UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q (Mark One) [X]

Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities  Exchange Act of 1934 For the
Quarter Ended September 30, 2004  or [   ]

Transition
 Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the
transition period from _________________ to _________________  Commission File Number 0-9273 MOCON, INC.(Exact name of registrant as specified in its charter) Minnesota
     41-0903312(State or other jurisdiction of
     (I.R.S. employerincorporation or organization)
     identification no.)  7500 Boone Avenue North, Minneapolis, Minnesota 55428
(Address of principal executive offices)            (Zip code) (763) 493-6370
(Registrants telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES _X_ NO ___ Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).YES ___ NO _X_ 5,308,227 Common Shares were outstanding as of September 30, 2004


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MOCON, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q
For the Quarter Ended September 30, 2004

|                                                                            
|----------------------------------------------------------------------------
|                                                                            
|PART I.  FINANCIAL INFORMATION                                              
|                                                                            
|                                                                            
|Item 1.  Financial Statements                                               
|                                                                            
|Condensed Consolidated Balance Sheets                                       
|September 30, 2004 (Unaudited) and December 31, 2003                        
|                                                                            
|                                                                            
|Condensed Consolidated Statements of Income (Unaudited)                     
|Three months and nine months ended September 30, 2004 and 2003              
|                                                                            
|                                                                            
|Condensed Consolidated Statements of Cash Flows (Unaudited)                 
|Nine months ended September 30, 2004 and 2003                               
|                                                                            
|                                                                            
|Notes to Condensed Consolidated Financial Statements (Unaudited)            
|                                                                            
|                                                                            
|Item 2.  Management's Discussion and Analysis of Financial Condition        
|and Results of Operations                                                   
|                                                                            
|                                                                            
|Item 3.  Quantitative and Qualitative Disclosures About Market Risk         
|                                                                            
|                                                                            
|Item 4.  Controls and Procedures                                            
|                                                                            
|                                                                            
|PART II.  OTHER INFORMATION                                                 
|                                                                            
|                                                                            
|Item 2.  Unregistered Sales of Equity Securities, Use of Proceeds and Issuer
|Purchases of Equity Securities                                              
|                                                                            
|                                                                            
|Item 6.  Exhibits                                                           
|                                                                            
|                                                                            
|Signatures                                                                  

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PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

MOCON, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                           | (Unaudited)September 30,2004 |  | December 31,2003
|---------------------------------------------------------- | ---------------------------- |  | ----------------
|                                                           |                              |  |                 
|ASSETS                                                     |                              |  |                 
|Current assets:                                            |                              | 
|Cash and temporary cash investments                        |                              |  | $               
|Marketable securities, current                             |                              |  |                 
|Trade accounts receivable, less allowance for doubtful     |                              | 
|accounts of $253,000 in 2004 and $244,000 in 2003          |                              |  |                 
|Other receivables                                          |                              |  |                 
|Inventories                                                |                              |  |                 
|Prepaid expenses                                           |                              |  |                 
|Deferred income taxes                                      |                              |  |                 
|                                                           |                              |  |                 
|Total current assets                                       |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|Marketable securities, non-current                         |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|Property, plant and equipment, net of accumulated          |                              | 
|depreciation of $3,992,507 in 2004 and $3,700,052 in 2003  |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|Other assets:                                              |                              | 
|Software development costs, net of accumulated             |                              | 
|amortization of $687,035 in 2004 and $435,430 in 2003      |                              |  |                 
|Goodwill                                                   |                              |  |                 
|Technology rights and other intangibles, net               |                              |  |                 
|Other                                                      |                              |  |                 
|                                                           |                              |  |                 
|Total other assets                                         |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|TOTAL ASSETS                                               |                              |  | $               
|                                                           |                              |  |                 
|                                                           |                              | 
|LIABILITIES AND STOCKHOLDERS' EQUITY                       |                              | 
|Current liabilities:                                       |                              | 
|Accounts payable                                           |                              |  | $               
|Accrued compensation and vacation                          |                              |  |                 
|Other accrued expenses                                     |                              |  |                 
|Accrued product warranties                                 |                              |  |                 
|Accrued income taxes                                       |                              |  |                 
|Dividends payable                                          |                              |  |                 
|                                                           |                              |  |                 
|Total current liabilities                                  |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|Obligations to former employees                            |                              |  |                 
|Minimum earnout payable                                    |                              |  |                 
|Deferred income taxes                                      |                              |  |                 
|                                                           |                              |  |                 
|Total non-current liabilities                              |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|Total liabilities                                          |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|Stockholders' equity:                                      |                              | 
|Capital stock - undesignated - authorized 3,000,000 shares |                              |  |                 
|Common stock - $.10 par value.  Authorized 22,000,000      |                              | 
|shares; issued and outstanding 5,308,227 shares in 2004    |                              | 
|and 5,406,189 shares in 2003                               |                              |  |                 
|Capital in excess of par value                             |                              |  |                 
|Retained earnings                                          |                              |  |                 
|Accumulated other comprehensive (loss) income              |                              |  |                 
|                                                           |                              |  |                 
|Total stockholders' equity                                 |                              |  |                 
|                                                           |                              |  |                 
|                                                           |                              | 
|TOTAL LIABILITIES AND                                      |                              | 
|STOCKHOLDERS' EQUITY                                       |                              |  | $               
|                                                           |                              |  |                 

See accompanying notes to condensed consolidated financial statements.

-1-

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MOCON, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

|                                             | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|-------------------------------------------- | ------------------------------- |  | ------------------------------
|                                             |                                 |  |                               
|
|                                             |                                 |  |                               
|Sales:                                       |                                 |  |                               
|Products                                     |                                 |  | $                             
|Consulting services                          |                                 |  |                               
|                                             |                                 |  |                               
|Total sales                                  |                                 |  |                               
|                                             |                                 |  |                               
|Cost of sales:                               |                                 | 
|Products                                     |                                 |  |                               
|Consulting services                          |                                 |  |                               
|                                             |                                 |  |                               
|Total cost of sales                          |                                 |  |                               
|                                             |                                 |  |                               
|Gross profit                                 |                                 |  |                               
|                                             |                                 |  |                               
|Selling, general and administrative expenses |                                 |  |                               
|Research and development expenses            |                                 |  |                               
|                                             |                                 |  |                               
|Operating income                             |                                 |  |                               
|Other income                                 |                                 |  |                               
|                                             |                                 |  |                               
|Income before income taxes                   |                                 |  |                               
|Income taxes                                 |                                 |  |                               
|                                             |                                 |  |                               
|Net income                                   |                                 |  | $                             
|                                             |                                 |  |                               
|                                             |                                 | 
|                                             |                                 | 
|Net income per common share:                 |                                 | 
|Basic                                        |                                 |  | $                             
|                                             |                                 |  |                               
|Diluted                                      |                                 |  | $                             
|                                             |                                 |  |                               
|                                             |                                 | 
|                                             |                                 | 
|Weighted average shares outstanding:         |                                 | 
|Basic                                        |                                 |  |                               
|                                             |                                 |  |                               
|Diluted                                      |                                 |  |                               
|                                             |                                 |  |                               

See accompanying notes to condensed consolidated financial statements.

-2-

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MOCON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                     | Nine MonthsEnded September 30,
|-------------------------------------------------------------------- | ------------------------------
|                                                                     |                               
|
|                                                                     |                               
|Cash flows from operating activities:                                |                               
|Net income                                                           |                               
|Adjustments to reconcile net income to net cash provided by          |                               
|operating activities:                                                |                               
|Loss on disposition of long-term assets                              |                               
|Depreciation and amortization                                        |                               
|Deferred income taxes                                                |                               
|Changes in operating assets and liabilities, net of effect of        |                               
|acquisitions:                                                        |                               
|Trade accounts receivable                                            |                               
|Other receivables                                                    |                               
|Inventories                                                          |                               
|Prepaid expenses                                                     |                               
|Accounts payable                                                     |                               
|Accrued compensation and vacation                                    |                               
|Other accrued expenses                                               |                               
|Accrued product warranties                                           |                               
|Accrued income taxes                                                 |                               
|                                                                     |                               
|Net cash provided by operating activities                            |                               
|                                                                     |                               
|Cash flows from investing activities:                                |                               
|Cash paid in acquisitions, net of cash acquired                      |                               
|Purchases of marketable securities                                   |                               
|Proceeds from sales or maturities of marketable securities           |                               
|Purchases of property and equipment                                  |                               
|Purchases and development of software                                |                               
|Purchases of patents and trademarks                                  |                               
|Other                                                                |                               
|                                                                     |                               
|Net cash used in investing activities                                |                               
|                                                                     |                               
|Cash flows from financing activities:                                |                               
|Proceeds from the exercise of stock options                          |                               
|Purchases and retirement of common stock                             |                               
|Dividends paid to former parent company of Paul Lippke Handels       |                               
|Dividends paid to MOCON shareholders                                 |                               
|                                                                     |                               
|Net cash used in financing activities                                |                               
|                                                                     |                               
|Effect of exchange rate changes on cash                              |                               
|Net increase (decrease) in cash and temporary cash investments       |                               
|Cash and temporary cash investments:                                 |                               
|Beginning of period                                                  |                               
|                                                                     |                               
|End of period                                                        |                               
|                                                                     |                               
|Supplemental disclosures of cash flow information:                   |                               
|Cash paid during the period for income taxes                         |                               
|Supplemental schedule of noncash investing and financing activities: |                               
|Unrealized holding (loss) gain on available-for-sale securities      |                               
|Dividends accrued                                                    |                               
|Minimum earnout payable                                              |                               

See accompanying notes to condensed consolidated financial statements.

-3-

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MOCON, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1  Condensed Consolidated Financial Statements

The condensed consolidated balance
sheet as of September 30, 2004, the condensed consolidated statements of income for the
three- and nine-month periods ended September 30, 2004 and 2003, and the condensed
consolidated statements of cash flows for the nine-month periods ended September 30, 2004
and 2003 have been prepared by us, without audit. However, all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of management,
necessary to present fairly the financial position, results of operations and cash flows
at September 30, 2004, and for all periods presented, have been made. The results of
operations for the period ended September 30, 2004 are not necessarily indicative of
operating results for the full year.

Certain information and footnote
disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have been
condensed or omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and notes
included in the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2003, previously filed with the Securities and Exchange Commission.

We operate in a single industry
segment: the development, manufacturing, and marketing of measurement, analytical,
monitoring, sample preparation, and consulting products used to detect, measure, and
analyze gases and chemical compounds for customers in the barrier packaging, food,
pharmaceutical, and other industries throughout the world.

Principles of Consolidation

The consolidated financial
statements include the accounts of MOCON, Inc. and its subsidiaries after elimination of
inter-company transactions and accounts.

Foreign Currency Translation

The financial statements for
operations outside the United States are maintained in their local currency. All assets
and liabilities of our foreign subsidiary are translated to United States dollars at
period-end exchange rates, while revenue and expense accounts are translated at the
average exchange rates during the period transactions occurred. Translation adjustments
arising from the use of differing exchange rates are included in accumulated other
comprehensive income or loss in stockholders equity. Gains and losses on foreign
currency transactions are included in other income or loss.

Use of Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Significant items subject to such

-4-

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estimates and assumptions
include the carrying amount of property, plant and equipment, intangibles and goodwill;
and valuation of allowances for receivables, inventory, warranty and deferred income
taxes. Actual results could differ from those estimates.

Stock-Based Compensation

We use the intrinsic-value method
for employee stock-based compensation pursuant to Accounting Principles Board Opinion No.
25 (Opinion 25), Accounting for Stock Issued to Employees. Under the guidelines of
Opinion 25, compensation cost for stock-based employee compensation plans is recognized
based on the difference, if any, between the quoted market price of the stock on the date
of grant and the amount an employee must pay to acquire the stock.

We have adopted the disclosure-only
provisions for employee stock-based compensation and the fair-value method for
nonemployee stock-based compensation of Statement of Financial Accounting Standard (SFAS)
No. 123, Accounting for Stock-Based Compensation. These provisions require us to
show, on a pro forma basis, our net income and income per common share if we had recorded
an expense for our stock options at the time of grant. Other than disclosure in this
footnote, we do not use these pro forma results for any purpose. No stock options were
granted during the three-month period ended September 30, 2004.

Had we recorded compensation cost
based on the estimated fair value on the date of grant, as defined by SFAS No. 123, our
net income and net income per common share would have been reduced to the pro forma
amounts indicated below:

|                                            | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|------------------------------------------- | ------------------------------- |  | ------------------------------
|                                            |                                 |  |                               
|
|                                            |                                 |  |                               
|Net income  as reported                    |                                 |  | $                             
|Deduct:  Total stock-based employee         |                                 | 
|compensation expense determined under       |                                 | 
|fair value based method for all awards, net |                                 | 
|of related tax effects                      |                                 |  |                               
|                                            |                                 |  |                               
|Net income  pro forma                      |                                 |  | $                             
|                                            |                                 |  |                               
|Net income per common share  as reported:  |                                 | 
|Basic                                       |                                 |  | $                             
|Diluted                                     |                                 |  | $                             
|Net income per common share  pro forma:    |                                 | 
|Basic                                       |                                 |  | $                             
|Diluted                                     |                                 |  | $                             

Note 2  Inventories

Inventories consist of the following:

-5-

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|                  | September 30,2004 |  | December 31,2003
|----------------- | ----------------- |  | ----------------
|                  |                   |  |                 
|Finished products |                   |  | $               
|Work in process   |                   |  |                 
|Raw materials     |                   |  |                 
|                  |                   |  |                 
|                  |                   |  | $               
|                  |                   |  |                 

Note 3  Net Income Per Common Share

Basic net income per common share is
computed by dividing net income by the weighted average number of shares of common stock
outstanding during the period. Diluted net income per common share is computed using the
treasury stock method to compute the weighted average common stock outstanding assuming
the conversion of potential dilutive common shares.

The following table presents a
reconciliation of the denominators used in the computation of net income per common share
 basic and net income per common share  diluted for the three- and nine-month
periods ended September 30, 2004, and 2003:

|                                | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|------------------------------- | ------------------------------- |  | ------------------------------
|                                |                                 |  |                               
|
|                                |                                 |  |                               
|Weighted shares of common stock |                                 |  |                               
|outstanding  basic             |                                 |  |                               
|Weighted shares of common stock |                                 | 
|assumed upon exercise of stock  |                                 | 
|options                         |                                 |  |                               
|                                |                                 |  |                               
|Weighted shares of common stock |                                 | 
|outstanding  diluted           |                                 |  |                               
|                                |                                 |  |                               

Note 4  Goodwill and Intangible Assets

As of September 30, 2004,
unamortized goodwill amounted to $1,868,556, which includes the current year addition of
$521,761 related to the acquisition of Paul Lippke Handels-GmbH. Other identifiable
intangible assets are as follows:

|                          | As of September 30, 2004
|------------------------- | ------------------------
|
|Patents                   |                         
|Trademarks and tradenames |                         
|Technology rights         |                         
|Other intangibles         |                         
|                          |                         
|                          |                         
|                          |                         

-6-

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|                          | As of September 30, 2003
|------------------------- | ------------------------
|
|Patents                   |                         
|Trademarks and tradenames |                         
|Technology rights         |                         
|Other intangibles         |                         
|                          |                         
|                          |                         
|                          |                         

Total amortization expense for the
three and nine months ended September 30, 2004 was $112,743 and $350,388, respectively,
and $44,949 and $135,498, respectively, for the three and nine months ended September 30,
2003. Estimated amortization expense for each of the five succeeding fiscal years based
on the intangible assets as of September 30, 2004 is as follows:

|     | Estimated Expense
|---- | -----------------
|     |                  
|2004 |                  
|2005 |                  
|2006 |                  
|2007 |                  
|2008 |                  

Note 5  Marketable Securities

Available-for-sale securities are
recorded at fair value. Unrealized holding gains and losses on available-for-sale
securities are excluded from income and are reported as a separate component of
stockholders equity until realized. A decline in the market value of any
available-for-sale security below cost that is deemed other than temporary is charged to
income resulting in the establishment of a new cost basis for the security. At September
30, 2004, and September 30, 2003, this resulted in a net unrealized (loss) gain of
($1,297) and $5,553, respectively, within stockholders equity.

Note 6  Comprehensive Income

Other comprehensive income pertains
to net unrealized gains and losses on marketable securities and foreign currency
translation adjustments that are not included in net income but rather are recorded
directly in stockholders equity.

|                              | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|----------------------------- | ------------------------------- |  | ------------------------------
|                              |                                 |  |                               
|
|                              |                                 |  |                               
|Net income                    |                                 |  | $                             
|Foreign currency translation  |                                 | 
|adjustment                    |                                 |  |                               
|Net unrealized gain (loss) on |                                 | 
|marketable securities         |                                 |  |                               
|                              |                                 |  |                               
|Comprehensive income          |                                 |  | $                             
|                              |                                 |  |                               

-7-

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Note 7  Warranty Guarantees

We provide a warranty for most of
our products. Warranties are for periods ranging from ninety days to one year, and cover
parts and labor for non-maintenance repairs, at our location. Operator abuse, improper
use, alteration, damage resulting from accident, or failure to follow manufacturers
directions, are excluded from warranty coverage.

Warranty expense is accrued at the
time of sale based on historical claims experience. Special warranty reserves are also
accrued for special rework campaigns for known major product modifications. We also offer
service contracts for select products when the factory warranty period expires.

Warranty provisions and claims for
the nine-month periods ended September 30, 2004 and 2003 were as follows:

|                    | Nine Months EndedSeptember 30,
|------------------- | ------------------------------
|                    |                               
|
|                    |                               
|Beginning balance   |                               
|Warranty provisions |                               
|Warranty claims     |                               
|                    |                               
|Ending balance      |                               
|                    |                               

Note 8  Acquisition

Effective January 1, 2004, we
acquired Paul Lippke Handels-GmbH Prozess- und Laborsysteme (Lippke) which is located in
Germany. Lippke had been the primary distributor of our products in Europe for
approximately thirty years, and also served in the capacity of distributor or agent for
several companies in addition to MOCON. The acquisition of Lippke provides us with a
direct presence in Europe, which we plan to leverage to benefit all of our product and
service offerings. We acquired all of the shares of Lippke for a base purchase price of
$802,688. In addition, we are obligated to make three future earnoutpayments
to Lippkes former parent company based on the net profits of Lippke in each of the
years 2004, 2005, and 2006, with a minimum payment amount of 100,000 euros per year which
is included in the financial statements.

The purchase price of the acquisition was:

|                                                 | 
|------------------------------------------------ | 
|Cash consideration (625,000 euros)               | 
|Present value of future minimum earnout payments | 
|Costs associated with the transaction            | 
|                                                 | 
|                                                 | 
|                                                 | 

Purchase Price Allocation

The purchase price was allocated to
the tangible and identifiable intangible assets acquired and liabilities assumed based on
their estimated fair values at the acquisition date. The following table summarizes the
estimated fair values of the assets acquired and liabilities assumed as of the
acquisition date:

-8-

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|Cash and marketable securities                                  |  |  | $ | 518,980    |  
|--------------------------------------------------------------- |  |  | - | ---------- | -
|Current assets, principally accounts receivable and inventories |  |  |   | 1,088,824  |  
|Property, plant and equipment                                   |  |  |   | 166,021    |  
|Identifiable intangible assets:                                 |  | 
|Domain names                                                    |  |  |   | 5,700      |  
|Trademark and trade name                                        |  |  |   | 335,000    |  
|Commercial agent/subagent network                               |  |  |   | 70,000     |  
|Sales order backlog                                             |  |  |   | 84,896     |  
|Compiled customer list                                          |  |  |   | 48,000     |  
|Manufacturer's representative contracts                         |  |  |   | 225,000    |  
|Goodwill                                                        |  |  |   | 521,761    |  
|Current liabilities                                             |  |  |   | (1,355,009 | )
|Other non-current liabilities                                   |  |  |   | (371,763   | )
|                                                                |  | 
|                                                                |  |  | $ | 1,337,410  |  
|                                                                |  | 

The allocation of the purchase price
was based, in part, on a third-party valuation of the fair value of identifiable
intangible assets, and certain property, plant and equipment. Other non-current
liabilities includes deferred income taxes of $264,683 and obligations payable to two
former employees totaling $107,080. The cost of the identifiable intangible assets will
be amortized on a straight-line basis over periods of less than 1 to 5 years. We expect
that substantially all of the amount allocated to goodwill will not be deductible for tax
purposes.

The results of Lippke have been
included in the consolidated financial statements since the date of acquisition of
January 1, 2004.  Unaudited pro forma results of operations for the three- and
nine-month periods ended September 30, 2003 are included below.  Such pro forma
information assumes that the above acquisition had occurred as of January 1, 2003.  This
summary is not necessarily indicative of what our results of operations would have been
had we been a combined entity during the period ended September 30, 2003, nor does it
purport to represent results of operations for any future periods. Pro forma adjustments
consist primarily of amortization of intangible assets.

|                            | Three Months EndedSeptember 30, 2003 |  | Nine Months EndedSeptember 30, 2003
|--------------------------- | ------------------------------------ |  | -----------------------------------
|                            |                                      |  |                                    
|Net sales                   |                                      |  | $                                  
|Net income                  |                                      |  | $                                  
|Net income per common share |                                      | 
|Basic                       |                                      |  | $                                  
|Diluted                     |                                      |  | $                                  

-9-

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MOCON, INC.

Item 2.  Management's Discussion and
Analysis of Financial Condition and Results of Operations

This Form 10-Q includes certain
statements that are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements, other than statements of historical facts,
included in this Form 10-Q that address activities, events, or developments that we
expect, believe, or anticipate will or may occur in the future, are forward-looking
statements. The forward-looking statements in this filing are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that any such statements are not guarantees of future performance and that
actual results or developments may differ materially from those projected in the
forward-looking statements because these statements are subject to a number of risks and
uncertainties including, but not limited to, expected orders, expected revenues, expected profitability and financial
performance for the fourth quarter of 2004, as well as, the risk factors described in our annual
report on Form 10-K for the year ended December 31, 2003, and the factors included in this
report in the section entitled "Risk Factors." Persons reading this Form 10-Q should carefully
review the discussion of all of the risk factors described in this report and in our other filings made from time to time
with the Securities and Exchange Commission. We undertake no duty to update any of the forward-looking
statements after the date of this report.

Overall Summary of
Financial Results for Third Quarter and First Nine Months of 2004

Sales for the third quarter of 2004
were $6,411,073, an increase of 34% compared to $4,778,161 for 2003. The increase is
primarily due to the acquisition of Paul Lippke Handels-GmbH Prozess- und Laborsysteme
(Lippke) as explained below in the Company Overview section. Net income was $728,369, a
36% increase compared to $534,316 in the third quarter of 2003. Net income per share was
13 cents (diluted) in the third quarter of 2004, a 30% increase compared to 10 cents
(diluted) for the same period in 2003. Nine-month sales increased 22% to $18,287,249
compared to $14,939,584 for the first nine months of 2003. Net income and net income per
share were $1,694,362 and 31 cents (diluted), respectively, for the first nine months of
2004, both down 3% compared to $1,750,253 and 32 cents (diluted) during the same period
in 2003.

Company Overview

MOCON, Inc. designs, manufactures,
markets, and services products and provides consulting services primarily in the
measurement and analytical instrument and services markets. Our products include
instruments that detect, measure and monitor gases and chemical compounds as well as
products that prepare samples of various substances for laboratory analysis. Although
some of the markets for our products are maturing, we continually seek growth
opportunities through technological and product improvement, by acquiring and developing
new products, and by acquiring new companies.

Effective January 1, 2004, we
acquired Lippke which is located in Germany. Lippke had been the primary distributor of
our products in Europe for approximately thirty years, and also served in the capacity of
distributor or agent for several companies in addition to MOCON. The acquisition of
Lippke provides us with a direct presence in Europe, which we plan to leverage to benefit
many of our product and service offerings. We acquired all of the shares of Lippke for a
base purchase price of $802,688. In addition, we are obligated to make three future earnout payments
to Lippkes former parent company based on the net profits of Lippke in each of the
years 2004, 2005, and 2006, with a minimum payment amount of 100,000 euros per year.

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Prior to 1998, we expanded our
business primarily through internally developing new products and technologies, acquiring
product lines and technology, and licensing products and technology. In 1998, 2001,
2003, and 2004, we supplemented our internal growth through a total of five acquisitions
that have provided us with additional technologies, products and product development
expertise. We have three primary operating locations in the United States and one in
Germany.

Critical Accounting Policies

Our estimates related to certain
assets and liabilities are an integral part of our consolidated financial statements.
These estimates are considered critical to our consolidated financial statements because
they require us to make subjective and complex judgments.

Allowance for doubtful accounts
 This reserve is for accounts receivable balances that are potentially
uncollectible. The reserve is based on (1) an analysis of customer accounts and (2) our
historical experience with accounts receivable write-offs. The analysis includes the age
of the receivable, the financial condition of a customer or industry, and general
economic conditions. We believe the results could be materially different if historical
trends do not reflect actual results or if economic conditions worsened for our customers.

Inventory obsolescence analysis
 We perform an analysis to identify inventory shrinkage, slow moving, and obsolete
inventory. We record a charge to cost of sales for amounts identified. Our analysis
includes inventory levels, physical inventory counts, cycle count adjustments, the nature
of the finished product and its inherent risk of obsolescence, the gross margin of the
product, and the on-hand quantities relative to the sales history of that finished
product. We believe that the results could be materially different if historical trends
do not reflect actual results or if demand for our products decreased because of economic
or competitive conditions or otherwise.

Recoverability of long-lived assets
 We assess the recoverability of goodwill and other long-lived assets annually or
whenever events or changes in circumstances indicate that expected future undiscounted
cash flows might not be sufficient to support the carrying amount of an asset. We deem an
asset to be impaired if a forecast of undiscounted future operating cash flows is less
than an assets carrying amount. If an asset is determined to be impaired, the loss
is measured as the amount by which the carrying value of the asset exceeds its fair
value. Changes in our business strategies and/or changes in the economic environment in
which we operate may result in future impairment charges.

Results of Operations

The following table sets forth the
relationship between various components of operations, stated as a percent of sales, for
the three- and nine-month periods ended September 30, 2004, and 2003.

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|                                             | Percent of Sales
|-------------------------------------------- | ----------------
|                                             |                 
|
|                                             |                 
|
|                                             |                 
|Sales                                        |                 
|Cost of sales                                |                 
|                                             |                 
|Gross profit                                 |                 
|Selling, general and administrative expenses |                 
|Research and development expenses            |                 
|                                             |                 
|Operating income                             |                 
|Other income                                 |                 
|                                             |                 
|Income before income taxes                   |                 
|Income taxes                                 |                 
|                                             |                 
|Net income                                   |                 
|                                             |                 

The following table sets forth the
relationship  between various  components of domestic and foreign sales,  stated as a
percent of total sales, for the three- and nine-month periods ended September 30, 2004
and 2003.

|                    | Percent of Sales
|------------------- | ----------------
|                    |                 
|
|                    |                 
|
|                    |                 
|Domestic sales      |                 
|Foreign sales:      |                 
|Japan               |                 
|Western Europe      |                 
|Canada              |                 
|Other               |                 
|                    |                 
|Total foreign sales |                 
|                    |                 
|Total sales         |                 
|                    |                 

Net Sales

Sales for the third quarter of 2004
were $6,411,073, up 34% compared to $4,778,161 for the same period in 2003. This increase
was primarily the result of the Lippke acquisition, which provided $964,329 in net
incremental sales. On a product basis, this increase was primarily due to increased
foreign sales of our permeation products (including $426,451 in net additional foreign
permeation sales from Lippke), foreign sales of our leak detection products (including
$197,423 in net additional foreign leak detection sales from Lippke), domestic and
foreign sales of our headspace analyzer products, and foreign sales of our weighing
products, offset somewhat by decreases in domestic sales of our weighing products. The
impact of price increases was not significant.

Sales for the nine months ended
September 30, 2004, were $18,287,249, up 22% compared to $14,939,584 for the nine months
ended September 30, 2003. This increase was primarily the result of the addition of
Lippke, which provided $2,737,074 in net incremental sales. On a product basis, this
increase was primarily due to increased foreign sales of our permeation products
(including $1,473,786 in net additional foreign permeation sales from Lippke), foreign
sales of our leak detection products (including $456,698 in net additional foreign leak
detection

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sales from Lippke), foreign sales of
our headspace analyzer products (including $281,045 in net additional foreign headspace
sales from Lippke), foreign sales of our weighing products, and domestic sales of our
sample preparation products, offset somewhat by decreases in domestic sales of our
permeation and weighing products and domestic sales of our consulting and analytical
services. The impact of price increases was not significant.

In addition to a direct presence in
Europe provided by the acquisition of Lippke, we use a network of independent
representatives to market and service our products in foreign countries, and expect that
international sales will continue to account for a significant portion of our revenues
for the foreseeable future.

Permeation Products

Sales of our permeation products
accounted for approximately 55% and 57% of our consolidated third quarter sales in 2004
and 2003, respectively. Sales of permeation products for the nine months ended September
30, 2004, and 2003, were approximately 59% and 60%, respectively.

Gas Analyzer Products

Sales of our gas analysis and
monitoring instrumentation products through our Baseline-MOCON, Inc. subsidiary were
approximately 13% and 18% of our consolidated third quarter sales in 2004 and 2003,
respectively, and approximately 14% and 17%, of consolidated sales for the nine months
ended September 30, 2004, and 2003, respectively. In order to reduce operating costs and
increase operating efficiencies, we moved a portion of Baselines production to our
Minneapolis, Minnesota, facility during the first quarter of 2004.

Headspace Analyzer Products

Sales of our headspace analyzer
products were approximately 8% and 6% of our consolidated third quarter sales in 2004 and
2003, respectively. Sales of headspace analyzer products for the nine months ended
September 30, 2004, and 2003, were consistent at approximately 7% of consolidated sales
for those periods.

Weighing Products

Sales of our weighing products
accounted for approximately 8% of our consolidated third quarter sales in both 2004 and
2003, and approximately 5% of our consolidated sales for both the nine months ended
September 30, 2004, and 2003.

Leak Detection Products

Sales of our leak detection products
were approximately 5% and 1% of our consolidated third quarter sales in 2004 and 2003,
respectively. Sales of leak detection products accounted for approximately 5% and 2% of
our consolidated sales for the nine months ended September 30, 2004, and 2003,
respectively. These increases were primarily due to net additional foreign leak detection
sales associated with Lippke.

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Gas Chromatography Analyzer Products

Sales of our gas chromatography
analyzer products through our Microanalytics Instrumentation Corp. subsidiary located in
Round Rock, Texas, accounted for approximately 3% of our consolidated sales for the three
and nine months ended September 30, 2004 and 2003.

Consulting
and Analytical Services

Consulting and analytical services
sales were approximately 2% and 5%, respectively, of our consolidated third quarter sales
in 2004 and 2003, respectively. Consulting and analytical services sales were
approximately 3% and 4% of our consolidated sales for the nine months ended September 30,
2004, and 2003, respectively.

Sample Preparation Products

Sales of our sample
preparation products through our Lab Connections, Inc. (Lab Connections)
subsidiary accounted for approximately 1% and 2% of our consolidated third
quarter sales in 2004 and 2003, respectively. Sales of sample preparation
products accounted for approximately 2% of consolidated sales for both the nine
months ended September 30, 2004, and 2003. During the first quarter of 2004, we
moved our Lab Connections operations into our Round Rock, Texas, location and
closed the Boston location. The total costs incurred in the first quarter of
2004 associated with this relocation were $78,900. As anticipated, the closing
of the Boston location has resulted in a reduction in certain operating costs.
Overall Lab Connections results, however, have continued to be below
expectations. While we anticipate improvement in revenue and operating results
for Lab Connections in the fourth quarter, should these improvements fail to
materialize, we may incur a charge in the fourth quarter for the impairment of
technology rights associated with Lab Connections. The total remaining net
balance of technology rights associated with Lab Connections as of September 30,
2004 is $255,000.

Gross Profit

Our gross profit margin was 53.4%
and 54.6% for the three months ended September 30, 2004 and 2003, respectively. The gross
profit margin as a percentage of sales was lower for the three months ended September 30,
2004 compared to the same period in 2003 due mostly to increases in our inventory reserve
for obsolescence and additional costs associated with moving a portion of our Baseline
subsidiarys manufacturing to Minneapolis, Minnesota. We believe this manufacturing
consolidation will positively impact future operating income as reduced costs and
increased operating efficiencies are realized.

Our gross profit margin for the nine
months ended September 30, 2004 and 2003, respectively, was 53.3% and 55.3%. The gross
profit margin as a percentage of sales was lower for the nine months ended September 30,
2004 compared to the same period in 2003 due mostly to costs related to the acquisition
of Lippke including the increased cost of sales assigned to finished goods inventory
under purchase accounting rules of $161,000, costs associated with the relocation of our
Lab Connections subsidiary to Round Rock, Texas, and additional costs associated with
moving a portion of our Baseline subsidiarys manufacturing to Minneapolis,
Minnesota. We believe both of these manufacturing consolidations will positively impact
future operating income as reduced costs and increased operating efficiencies are
realized.

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Selling, General and Administrative Expenses

Selling, general and administrative
(SG&A) expenses in the third quarter of 2004 were $2,068,871, or 32.2% of sales,
compared to $1,498,595, or 31.4% of sales in the third quarter of 2003. The increase in SG&A
expenses was primarily due to costs associated with the increase in sales, including
Lippke sales, and costs associated with the acquisition of Lippke, including ongoing
amortization related to various purchased intangibles of $44,000.

SG&A expenses for the first nine
months of 2004 were $6,297,024, or 34.4% of sales, compared to $4,650,221, or 31.2% of
sales, for the first nine months of 2003. The increase in SG&A expenses was primarily
due to costs associated with the increase in sales, including Lippke sales, and costs
associated with the acquisition of Lippke, including amortization of $85,000 related to
purchased backlog and ongoing amortization related to various other purchased intangibles
of $133,000.

Research and Development Expenses

Research and development (R&D)
expenses were $294,840, or approximately 4.6% of sales, in the third quarter of 2004,
compared to $314,790, or approximately 6.6% of sales, in the third quarter of 2003. For
the nine months ended September 30, 2004, R&D expenses were $1,004,547, or
approximately 5.5% of sales, compared to $1,005,992, or approximately 6.7% of sales, for
the same period in 2003. Continued R&D expenditures are necessary as we develop new
products to expand in our niche markets. For the foreseeable future, we expect to
allocate on an annual basis approximately 5% to 8% of sales to research and development.

Other Income

Other income for the nine months
ended September 30, 2004 consisted of interest income of $97,107 and gain on foreign
currency exchange of $13,943. Interest income increased slightly from $91,610 for the
nine months ended September 30, 2003.

Income Tax Expense

Our provision for income taxes was
33.8% of income before income taxes for the three and nine months ended September 30,
2004, compared to 35% of income before income taxes for the three and nine months ended
September 30, 2003. Based on current operating conditions and income tax laws, we expect
the tax rate for all of 2004 to be in the range of 33% to 36%.

Net Income

Net income was $728,369 in the third
quarter of 2004, compared to $534,316 in the third quarter of 2003. Diluted net income
per share was 13 cents per share in the third quarter of 2004 compared to 10 cents per
share in the third quarter of 2003. For the nine months ended September 30, 2004, net
income was $1,694,362 compared to $1,750,253 for the nine months ended September 30,
2003. Diluted net income per share was 31 cents and 32 cents for the nine months ended
September 30, 2004 and 2003, respectively.

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Liquidity and Capital Resources

Operating Activities

Cash flow from operations has
historically been sufficient to meet our liquidity requirements, capital expenditures and
research and development costs. Cash flow from operations for the first nine months of
2004 and 2003 totaled $3,215,370 and $2,231,733, respectively.

The accounts receivable balance at
September 30, 2004 increased $222,915 compared to December 31, 2003, mostly due to the
increase in sales, offset in part by improved collections. Total inventory increased
$106,258 at September 30, 2004, compared to December 31, 2003, primarily due to the
acquisition of Lippke. The $817,601 increase in accounts payable at September 30, 2004
compared to December 31, 2003 was also due primarily to the acquisition of Lippke and, to a
lesser extent, to increases in commissions payable and customer advance payments.

Investing Activities

Cash flow used in investing
activities totaled $73,701 in the first nine months of 2004. Proceeds from sales or
maturities of marketable securities, net of purchases, were $705,564. Purchases of
property and equipment totaled $276,003, primarily for additions of manufacturing and
laboratory equipment.

Effective January 1, 2004, we
acquired all of the shares of Lippke for a base purchase price of $802,688. In addition,
we are obligated to make three future earnout payments to Lippkes
former parent company based on the net profits of Lippke in each of the years 2004, 2005,
and 2006, with a minimum payment amount of 100,000 euros per year.

Financing Activities

During the first nine months of
2004, we made final dividend payments of $449,087 to Lippkes former parent company
and dividend payments of $1,048,132 to our shareholders, for total year-to-date dividend
payments of $1,497,219.

Our Board of Directors has
authorized, depending upon market conditions and other factors, the repurchase of up to a
total of $3,200,000 of our common stock at prices not exceeding prevailing market prices
at the time of purchase. There were no repurchases of our common stock during the third
quarter of 2004, however, the year-to-date repurchases total $900,360. As of September
30, 2004, $1,672,034 was remaining in this authorization.

We continue to maintain a strong
financial position. Total cash, temporary cash investments and marketable securities
increased $135,231 during the first nine months of 2004 to $6,926,881, compared to
$6,791,650 at December 31, 2003. Our working capital as of September 30, 2004 increased
$341,514 to $11,243,640, compared to $10,902,126 at December 31, 2003.

We had no material commitments for
capital expenditures as of September 30, 2004. We do not believe that any major property,
plant and equipment expenditures are required to accommodate our current level of
operations. We anticipate that a combination of our existing cash, temporary cash
investments and marketable securities, plus an expected continuation of cash flow from
operations, will continue to be adequate to fund operations, capital expenditures and
dividend payments in the foreseeable future.

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Contractual Obligations

We refer you to our Annual Report on
Form 10-K for the year ended December 31, 2003 for a summary of our contractual
obligations. Except for the earnout payments expected to be paid in connection with the
Lippke acquisition, there has been no material change in this information.

Off-Balance Sheet Arrangements

Except for operating leases entered
in the ordinary course of business and customary indemnification obligations under
certain of our agreements entered in the ordinary course of business, we do not have any
material off-balance sheet arrangements.

Risk Factors

Our business faces significant
risks. The risks below are not the only risks we face. Additional risks and uncertainties
not presently known to us, or that we currently believe are immaterial, may also impair
our business operations. If any of the events or circumstances described in the following
risks occurs, our business, operating results or financial condition could be materially
adversely affected. The following risk factors should be read in conjunction with the
other information and risks set forth in this report.

| |  | If
we experience any increase in the cost of raw materials or supplies, we may experience a
decrease in profit margins.
|- |  | -----------------------------------------------------------------------------------------------------------------------

In the past, the overall cost of the
materials that we purchase has not risen much more than the rate of inflation, although
the price of some of the components that we purchase has increased in the past several
years due in part to our purchasing less of such components. Certain other material and
labor costs have increased, but we believe that such increases are approximately
consistent with overall inflation rates. We believe that the price of our products and
the prices of our competitors products is a significant factor affecting our
customers buying decisions and consequently, we may not be able to pass along any
cost increases in the form of price increases or sustain profit margins that we have
achieved in prior years.

| |  | The markets in which we operate have experienced minimal growth in recent years, and our
ability to increase our revenues will depend in part on our ability to develop new
products, develop new applications for our existing products and to acquire complementary
businesses and product lines.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The analytical and measurement
instrument markets in which we operate have not shown significant growth in recent years.
Although we have identified a number of strategies that we believe will allow us to grow
our business and increase our sales, including developing new products and technologies,
developing new applications for our technologies, acquiring complementary businesses and
product lines, and strengthening our sales force, we can not assure you that we will be
able to successfully implement these strategies, or that these strategies will result in
the growth of our business or an increase in sales.

| |  | If we acquire businesses in the future, we may experience a decrease in our profit margins
and our net income.
|- |  | --------------------------------------------------------------------------------------------------------------

One of our growth strategies is to
supplement our internal growth with the acquisition of businesses and technologies that
complement or augment our existing products. Some of the businesses that we previously
acquired have produced net operating losses or low levels of profitability. Businesses
that we may acquire in the future may be marginally profitable or unprofitable. We will
likely have to successfully change the operations of any companies that we acquire in the
future and improve the market penetration of such companies in order to achieve the level
of profitability that we desire. In addition, acquisitions that we believe will be
beneficial to our business and financial results are difficult to identify and complete
for a number of reasons, including the competition among prospective buyers. We may not
be able to complete

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acquisitions in the future and any
acquisitions that we do complete may have an adverse effect on our financial performance
and liquidity. It may be necessary for us to raise additional funds either through public
or private financing in order to finance any future acquisitions. Any equity or debt
financing, if available at all, may be on terms that are not favorable to us and may
dilute the ownership of our existing shareholders.

| |  | We
face risks of technological changes that may render our products obsolete.
|- |  | -----------------------------------------------------------------------------

The markets for our products and
services are characterized by rapid and significant technological change and evolving
industry standards. As a result of such changes and evolving standards, our products may
become noncompetitive or obsolete and we may have to develop new products in order to
maintain or increase our revenues. New product introductions that are responsive to these
factors require significant planning, design, development and testing at the
technological, product, and manufacturing process levels and we may not be able to timely
develop new products. In addition, industry acceptance of new technologies that we may
develop may be slow to develop due to, among other things, existing regulations or
standards written specifically for older technologies and general unfamiliarity of users
with new technologies. As a result, any new products that we may develop may not generate
any meaningful revenues or profits for us for a number of years, if at all.

| |  | Any
reduction in the level of capital expenditures by our customers could negatively impact
our sales.
|- |  | ------------------------------------------------------------------------------------------------------

Our customers include
pharmaceutical, food, medical, and chemical companies, laboratories, government agencies,
and public and private research institutions. The capital spending of these entities can
have a significant effect on the demand for our products. Any decrease in capital
spending by any of these customer groups could have a material adverse effect on our
business and results of operations.

| |  | A significant portion of our sales are generated from foreign countries and selling in
foreign countries entails a number of risks which could result in a decrease to our sales
or an increase in our operating expenses.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sales outside the United States
accounted for approximately 55% of our revenues for the nine months ended September 30,
2004 and for approximately 40% of our revenues for the same period in 2003. We expect
that foreign sales will continue to account for a significant portion of our revenues in
the future. Sales to customers in foreign countries are subject to a number of risks,
including the following:

| |  |  | agreements
may be difficult to enforce;
| | - |  | ---------------------------------------

| |  |  | receivables
may difficult to collect;
| | - |  | -------------------------------------

| |  |  | certain
regions are experiencing political unrest and conflict;
| | - |  | ---------------------------------------------------------------

| |  |  | foreign
customers may have longer payment cycles;
| | - |  | -------------------------------------------------

| |  |  | the
countries into which we sell may impose tariffs or adopt other restrictions on foreign
trade;
| | - |  | -------------------------------------------------------------------------------------------------

| |  |  | fluctuations
in exchange rates may affect product demand; and
| | - |  | -------------------------------------------------------------

| |  |  | export
licenses, if required, may be difficult to obtain and the protection of intellectual
property in foreign
countries may be more difficult to enforce.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

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If any of these risks were to
materialize, our sales into foreign countries could decline, or our operating costs could
increase, which would adversely affect our financial results.

| |  | Some of our competitors have greater resources than we do, which may provide our
competitors with an advantage in the development and marketing of new products.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

We currently encounter, and expect
to continue to encounter, competition in the sale of our products. We believe that the
principal competitive factors affecting the market for our products include product
quality and performance, price, reliability and customer service.

Our competitors include large
multinational corporations. Some of our competitors have substantially greater financial,
marketing, and other resources than we do. As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements, or to
devote greater resources to the promotion and sale of their products than we can. In
addition, competition could increase if new companies enter the market or if existing
competitors expand their product lines or intensify efforts within existing product
lines. Our current products, products under development and our ability to discover new
technologies may be insufficient to enable us to compete effectively with our competitors.

| |  | Our reliance upon patents, domestic trademark laws and contractual provisions to protect
our proprietary rights may not be sufficient to protect our intellectual property from
others who may sell similar products.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We hold patents relating to various
aspects of our products and believe that proprietary technical know-how is critical to
many of our products. Proprietary rights relating to our products are protected from
unauthorized use by third parties only to the extent that they are covered by valid and
enforceable patents or are maintained in confidence as trade secrets. We can not be
certain that we will be issued any patents from any pending or future patent applications
owned by or licensed to us or that the claims allowed under any issued patents will be
sufficiently broad to protect our technology. In the absence of patent protection, we may
be vulnerable to competitors who attempt to copy our products or gain access to our trade
secrets and know-how. Our competitors may initiate litigation to challenge the validity
of our patents, or they may use their resources to design comparable products that do not
infringe our patents. We may incur substantial costs if our competitors initiate
litigation to challenge the validity of our patents or if we initiate any proceedings to
protect our proprietary rights and if the outcome of any such litigation is unfavorable
to us, our business and results of operations could be materially adversely affected.
There may also be pending or issued patents held by parties not affiliated with us that
relate to our products or technologies and we may need to acquire licenses to any such
patents to continue selling some or all of our products. If we had to obtain any such
license in order to be able to continue to sell some or all of our products, we may not
be able to do so on terms that were favorable to us, if at all.

In addition, we rely on trade
secrets and proprietary know-how that we seek to protect, in part, by confidentiality
agreements with our collaborators, employees, and consultants. These agreements may be
breached and we may not have adequate remedies for any such breach. Even if these
confidentiality agreements are not breached, our trade secrets may otherwise become known
or be independently developed by competitors.

| |  | If we are required to account for stock options as a compensation expense, our net income
and net income per common share will be reduced.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------

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Some companies have begun to account
for stock options as compensation expense thus resulting in a reduction of their net
income and net income per common share. We currently grant all options at fair market
value and do not record compensation expense in connection with the grants. It is
possible that future laws, regulations or changes in accounting standards will require us
to record the fair market value of all stock options as a compensation expense in our
consolidated financial statements. If such a change occurs, our net income and net income
per common share will be reduced.

| |  | The market price of our common stock has fluctuated significantly in the past and will
likely continue to do so in the future and any broad market fluctuations may materially
adversely affect the market price of our common stock.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The market price of our common stock
has been volatile in the past, and several factors could cause the price to fluctuate
substantially in the future. These factors include:

| |  |  | announcements
of new products by us or our competitors;
| | - |  | -------------------------------------------------------

| |  |  | quarterly
fluctuations in our financial results;
| | - |  | ------------------------------------------------

| |  |  | customer
contract awards;
| | - |  | -------------------------

| |  |  | developments
in regulation; and
| | - |  | -------------------------------

| |  |  | general
economic and political conditions in the various markets where our products are sold.
| | - |  | ---------------------------------------------------------------------------------------------

In addition, the stock prices of
instrumentation companies have experienced significant price and volume fluctuations that
often have been unrelated to the operating performance of such companies. This market
volatility may adversely affect the market price of our common stock.

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Item 3. Quantitative and
Qualitative Disclosures About Market Risk

Equity Price and Interest
Rate Risk

Substantially all of our marketable
securities are at fixed interest rates. However, virtually all of our marketable
securities mature within two years, therefore, we believe that the market risk arising
from the holding of these financial instruments is minimal.

Foreign Currency Exchange
Risk

We are exposed to market risks related to fluctuations in foreign exchange rates because some
sales transactions, primarily associated with our foreign subsidiary Lippke, and the assets and
liabilities of Lippke, are denominated in foreign currencies, primarily the euro. We are not
currently engaging in any hedging activities, but may do so in the future.

Item 4. Controls and
Procedures

Evaluation of Disclosure
Controls and Procedures

We maintain disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed
to ensure that information required to be disclosed by us in the reports we file or
submit under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized, and reported, within the time periods specified in the Securities and
Exchange Commissions rules and forms and that such information is accumulated and
communicated to our management, including our principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. Our management evaluated, with the participation
of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the
period covered in this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of such period.

Changes in Internal
Controls

There was no change in our internal
control over financial reporting that occurred during our quarter ended September 30,
2004 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 2. Unregistered Sales of
Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Unregistered Sales of
Equity Securities

We did not sell any equity
securities of MOCON, Inc. during the three months ended September 30, 2004 that were not
registered under the Securities Act of 1933.

Issuer Repurchases of
Equity Securities

We did not repurchase any equity
securities of MOCON, Inc. during the three months ended September 30, 2004. In November
2002, our Board of Directors authorized the repurchase of up to $2,000,000 of our common
stock in the open market at prices not exceeding the market price at the time of
purchase. In May 2003, our Board of Directors authorized a $1,200,000 increase in our
stock repurchase program, increasing the total to $3,200,000. As of September 30, 2004,
we had repurchased 204,000 shares of MOCON common stock under the program at a total
cumulative cost of approximately $1,527,966. The repurchase program does not have an
expiration date.

Item 6. Exhibits

| | 31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
| | ---- |  | --------------------------------------------------------------------------------------------------

| | 31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
| | ---- |  | --------------------------------------------------------------------------------------------------

| | 32.1 |  | Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
| | ---- |  | --------------------------------------------------------------------------------------------------

| | 32.2 |  | Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
| | ---- |  | --------------------------------------------------------------------------------------------------

-22-

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SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

|                          |                                                                                                                  |                          | 
|------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------------------ | 
|                          |                                                                                                                  | MOCON, INC.             
|                         
|Date:   November 15, 2004 |                                                                                                                  | /s/   Robert L. Demorest | 
|                          |                                                                                                                 
|                          | Robert L. DemorestChairman, President and ChiefExecutive Officer(Principal Executive Officer)                    |                         
|Date:   November 15, 2004 |                                                                                                                  | /s/   Dane D. Anderson   | 
|                          |                                                                                                                 
|                          | Dane D. AndersonVice President, Treasurer and ChiefFinancial Officer(Principal Financial and Accounting Officer) |                         

-23-

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MOCON, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004

EXHIBIT INDEX

|     | 
|---- | 
|
|     | 
|31.1 | 
|     | 
|31.2 | 
|     | 
|32.1 | 
|     | 
|32.2 | 
|     | 

-24-

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