          | 23,739     |       | $          | 20,723     |       | $          | 14,919 |   | $ | 15,379 |   |
| **Average  Return Data**                |       |       |       |       |       |       |       |       |       |       |       |
| Stockholder Investment (1)              |       | 19         | %          | 21         | %          | 22         | %          | 19         | %          | 15         | %          |
| Assets                                  |       | 17         | %          | 19         | %          | 20         | %          | 17         | %          | 14         | %          |
| Invested Capital (2)                    |       | 26         | %          | 26         | %          | 29         | %          | 31         | %          | 26         | %          |

 

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(1)   Averagereturn on stockholder investment is calculated by dividing total net income bythe average of end of year and beginning of year total stockholder’s equity.

(2)   Averagereturn on invested capital (invested capital = total assets – currentliabilities – cash and short-term investments) is calculated by dividing totalnet income by the average of end of year and beginning of year investedcapital.

 

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**ITEM 7  MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Overview**

 

Mesa Laboratories, Inc. manufactures and distributes electronicmeasurement systems and disposable products for various niche applications,including renal treatment, food processing, medical sterilization,pharmaceutical processing and other industrial applications.  Our Company follows a philosophy ofmanufacturing a high quality product and providing a high level of on-goingservice for those products.  In order tooptimize the performance of our Company and to build the value of the Companyfor its shareholders, we continually follow the trend of various key financialindicators.  A sample of some of the mostimportant of these indicators is presented in the following table.

 

**Key Financial Indicators**

 
| ** **                 | ** ** | **2009** | ** ** | **2008** | ** ** | **2007**   | ** ** | **2006** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|------------|------------|----------|------------|
| Cash and Investments       |       | $        | 9,111,000  |     | $          | 5,770,000  |       | $        | 3,346,000  |   | $ | 5,711,000 |   |
|                       |       |     |       |     |       |       |       |     |       |
| Trade Receivables          |       | $        | 4,587,000  |     | $          | 4,075,000  |       | $        | 4,017,000  |   | $ | 2,520,000 |   |
| Days Sales Outstanding     |       | 74       |       | 60       |       | 63         |       | 61       |       |
|                       |       |     |       |     |       |       |       |     |       |
| Inventory (Net)            |       | $        | 4,499,000  |     | $          | 4,020,000  |       | $        | 3,297,000  |   | $ | 2,374,000 |   |
| Inventory Turns            |       | 1.8      |       | 1.8      |       | 1.9        |       | 1.9      |       |
|                       |       |     |       |     |       |       |       |     |       |
| Working Capital            |       | $        | 17,109,000 |     | $          | 12,824,000 |       | $        | 9,373,000  |   | $ | 9,753,000 |   |
| Current Ratio              |       | 13:1     |       | 9:1      |       | 7:1        |       | 9:1      |       |
| Average Return On:         |       |     |       |     |       |       |       |     |       |
| Stockholder Investment (1) |       | 18.7     | %          | 20.7     | %          | 22.2       | %          | 18.5     | %          |
| Assets                     |       | 17.4     | %          | 19.3     | %          | 20.4       | %          | 17.0     | %          |
| Invested Capital (2)       |       | 25.8     | %          | 25.8     | %          | 29.2       | %          | 30.7     | %          |
|                       |       |     |       |     |       |       |       |     |       |
| Net Sales                  |       | $        | 21,536,000 |     | $          | 19,558,000 |       | $        | 17,242,000 |   | $ | 11,583,000 |   |
| Gross Profit               |       | $        | 13,817,000 |     | $          | 12,858,000 |       | $        | 10,895,000 |   | $ | 7,437,000 |   |
| Gross Margin               |       | 64       | %          | 66       | %          | 63         | %          | 64       | %          |
| Operating Income           |       | $        | 7,608,000  |     | $          | 7,061,000  |       | $        | 5,659,000  |   | $ | 4,110,000 |   |
| Operating Margin           |       | 35       | %          | 36       | %          | 33         | %          | 35       | %          |
| Net Profit                 |       | $        | 4,790,000  |     | $          | 4,610,000  |       | $        | 3,958,000  |   | $ | 2,805,000 |   |
| Net Profit Margin          |       | 22       | %          | 24       | %          | 23         | %          | 24       | %          |
| Earnings Per Diluted Share |       | $        | 1.48       |     | $          | 1.41       |       | $        | 1.22       |   | $ | .92 |   |
|                       |       |     |       |     |       |       |       |     |       |
| Capital Expenditures (Net) |       | $        | 676,000    |     | $          | 207,000    |       | $        | 1,780,000  |   | $ | 115,000 |   |
|                       |       |     |       |     |       |       |       |     |       |
| Head Count                 |       | 111      |       | 113      |       | 100        |       | 51.5     |       |
| Sales Per Employee         |       | $        | 194,000    |     | $          | 173,000    |       | $        | 172,000    |   | $ | 225,000 |   |

 

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(1)        Average return onstockholder investment is calculated by dividing total net income by theaverage of endof year and beginning of year totalstockholder’s equity.

(2)        Average return on investedcapital (invested capital = total assets — current liabilities — cash andshort-term investments) is calculated by dividing total net income by theaverage of end of year and beginning of year invested capital.

 

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While we continually try to optimize the overall performance andtrends, the table above does highlight various exceptions.  Most of the indicators above are improving inthe most recent fiscal year. Exceptions to the improving trends are days salesoutstanding, the average return calculations, and net profit margin.  Longer times to payment for our foreigncustomers have increased the total days sales outstanding average for the totalCompany in fiscal 2009. A small decrease in net profit margin combined withincreasing balance sheet levels during fiscal 2009  caused the average return calculations todecrease slightly in the current fiscal year. Our company saw a small decreasein net profit margin in fiscal 2009 due to a small decrease in gross profitmargins and decreased interest income on invested cash due to lower interestrates.

 

**Results of Operations**

 

NetSales

 

Netsales for fiscal 2009 increased 10 percent from fiscal 2008, and net sales forfiscal 2008 increased 13 percent from fiscal 2007.  In dollars, net sales of $21,536,000 infiscal 2009 increased $1,978,000 from $19,558,000 in 2008, and net sales of$19,558,000 in fiscal 2008 increased $2,316,000 from $17,242,000 in 2007.

 

Ourrevenues come from two main sources, which include product revenues and partsand service revenues.  Parts and servicerevenues are derived from on-going repair and recalibration or certification ofour products.  The certification orrecalibration of product is usually a key component of the customer’s ownquality system and many of our customers operate in regulated industries, suchas food processing or medical and pharmaceutical processing.  For this reason, these revenues tend to befairly stable and grow slowly over time. During fiscal years 2009, 2008 and 2007 our Company had parts andservice revenue of $3,642,000, $3,499,000 and $3,333,000.  As a percentage of total revenue, parts andservice revenues were 17% in 2009, 18% in 2008 and 19% in 2007.

 

Theperformance of new product sales is dependent on several factors, includinggeneral economic conditions in the United States and abroad, capital spendingtrends and the introduction of new products. Until the current fiscal year, general economic conditions had beenimproving, and more specifically, capital spending had been improving, butthese trends have reversed during fiscal 2009. New products released to the market over the past five fiscal yearsinclude the Datatrace Micropack III temperature loggers during the middle offiscal 2003, the Datatrace Micropack III humidity and pressure loggers at theend of fiscal 2004, the 90XL Dialysate Meter for kidney dialysis was introducedlate in fiscal 2006, and the Datatrace RF System was introduced in early fiscal2009.  For fiscal years 2009, 2008 and2007 product sales for our company were $17,894,000, $16,059,000 and$13,909,000.

 

Duringfiscal 2009, sales of the Company’s medical products and services increased 16%for the fiscal year compared to the prior year period.  For the year, Medical saw increased sales ofmeter products, disposables and service, which were partially off-set by lowersales of the discontinued dialyzer reprocessor. Sales of our new 90XL Meter continued to progress well during fiscal2009.  In addition, we continue tomaintain strong relationships with our major customers in this market.

 

Duringfiscal 2009, sales of Datatrace data logger products preformed at the samelevel as the prior year.  For the year,DataTrace products did not experience an increase in sales due to existingeconomic trends which influenced some industrial customers to delay theircapital equipment purchases. Sales for the twelve month period saw smalldeclines though the various categories of Micropack III products which wereoff-set by sales of the new Micropack RF products.  We are optimistic and look forward toimproving trends in both new product shipments and service sales in both thedomestic and international markets for the later part of fiscal 2010.  Introduction of the new Micropack RFproducts, with their real-time reporting capabilities, is expected to furtheradd to Datatrace product line sales in the new fiscal year.

 

Fiscal2009 sales of Raven biological indicator products increased 15 percent comparedto the prior year period.  In fiscal2009, Raven experienced an increase in biological indicator and chemicalindicator sales.  Sales

 

15

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duringfiscal 2009 benefited from increased production capabilities and automation,which is allowing our company to better penetrate the market with additionalproduct size configurations and increased production of key products.

 

Duringfiscal 2009, sales of the Nusonics line of ultrasonic fluid measurement systemsincreased by three percent. Sales of these products remain stable, but Nusonicsproducts currently contribute less than four percent of the Company’s totalsales and are not expected to grow in the future.

 

Duringfiscal 2008, sales of the Company’s medical products and services increasedfive percent for the fiscal year compared to the prior year period.  For the year, Medical saw increased sales ofmeter products, disposables and service, which were partially off-set by lowersales of the discontinued dialyzer reprocessor line and lower repair partsales.  Sales of our new 90XL Metercontinued to progress well during fiscal 2008. In addition, we continued to maintain strong relationships with ourmajor customers in this market.

 

Duringfiscal 2008, sales of Datatrace data logger products increased 13% compared tothe prior year.  For the year, DataTraceproducts continued to see improving trends in both new product shipments andservice sales in both the domestic and international markets.  Introduction of the new Micropack RF products,with their real-time reporting capabilities, was expected to further add toDatatrace product line sales in the fiscal 2009.

 

Fiscal2008 sales of Raven biological indicator products increased 29 percent comparedto the prior year period.  The Ravenbiological indicator products were acquired on May 4, 2006.  For this reason, sales of the company’s Ravenbiological indicator products benefited from an extra five weeks of sales forthe full year when compared to the prior year period.

 

Duringfiscal 2008, sales of the Nusonics line of ultrasonic fluid measurement systemsdecreased by three percent. Sales of these products remain stable, but Nusonicsproducts currently contribute less than four percent of the Company’s totalsales and are not expected to grow in the future.

 

Costof Sales

 

Cost of sales as a percent of net sales in fiscal 2009 increased 1.5percent from fiscal 2008 to 35.8 percent, and in fiscal 2008 decreased 2.5percent from fiscal 2007 to 34.3 percent from 36.8 percent.  Most of our products enjoy gross margins inexcess of 50 percent.  Due to the factthat the dialysis products have sales concentrated with several companies thatmaintain large chains of treatment centers, the products that are sold to therenal market tend to beslightly more price sensitive than the datalogging products.  Also, due to thenature of the market for biological indicators, the RAVEN products producegross margins lower than DATATRACE and MEDICAL. Therefore, shifts in product mix toward higher sales of DATATRACE andMEDICAL products will tend to produce lower cost of goods sold expense andhigher gross margins while shifts toward higher sales of RAVEN products willnormally produce the opposite effect on cost of goods sold expense and grossmargins.

 

During fiscal 2009, our Company saw increases in costs of sales due toflat DATATRACE sales as result of the economic down turn, and increases inRAVEN and MEDICAL products with a resulting increase in cost of sales. TheCompany continues to monitor and implement cost reduction programs, priceincreases and improvements in freight cost recovery.

 

During fiscal 2008, our Company saw reductions in costs of sales yearover year with the exception of the DATATRACE line which saw a small increaseof one half of one percent as a percent of DATATRACE sales.  Most of the decline in costs of sales percentin the current fiscal year was attributable to an improvement in the Medicalline, where cost reduction programs, price increases and improvements infreight cost recovery all contributed to the gain.

 

16

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Selling,General and Administrative

 

General and administrative expenses tend to be fairly fixed and stablefrom year-to-year. To the greatest extent possible, we work at containing andminimizing these costs.  Totaladministrative costs were $2,522,000 in fiscal 2009, $2,420,000 in fiscal 2008and $2,075,000 in fiscal 2007, which represents a $102,000 increase from fiscal2008 to fiscal 2009 and a $345,000 increase from fiscal 2007 to fiscal 2008.The increase in general and administrative costs for 2009 can be attributed togeneral increases in operating costs and the addition of the Controllerposition. Fiscal 2008 general and administrative costs increased due to five additionalweeks of RAVEN related costs compared to the prior year along with higheraccounting and consulting costs, which mostly can be attributed to theCompany’s efforts to comply with the demands of Section 404 of theSarbanes-Oxley Act of 2002.

 

Ourselling and marketing costs tend to be far more variable in relation to sales,although there are various exceptions. Some of these exceptions include the introduction of new products andthe mix of international sales to domestic sales.  For a product line experiencing introductionof a new product, costs will tend to be higher as a percent of sales due tohigher advertising development and sales training programs.  Our Company’s international sales are usuallydiscounted and recorded at the net discounted price, so that a change in mixbetween international and domestic sales may influence sales and marketingcosts.  One other major influence onsales and marketing costs is the mix of domestic dialysis product sales to allother domestic sales.  Domestic dialysisproduct sales are made by direct telemarketing representatives, which gives usa lower cost structure, when compared to the field salesman and independentrepresentative sales channels utilized by our other products.  Through fiscal 2009 and fiscal 2008 theCompany continued to focus additional resources on its sales and marketingefforts.  In June of fiscal 2006,the company began a transition from independent manufacturer’s representativesto direct sales personnel for domestic sales of its Datatrace products.  This change to our sales channels increasedour selling costs in recent years, but our domestic sales levels have beenrising to compensate for these cost increases. The past year’s continuing transition to direct selling was focused onoverall sales management and telemarketing resources for both the DATATRACE andRAVEN lines.

 

In dollars, selling costs were $3,051,000 in fiscal 2009, $2,845,000 infiscal 2008 and $2,769,000 in fiscal 2007. As a percent of sales, selling cost were 14.2 percent in fiscal 2009,14.5 percent in fiscal 2008 and 16.1 percent in fiscal 2007.  During both fiscal 2009 and 2008, sales andmarketing costs as a percent of sales declined. In real dollars, the DATATRACE and RAVEN costs increased during fiscal2009 due to the expansion of our selling staff and additional sales andmarketing expenses to increase the Company’s customer base, and during fiscal2008, weexperienced an additional five weeks of costs for RAVEN products whencompared with fiscal 2007.

 

Researchand Development

 

Companysponsored research and development cost was $636,000 in fiscal 2009, $532,000in fiscal 2008 and $392,000 in fiscal 2007. We are currently executing a strategy of increasing the flow ofinternally developed products. Late in the first quarter of fiscal 2009, theDatatrace Micropack RF product was introduced, and on-going research tointroduce this technology into the environmental monitoring segment of themarket continued during the remainder of the fiscal year. Most of our workduring fiscal 2008 and 2007 was focused on the development of the new MicropackRF products as part of our Datatrace line.

 

NetIncome

 

Netincome increased to $4,790,000 or $1.48 per share on a diluted basis in fiscal2009 from $4,610,000 or $1.41 per share on a diluted basis in fiscal 2008 and$3,958,000 or $1.22 per share on a diluted basis in fiscal 2007.  For the fiscal year 2009, Mesa experiencednet income growth of four percent, which was behind the sales growth rate of 10percent for the fiscal year.  The slowerprofitability growth was a result of static DATATRACE sales, and an increase incost of sales.

 

17

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In2008 the acceleration of profitability for the fiscal year can be attributed toa gain in gross profits as a percent of net sales, but was partially off-set byan increase in the income tax rate as a percent of earnings before income tax.

 

**Liquidity and Capital Resources**

 

On March 31, 2009, we had cash and cash equivalents of$9,111,000.  In addition, we had othercurrent assets totaling $9,482,000 and total current assets of$18,593,000.  Current liabilities of ourCompany were $1,484,000 which resulted in a current ratio of 13:1.  For comparison purposes at March 31,2008, we had cash and short term investments of $5,770,000, other currentassets of $8,641,000, total current assets of $14,411,000, current liabilitiesof $1,587,000 and a current ratio of 9:1.

 

Our Company has made capital acquisitions of $676,000 in fiscal 2009,and $207,000 in fiscal 2008. Fiscal 2009 included approximately $444,000expended on equipment to automate certain manufacturing processes for our Ravenproducts.

 

We have instituted a program to repurchase up to 300,000 shares of ouroutstanding common stock.  Under theplan, the shares may be purchased from time to time in the open market atprevailing prices or in negotiated transactions off the market.  Shares purchased will be canceled andrepurchases will be made with existing cash reserves.  We do not maintain a set policy for ourbuyback program.  Most of our stockbuybacks have occurred during periods when the price to earnings multiple hasbeen near historical low points, or during times when selling activity in thestock is out of balance with buying demand. On February 27, 2007, theCompany entered into an agreement to purchase 30,000 shares of MesaLaboratories, Inc. common stock from one of its current Board of Directorsmembers, Mr. Paul D. Duke.  Underthe terms of the agreement, Mesa Laboratories, Inc. would purchase 3,000shares of Mesa Laboratories, Inc. common stock from Mr. Duke eachmonth beginning in March 2007 through December 2007 at a per shareprice equal to the volume weighted average price (VWAP) of the common stock forthe previous calendar month. While Mr. Duke’s commitment to sell wasbinding through the entire term of the buyback period, the company and itsBoard retained the right to rescind the agreement at anytime during the perioddepending upon the circumstances existing at the time.

 

Duringfiscal 2009 the Company paid regular quarterly dividends of $.10 per share ofcommon stock.  For fiscal year 2009,dividends totaled $.40 per common share of stock.  During the first half of fiscal 2008, theCompany maintained the regular quarterly dividend of $.08 per share of commonstock and raised the quarterly dividend to $.10 per common share of stockduring the second half of the fiscal year. For fiscal year 2008, dividends totaled $.36 per common share of stock.

 

OurCompany invests its surplus capital in various interest bearing instruments,including money market funds and short-term treasuries.  All investments are fixed dollar investmentswith variable rates in order to minimize the risk of principal loss.

 

TheCompany does not currently maintain a line of credit or any other form ofdebt.  Nor does the Company guarantee thedebt of any other entity.  The Companyhas maintained a long history of surplus cash flow from operations.  This surplus cash flow has been used in thepast to fund acquisitions and stock buybacks and has been partially utilized tofund past special dividends.  We areactively investigating opportunities to acquire new product lines or companies,for which we may utilize cash in the future.

 

**Contractual Obligations**

 

At March 31, 2009 we had routine contractual obligations for openpurchase orders for purchases of supplies

 

18

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and inventory, which would be payable in less than one year.

 

**Forward Looking Statements**

 

All statements other than statements of historical fact included inthis annual report regarding our Company’s financial position and operating andstrategic initiatives and addressing industry developments are forward-lookingstatements.  Where, in any forward-lookingstatement, the Company, or its management, expresses an expectation or beliefas to future results, such expectation or belief is expressed in good faith andbelieved to have a reasonable basis, but there can be no assurance that thestatement of expectation or belief will result or be achieved oraccomplished.  Factors which could causeactual results to differ materially from those anticipated, include but are notlimited to general economic, financial and business conditions; competition inthe data logging market; competition in the kidney dialysis market; competitionin the fluid measurement market, competition in the biological indicatormarket; the business abilities and judgment of personnel; the impacts ofunusual items resulting from ongoing evaluations of business strategies; andchanges in business strategy.  We do notintend to update these forward looking statements.  You are advised to review the “Item 1A. RiskFactors” of this report for more information about risks that could affect thefinancial results of Mesa Laboratories, Inc.

 

**Critical****Accounting****Policies and Estimates**

 

The preparation ofour financial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates andassumptions that affect the amounts reported in our financial statements and accompanyingnotes.  Actual results could differmaterially from those estimates.

 

We believe thatthere are several accounting policies that are critical to understanding theCompany’s historical and future performance, as these policies affect thereported amounts of revenue and the more significant areas involvingmanagement’s judgments and estimates. These significant accounting policies relate to revenue recognition,research and development costs, valuation of inventory, valuation of long-livedassets and stock based compensation. These policies, and the Company’s procedures related to these policies,are described in detail below.

 

Revenue Recognition

 

We sell ourproducts directly through our sales force and through distributors.  Revenue from direct sales of our product isrecognized upon shipment to the customer. Revenue from ongoing product service and repair is fully recognized uponcompletion and shipment of serviced product.

 

Accounts Receivable

 

At the time the accounts areoriginated, the Company considers a reserve for doubtful accounts based on thecreditworthiness of the customer.  Theprovision for uncollectible amounts is continually reviewed and adjusted tomaintain the allowance at a level considered adequate to cover futurelosses.  The allowance is management’sbest estimate of uncollectible amounts and is determined based on historicalperformance that is tracked by the Company on an ongoing basis.  The losses ultimately incurred could differmaterially in the near term from the amounts estimated in determining theallowance.

 

Research &Development Costs

 

Research and development activities consist primarily of new productdevelopment and continuing engineering on existing products.  Costs related to research and developmentefforts on existing or potential products are expensed as incurred.

 

Valuation of Inventories

 

Inventories arestated at the lower of cost or market, using the first-in, first-out method(FIFO) to determine cost.  The Company’spolicy is to periodically evaluate the market value of the inventory and thestage of product life cycle, and record a reserve for any inventory consideredslow moving or obsolete.  As ofMarch 31, 2009 and 2008 the Company had recorded a reserve of $175,000each year.

 

19

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Valuationof Long-Lived Assets

 

The Company assesses the realizable value of long-lived assets forpotential impairment at least annually or when events and circumstances warrantsuch a review.  The carrying value of along-lived asset is considered impaired when the anticipated fair value is lessthan its carrying value.  In assessingthe recoverability of our long-lived assets, we must make assumptions regardingestimated future cash flows and other factors to determine the fair value ofthe respective assets.  In addition, wemust make assumptions regarding the useful lives of these assets.  As of March 31, 2009, we evaluated ourlong-lived assets for potential impairment. Based on our evaluation, no impairment charge was recognized.

 

StockBased Compensation

 

The Company implemented the provisions of SFAS 123(R) effective April 1,2006 using the modified prospective method. Under this transition method, stockbased compensation expense for the year ended March 31, 2007 includescompensation expense for all stock based compensation awards granted subsequentto April 1, 2006 and previously granted awards not vested as of April 1,2006.  The Company uses the Black-Scholesvaluation model to value option grants. We use historical data to estimate the expected price volatility, theexpected option life and expected forfeiture rate.  The risk-free rate is based on the U.S.Treasury yield in effect at the time of the grant for the estimated life of theoption.  The dividend yield is estimatedbased on the dividend payments made during the prior four quarters as a percentof average stock price for that period.

 

The above listingis not intended to be a comprehensive list of all of our accountingpolicies.  In many cases, the accountingtreatment of a particular transaction is specifically dictated by accountingprinciples, generally accepted in the United States of America, with no needfor management’s judgment in their application. There are also areas in which management’s judgment in selecting anyviable alternative would not produce a materially different result.  See our audited financial statements andnotes thereto which begin at “Item 8.  Financial Statements and Supplementary Data”of this Annual Report on Form 10-K which contain accounting policies andother disclosures required by accounting principles, generally accepted in theUnited States of America.

 

20

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**ITEM 8  FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

**TABLE OF CONTENTS**

 
| Report of Independent Registered Public Accounting  Firm |   | 22      |   |
|----------------------------------------------------------|--------|---------|--------|
|                                                     |   |    |   |
| Financial Statements:                                    |   |    |   |
|                                                     |   |    |   |
| Balance Sheets                                           |   | 23 - 24 |   |
|                                                     |   |    |   |
| Statements of Income                                     |   | 25      |   |
|                                                     |   |    |   |
| Statement of Stockholders’ Equity                   |   | 26      |   |
|                                                     |   |    |   |
| Statements  of Cash Flows                                |   | 27      |   |
|                                                     |   |    |   |
| Notes to Financial Statements                            |   | 28 - 41 |   |

 

21

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Boardof Directors and Stockholders

MesaLaboratories, Inc.

Lakewood,Colorado

 

Wehave audited the accompanying balance sheets of Mesa Laboratories, Inc. asof March 31, 2009 and 2008, and the related statements of income,stockholders’ equity, and cash flows for the years then ended.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.   The Company isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audit included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion.An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in thefinancial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Mesa Laboratories, Inc. as ofMarch 31, 2009 and 2008, and the results of its operations and its cashflows for the years then ended, in conformity with accounting principlesgenerally accepted in the United States of America.

 
|   | /s/    | Ehrhardt  Keefe Steiner & Hottman PC |
|--------|--------|-----------------------------------------------|
|   |   | Ehrhardt  Keefe Steiner & Hottman PC |

June 29,2009

Denver,Colorado

 

22

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**MESA LABORATORIES, INC.**

**BALANCE SHEETS**

 
| ** **                                                                            | ** ** | **March 31,** | ** ** |
|---------------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                            | ** ** | **2009**           | ** ** | **2008** | ** ** |
| **ASSETS**                                                                            |       |               |       |   |   |
| CURRENT  ASSETS:                                                                      |       |               |       |   |   |
| Cash  and cash equivalents                                                            |       | $                  | 9,111,000  |   | $ | 5,770,000 |   |
| Accounts  receivable -                                                                |       |               |       |   |   |
| Trade,  net of allowance for doubtful accounts of $280,000 (2009) and $200,000 (2008) |       | 4,307,000          |       | 3,875,000 |   |
| Other                                                                                 |       | 16,000             |       | 34,000 |   |
| Inventories,  net                                                                     |       | 4,499,000          |       | 4,020,000 |   |
| Prepaid  expenses and other                                                           |       | 318,000            |       | 419,000 |   |
| Deferred  income taxes                                                                |       | 342,000            |       | 293,000 |   |
| TOTAL  CURRENT ASSETS                                                                 |       | 18,593,000         |       | 14,411,000 |   |
|                                                                                  |       |               |       |   |   |
| PROPERTY,  PLANT AND EQUIPMENT, net                                                   |       | 3,879,000          |       | 3,488,000 |   |
|                                                                                  |       |               |       |   |   |
| OTHER  ASSETS:                                                                        |       |               |       |   |   |
| Goodwill                                                                              |       | 5,301,000          |       | 5,301,000 |   |
| Other  intangible assets, net                                                         |       | 1,685,000          |       | 2,188,000 |   |
| Deferred  income taxes – long-term                                               |       | 156,000            |       | — |   |
| Deposits                                                                              |       | —             |       | 145,000 |   |
|                                                                                  |       | $                  | 29,614,000 |   | $ | 25,533,000 |   |

 

See notes to financial statements.

 

23

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**MESA LABORATORIES, INC.**

**BALANCE SHEETS**

 
| ** **                                                                                                               | ** ** | **March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                                                               | ** ** | **2009**           | ** ** | **2008** | ** ** |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                            | ** ** | ** **         | ** ** | ** ** | ** ** |
| CURRENT  LIABILITIES:                                                                                                    | ** ** | ** **         | ** ** | ** ** | ** ** |
| Accounts  payable, trade                                                                                                 |       | $                  | 296,000    |   | $ | 173,000 |   |
| Accrued  salaries and payroll taxes                                                                                      |       | 1,033,000          |       | 1,189,000 |   |
| Accrued  warranty expense                                                                                                |       | 30,000             |       | 30,000 |   |
| Other  accrued liabilities                                                                                               |       | 6,000              |       | 99,000 |   |
| Taxes  payable                                                                                                           |       | 119,000            |       | 96,000 |   |
| TOTAL  CURRENT LIABILITIES                                                                                               |       | 1,484,000          |       | 1,587,000 |   |
|                                                                                                                     |       |               |       |   |   |
| LONG  TERM LIABILITIES:                                                                                                  |       |               |       |   |   |
| Deferred  income taxes                                                                                                   |       | 528,000            |       | 207,000 |   |
|                                                                                                                     |       |               |       |   |   |
| 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,  3,182,228 (2009) and 3,166,492 (2008) |       | 4,817,000          |       | 4,665,000 |   |
| Retained  earnings                                                                                                       |       | 22,785,000         |       | 19,074,000 |   |
|                                                                                                                     |       |               |       |   |   |
| TOTAL  STOCKHOLDERS’ EQUITY                                                                                         |       | 27,602,000         |       | 23,739,000 |   |
|                                                                                                                     |       | $                  | 29,614,000 |   | $ | 25,533,000 |   |

 

See notes to financial statements.

 

24

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**MESA LABORATORIES, INC.**

**STATEMENTS OF INCOME**

 
| ** **                                   | ** ** | **Years Ended March 31,** | ** ** |
|----------------------------------------------|------------|--------------------------------|------------|
| ** **                                   | ** ** | **2009**                       | ** ** | **2008** | ** ** |
| Sales                                        |       | $                              | 21,536,000 |   | $ | 19,558,000 |   |
| Cost  of Sales                               |       | 7,719,000                      |       | 6,700,000 |   |
| Gross  profit                                |       | 13,817,000                     |       | 12,858,000 |   |
|                                         |       |                           |       |   |   |
| Operating  expenses                          |       |                           |       |   |   |
| Selling                                      |       | 3,051,000                      |       | 2,845,000 |   |
| General  and administrative                  |       | 2,522,000                      |       | 2,420,000 |   |
| Research  and development                    |       | 636,000                        |       | 532,000 |   |
| Total  operating expenses                    |       | 6,209,000                      |       | 5,797,000 |   |
|                                         |       |                           |       |   |   |
| Operating  income                            |       | 7,608,000                      |       | 7,061,000 |   |
| Interest  income                             |       | 86,000                         |       | 195,000 |   |
| Earnings  before income taxes                |       | 7,694,000                      |       | 7,256,000 |   |
|                                         |       |                           |       |   |   |
| Income  taxes                                |       | 2,904,000                      |       | 2,646,000 |   |
|                                         |       |                           |       |   |   |
| Net  income                                  |       | $                              | 4,790,000  |   | $ | 4,610,000 |   |
|                                         |       |                           |       |   |   |
| Net  income per share (basic)                |       | $                              | 1.51       |   | $ | 1.46 |   |
|                                         |       |                           |       |   |   |
| Net  income per share (diluted)              |       | $                              | 1.48       |   | $ | 1.41 |   |
|                                         |       |                           |       |   |   |
| Average  common shares outstanding - basic   |       | 3,179,000                      |       | 3,168,000 |   |
|                                         |       |                           |       |   |   |
| Average  common shares outstanding - diluted |       | 3,238,000                      |       | 3,281,000 |   |

 

See notes to financial statements.

 

25

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**MESA LABORATORIES, INC.**

**STATEMENTOF STOCKHOLDERS’ EQUITY**

** **
| ** **                                                                                               | ** ** | **Common Stock** | ** ** | ** ** | ** ** | **Total**    | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------|------------|--------------|------------|
| ** **                                                                                               | ** ** | **Number of**    | ** ** | ** ** | ** ** | **Retained** | ** ** | **Stockholders** | ** ** |
| ** **                                                                                               | ** ** | **Shares**       | ** ** | **Amount** | ** ** | **Earnings** | ** ** | **Equity** | ** ** |
| ** **                                                                                               | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| BALANCE,  March 31, 2007                                                                            |       | 3,178,401        |       | $          | 4,646,000  |         | $          | 16,077,000 |   | $ | 20,723,000 |   |
| ** **                                                                                               | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Common  stock issued for conversion of stock options net of 9,676 shares returned to  Company as payment |       | 26,124           |       | 102,000    |       | —       |       | 102,000 |   |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Purchase  and retirement of treasury stock                                                               |       | (38,033          | )          | (83,000    | )          | (748,000     | )          | (831,000 | ) |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Dividends  paid ($.36 per share)                                                                         |       | —           | ** ** | **—** |       | (1,140,000   | )          | (1,140,000 | ) |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Stock  based compensation                                                                                | ** ** | **—**       | ** ** | **—** |       | 246,000      |       | 246,000 |   |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Tax  benefit on exercise of non-qualified options                                                        |       | —           |       | —     |       | 29,000       |       | 29,000 |   |
|                                                                                                     |       |             |       |       | ** ** | ** **   |       |   |   |
| Net  income for the year                                                                                 |       | —           |       | —     |       | 4,610,000    |       | 4,610,000 |   |
| BALANCE,  March 31, 2008                                                                            |       | 3,166,492        |       | 4,665,000  |       | 19,074,000   |       | 23,739,000 |   |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Common  stock issued for conversion of stock options net of 5,682 shares returned to  Company as payment |       | 23,468           |       | 165,000    |       | —       |       | 165,000 |   |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Purchase  and retirement of treasury stock                                                               |       | (7,732           | )          | (13,000    | )          | (119,000     | )          | (132,000 | ) |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Dividends  paid ($.40 per share)                                                                         |       | —           | ** ** | **—** |       | (1,272,000   | )          | (1,272,000 | ) |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Tax  Benefit on exercise of non-qualified stock options                                                  |       | —           |       | —     |       | 36,000       |       | 36,000 |   |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Stock  based compensation                                                                                | ** ** | **—**       | ** ** | **—** |       | 276,000      |       | 276,000 |   |
|                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** | ** ** |
| Net  income for the year                                                                                 |       | —           |       | —     |       | 4,790,000    |       | 4,790,000 |   |
| BALANCE,  March 31, 2009                                                                            |       | 3,182,228        |       | $          | 4,817,000  |         | $          | 22,785,000 |   | $ | 27,602,000 |   |

 

See notes to financial statements.

 

26

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**MESA LABORATORIES, INC.**

##### **STATEMENTSOF CASH FLOWS**

 
| ** **                                                    | ** ** | **Years Ended March 31,** | ** ** |
|---------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                    | ** ** | **2009**                       | ** ** | **2008** | ** ** |
| Cash  flows from operating activities:                        | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net  income                                                   |       | $                              | 4,790,000  |   | $ | 4,610,000 |   |
| Depreciation  and amortization                                |       | 788,000                        |       | 742,000 |   |
| Allowance  for bad debt                                       |       | 80,000                         | ** ** | **—** | ** ** |
| Deferred  income taxes                                        |       | 116,000                        |       | 9,000 |   |
| Stock  based compensation                                     |       | 276,000                        |       | 246,000 |   |
| Change  in assets and liabilities                             | ** ** | ** **                     | ** ** | ** ** | ** ** |
| (Increase)  decrease in accounts receivable                   |       | (494,000                       | )          | (82,000 | ) |
| (Increase)  decrease in inventories                           |       | (479,000                       | )          | (723,000 | ) |
| (Increase)  decrease in prepaid expenses                      |       | 101,000                        |       | (304,000 | ) |
| Increase  (decrease) in accounts payable, trade               |       | 123,000                        |       | (84,000 | ) |
| Increase  (decrease) in accrued liabilities and taxes payable |       | (226,000                       | )          | 202,000 |   |
| Net  cash provided by operating activities                    |       | 5,075,000                      |       | 4,616,000 |   |
|                                                          |       |                           |       |   |   |
| Cash  flows from investing activities:                        |       |                           |       |   |   |
| Capital  expenditures                                         |       | (676,000                       | )          | (207,000 | ) |
| Deposit  on manufacturing equipment                           |       | 145,000                        |       | (145,000 | ) |
| Net  cash used by investing activities                        |       | (531,000                       | )          | (352,000 | ) |
|                                                          |       |                           |       |   |   |
| Cash  flow from financing activities:                         |       |                           |       |   |   |
| Tax  benefit of nonqualified stock options                    |       | 36,000                         |       | 29,000 |   |
| Dividends  paid                                               |       | (1,272,000                     | )          | (1,140,000 | ) |
| Net  proceeds from issuance of stock                          |       | 165,000                        |       | 102,000 |   |
| Common  stock repurchases                                     |       | (132,000                       | )          | (831,000 | ) |
| Net  cash used by financing activities                        |       | (1,203,000                     | )          | (1,840,000 | ) |
| Net  increase (decrease) in cash and cash equivalents         |       | 3,341,000                      |       | 2,424,000 |   |
| Cash  and cash equivalents at beginning of year               |       | 5,770,000                      |       | 3,346,000 |   |
| Cash  and cash equivalents at end of year                     |       | $                              | 9,111,000  |   | $ | 5,770,000 |   |
|                                                          |       |                           |       |   |   |
| Supplemental  disclosures of cash flow information:           |       |                           |       |   |   |
| Cash  paid during the year for:                               |       |                           |       |   |   |
| Income  taxes                                                 |       | $                              | 2,665,000  |   | $ | 2,789,000 |   |

 

See notes to financial statements

 

27

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**MESALABORATORIES, INC.**

**NOTESTO FINANCIAL STATEMENTS**

 

**1.****                                 ****Summary of SignificantAccounting Policies:**

 

**General** - Mesa Laboratories, Inc. wasincorporated under the laws of the State of Colorado on March 26, 1982,for the purpose of designing, manufacturing and marketing electronicinstruments, supplies and disposable products.

 

**Concentration of Credit Risk** - Financial instruments whichpotentially subject the Company to concentrations of credit risk consist ofmoney market funds, short-term investments and accounts receivable.  The Company invests primarily all of itsexcess cash in money market funds administered by reputable financialinstitutions.  The Company grants creditto its customers who are located throughout the United States and foreigncountries.  To reduce credit risk, theCompany periodically evaluates the money market fund administrators andperforms credit analysis of customers and monitors their financialcondition.  Additionally, the Companymaintains cash balances in bank deposit accounts which, at times, may exceedfederally insured limits.  The Companyhas not experienced any losses in such accounts.

 

Duringthe fiscal year ended March 31, 2009, one customer representedapproximately 14% of the Company’s revenues and approximately 12% of theCompany’s accounts receivable balance. During the fiscal year ended March 31, 2008, one customerrepresented approximately 13% of the Company’s revenues and approximately 12%of the Company’s accounts receivable balance.

 

**Cash Equivalents** - Cash equivalents include all highlyliquid investments with an original maturity of three months or less.

 

**Accounts Receivable** - At the time the accountsare originated, the Company considers a reserve for doubtful accounts based onthe creditworthiness of the customer. The provision for uncollectible amounts is continually reviewed andadjusted to maintain the allowance at a level considered adequate to coverfuture losses.  The allowance ismanagement’s best estimate of uncollectible amounts and is determined based onhistorical performance that is tracked by the Company on an ongoing basis.  The losses ultimately incurred could differmaterially in the near term from the amounts estimated in determining theallowance.

* *

**Inventories** - Inventories are stated at the lower ofcost or market, using the first-in, first-out method (FIFO) to determinecost.  The Company’s policy is toperiodically evaluate the market value of the inventory and the stage ofproduct life cycle, and record a reserve for any inventory considered slowmoving or obsolete.  As of March 31,2009 and 2008 the Company had recorded a reserve of $175,000, against slowmoving inventory.

 

**Property, Plant and Equipment** - Property, plant and equipment isstated at acquisition cost.  Depreciationand amortization is provided using the straight-line method over the estimateduseful lives of 3 to 39 years.

 

**Goodwill****andOther Intangible Assets** — Goodwill, which resulted from theacquisitions of Nusonics, Datatrace, Raven and Automata, is no longer subjectto amortization, and is tested annually for impairment in accordance withStatement of Financial Accounting Standards (“SFAS”) No. 142 “Goodwill andIntangible Assets.”  Certain intangibleassets including patents, non-compete agreements and customer relationshipswere recognized as part of the Raven acquisition and are amortized over theirestimated useful lives which range from 3 to 16 years.

 

28

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**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

**Valuation of Long-Lived Assets** - The Company assesses the realizable value oflong-lived assets for potential impairment at least annually or when events andcircumstances warrant such a review.  Thecarrying value of a long-lived asset is considered impaired when theanticipated fair value is less than its carrying value.  In assessing the recoverability of ourlong-lived assets, we must make assumptions regarding estimated future cashflows and other factors to determine the fair value of the respectiveassets.  In addition, we must makeassumptions regarding the useful lives of these assets.  As of March 31, 2009 and 2008, weevaluated our long-lived assets for potential impairment.  Based on our evaluation, no impairment chargewas recognized.

 

**Revenue Recognition** - Revenue is recognized when persuasiveevidence of an arrangement exists, when title and risk of ownership passes, thesales price is fixed or determinable, and collectibility is probable.  The Company recognizes revenues at the timeproducts are shipped. Revenue from ongoing product service and repair is fullyrecognized upon completion and shipment of serviced product.

 

Sales to distributors aremade at their net discounted price.  Thisnet discounted price is net of any volume pricing that may be available.  Customers who may be unsure of theappropriateness of our products for their application are offered demonstrationequipment prior to purchase, thus no return rights are extended.  Products are built to customer order and noprice protections are offered.

 

Other than normal and customary on-going customer service, the Companydoes not have any post shipment contractual obligations to its customers, suchas installation, training, etc.

 

**Research & Development Costs** - Costs related to research anddevelopment efforts on existing or potential products are expensed asincurred.  Research and development costsfor the fiscal years ended March 31, 2009 and 2008 were $636,000 and$532,000 each year, respectively.

 

**Accrued Warranty Expense** - The Company provides limited productwarranty on its products and, accordingly, accrues an estimate of the relatedwarranty expense at the time of sale.

 

**Advertising Costs** - Advertising costs are expensed asincurred.  Advertising costs for theyears ended March 31, 2009 and 2008 were $368,000 and $212,000,respectively.

 

**Income Taxes** - The Company accounts for income taxes under theliability method, which requires an entity to recognize deferred tax assets andliabilities.  Temporary differences aredifferences between the tax basis of assets and liabilities and their reportedamounts in the financial statements that will result in taxable or deductibleamounts in future years.

 

**StockBased Compensation**- In December 2004, the FASB issued Statement of Financial Accounting StandardNo. 123(R), Share Based Payment (SFAS 123(R)). SFAS 123(R) is a revision of FASB Statement No. 123, Accounting forStock-Based Compensation, and supersedes APB Opinion No. 25, Accounting forStock Issued to Employees, and amends SFAS 95, and its related implementationguidance. SFAS 123(R) focuses primarily on accounting for transactions in whichan entity obtains employee services through share-based payment transactions.SFAS 123(R) requires an entity to measure the cost of employee servicesreceived in exchange for the award of equity instruments based on the fairvalue of the award at the date of grant. The cost is to be recognized over theperiod during which an employee is required to provide services in exchange forthe award. SFAS 123(R) also requires the benefits of tax deductions in excessof recognized compensation expense to be reported

 

29

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**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

as a financing cash flow,rather than as an operating cash flow as prescribed under the prior accountingrules. This requirement reduces net operating cash flows and increases netfinancing cash flows in periods after adoption. Total cash flow remainsunchanged from what would have been reported under prior accounting rules.

 

The Company implementedthe provisions of SFAS 123(R) effective April 1, 2006 using themodified prospective method. Under this method, the Company recognizescompensation expense on a straight-line basis over the vesting period for allstock-based awards granted on or after April 1, 2006, and for previouslygranted awards not yet vested as of April 1, 2006. Under the provisions ofSFAS 123(R), the company recognizes stock-based compensation net of an estimatedforfeiture rate, resulting in the recognition of compensation cost for onlythose shares expected to vest. Prior to the adoption of SFAS 123(R), theCompany followed the intrinsic value method in accordance with APB 25 toaccount for the issuance of stock incentives to employees and directors.Accordingly, no compensation expense was recognized relating to stock-basedawards prior to April 1, 2006.

 

**Earnings Per Share** - Basic earnings per share is calculatedusing the average number of common shares outstanding.  Diluted earnings per share is computed on thebasis of the average number of common shares outstanding plus the effect ofoutstanding stock options using the treasury stock method, which totaled 59,000and 113,000 additional shares in 2009 and 2008, respectively.

 

Basic net income per common share is computed by dividing net income bythe weighted average number of shares of common stock outstanding during theperiod. Diluted net income per common share is computed using the treasurystock method to compute the weighted average common stock outstanding assumingthe conversion of potentially dilutive common shares.

 

Thefollowing table presents a reconciliation of the denominators used in thecomputation of net income per common share — basic and net income per commonshare — diluted for the twelve month periods ended March 31, 2009 and2008:

 
| ** **                                       | ** ** | **Twelve Months Ended** | ** ** |
|--------------------------------------------------|------------|-------------------------|------------|
| ** **                                       | ** ** | **March 31,**      | ** ** |
| ** **                                       | ** ** | **2009**                | ** ** | **2008** | ** ** |
|                                             |       |                    |       |   |   |
| Net income available for shareholders            |       | $                       | 4,790,000  |   | $ | 4,610,000 |   |
|                                             |       |                    |       |   |   |
| Weighted avg. outstanding shares of common stock |       | 3,179,000               |       | 3,168,000 |   |
| Dilutive effect of stock options                 |       | 59,000                  |       | 113,000 |   |
|                                             |       |                    |       |   |   |
| Common stock and equivalents                     |       | 3,238,000               |       | 3,281,000 |   |
|                                             |       |                    |       |   |   |
| Earnings per share:                              |       |                    |       |   |   |
| Basic                                            |       | $                       | 1.51       |   | $ | 1.46 |   |
| Diluted                                          |       | $                       | 1.48       |   | $ | 1.41 |   |

 

30

----

 

**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

Forthe twelve months ended March 31, 2009 and 2008, 184,970 and 2,000 shares,respectively, attributable to outstanding stock options were excluded from thecalculation of diluted earnings per share because the exercise prices of thestock options were greater than or equal to the average price of the commonshares, and therefore their inclusion would have been anti-dilutive.

 

**Use of Estimates** - The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

**Fair Value of Financial Instruments** - The carrying amount of financialinstruments including cash and cash equivalents, accounts receivable,short-term investments, accounts payable and accrued expenses approximated fairvalue as of March 31, 2009 because of the relatively short maturity of theseinstruments.

 

**Recently Issued AccountingPronouncements** -In September 2006, the FASB issued SFAS 157, Fair Value Measurement**(SFAS 157). The standard providesguidance for using fair value to measure assets and liabilities. SFAS 157clarifies the principle that fair value should be based on the assumptionsmarket participants would use when pricing an asset or liability andestablishes a fair value hierarchy that prioritizes the information used todevelop those assumptions. Under the standard, fair value measurements would beseparately disclosed by level within the fair value hierarchy. The statement iseffective for the Company beginning April 1, 2009; however, early adoptionis permitted. The adoption of SFAS 157 has not had a material impact on theCompany’s financial statements.

 

In December 2007,the FASB issued SFAS No. 160, “Non-controlling Interests inConsolidated Financial Statements—an amendment of ARB No. 51.”SFAS 160 establishes accounting and reporting standards fornon-controlling interests in subsidiaries. This statement requires thereporting of all non-controlling interests as a separate component ofstockholders’ equity, the reporting of consolidated net income (loss) as theamount attributable to both the parent and the non-controlling interests andthe separate disclosure of net income (loss) attributable to the parent and tothe non-controlling interests. In addition, this statement provides accountingand reporting guidance related to changes in non-controlling ownershipinterests. Other than the reporting requirements described above which requireretrospective application, the provisions of SFAS 160 are to be appliedprospectively in the first annual reporting period beginning on or afterDecember 15, 2008. The Company currently has no non-controllinginterests, thus the adoption of FAS 160 is expected to have no impact onour financial statements.

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,”(FAS 141R), which replaces FASB Statement No. 141. FAS 141R establishesprinciples and requirements for how an acquirer recognizes and measures in itsfinancial statements the identifiable assets acquired, the liabilities assumed,any non-controlling interest in the acquiree and the goodwill acquired. TheStatement also establishes disclosure requirements which will enable users toevaluate the nature and financial effects of the business combination. FAS 141Ris effective as of the beginning of an entity’s fiscal year that begins afterDecember 15, 2008, which will be our year beginning April 1, 2009.The impact of adopting SFAS 141R will depend on any future businesscombinations that the Company may pursue.

 

31

----

 

**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

In March 2008, theFASB issued SFAS No. 161, Disclosures about Derivative Instruments andHedging Activities - an amendment of FASB Statement No. 133 (SFASNo. 161).  SFAS No. 161 requires additional disclosuresabout the objectives of using derivative instruments, the method by which thederivative instruments and related hedged items are accounted for underStatement No. 133 and its related interpretations, and the effect ofderivative instruments and related hedged items on financial position,financial performance, and cash flows.  SFAS No. 161 alsorequires disclosure of the fair values of derivative instruments and theirgains and losses in a tabular format.  SFAS No. 161 is effectivefor financial statements issued for fiscal years and interim periods beginningafter November 15, 2008.  The Company has no derivativeinstruments or hedging activities and this pronouncement is onlydisclosure-related; accordingly, SFAS 161 has no impact on the Company’sfinancial position, results of operations or cash flows.

 

In April 2008, theFASB issued Staff Position (FSP) No. FAS 142-3, Determination of theUseful Life of Intangible Assets (FSP FAS 142-3).  FSP FAS 142-3amends the factors that should be considered in developing renewal or extensionassumptions used to determine the useful life of a recognized intangible assetunder SFAS No. 142, Goodwill and Other Intangible Assets.  It iseffective for financial statements issued for fiscal years beginning afterDecember 15, 2008, and interim periods within those fiscal years andshould be applied prospectively to intangible assets acquired after theeffective date.  Early adoption is not permitted. FSP FAS 142-3 alsorequires expanded disclosure related to the determination of intangible assetuseful lives for intangible assets and should be applied to all intangibleassets recognized as of, and subsequent to the effective date.  Theimpact of FSP FAS 142-3 will depend on the size and nature of any acquisitionson or after April 1, 2009.

 

**2.****                                     ****Inventories:**

 

Inventories consist of the following:

 
| ** **      | ** ** | **March 31** | ** ** |
|-----------------|------------|-------------------|------------|
| ** **      | ** ** | **2009**          | ** ** | **2008** | ** ** |
| Raw materials   |       | $                 | 3,092,000  |   | $ | 2,896,000 |   |
| Work-in-process |       | 518,000           |       | 490,000 |   |
| Finished goods  |       | 1,064,000         |       | 809,000 |   |
| Less reserve    |       | (175,000          | )          | (175,000 | ) |
|            |       | $                 | 4,499,000  |   | $ | 4,020,000 |   |

 

Work-in-process and finished goods include raw materials, direct laborand manufacturing overhead at March 31, 2009 and 2008.

 

32

----

 

**MESALABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

**3.****                                     ****Property, Plant andEquipment:**

 

Property,plant and equipment consist of the following:

 
| ** **                    | ** ** | **March 31,** | ** ** |
|-------------------------------|------------|--------------------|------------|
| ** **                    | ** ** | **2009**           | ** ** | **2008** | ** ** |
| Land                          |       | $                  | 273,000    |   | $ | 273,000 |   |
| Building                      |       | 2,601,000          |       | 2,577,000 |   |
| Manufacturing equipment       |       | 3,081,000          |       | 2,490,000 |   |
| Computer equipment            |       | 487,000            |       | 427,000 |   |
| Furniture and fixtures        |       | 78,000             |       | 78,000 |   |
| Construction in progress      |       | 1,000              |       | — |   |
|                          |       | 6,521,000          |       | 5,845,000 |   |
| Less accumulated depreciation |       | (2,642,000         | )          | (2,357,000 | ) |
|                          |       | $                  | 3,879,000  |   | $ | 3,488,000 |   |

 

Depreciation expense for the years endedMarch 31, 2009 and 2008 were $285,000 and $240,000, respectively.

 

**4.****             ****Goodwill and OtherIntangible Assets**

 

As of March 31,2009, goodwill amounted to $5,301,000, which includes the addition in fiscal2007 of $1,093,000 for the acquisition of Raven Biological Laboratories, Inc.,all of which is deductible for tax purposes.  Prior to the Raven acquisition, goodwill amounted to $4,208,000, whichresulted from the acquisitions of Nusonics, Datatrace and Automata. The Companycompleted its annual impairment tests during the fourth quarters of fiscal 2009and 2008 and determined there was no impairment.

 

Other intangible assets(all of which are being amortized except projects in process) are as follows:

 
| ** **             | ** ** | **As of March 31, 2009** | ** ** |
|------------------------|------------|-------------------------------|------------|
| ** **             | ** ** | **Carrying  Amount**          | ** ** | **Accumulated  Amortization** | ** ** | **Net** | ** ** | **Useful Life** | ** ** |
| Patents                |       | $                             | 37,000     |   | $ | 7,000 |   | $ | 30,000 |   | 16 years |   |
| Non-compete Agreements |       | 382,000                       |       | 371,000 |   | 11,000 |   | 3 years |   |
| Trade Names            |       | 123,000                       |       | — |   | 123,000 |   | Indefinite |   |
| Customer Relationships |       | 2,608,000                     |       | 1,087,000 |   | 1,521,000 |   | 7 years |   |
|                   |       | $                             | 3,150,000  |   | $ | 1,465,000 |   | $ | 1,685,000 |   |   |   |

 
| ** **             | ** ** | **As of March 31, 2008** | ** ** |
|------------------------|------------|-------------------------------|------------|
| ** **             | ** ** | **Carrying  Amount**          | ** ** | **Accumulated  Amortization** | ** ** | **Net** | ** ** | **Useful Life** | ** ** |
| Patents                |       | $                             | 37,000     |   | $ | 4,000 |   | $ | 33,000 |   | 16 years |   |
| Non-compete Agreements |       | 382,000                       |       | 244,000 |   | 138,000 |   | 3 years |   |
| Trade Names            |       | 123,000                       |       | — |   | 123,000 |   | Indefinite |   |
| Customer Relationships |       | 2,608,000                     |       | 714,000 |   | 1,894,000 |   | 7 years |   |
|                   |       | $                             | 3,150,000  |   | $ | 962,000 |   | $ | 2,188,000 |   |   |   |

 

33

----

 

**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

Amortizationexpense was $503,000 in 2009 and $502,000 in 2008.

 

Estimated amortizationexpense for the fiscal years 2010 to 2014 is $385,000, $375,000, $375,000, 375,000and $33,000 respectively.

 

**5.****             ****Income Taxes:**

 

Effective April 1, 2007, we adopted theprovisions of the Financial Accounting Standards Board (“FASB”) InterpretationNo. 48, *Accounting of Uncertainty inIncome Taxes—An Interpretation of FASB Statement No. 109*. UnderFIN 48, we must recognize the tax benefit from an uncertain tax position onlyif it is more likely than not that the tax position will be sustained onexamination by the taxing authorities, based on the technical merits of theposition. We measure the tax benefits recognized in the consolidated financialstatements from such a position based on the largest benefit that has a greaterthan 50% likelihood of being realized upon ultimate resolution. The applicationof income tax law is inherently complex. Laws and regulations in this area arevoluminous and are often ambiguous. As such, we are required to make manysubjective assumptions and judgments regarding our income tax exposures.Interpretations of and guidance surrounding income tax law and regulationschange over time and may result in changes to our subjective assumptions andjudgments which can materially affect amounts recognized in our Balance Sheetsand Statements of Income. The result of the reassessment of our tax positionsin accordance with FIN 48 did not have a material impact on our financialstatements. Our federal tax returns for all years after 2003 and our state taxreturns after 2002 are subject to future examination by tax authorities for allour tax jurisdictions. We recognize interest and penalties related to incometax matters in other income (expense) and corporate, general and administrationexpenses, respectively.

 

The components of the provision for income taxes forthe years ended March 31, 2009 and 2008 are as follows:

** **
| ** **              | ** ** | **March 31,** | ** ** |
|-------------------------|------------|--------------------|------------|
| ** **              | ** ** | **2009**           | ** ** | **2008** | ** ** |
| Current tax provision   | ** ** | ** **         | ** ** | ** ** | ** ** |
| Federal                 |       | $                  | 2,316,000  |   | $ | 2,248,000 |   |
| State                   |       | 472,000            |       | 407,000 |   |
|                    |       | 2,788,000          |       | 2,655,000 |   |
| Deferred tax provision: |       |               |       |   |   |
| Federal                 |       | 97,000             |       | (8,000 | ) |
| State                   |       | 19,000             |       | (1,000 | ) |
|                    |       | 116,000            |       | (9,000 | ) |
|                    |       | $                  | 2,904,000  |   | $ | 2,646,000 |   |

 

34

----

 

**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

Deferred taxes result from temporary differences inthe recognition of income and expenses for financial and income tax reportingpurposes and differences between the fair value of assets acquired in businesscombinations accounted for as a purchase and their tax bases.  The components of net deferred tax assets andliabilities as of March 31, 2009 and 2008 are as follows:

 
| ** **                                | ** ** | **March 31,** | ** ** |
|-------------------------------------------|------------|--------------------|------------|
| ** **                                | ** ** | **2009**           | ** ** | **2008** | ** ** |
| Current deferred tax assets:              | ** ** | ** **         | ** ** | ** ** | ** ** |
| Accrued vacation                          |       | $                  | 133,000    |   | $ | 120,000 |   |
| Bad debt expense                          |       | 104,000            |       | 74,000 |   |
| Inventory reserve                         |       | 65,000             |       | 65,000 |   |
| Warranty reserve                          |       | 11,000             |       | 11,000 |   |
| Other                                     |       | 29,000             |       | 23,000 |   |
|                                      |       | 342,000            |       | 293,000 |   |
| Long-term deferred tax asset (liability): |       |               |       |   |   |
| Depreciation and amortization             |       | (372,000           | )          | (207,000 | ) |
| Net deferred (liability)/asset            |       | $                  | (30,000    | ) | $ | 86,000 |   |

 

A reconciliation of the Company’s income tax provision for the yearsended March 31, 2009 and 2008, and the amounts computed by applyingstatutory rates to income before income taxes is as follows:

 
| ** **                                 | ** ** | **March 31,** | ** ** |
|--------------------------------------------|------------|--------------------|------------|
| ** **                                 | ** ** | **2009**           | ** ** | **2008** | ** ** |
| Income taxes at statutory rates            |       | $                  | 2,616,000  |   | $ | 2,467,000 |   |
| State income taxes, net of federal benefit |       | 231,000            |       | 213,000 |   |
| Tax benefit on stock option exercises      |       | 95,000             |       | 70,000 |   |
| Sec. 199 manufacturing deduction           |       | (161,000           | )          | (145,000 | ) |
| Other                                      |       | 123,000            |       | 41,000 |   |
|                                       |       | $                  | 2,904,000  |   | $ | 2,646,000 |   |

 

**6.****                                     ****Stock Repurchase:**

 

In November, 2005, the Company’s Board of Directors approved a programto repurchase up to 300,000 shares of its outstanding common stock.  Under the program, shares may be purchasedfrom time to time in the open market at prevailing prices or in negotiatedtransactions off the market.  Sharespurchased will be cancelled and repurchases of shares will be funded throughexisting cash reserves.

 

35

----

 

**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

7.                                       **Employee Benefit Plan:**

 

The Company adopted a 401(k) plan effective January 1,2000.  Participation is voluntary andemployees are eligible to participate at age 21 and after six months ofemployment with the Company.  The Companymatches 50% of the employee’s contribution up to 6% of the employeessalary.  A participant vests in theCompany’s contributions at a rate of 25% per year, fully vesting at the end ofthe participant’s fourth year of service. The Company contributed $118,000 tothe plan for fiscal 2009 and $129,000 for fiscal 2008.

 

**8.****                                     ****Stockholders’ Equity:**

 

The State of Colorado has eliminated the ability of Coloradocorporations to retain treasury stock. As a result, the Company reduced common stock to its average share valueand further

 

reduced retained earnings for the remainder of the cost of treasurystock acquired in each fiscal year. In the most recent fiscal year, managementestimated that approximately 10% of the price paid for repurchased shares wasattributable to the original purchase of common stock, while the remainder wascharged to retained earnings.

 

The Company has adopted incentive stock option plans for the benefit ofthe Company’s key employees and outside directors. Under terms of the plans,options are granted at an amount not less than 100% of the bid price of theunderlying shares at the date of grant. Options are exercisable for a term offive to ten years and, during such term, may be exercised as follows:  25% after each year, and 100% anytime afterthe fourth year until the end of the fifth to tenth year, or 10% after each ofthe first five years,25% after each of the sixth and seventh years and 100%after the seventh year until the end of the tenth year.

 

On October 3, 1996, the Company adopted a nonqualified performancestock option plan for the benefit of the Company’s outside Directors.  The plan provides that the outside Directorswill receive grants to be determined and approved by the Company’s insideDirectors and not to exceed 20,000 options per year per director.  Under the terms of the plan, the options areexercisable for a term of ten years and, during such term are exercisable asfollows:  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 willbe equal to 100% of the closing price of the common stock on theover-the-counter market on the date of grant. Effective March 24, 2006,this plan has expired, and no new grants can be made.

 

On October 21, 1999, the Company adopted a new stock compensationplan. The purpose of the plan is to encourage ownership of the Common Stock ofthe Company by certain officers, directors, employees and certain advisors ofthe Company in order to provide incentive to promote the success and businessof the Company.  A total of 300,000shares of Common Stock were reserved for issuance under the plan and are subjectto terms as set by the Compensation Committee of the Board of Directors at thetime of grant.  On October 18, 2004,the shareholders approved an amendment to the plan to reserve an additional200,000 shares of Common Stock for issuance under the plan.

 

On December 8, 2006, the Company adopted a new stock compensationplan. The purpose of the plan is to encourage ownership of the Common Stock ofthe Company by certain officers, directors, employees and certain advisors ofthe Company in order to provide incentive to promote the success and businessof the Company.  A total of 400,000shares of Common Stock were reserved for issuance under the plan and aresubject to terms as set by the Compensation Committee of the Board of Directorsat the time of grant.

 

36

----

 

**MESA LABORATORIES, INC.**

**NOTES TOFINANCIAL STATEMENTS**

**(CONTINUED)**

 

All option plans have been approved by the stockholders of the Company.

 

The following is a summary of options granted underthe plans:

 
| ** **                               | ** ** | **FY 2009** | ** ** | **FY 2008**      | ** ** |
|------------------------------------------|------------|------------------|------------|-----------------------|------------|
| ** **                               | ** ** | ** **       | ** ** | **WEIGHTED**          | ** ** | ** ** | ** ** | **WEIGHTED** | ** ** |
| ** **                               | ** ** | ** **       | ** ** | **AVG EXERCISE** | ** ** | ** ** | ** ** | **AVG EXERCISE** | ** ** |
| ** **                               | ** ** | **SHARES**       | ** ** | **PRICE**             | ** ** | **SHARES** | ** ** | **PRICE** | ** ** |
| Options outstanding at beginning of year |       | 324,455          |       | $                     | 14.92      |   | 259,390 |   | $ | 12.32 |   |
| Options granted                          |       | 84,100           |       | $                     | 21.65      |   | 118,920 |   | $ | 19.23 |   |
| Options forfeited                        |       | (20,480          | )          | $                     | 18.49      |   | (18,055 | ) | $ | 16.30 |   |
| Options exercised                        |       | (29,350          | )          | $                     | 10.10      |   | (35,800 | ) | $ | 9.71 |   |
| Options outstanding at end of year       |       | 358,725          |       | $                     | 16.68      |   | 324,455 |   | $ | 14.92 |   |
|                                     |       |             |       |                  |       |   |   |   |   |
| Options exercisable at end of year       |       | 133,330          |       | $                     | 13.21      |   | 87,730 |   | $ | 10.93 |   |
|                                     |       |             |       |                  |       |   |   |   |   |
| Shares available for future option grant |       | 306,715          |       |                  |       | 370,335 |   |   |   |

 

The following is asummary of information about stock options outstanding as of March 31,2009:

** **
| ** **                  | ** ** | **Options Outstanding**         | ** ** | **Options Exercisable**    | ** ** |
|-----------------------------|------------|---------------------------------|------------|----------------------------|------------|
| **Range of  Exercise** | ** ** | **Number  Outstanding as** | ** ** | **Remaining  Contractual** | ** ** | **Weighted - Average** | ** ** | **Number  Exercisable as of** | ** ** | **Weighted  Average Exercise** | ** ** |
| **Prices**                  | ** ** | **of 03/31/09**                 | ** ** | **Life in Years**          | ** ** | **Exercise Price** | ** ** | **03/31/09** | ** ** | **Price** | ** ** |
| $5.91 - $12.56              |       | 79,315                          |       | 2.9                        |       | $ | 10.58 |   | 69,735 |   | $ | 10.40 |   |
| $14.50 - $17.15             |       | 99,440                          |       | 4.3                        |       | $ | 15.01 |   | 43,435 |   | $ | 14.90 |   |
| $18.90 - $22.51             |       | 179,970                         |       | 5.2                        |       | $ | 20.30 |   | 20,160 |   | $ | 19.29 |   |
| $5.91 - $22.51              |       | 358,725                         |       | 4.5                        |       | $ | 16.68 |   | 133,330 |   | $ | 13.21 |   |

 

**9.****                                     ****Stock basedcompensation:**

 

Effective April 1,2006, we adopted Statement of Financial Accounting Standards No. 123(revised 2004), “Share-Based Payment” (SFAS 123(R)) which requires themeasurement and recognition of compensation expense for all share-based paymentawards made to employees and directors. SFAS 123(R) supersedes ourprevious accounting under Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees (APB 25).

 

Weadopted the modified prospective transition method of applying SFAS123(R) which requires the application of the standard as of April 1,2006 and requires us to record compensation cost related to unvested stockoptions as of April 1, 2006, by recognizing the unamortized grant datefair value of these awards over the remaining service periods of those awardswith no change in historical reported earnings. Awards granted after April 1, 2006 are valued at fair value inaccordance with the provisions of SFAS 123(R) and recognized on a straightline basis over the service periods of each award.  We estimated forfeiture rates for the yearbased on historical experience.

 

37

----

 

**MESA LABORATORIES, INC.**

**NOTES TO FINANCIAL STATEMENTS**

**(CONTINUED)**

 

Amountsrecognized in the consolidated financial statements related to stock-basedcompensation are as follows:

 
| ** **                                                                       | ** ** | **March 31** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                       | ** ** | **2009**          | ** ** | **2008** | ** ** |
| Total cost of stock based compensation charged against  income before income tax |       | $                 | 276,000    |   | $ | 246,000 |   |
| Amount of income tax benefit recognized in Earnings                              |       | 99,000            |       | 91,000 |   |
| Amount charged against net income                                                |       | $                 | 177,000    |   | $ | 155,000 |   |
| Impact on net income per common share:                                           |       |              |       |   |   |
| Basic                                                                            |       | $                 | .06        |   | $ | .05 |   |
| Diluted                                                                          |       | $                 | .05        |   | $ | .05 |   |

 

Stock-basedcompensation expense was allocated as cost of sales and general andadministrative expense in the statements of operations.

 

Thefair value of each option grant is estimated on the date of grant using theBlack-Scholes option-pricing model (Black-Scholes). We use historical data toestimate the expected price volatility, the expected option life and expectedforfeiture rate. The risk-free interest rate is based on the U.S. Treasuryyield curve in effect at the time of grant for the estimated life of theoption. The dividend yield is calculated based upon the dividend payments madeduring the prior four quarters as a percent of the average stock price for thatperiod. The following assumptions were used to estimate the fair value ofoptions granted during fiscal 2009 and 2008 using the Black-Scholes model:

 
| ** **                   | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
| Stock options:               |       |     |       |     |       |
| Volatility                   |       | 33-34%   |       | 33-36%   |       |
| Risk-free interest rate      |       | 2.7-3.6% |       | 4.0-5.1% |       |
| Expected option life (years) |       | 5-10     |       | 5-10     |       |
| Dividend yield               |       | 1.7-2.0% |       | 2.1-2.9% |       |

 

38

----

 

**MESALABORATORIES, INC.**

**NOTES TO FINANCIAL STATEMENTS**

**(CONTINUED)**

 

A summary of the option activity for fiscal 2009 is as follows:

 
| ** **                         | ** ** | **Number of   Shares** | ** ** | **Weighted-   average   Exercise   Price per   Share** | ** **  | **Weighted-   average   Remaining   Contractual   Term** | ** ** | **Aggregate   Intrinsic   Value** | ** ** |
|------------------------------------|------------|------------------------|------------|--------------------------------------------------------|-------------|----------------------------------------------------------|------------|-----------------------------------|------------|
| Outstanding at March 31, 2008 |       | 324,455                |       | $                                                      |  14.92 |                                                     | 5.1        |                              |       |   |
| Options granted                    |       | 84,100                 |       | 21.65                                                  |        | 4.8                                                      |       |                              |       |
| Options forfeited                  |       | (20,480                | )          | 18.49                                                  |        | —                                                   |       |                              |       |
| Options expired                    |       | —                 |       | —                                                 |        | —                                                   |       |                              |       |
| Options exercised                  |       | (29,350                | )          | 10.10                                                  |        | —                                                   |       |                              |       |
| Outstanding at March 31, 2009 |       | 358,725                |       | $                                                      |  16.68 |                                                     | 4.6        |                              | $          |  (245,000 | ) |
|                               |       |                   |       |                                                   |        |                                                     |       |                              |       |
| Exercisable at March 31, 2009 |       | 133,330                |       | $                                                      |  13.21 |                                                     | 3.6        |                              | $          |  372,000 |   |

 

Theweighted average exercise price fair value based on the Black-Scholes model foroptions granted in fiscal 2009 was $21.65 and $19.23 in fiscal 2008. TheCompany issues new shares of common stock upon exercise of stock options. The total intrinsic value of options exercised was $172,000 and $523,000 duringfiscal 2009 and 2008, respectively.

 

Asummary of the status of our unvested option shares as of March 31, 2009is as follows:

 
| ** **                      | ** ** | **Number of   Shares** | ** ** | **Weighted-   average   Grant-Date   Fair Value** | ** ** |
|---------------------------------|------------|------------------------|------------|---------------------------------------------------|------------|
| Unvested at March 31, 2008 |       | 236,725                |       | $                                                 | 5.38       |   |
| Options granted                 |       | 84,100                 |       | $                                                 | 5.99       |   |
| Options forfeited               |       | (20,480                | )          | $                                                 | 5.45       |   |
| Options vested                  |       | (74,950                | )          | $                                                 | 4.52       |   |
| Unvested at March 31, 2009 |       | 225,395                |       | $                                                 | 5.92       |   |

 

Asof March 31, 2009, there was $828,000 of total unrecognized compensationcost related to unvested share-based compensation granted under our plans. Thatcost is expected to be recognized over a weighted-average period of 2.9 years.

 

**10.****                              ****SegmentData:**

 

The Company adopted SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information. FAS 131designates the internal reporting that is used by management for makingoperating decisions and assessing performance as the source of the Company’sreportable segments. FAS 131 also requires disclosure about products andsources, geographic areas and major customers. The Company aggregates itssegments as one reportable segment based on the similar characteristics oftheir operations.

 

39

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**MESA LABORATORIES, INC.**

**NOTES TO FINANCIAL STATEMENTS**

**(CONTINUED)**

 

Revenues related to operations in the U.S. and foreigncountries for the years ended March 31, 2009 and 2008 are presented below.Revenues from external customers are attributed to individual countries basedupon locations to which the product is shipped or exported. Long-lived assetsrelated to continuing operations in the U.S. and foreign countries as of theyears ended March 31, 2009 and 2008 are as follows:

 
| ** **                                 | ** ** | **Years Ended March 31** | ** **       |
|--------------------------------------------|------------|-------------------------------|------------------|
| ** **                                 | ** ** | **2009**                      | ** **       | **2008** | ** ** |
| Net  revenues from unaffiliated customers: | ** ** | ** **                    | ** **       | ** ** | ** ** |
| United  States                             |       | $                             | 15,555,000       |   | $ | 14,431,000 |   |
| Foreign  (no country exceeds 10% of total) |       | $                             | 5,981,000        |   | $ | 5,127,000 |   |
|                                       |       |                          |             |   |   |
| Long-lived assets at end of year:          |       |                          |             |   |   |
| United  States                             |       | $                             |  11,022,000 |   | $ |  11,122,000 |   |

 

**11.****                              ****QuarterlyResults (unaudited):**

 

Quarterly financial information for fiscal 2009 and 2008 is summarizedas follows:

** **
| **($ in thousands, except per  share amounts)** | ** ** | **First** | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
|------------------------------------------------------|------------|-----------|------------|------------|------------|-----------|------------|------------|------------|
| **2009**                                             | ** ** | **Qtr.**  | ** ** | **Qtr**    | ** ** | **Qtr**   | ** ** | **Qtr**    | ** ** |
| Net revenue                                          |       | $         | 5,054      |       | $          | 5,679     |       | $          | 5,337      |   | $ | 5,466 |   |
| Gross profit                                         |       | $         | 3,204      |       | $          | 3,646     |       | $          | 3,434      |   | $ | 3,533 |   |
| Net income                                           |       | $         | 1,016      |       | $          | 1,353     |       | $          | 1,216      |   | $ | 1,205 |   |
| Earnings per share – basic                      |       | $         |  .32  |       | $          | .43       |       | $          | .38        |   | $ | .38 |   |
| Earnings per share – diluted                    |       | $         |  .31  |       | $          | .42       |       | $          | .38        |   | $ | .37 |   |

** **
| **($ in thousands, except per  share amounts)** | ** ** | **First** | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
|------------------------------------------------------|------------|-----------|------------|------------|------------|-----------|------------|------------|------------|
| **2008**                                             | ** ** | **Qtr.**  | ** ** | **Qtr**    | ** ** | **Qtr**   | ** ** | **Qtr**    | ** ** |
| Net revenue                                          |       | $         | 4,286      |       | $          | 4,868     |       | $          | 4,614      |   | $ | 5,790 |   |
| Gross profit                                         |       | $         | 2,901      |       | $          | 3,285     |       | $          | 3,087      |   | $ | 3,584 |   |
| Net income                                           |       | $         | 1,015      |       | $          | 1,279     |       | $          | 1,121      |   | $ | 1,195 |   |
| Earnings per share – basic                      |       | $         |  .32  |       | $          |  .40 |       | $          |  .35  |   | $ |  .39 |   |
| Earnings per share – diluted                    |       | $         |  .31  |       | $          |  .39 |       | $          |  .34  |   | $ |  .37 |   |

 

**12.   Related Party Transactions:**

 

On December 31, 2008 the Company purchased 2,000 shares of MesaLaboratories, Inc. common stock in a related party transaction from itsChief Financial Officer, Mr. Steven Peterson, for $34,840.  This transaction was paid from the Company’sexisting cash balance, and the price paid of $17.42 per common share was basedon the weighted average of closing prices for the previous five trading daysand compared favorably to the closing price on December 31, 2008 of $17.50per common share.

 

40

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**MESALABORATORIES, INC.**

**NOTES TO FINANCIAL STATEMENTS**

**(CONTINUED)**

 

On February 27,2007, the Company entered into an agreement to purchase 30,000 shares of MesaLaboratories, Inc. common stock from one of its current Board of Directorsmembers, Mr. Paul D. Duke.  Under theterms of the agreement, Mesa Laboratories, Inc. would purchase 3,000 shares ofMesa Laboratories, Inc. common stock from Mr. Duke each month beginning inMarch 2007 through December 2007 at a per share price equal to the volumeweighted average price (VWAP) of the common stock for the previous calendarmonth. While Mr. Duke’s commitment to sell was binding through the entire termof the buyback period, the company and its Board retained the right to rescindthe agreement at anytime during the period depending upon the circumstancesexisting at the time.

 

**ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

None.

 

**ITEM 9A.  CONTROLS AND PROCEDURES**

 

Wemaintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e)) that are designed to ensure that information required to bedisclosed by us in the reports we file or submit under the Securities ExchangeAct of 1934, as amended, is recorded, processed, summarized, and reported,within the time periods specified in the Securities and Exchange Commission’s rules andforms and that such information is accumulated and communicated to ourmanagement, including our principal executive and principal financial officers,or persons performing similar functions, as appropriate to allow timelydecisions regarding required disclosure. Our Chief Executive Officer and ChiefFinancial Officer evaluated the effectiveness of the design and operation ofour disclosure controls and procedures as of the end of the period covered inthis Annual Report of Form 10-K. Based on that evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that our disclosurecontrols and procedures were effective as of the end of such period.

 

There have been no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2009 identified in connection with the Company’s evaluation that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

41

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#### **PART III**

#### ** **

Certaininformation required by Part III is incorporated by reference to the Company’sDefinitive Proxy Statement pursuant to Regulation 14A (the “Proxy Statement”)for its Annual Meeting of Shareholders to be held September 24, 2009 (“AnnualMeeting”).

 

**ITEM 10.  DIRECTORS, EXECUTIVEOFFICERS OF THE REGISTRANT**

 

Theinformation required by Item 9 is incorporated herein by reference to thesections entitled “Election of Directors,” “Section 16(a) BeneficialOwnership Reporting Compliance,” “Corporate Governance — Code of Ethics andBusiness Conduct” and “Corporate Governance — Audit Committee” that appear inthe Company’s definitive Proxy Statement for its Annual Meeting. Informationconcerning executive officers Luke R. Schmieder, John J. Sullivan, GlennAdriance and Steven W. Peterson are included in the sections referred to above.

 

**ITEM 11.  EXECUTIVE COMPENSATION**

 

Theinformation required by Item 10 is incorporated herein by reference to thesection entitled “Executive Compensation” that appears in the Company’sdefinitive Proxy Statement for its Annual Meeting.

 

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

Theinformation required by Item 11 relating to security ownership of certainbeneficial owners and management and related shareholder matters is incorporatedherein by reference to the section entitled “Security Ownership of CertainBeneficial Owners and Management” that appears in the Company’s definitiveProxy Statement for its Annual Meeting.

 

For information regarding securities authorized for issuance under ourequity compensation plans, please see Footnote 9 to the Financial Statements.

 

**ITEM 13.  CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS**

 

On December 31, 2008 the Company purchased 2,000 shares of MesaLaboratories, Inc. common stock in a related party transaction from itsChief Financial Officer, Mr. Steven Peterson, for $34,840.  This transaction was paid from the Company’sexisting cash balance, and the price paid of $17.42 per common share was basedon the weighted average of closing prices for the previous five trading daysand compared favorably to the closing price on December 31, 2008 of $17.50per common share.

 

On February 27,2007, the Company entered into an agreement to purchase 30,000 shares of MesaLaboratories, Inc. common stock from one of its current Board of Directorsmembers, Mr. Paul D. Duke.  Under theterms of the agreement, Mesa Laboratories, Inc. would purchase 3,000 shares ofMesa Laboratories, Inc. common stock from Mr. Duke each month beginning inMarch 2007 through December 2007 at a per share price equal to the volumeweighted average price (VWAP) of the common stock for the previous calendarmonth. While Mr. Duke’s commitment to sell was binding through the entire termof the buyback period, the company and its Board retained the right to rescindthe agreement at anytime during the period depending upon the circumstancesexisting at the time.

 

**ITEM14.  PRINCIPAL ACCOUNTING FEES ANDSERVICES**

 

The informationrequired by Item 14 relating to principal accountant fees and services isincorporated herein by reference to the section entitled “Disclosure of FeesPaid to Independent Auditors” that appears in the Company’s definitive ProxyStatement for its Annual Meeting of Shareholders

 

 

42

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#### **PART IV**

#### ** **

**ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K**

 

(a)          1. FinancialStatements of Mesa Laboratories Inc and its subsidiaries are included herein:

 
| ** **                                                                               | **Page** |
|------------------------------------------------------------------------------------------|----------|
| Report of Independent Registered Public Accounting  Firm                                 | 22       |
|                                                                                     |     |
| Balance Sheets as of March 31, 2009 and 2008                                        | 23-24    |
|                                                                                     |     |
| Statements of Income for the years ended  March 31, 2009 and 2008                   | 25       |
|                                                                                     |     |
| Statement of Stockholders’ Equity for the years ended  March 31, 2009 and 2008 | 26       |
|                                                                                     |     |
| Statements  of Cash Flows for the years ended March 31, 2009 and 2008               | 27       |
|                                                                                     |     |
| Notes to Financial  Statements                                                           | 28-41    |

 

(b) 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 registered  public accounting firm, to the incorporation by reference in the Registration  Statements on Form S-8 (file numbers 333-89808, 333-02074, 333-18161,  333-48556, 333-122911, 333-138619 and 333-152210) of their report dated  June 29, 2009, included in the Registrant’s Report on Form 10-K for  the fiscal year ended March 31, 2009. |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (31.1)   |   | Certification  of Chief Executive Officer Pursuant to Rule 13a-14(a).                                                                                                                                                                                                                                                                                                                                                                           |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (31.2)   |   | Certification  of Chief Financial Officer Pursuant to Rule 13a-14(a).                                                                                                                                                                                                                                                                                                                                                                           |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (32.1)   |   | Certification  of Chief Executive Officer Pursuant to Rule 13a-14(a) and 18 U.S.C.  Section 1350.                                                                                                                                                                                                                                                                                                                                     |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (32.2)   |   | Certification  of Chief Financial Officer Pursuant to Rule 13a-14(a) and 18 U.S.C.  Section 1350.                                                                                                                                                                                                                                                                                                                                     |

 

43

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(b)                                Reports on Form 8-K.  On February 11, 2009, the Registrantfiled a Report on Form 8-K, under Item 2.02, reporting the issuance of apress release reporting revenues and earnings for the quarter and nine monthsended December 31, 2008.

 

On February 26, 2009, the Registrant filed a Report on Form 8-K,under Item 5.02, reporting the issuance of a press release reporting theappointment of Mr. Evan Guillemin to its Board of Directors.

 

On March 11, 2009, the Registrant filed a Report on Form 8-K,under Item 5.02, reporting the issuance of a press release reporting theresignation of Luke R. Schmieder from the position of Chief Executive Officer(CEO) and Treasurer, while retaining his position as the Chairman of the Boardof Directors. Dr. John Sullivan was appointed to the position of CEO,retained his position as President, and will be named to the Board ofDirectors.

 

44

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**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 theundersigned, thereunto duly authorized.

 
|   | MESA  LABORATORIES, INC. |
|--------|--------------------------|
|   | Registrant               |
|   |                     |
|   |                     |
| Date:  | June 29,  2009      |   | By: | /s/John  J. Sullivan, Ph.D. |
|   |                     | John  J. Sullivan, Ph.D., CEO |
|        |                          |  |  |  |

 

 

In accordance with the Exchange Act, this report has been signed belowby the following persons on behalf of the registrant and in the capacities andon the dates indicated.

 

 
| **Name**                    | ** ** | **Title**                                        | ** ** | **Date**           |
|-----------------------------|------------|--------------------------------------------------|------------|--------------------|
|                        |       |                                             |       |               |
| /s/Luke  R. Schmieder       |       | Chairman  of the Board of Directors              |       | June 29, 2009 |
| Luke  R. Schmieder          |       |                                             |       |               |
|                        |       |                                             |       |               |
| /s/John  J. Sullivan, Ph.D. |       | Chief  Executive Officer, President and Director |       | June 29, 2009 |
| John  J. Sullivan, Ph.D.    |       |                                             |       |               |
|                        |       |                                             |       |               |
| /s/Steven  W. Peterson      |       | Vice  President, Finance, Chief Financial        |       | June 29, 2009 |
| Steven  W. Peterson         |       | and Chief Accounting Officer and Secretary       |       |               |
|                        |       |                                             |       |               |
| /s/Paul  D. Duke            |       | Director                                         |       | June 29, 2009 |
| Paul  D. Duke               |       |                                             |       |               |
|                        |       |                                             |       |               |
| /s/H.  Stuart Campbell      |       | Director                                         |       | June 29, 2009 |
| H.  Stuart Campbell         |       |                                             |       |               |
|                        |       |                                             |       |               |
| /s/Michael  T. Brooks       |       | Director                                         |       | June 29, 2009 |
| Michael  T. Brooks          |       |                                             |       |               |
|                        |       |                                             |       |               |
| /s/Robert  V. Dwyer         |       | Director                                         |       | June 29, 2009 |
| Robert  V. Dwyer            |       |                                             |       |               |
|                        |       |                                             |       |               |
| /s/Evan  Guillemin          |       | Director                                         |       | June 29, 2009 |
| Evan  Guillemin             |       |                                             |       |               |

 

45

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**EXHIBITS INDEX**

 
| (23)(i) |   | Consent  of Ehrhardt Keefe Steiner & Hottman PC, independent registered  public accounting firm, to the incorporation by reference in the Registration  Statements on Form S-8 (file numbers 333-89808, 333-02074, 333-18161,  333-48556, 333-122911, 333-138619 and 333-152210) of their report dated  June 29, 2009, included in the Registrant’s Report on Form 10-K for  the fiscal year ended March 31, 2009. |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (31.1)  |   | Certification  of Chief Executive Officer Pursuant to Rule 13a-14(a).                                                                                                                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (31.2)  |   | Certification  of Chief Financial Officer Pursuant to Rule 13a-14(a).                                                                                                                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (32.1)  |   | Certification  of Chief Executive Officer Pursuant to Rule 13a-14(a) and 18 U.S.C.  Section 1350.                                                                                                                                                                                                                                                                                                                                     |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (32.2)  |   | Certification  of Chief Financial Officer Pursuant to Rule 13a-14(a) and 18 U.S.C.  Section 1350.                                                                                                                                                                                                                                                                                                                                     |

 

46

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