UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

(Mark one)ý

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010o

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the transition period from  to
  .

Commission File No.: 000-09273



MOCON, Inc.(Exact name of registrant as specified in its charter)

Minnesota(State or other jurisdiction of
incorporation or organization)

41-0903312(I.R.S. Employer
Identification No.)7500 Mendelssohn Avenue NorthMinneapolis, Minnesota(Address of principal executive offices)

55428(Zip Code)


Registrant's telephone number, including area code:(763) 493-6370

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

Title of each class

Name of each exchange on which registeredCommon Stock, par value $.10 per share

The NASDAQ Stock Market LLC
(NASDAQ Global Market)


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



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

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

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 ý    NO o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was
required to submit and post such files).    YES o    NO o*

* The registrant has not yet been phased into the interactive data requirements.

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (do not check if a smaller reporting company)

Smaller reporting company ý


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

The aggregate market value of the registrant's common stock, excluding outstanding shares beneficially owned by directors and executive officers, computed by reference to the
price at which the common stock was last sold as of June 30, 2010 (the last business day of the registrant's second quarter) as reported by the Nasdaq Global Market System, was $51,638,187.

As
of March 28, 2011, 5,277,481 shares of common stock of the registrant were deemed outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III
of this annual report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the registrant's Proxy
Statement for its 2011 Annual Meeting of Shareholders to be held May 26, 2011.



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PART I

This annual report on Form 10-K contains or incorporates by reference not only historical
information, but also 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, and are subject to the safe harbor created by those sections. We refer you to the information under the heading "Part I. Item 1. BusinessForward-Looking
Statements."

As used in this annual report on Form 10-K, references to "MOCON," the "Company," "we," "our" or "us," unless the context otherwise requires,
refer to MOCON, Inc. and our subsidiaries.

All trademarks or trade names referred to in this report are the property of their respective owners.

ITEM 1.    BUSINESS

MOCON, Inc. designs, manufactures, markets and services products, and provides consulting services, primarily in the test and
measurement, analytical instrument and services markets. Our products include instruments that detect, measure and monitor gases and other chemical compounds.

Our
gas and vapor permeation instruments were first used in the food packaging industry, starting in the 1970's, to measure small amounts of moisture which adversely affects dry cereal
and other food packaging. Today our core business, the detection, measurement and analysis of vapors and gases, serves industries far beyond food packaging. Our products serve niche markets from
foods, beverages, pharmaceuticals and consumer products, to oil and gas exploration, industrial safety and homeland security. For example, our newest analyzers measure the parameters necessary to
predict the safe shelf life of packaged foods. This effort, together with others, has allowed us to enter the food and beverage safety markets worldwide.

Our
principal business strategy is to employ our product development and technological capabilities, manufacturing processes and sales and marketing skills in niches where we can
successfully penetrate the market and become a leader in the segment. Our management team continually emphasizes product innovation, product performance, quality improvements, cost reductions and
other value-adding activities. We seek growth opportunities through technological and product improvement, by acquiring and developing new products, and by acquiring new companies or product lines.

MOCON, Inc.
was incorporated as a Minnesota corporation in February 1966, and was initially involved in the commercialization of technology developed for the measurement of water
vapor permeating through various materials. Today, the key drivers in the industries we serve are food and beverage product safety and quality, improving workplace safety, supplying equipment for oil
and gas exploration, and analyzing the quality of air both indoors and outdoors.

Historically,
a significant portion of our sales has come from international customers. In recognition of the importance of our international customers, we maintain a physical presence
in Europe through our wholly-owned subsidiary, Paul Lippke Handels-GmbH, located in Neuwied, Germany, and in Asia through a sales office in Shanghai, China.

Our
current plans for growth include continued substantial funding for research and development to foster new product development and to pursue strategic acquisitions and investments
where appropriate.

Our
principal executive offices and worldwide headquarters are located at 7500 Mendelssohn Avenue North, Minneapolis, Minnesota 55428, and our telephone number is
(763) 493-6370. Our website address iswww.mocon.com. The information contained on our website or connected to our website is not
incorporated by reference into this annual report on Form 10-K and should not be considered part of this report.

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We
make available, free of charge on our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. We also make available, free of charge and through our website, to any
shareholder who requests, the charters of our board committees and our Code of Ethics. Requests for copies can be directed to our Chief Financial Officer at the address and phone number above.

Products and Services

We develop, manufacture, market and service measurement, analytical and monitoring products used to detect, measure and analyze gases
and other chemical compounds, as well as provide related consulting services. Please see our consolidated financial statements beginning on page F-1 for financial information
concerning our business, including our sales, net income and net assets. Our sales are grouped into four major categories as discussed below.

Permeation Products and Services

Our permeation products consist of systems and services that measure the rate at which various gases and vapors transmit through a
variety of materials. These products perform measurements under precise temperature, pressure and relative humidity conditions. The principal market for these products consists of manufacturers of
packaging materials, including manufacturers of papers, plastic films, coatings and containers and the users of such packaging materials, such as companies in the food, beverage, pharmaceutical and
consumer product industries.

We
also provide certain laboratory testing services to companies that have a need for permeation data. These services consist primarily of testing film and package permeation for
companies that:



Our
permeation products and services accounted for approximately 57%, 57% and 53% of our consolidated sales in 2010, 2009 and 2008, respectively. Permeation instruments that we currently
manufacture include OX-TRAN® systems for oxygen transmission rates, PERMATRAN-W® systems for water vapor transmission rates, and
PERMATRAN-C® systems for carbon dioxide transmission rates. Our AQUATRAN® ultra-high sensitivity, trace moisture permeation analyzer has been
increasingly accepted as the standard test instrument of choice in the flat panel, solar cell and electronics industries. Our systems are available in a wide range of options for our customers,
including high or low throughput, price, sensitivity and ease of use. They are primarily marketed to research and development departments, as well as production and quality assurance groups.

Gas Analyzer Instruments, Sensors and Detectors

Our Baseline-MOCON, Inc. subsidiary located near Boulder, Colorado offers advanced gas analysis and monitoring instrumentation
used in applications such as oil and gas exploration, process gas analysis, industrial hygiene and safety, environmental air monitoring and homeland security.

We
manufacture and sell two types of gas analyzer instruments: gas chromatographs (GCs) and total hydrocarbon analyzers. These instruments are typically installed in fixed locations at
the monitoring sites and generally perform their functions of detecting and measuring various hydrocarbons continually or at regular intervals. We also sell gas sensors and detectors which are sold to
original equipment manufacturers (OEMs) of mobile equipment.

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Our
gas analyzer instruments, sensors and detectors are for use in industrial hygiene (detection of hazardous gases in the workplace), hydrocarbon gas analysis for oil and gas
exploration, contaminant detection in the manufacture of specialty gases, and environmental monitoring (tracking the release, or the presence, of toxic substances). These substances can include the
intentional release of toxic gases by terrorists which would be a homeland security application. Our newest GC offering measures trace levels of contaminants in beverage grade carbon dioxide which is
used to carbonate soft drinks, beer and water.

Our
gas analyzer instruments, sensors and detectors accounted for approximately 18%, 18% and 23% of our consolidated sales in 2010, 2009 and 2008, respectively. We market some of these
products under the names BEVALERT®, PETROALERT®, and piD-TECH®.

Packaging Products and Services

We manufacture and sell two primary products in this groupheadspace analyzers and leak detection equipment. Our headspace
analyzer products are used to analyze the amount and type of gas present in the headspace of flexible and rigid packages, as applied to gas flushing in modified or controlled atmosphere packaging. The
principal market for these products consists of packagers of foods, beverages and pharmaceuticals. Our headspace analyzer products include the PAC CHECK® series of off-line
headspace analyzers and the GSA series of on-line gas stream analyzers for continuous and intermittent monitoring of modified atmosphere packaging (MAP) and other gas flushing
operations.

Our
leak detection products detect leaks in sterile medical trays, food pouches, blister packs and a wide range of other packages. We currently manufacture three types of leak detection
instruments. The first type is a non-destructive leak detector that senses small amounts of carbon dioxide escaping from a package or tray. The second type of instrument detects leaks and
checks for seal integrity by applying and measuring pressure within a package. The third type pulls a vacuum on a package and looks for vacuum or gas flow changes. The principal markets for these
products are packagers of sterile medical items, pharmaceuticals and food products.

Our
packaging products and services group accounted for 16%, 18% and 16% of our consolidated sales in 2010, 2009 and 2008, respectively. We market these products under the names PAC
CHECK®, LIPPKE®, SKYE® and PAC GUARD®.

Other Instruments and Services



We provide consulting and analytical services, on a special project basis, for customers that require custom solutions to unique
problems. Services that we typically provide relate to:



The
principal markets for our consulting and analytical services consist of manufacturers of foods, beverages, pharmaceuticals, plastics, chemicals, electronics and personal care
products.



We sell various gas chromatographic (GC) instruments and provide services with an emphasis on multidimensional gas chromatography
through our Microanalytics Instrumentation Corp. (Microanalytics) subsidiary, which is located near Austin, Texas. A variety of GC specific applications

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have
been developed by Microanalytics, ranging from petroleum and petrochemical purity assay to aroma and off-odor analysis for the food, beverage, packaging and other industries. We
integrate GCs and components that we purchase from third parties to form multidimensional GC analyzer systems. These GC analyzers represent state-of-the-art
technology in gas chromatographic separations and are used in identifying compounds causing off-odors in various products, in identifying critical aroma compounds, and in high purity
analysis of single component matrixes. Our GC analyzer products include the AROMATRAX® systems for odor and aroma analysis and profiling. The principal markets for our GC analyzer products
consist of food, beverage, petroleum, chemical and petrochemical manufacturers.



Our weighing products automatically determine the weight of pharmaceutical capsules and tablets and reject those that are out of
acceptable limits. Our VERICAP high-speed capsule weighing system runs at rates up to 2,000 capsules per minute and can be integrated into a capsule production line in
pharmaceutical factories. Our AB automatic balance weighing systems are designed for off-line use for both tablets and capsules, and we market these products primarily to the
pharmaceutical industry. In addition, we sell tablet inspection systems and blister packaging-related equipment through our Lippke subsidiary, which also sells products of other manufacturers.

Our
other instruments and services groups accounted for an aggregate of approximately 9%, 7% and 8% of our consolidated sales in each of the years 2010, 2009 and 2008.

Competition

We have several competitors for all of our products and services in both foreign and domestic markets. The principal competitive
factors for our products and services are:



We
compete with a variety of companies in each market in which we sell our products. Some of our competitors have greater assets and resources than we do, and some are smaller than we
are. To remain competitive, we must continue to invest in research and development, marketing, customer service and support, and manage our operating expenses. We believe that we have strategies in
place to develop technological and other advantages that will give us a competitive advantage over our competitors. However, there can be no assurance that we will have sufficient resources to execute
these strategies, or that our competitors will not develop new technologies or other advantages which would require us to reduce our prices, result in lost orders or otherwise adversely affect our
financial results.

Manufacturing and Supplies

We manufacture products at our locations in Minnesota, Texas and Colorado. Our manufacturing capabilities include electro-mechanical
assembly, testing, integration of components and systems, calibration and validation of systems. Certain components that we use in our
products are currently purchased from single source suppliers. Although we purchase additional quantities of these components in the case of an interruption or delay in supply, an interruption of one
of these sources could result in delays in our production while we locate an alternative supplier, which in turn could result in a loss of sales and income.

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Patents, Trademarks and Other Intellectual Property Rights

We believe that the protection afforded us by our patent rights is important to our business, and we will continue to seek patent
protection for our technology and products. We require all of our employees and consultants to assign to us all inventions that are conceived and developed during their employment, except to the
extent prohibited by applicable law. To protect our proprietary information, we have entered into confidentiality and non-compete agreements with those of our employees and consultants who
have access to sensitive information. We hold both United States and international patents and have U.S. and international patents pending. We currently hold 39 U.S. patents and 36 foreign patents
which will expire during the period from 2011 through 2027, and have another 43 patents pending. We do not believe that the expiration of our patents on their scheduled expiration dates will have a
material adverse effect on our business.

We
own or have applied for certain trademarks which protect and identify our products. Our trademarks and service marks include the following registered marks: MOCON®,
AQUATRACE®, AQUATRAN®, AROMATRAN®, AROMATRAX®, BASELINE®, BEVALERT®, CALCARD®, CAL-SMART®,
COULOX®, FLO SMART®, HERSCH®, LIPPKE®, LIQUI-BLOK®, MICROANALYTICS®, OPTECH®,
OX-TRAN®, PAC CHECK®, PAC GUARD®, PERMATRAN-C®, PERMATRAN-W®, PETROALERT®,
piD-TECH®, QUICK START® and SKYE®. Our trademarks and service marks have a life of 5 to 20 years, and are subject to periodic maintenance which
may be extended in accordance with applicable law.

Marketing and Customers; Distribution Methods

We market our products and services throughout the United States and in over 60 foreign markets. We use a direct sales force of
approximately 20 employees and approximately 15 independent sales representatives to market and sell our products and services to end users in the United States, Canada, Germany and China, and use a
network of approximately 50 independent sales representatives to market, service and sell our products and services in other foreign countries. To our knowledge, none of our independent sales
representatives sell a material amount of product manufactured by any of our competitors.

For
information concerning our export sales by geographic area, see Note 13 of the notes to consolidated financial statements. We market products and services to research
laboratories, production departments and quality control groups in the life science, medical, food, pharmaceutical, plastics, paper, electronics, oil and gas and other industries. One independent
representative accounted for approximately 10% of our consolidated sales in 2010, and another independent representative accounted for 6% in each of the years 2009 and 2008. We do not believe that the
loss of any single customer would have a material adverse effect on our business or financial performance.

Backlog

As of December 31, 2010, our total backlog was $6,055,065 for all of our products as compared to $2,440,794 and $2,157,132 as of
December 31, 2009 and 2008, respectively. The significant increase in backlog at the end of 2010 was due primarily to an unprecedented order volume received in the last quarter of our fiscal
year. We anticipate shipping the majority of the current backlog in 2011.

Research and Development

We are committed to an ongoing engineering program dedicated to innovating new products and improving the quality and performance of
our existing products. Our engineering expenses are primarily incurred in connection with the improvement of existing products, cost reduction efforts, and the development of new products that may
have additional applications or represent extensions of existing product lines. None of these costs are borne directly by our customers.

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We
incurred expenses of $2,135,365, $1,847,993 and $1,950,754 during the fiscal years ended December 31, 2010, 2009 and 2008, respectively, for research and development (R&D) of
our products. These amounts were approximately 7% of our consolidated sales for each of those three fiscal years. On an annual basis, we currently intend to spend approximately 6% to 8% of our
consolidated sales on R&D in the future.

Working Capital Practices

We strive to maintain a level of inventory that is appropriate given our projected sales. Our standard domestic payment terms are net
30 days and our international payment terms vary but generally range between 30 and 90 days. International sales are, in some cases, transacted pursuant to letters of credit.

Seasonality

Our business is not seasonal in nature.

Employees

As of December 31, 2010, we had approximately 135 full-time employees. Included in this total are approximately 20
scientists and engineers who research and develop potential new products. None of our employees are represented by a labor union, and we consider our employee relations to be satisfactory.

Executive Officers of the Registrant

Our executive officers, their ages and their offices held, as of March 28, 2011, are as follows:

Name

Age

TitleRobert L. Demorest


65

Chairman of the Board, President and
Chief Executive Officer, MOCON, Inc.Daniel W. Mayer


60

Executive Vice President, MOCON, Inc.Darrell B. Lee


62

Vice President, Chief Financial Officer, Treasurer and Secretary, MOCON, Inc.Douglas J. Lindemann


53

Vice President and General Manager, MOCON, Inc.Robert E. Forsberg


55

President, Baseline-MOCON, Inc.


There
are no family relationships among any of our directors and executive officers. Information regarding the business experience of our executive officers is set forth below.

Mr. Robert
L. Demorest has been our President, Chief Executive Officer, and Chairman of the Board since April 2000. Mr. Demorest is also a director of Marten
Transport, Ltd., a publicly traded company.

Mr. Daniel
W. Mayer has been an Executive Vice President for us since January 1995.

Mr. Darrell
B. Lee has been our Chief Financial Officer, Vice President, Treasurer and Secretary since January 2006. Mr. Lee served as our Director of External Reporting
from April 2005 to January 2006.

Mr. Douglas
J. Lindemann has been a Vice President and General Manager for us since January 2001.

Mr. Robert
E. Forsberg has been the President of Baseline-MOCON, Inc. for more than five years.

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Forward-Looking Statements

This Annual Report on Form 10-K contains or incorporates by reference not only historical information, but also
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, and are
subject to the safe harbor created by those sections. In addition, we or others on our behalf may make forward-looking statements from time to time in oral presentations, including telephone
conferences and/or web casts open to the public, in press releases or reports, on our website or otherwise. All statements other than statements of historical facts included in this Annual Report on
Form 10-K that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in
particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial condition, results of operations, addressable market size estimates and
business. We have identified some of these forward-looking statements with words like "believe," "may," "could," "might," "forecast," "possible," "potential," "project," "will," "should," "expect,"
"intend," "plan," "predict," "anticipate," "estimate," "approximate" or "continue" and other words and terms of similar meaning. These forward-looking statements may be contained in the notes to our
consolidated financial statements and elsewhere in this Annual Report on Form 10-K, including under the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Forward-looking
statements involve risks and uncertainties. These uncertainties include factors that affect all businesses as well as matters specific to us. The following are some of
the uncertainties and factors known to us that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements: successfully competing against our
competitors; acceptance, endorsement, and use of our products; technological changes and product obsolescence; our ability to identify acquisition candidates and successfully integrate the operations
of those acquisitions into our existing operations; the impact of worldwide economic conditions on our operations; the disruption in global financial markets and the potential impact on the ability of
our counterparties to perform their obligations and our ability to obtain future financing; factors impacting
the stock market and share price; ability of our manufacturing facilities to meet customer demand; reliance on single source suppliers; loss or impairment of a principal manufacturing facility;
regulatory matters; timing and success of new product introductions; adequate protection of our intellectual property rights; product liability claims; and currency and other economic risks inherent
in selling our products internationally.

For
more information regarding these and other uncertainties and factors that could cause our actual results to differ materially from what we have anticipated in our forward-looking
statements or otherwise could materially adversely affect our business, financial condition or operating results, refer to this Annual Report on Form 10-K under Part I,
Item 1A, "Risk Factors."

All
forward-looking statements included in this Annual Report on Form 10-K are expressly qualified in their entirety by the foregoing cautionary statements. We wish to
caution readers not to place undue reliance on any forward-looking statement that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results,
which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties
described in this Annual Report on Form 10-K under the heading "Item 1A. Risk Factors" below, as well as others that we may consider immaterial or do not anticipate at this
time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. The expectations reflected in
our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including those described below under the heading
"Item 1A. Risk Factors." The risks and uncertainties described under the heading "Item 1A. Risk Factors" below are not exclusive and further information

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concerning
us and our business, including factors that potentially could materially affect our financial results or condition, may emerge from time to time. We assume no obligation to update
forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. We advise you, however, to consult any further disclosures we make
on related subjects in our quarterly reports on Form 10-Q and current reports on Form 8-K we file with or furnish to the Securities and Exchange Commission.

ITEM 1A.    RISK FACTORS

The following are significant factors known to us that could have material adverse effects on our business, financial condition or
operating results and should be considered carefully in connection with any evaluation of an investment in our common stock. Additionally, the
following risk factors could cause our actual results to materially differ from those reflected in any forward-looking statements.

If economic conditions decline, companies may reduce their capital spending which could adversely affect our business, operating results and financial condition.

Global economic conditions rebounded in 2010, which we believe contributed to an increase in sales over 2009, however, some economists
have predicted there will be a "double dip" recession. If that is to occur, our customers may decrease their capital expenditures. 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.
Decreases in capital spending by any of these customer groups could have a material adverse effect on our sales, business and results of operations.

Further,
if there was to be a double dip recession, our customers' and independent representatives' ability to borrow money from their existing lenders or to obtain credit from other
sources to purchase our products may be impaired. Although we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments and
such losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same loss rates that we have in the past,
especially given the current turmoil in the worldwide economy. A significant change in the liquidity or financial condition of our customers could cause unfavorable trends in our receivable
collections and additional allowances may be required, which could adversely affect our operating results. If investors have concerns that our business, operating results and financial condition will
be negatively impacted by a worldwide economic downturn, our stock price could decrease.

Some of the markets in which we operate have experienced minimal growth in recent years, and our ability to increase our sales will depend in part on our ability to develop
new products, develop new applications for our existing products or acquire complementary businesses and product lines.

We have identified a number of strategies that we believe will allow us to grow our business and increase our sales in markets
experiencing minimal growth, including developing new products and technologies, entering new markets such as food safety, capitalizing on our relationship with Luxcel Biosciences Limited, developing
new applications for our technologies, acquiring complementary businesses and product lines, and strengthening our sales force. However, we can make no assurance 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 our sales.

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If we fail to attract and retain qualified managerial and technical personnel, we may fail to remain competitive.

Our future success depends, in significant part, upon the continued service and performance of our senior management and other key
personnel. We rely on knowledgeable, experienced and skilled technical personnel, particularly engineers, scientists and service personnel, to design, assemble, sell and service our products. The loss
of the services of our management team, some of whom have significant experience in our industry, and other key personnel could impair our ability to effectively manage our company and to carry out
our business plan. Our inability to attract or retain qualified personnel could have a significant negative effect and thereby materially harm our business and financial condition.

If future operating results of Luxcel Biosciences Limited (Luxcel) do not meet our expectations, there is the possibility that our investment in this affiliated company
could be deemed to be impaired, and thus a potential write-down may be warranted.

In January 2010, we acquired a minority equity interest in Luxcel for €2,500,000 (approximately $3,625,000). This
investment is carried on our balance sheet at historical cost, adjusted only for currency fluctuations. We periodically assess this equity investment for impairment. If there are events or changes in
circumstances that might adversely affect the value of this investment, we must assess whether the amount of this investment reflected on the balance sheet exceeds its fair value. Any
write-down will reduce our reported net income and could possibly have a negative effect on our stock price.

If we acquire businesses in the future, we could experience a decrease in our profit margins, a decrease in our net income, and other adverse consequences.

We continue to explore and consider strategic investments and acquisitions. If we do complete an acquisition, the business or
businesses that we acquire may be marginally profitable or unprofitable, and may require us to improve the operations and market penetration of such companies in order to achieve the level of
profitability that we desire.

Further,
acquisitions and the integration of those acquisitions involve a number of risks, including:



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 acquisitions in the future, and have not completed an acquisition since January 2004. Any acquisitions that we do complete in the
future 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 debt or equity 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 percentage ownership of our existing shareholders.

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

The markets for our products and services are characterized by 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 sales. 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 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 sales or profits for us for a number of years,
if at all.

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 in our
sales or an increase in our operating expenses.

Sales outside the United States accounted for approximately 56% of our sales in each of the three years 2010, 2009, and 2008. 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, among
others:



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.

The recent events in Japan could negatively impact our sales.

Approximately 6% of our consolidated sales in 2010 were to customers located in Japan. To date, the recent earthquake and tsunami that
occurred in Japan, and the problems with the nuclear plants in Japan that followed these disasters, have not impacted our sales or impeded our ability to secure inventory. However, if the situation in
Japan were to deteriorate, our sales to customers in those countries could be negatively impacted which would reduce our revenues and net income.

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Fluctuations in foreign currency exchange rates could result in declines in our reported net sales and net earnings.

Because the functional currency of our foreign operations is the applicable local currency, we are exposed to foreign currency exchange
rate risk arising from transactions in the normal course of business, such as sales to third party customers and purchases from suppliers denominated in foreign currencies. Our reported net sales and
net earnings are subject to fluctuations in foreign exchange rates. Because our products are manufactured or sourced primarily from the United States, a stronger U.S. dollar generally has a negative
impact on results from operations outside the United States while a weaker dollar generally has a positive effect. Our primary exchange rate exposure is with the euro. We generally do not use hedging
activities to minimize the volatility associated with foreign currency exchange rate changes. If we do use such activities in the future, they also involve some risk.

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, trade secrets 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 cannot 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 proprietary 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. If the outcome of any such litigation is unfavorable to us, it could have a material adverse effect on our business and results of operations. 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 are required 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 are 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

12

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agreements
are not breached, our trade secrets may otherwise become known or be independently developed by competitors.

We rely on our management information systems for inventory management, distribution, accounting, and other functions. If our information systems fail to adequately perform
these functions or if we experience an interruption in their operation, our business and results of operations could be adversely affected.

The efficient operation of our business depends on our management information systems. We rely on our management information systems to
effectively manage accounting and financial functions, order entry, order fulfillment and inventory replenishment. The failure of our management information systems to perform could disrupt our
business and could result in decreased sales, increased overhead costs, excess inventory and product shortages, causing our business and results of operations to suffer. In addition, our management
information systems are vulnerable to damage or interruption from natural or man-made disasters, terrorist attacks, computer viruses or hackers, power loss, or other computer systems,
internet, telecommunications or data network failures. Any such interruption could adversely affect our business and results of operations.

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, ranging from a high sales price of $13.85 and a low sales price of
$9.00 during 2010, and several factors could cause the price to fluctuate substantially in the future. These factors include:



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.

Complying with securities laws and regulations is costly for us.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations promulgated by
the SEC and Nasdaq, are creating particular challenges for smaller publicly-held companies like us. We are committed to maintaining high standards of corporate governance and public
disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses
and a diversion of management time and attention from revenue-generating activities to compliance activities.

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. We believe that the
price of our products and the prices of our competitors' products

13

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is
a significant factor affecting our customers' buying decisions and consequently, we may not be able to pass along any cost increases in raw materials and supplies in the form of price increases or
sustain profit margins that we have achieved in prior years.

We have spent significant resources to develop new products in the food and beverage safety and packaging industries, and we have thus far only realized minimal revenues
from these products.

Over the past two years we began to market our newest BevAlert system and OpTech-O2 Platinum analyzer. We
believe that there are significant addressable markets for both of these products and while we believe both of these products are superior in many respects to other similar products being sold by our
competitors, each one is new to the marketplace and may not gain the market acceptance necessary to allow us to capitalize on what we believe will be an increasing demand in the food and beverage
industries for safety testing and monitoring products. While we have realized increasing sales of our BevAlert system and modest sales to date of our OpTech-O2 Platinum
analyzer, there can be no assurance that sales of these products will continue. In August 2010, we introduced the GreenLight food safety test instrument which determines the presence or
absence of bacteria in food products or ingredients. While we believe this product represents a dramatic improvement over existing technology being used in the food industry, we have not realized any
revenues to date.

If
we are not able to successfully market these products, we will not recover the significant research and development and other expenses we have incurred to bring these products to
market.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.    PROPERTIES

We lease an aggregate of 74,175 square feet of office, engineering, laboratory and production space in Minnesota, Texas, Germany and
China. We believe that all of our facilities are generally adequate for their present operations and that suitable space is readily available if any of our leases are not extended.

In
March 2010, we signed a 15-year lease for a property which replaced our former Minneapolis headquarters and operations center. The new lease commenced July 1, 2010
and is for a location consisting of approximately 60,000 square feet of space, also in Minneapolis, Minnesota. This space is leased until October 2025.

Microanalytics'
operations occupy approximately 5,100 square feet of space in the metropolitan area of Austin, Texas. This space is leased until February 2012.

Lippke's
operations are located in Neuwied, Germany, and occupy approximately 8,075 square feet. This space is leased until July 2018.

The
MOCON (Shanghai) Trading Co., Ltd. operations are located in Shanghai, China, and occupy approximately 1,000 square feet. This space is leased until December 2011.

In
addition to our leased facilities described above, we own approximately two acres of land and a building located near Boulder, Colorado that consists of approximately 9,300 square
feet of office and production space in which our Baseline-MOCON, Inc. subsidiary conducts its operations.

ITEM 3.    LEGAL PROCEEDINGS

There are no material pending legal, governmental, administrative or other proceedings to which we are a party or of which any of our
property is the subject.

ITEM 4.    RESERVED

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Dividends

Our common stock is quoted on the Nasdaq Global Market System under the symbol MOCO. The following table sets forth, for the fiscal
periods indicated, the high and low sales prices for our common stock as reported by the Nasdaq Global Market System. These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions. The following table also sets forth, for the fiscal periods indicated, the amount of cash dividends declared
on our common stock:

2010

2009Fiscal Period

High

Low

Dividend

High

Low

Dividend1st Quarter

$
11.10

$
9.00

$
0.095

$
9.25

$
6.74

$
0.092nd Quarter


12.60


10.00


0.095


10.04


8.10


0.093rd Quarter


12.90


10.02


0.095


9.00


7.95


0.094th Quarter


13.85


11.85


0.095


9.81


7.46


0.09


We
have paid quarterly cash dividends without interruption or decline since 1988. Cash dividends paid in 2010, 2009 and 2008 totaled $1,952,872, $1,958,750 and $1,835,707, respectively.
Our Board of Directors monitors and evaluates our dividend practice quarterly, and the Board may elect at any time to increase, decrease or not pay a dividend on our common stock based upon our
financial condition, results of operations, cash requirements and future prospects and other factors deemed relevant by the Board.

For
information concerning securities authorized for issuance under equity compensation plans, please see Part IIIItem 12.

Holders

As of March 28, 2011, there were 251 holders of record and approximately 3,500 beneficial holders of our common stock.

Issuer Repurchases of Equity Securities

Other than the withholding of 1,444 shares of our common stock in connection with the cashless net exercise of stock options to pay the
exercise price of such options, and 1,782 shares of our common stock retired in connection with a stock-for-stock option exercise, we did not repurchase any shares of our
common stock or other equity securities of MOCON registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the fourth quarter ended December 31, 2010.
We currently are not authorized by our Board of Directors to make repurchases of our common stock.

Recent Sales of Unregistered Securities

During the fourth quarter and year ended December 31, 2010, we did not issue or sell any shares of our common stock or other
equity securities of MOCON without registration under the Securities Act of 1933, as amended.

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ITEM 6.    SELECTED FINANCIAL DATA

Years Ended December 31,2010

2009

2008

2007

2006(in thousands, except per share data)CONSOLIDATED STATEMENT OF
INCOME DATA:Sales

$
31,549

$
26,638

$
29,696

$
27,397

$
26,290Net income


4,518


2,910


4,059


3,805


3,911Net income per common share:Basic


0.87


0.54


0.73


0.69


0.72Diluted


0.84


0.53


0.72


0.67


0.71Cash dividends declared per share


0.38


0.36


0.34


0.315


0.30




As of December 31,2010

2009

2008

2007

2006(in thousands)CONSOLIDATED BALANCE SHEET DATA:Current assets

$
19,399

$
23,706

$
22,357

$
21,306

$
21,023Total assets


34,339


30,327


32,953


29,673


26,877Current liabilities


5,632


4,088


4,464


3,949


4,817Noncurrent liabilities


298


257


271


339


100Stockholders' equity


28,409


25,982


28,218


25,385


21,960


16

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and
other users to assess our financial condition and results of operations. Statements that are not historical are forward-looking and involve risks and uncertainties including those discussed under the
heading "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form 10-K. For more information, see "Part I Item 1 BusinessForward-Looking
Statements" of this Annual Report on Form 10-K. The following discussion of the results of the operations and financial condition of MOCON should be read in conjunction with our
consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.

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. We continually seek growth opportunities through
technological and product improvement, by acquiring and developing new products, and by acquiring new companies.

We
have three primary operating locations in the United StatesMinnesota, Colorado and Texasand foreign offices in Germany and China. We use a mix of direct
sales force and independent sales representatives to market our products and services in the United States, Canada, Germany and China and use a network of independent sales representatives to market
and service our products and services in other foreign countries.

Historically,
a significant portion of our sales has come from international customers. In recognition of the importance of our international customers, we maintain a physical presence
in Europe through our wholly-owned subsidiary located in Neuwied, Germany, and in Asia through a sales office in Shanghai, China.

Our
current plans for growth include substantial funding for research and development to foster new product development together with strategic acquisitions where appropriate.

Significant Transactions and Financial Trends

Throughout these financial sections, you will read about significant transactions or events that materially contribute to, or reduce
our earnings, and materially affect our financial results and financial position. In 2010, we experienced a significant increase in sales and net income as global economic conditions improved. We
believe that this increase was primarily due to pent-up demand, a large order from the Chinese government and the extension of Federal tax incentives for domestic purchases of capital
equipment. In 2009, our sales and net income were negatively impacted by the depressed worldwide economic conditions, as compared to 2008 results.

Our
international sales have historically accounted for a significant portion of our revenues, and we expect our international sales, as a percentage of total sales, to continue at the
current rate for the foreseeable future.

Our
research and development costs were approximately 7% of our consolidated sales for the years 2010, 2009 and 2008. On an annual basis, we intend to spend approximately 6% to 8% of our
sales on research and development in the future.

While
these items are important in understanding and evaluating our financial results, certain trends, such as our international sales accounting for a significant portion of our
revenues, and other

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transactions
or events such as those discussed later in this Management's Discussion and Analysis, may also have a material impact on our financial results.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 to our consolidated financial statements included in Item 8
of this Annual Report on Form 10-K. This Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to
make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Securities and Exchange
Commission has defined a company's most critical accounting policies as those that are most important to the portrayal of its financial condition and results of operations, and which require the
company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the
following critical accounting policies. Although we believe that our estimates and assumptions are reasonable, they are based upon information available when they are made. Actual results may differ
significantly from these estimates under different assumptions or conditions.

Revenue Recognition

We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable when persuasive evidence
of an arrangement exists, the product has been shipped or the services have been provided to the customer, title and risk of loss of products has passed to the customer, the sales price is fixed or
determinable, and collectability is reasonably assured. Our terms are FOB shipping point with no right of return, except in rare cases, and customer acceptance of our products is not required. The
revenue recognition policy does not differ among the various product lines, the marketing venues, or various geographic destinations. We do not have distributors who stock our equipment. We do not
offer rebates, price protection, or other similar incentives, and discounts when offered are recorded as a reduction in revenue.

Revenue
for preventive maintenance agreements is recognized on a per visit basis and extended warranties on a straight-line basis over the life of the contracts.

In
the first quarter 2010, we adopted ASC Topic 605 related to recognizing revenue from shipments with multiple element arrangements. We consider each deliverable that provides value to
the customer on a standalone basis a separable element. Separable elements in these arrangements are generally limited to training provided to customers. We initially allocate consideration to each
separable element using the relative selling price method. Where the relative selling price is not readily determinable, revenue will be allocated using an estimated selling price. Revenue from
arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over a defined contractual period for service
maintenance contracts. Our sales arrangements typically do not include specific performance-, cancellation-, termination-, or refund-type provisions. The adoption of this revenue recognition guidance
for multiple element arrangements did not have a material impact on our consolidated financial statements.

Allowance for Doubtful Accounts and Sales Returns

Our allowance for doubtful accounts and sales returns is for accounts receivable balances that are estimated to be uncollectible as
well as anticipated sales returns. The reserve is based on a number of factors, including: (1) an analysis of customer accounts and (2) our historical experience with accounts receivable
write-offs and sales returns. The analysis includes the age of the receivable, the financial

18

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condition
of a customer or industry and general economic conditions. We believe our financial results could be materially different if historical trends are not predictive of future results or if
economic conditions worsened for our customers. In the event we determined that a smaller or larger allowance for doubtful accounts is appropriate, we would record a credit or charge to selling,
general and administrative expense in the period that we made such a determination. As of December 31, 2010 and 2009, we had $183,291 and $162,315, respectively, reserved against our accounts
receivable for doubtful accounts and sales returns.

Accrual for Excess and Obsolete Inventories

We perform an analysis to identify excess and obsolete inventory. We record a charge to cost of sales for amounts identified. Our
analysis includes inventory levels, the nature of the components and their inherent risk of obsolescence, and the on-hand
quantities relative to the sales history of that component. We believe that our financial results could be materially different if historical trends are not predictive of future results or if demand
for our products decreased because of economic or competitive conditions or otherwise. As of December 31, 2010 and 2009, we had $320,195 and $301,240, respectively, accrued for excess and
obsolete inventories.

Recoverability of Long-Lived Assets

We assess the recoverability of intangibles and other long-lived assets periodically 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, changes in the economic environment in which we operate, competitive conditions, and other factors could result in future impairment charges. We did not
record any long-lived asset impairment charges in 2010 or 2009.

Goodwill

We assess the recoverability of goodwill on our annual measurement date 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. Goodwill is considered to be impaired if it is determined that the carrying amount of the
reporting unit exceeds its fair value. Assessing the impairment of goodwill requires us to make judgments regarding the fair value of the net assets of our reporting units and the allocation of the
carrying amount of shared assets to the reporting units. Our annual assessment included comparison of the carrying amount of the net assets of a reporting unit, including goodwill, to the fair value
of the reporting unit. A significant change in our market capitalization or in the carrying amount of net assets of a reporting unit could result in an impairment charge in future periods. We did not
record any goodwill impairment as the fair values of our reporting units substantially exceeded their carrying values.

Accrued Product Warranties

Our products are generally covered by a warranty, with warranty periods ranging from ninety days to one year from the date of sale.
Estimated warranty costs are accrued in the same period in which the related revenue is recognized, based on anticipated parts and labor costs, utilizing historical experience. Additional warranty
reserves are also accrued for major rework campaigns. We periodically assess the adequacy of our warranty reserves based on changes in these factors and record any necessary adjustments if actual
claim experience indicates that adjustments are necessary. Although we believe the likelihood to be relatively low, warranty claims experience could be materially different from actual results due to
manufacturing changes that could impact product quality, a change in our

19

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warranty
policy in response to industry trends, as yet unrecognized defects in products sold, or other factors. As of December 31, 2010 and 2009, we had $217,819 and $209,710, respectively,
accrued for future estimated warranty claims.

Income Taxes

In the preparation of our consolidated financial statements, management is required to estimate income taxes in each of the
jurisdictions in which we operate. This process involves estimating actual current tax exposures together with assessing temporary differences resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets.

Management
reviews the deferred tax assets for recoverability on a quarterly basis and assesses the need for valuation allowances. These deferred tax assets are evaluated by considering
historical levels of income, estimates of future taxable income streams and the impact of tax planning strategies. A valuation allowance is recorded to reduce deferred tax assets when it is determined
that it is more likely than not that we would not be able to realize all or part of our deferred tax assets. At December 31, 2010 and 2009, we provided a valuation allowance in the amounts of
$318,000 and $320,000, respectively, against our net deferred tax assets, related to a long-term capital loss carryforward.

ASC
740 requires application of a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. Under ASC 740, once
the more-likely-than-not threshold is met, the amount of
benefit to be recognized is the largest amount of tax benefit that is greater than 50% likely of being ultimately realized upon settlement. It further requires that a change in judgment related to the
expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such a change. We have unrecognized tax benefits in the amount of $248,000 and $202,000 in 2010 and
2009, respectively, for estimated exposures associated with uncertain tax positions. However, due to the complexity of some of these uncertainties, the ultimate settlement may result in payments that
are different from our current estimate of tax liabilities, resulting in the recognition of additional charges or benefits to income tax expense.

Results of Operations

The following table sets forth the relationship between various components of our results of operations, stated as a percent of sales,
for fiscal years ended December 31, 2010, 2009 and 2008. Our historical financial data were derived from our consolidated financial statements and related notes included in Item 8 of
this Annual Report on Form 10-K.

Percent of Sales2010

2009

2008Sales


100.0


100.0


100.0Cost of sales


39.3


41.6


40.8Gross profit


60.7


58.4


59.2Selling, general and administrative expenses


35.4


37.0


34.2Research and development expenses


6.8


6.9


6.6Operating income


18.5


14.5


18.4Other income, net


2.0


1.4


2.0Income before income taxes


20.5


15.9


20.4Income taxes


6.2


5.0


6.7Net income


14.3


10.9


13.7


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The following table summarizes total sales by product line for 2010, 2009 and 2008:

Years Ended December 31,2010

2009

2008Permeation products and services

$
18,077,953

$
15,126,259

$
15,850,027Gas analyzers, sensors and detectors


5,738,948


4,933,256


6,678,982Packaging products and services


5,062,414


4,701,279


4,822,009Other instruments and services


2,669,314


1,877,304


2,344,688Total sales

$
31,548,629

$
26,638,098

$
29,695,706


The
following table sets forth the relationship between various components of domestic and foreign sales for 2010, 2009 and 2008:

Years Ended December 31,2010

2009

2008Domestic sales

$
13,806,660

$
11,790,911

$
12,960,723Foreign sales:Europe


7,148,879


6,591,749


7,836,335Asia


8,482,788


5,996,005


6,144,822Other


2,110,302


2,259,433


2,753,826Total foreign sales


17,741,969


14,847,187


16,734,983Total sales

$
31,548,629

$
26,638,098

$
29,695,706


Sales



Sales for 2010 were $31,549,000, an increase of 18% compared to $26,638,000 for 2009. We experienced increased sales in all of our
major product lines in 2010 as compared to 2009. These increases, we believe, were due primarily to global pent-up demand from a soft 2009 as well as the extension of Federal tax
incentives for domestic purchases of capital equipment. Sales of permeation instruments accounted for a significant portion of the dollar increase due primarily to strong demand in the Asian markets.
Our consolidated domestic sales, which accounted for 44% of total sales in both 2010 and 2009, increased 17% in 2010. Our consolidated foreign sales, which accounted for 56% of total sales in both
2010 and 2009, increased 20% in 2010 over 2009. The impact of any price increases was not significant in 2010.



Sales of our permeation products and services, which accounted for 57% of our consolidated sales in both 2010 and 2009, increased
$2,952,000, or 20% in 2010 compared to 2009. This increase in permeation sales came primarily in our foreign markets, and reflected increasing sales of the AQUATRAN, as well as strong sales of the
OX-TRAN and PERMATRAN-W instruments. One large order from the Chinese government supplied OX-TRAN and PERMATRAN-W instruments to numerous research
laboratories throughout the country. In total, foreign sales of permeation equipment and services increased 22%, while domestic sales showed a 15% increase. We believe the domestic increase was due to
pent-up demand from a soft 2009 as well as the extension of Federal tax incentives for purchases of capital equipment.

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Sales of our gas analyzers, sensors and detector products, which accounted for 18% of our consolidated sales in both 2010 and 2009,
increased $806,000, or 16% in 2010 compared to 2009. This increase was due primarily to higher sales of sensors and detectors to the OEM portable sensor market. In addition, we experienced increased
shipments of gas chromatograph and hydrocarbon analyzer instruments for environmental monitoring and industrial hygiene applications. We continue to experience increased market acceptance of our
BevAlert instrument which is used in the carbonated beverage industry for measuring purity of carbon dioxide.



Sales of our packaging products (headspace analyzers and leak detectors), which accounted for 16% and 18% of our consolidated sales in
2010 and 2009, respectively, increased $361,000, or 8% in 2010 compared to 2009. We have experienced growth both domestically and internationally, as we have continued to focus on strengthening our
offerings in the MAP (modified atmospheric packaging) area. We see potential growth in MAP as our food manufacturing customers continue to evaluate ways to safely extend the shelf life of their
perishable products.



Sales of our other instruments and services group, which accounted for 9% and 7% of our consolidated sales in 2010 and 2009,
respectively, increased $792,000, or 42% in 2010 compared to 2009. This group consists of our weighing and pharmaceutical products, our consulting and testing services, our contract manufacturing and
non-MOCON products sold by our German subsidiary. The increase in 2010 compared to 2009 was due primarily to an increase in our consulting and testing services. We continue to see growth
in this area as we increase our offerings and services.



Sales for 2009 were $26,638,000, a decrease of 10% compared to $29,696,000 for 2008. We believed the global economic slowdown caused
some of our potential customers to either defer their capital expenditures or purchase less expensive models. The decrease in sales was primarily the result of lower gas analyzer instrument sales to
the oil and gas exploration and environmental monitoring markets. In addition, sales of our permeation equipment declined in 2009 as demand in our foreign markets slowed after our strong marketing
emphasis in 2008 of a new low cost product. Our consolidated domestic sales, which accounted for 44% of total sales in both 2009 and 2008, decreased 9% in 2009. Our consolidated foreign sales, which
accounted for 56% of total sales in both 2009 and 2008, decreased 11% in 2009. The impact of any price increases was not significant in 2009.



Sales of our permeation products and services, which accounted for 57% and 53% of our consolidated sales in 2009 and 2008,
respectively, decreased $724,000, or 5% in 2009 compared to 2008. This decrease in permeation sales was primarily due to lower shipments to our foreign markets as a result of the slow economy and the
corresponding shift to lower cost equipment. We experienced increased sales volume of the PERMATRAN-W Model 1/50 (lower price point product for less sensitivity in water vapor
measurement), and the AQUATRAN (a high-end instrument targeted at the electronics, flat panel display, fuel cell, solar cell and other high barrier markets) during the year. Our domestic
sales of permeation products increased 5% from 2008 to 2009, as the U.S. economy began to recover from the downturn we experienced beginning in the second half of 2008.

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Sales of our gas analyzers, sensors and detector products, which accounted for 18% and 23% of our consolidated sales in 2009 and 2008,
respectively, decreased $1,746,000, or
26% in 2009 compared to 2008. This decrease was due primarily to lower shipments of instruments to the oil and gas drilling market as a result of lower oil prices, as well as reduced instrument sales
to the environmental monitoring market due to economic factors. Our BevAlert instrument is used in the carbonated beverage industry for measuring purity of carbon dioxide and is gaining increased
market acceptance, although our sales of this product have been modest to date. Increased concerns by carbonated beverage companies to prevent recalls due to unsafe products are driving this sector.
Sales of our piD-TECH sensors to the OEM portable sensor market and other OEM detectors were relatively stable between 2008 and 2009.



Sales of our packaging products (headspace analyzers and leak detectors), which accounted for 18% and 16% of our consolidated sales in
2009 and 2008, respectively, decreased $121,000, or 3% in 2009 compared to 2008. The decrease was due primarily to a shift in demand from the more expensive bench-top headspace analyzers
to the less expensive portable handheld units. The PAC CHECK series of analyzers continued to gain acceptance in both our domestic and foreign markets. Sales of the Lippke 4000 and 4500 series leak
detection instruments also continue to do well. A major focus in 2009 was on strengthening our offerings in the MAP (modified atmospheric packaging) area, where we saw potential growth as our food
manufacturing customers continue to evaluate ways to safely extend the shelf life of their perishable products.



Sales of our other instruments and services group, which accounted for 7% and 8% of our consolidated sales in 2009 and 2008,
respectively, decreased $467,000, or 20% in 2009 compared to 2008. This group consists of our weighing and pharmaceutical products, our consulting and testing services, our contract manufacturing and
non-MOCON products sold by our German subsidiary. The decrease from 2008 to 2009 was due primarily to lower shipments of our weighing and pharmaceutical products. This group consists of a
small number of products compared to our other product groups and will typically experience significant fluctuations in demand. In 2009, we committed additional resources to place emphasis on growing
our consulting and testing services area.

Gross Profit



Our overall gross profit percentages were 60.7% and 58.4% during 2010 and 2009, respectively. In the products area, a
2.3 percentage point margin increase was attributable to a favorable sales mix and improved cost of sales of our gas analyzer instruments and sensors. In the consulting area, a
5.9 percentage point margin increase was primarily the result of significantly higher volume over which to spread the fixed costs.



Our gross profit percentages were 58.4% and 59.2% during 2009 and 2008, respectively. The slight decrease in gross profit percentage
resulted primarily from lower production volume in our gas analyzer instrument area over which to allocate fixed manufacturing costs.

23

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Selling, General and Administrative Expenses



Selling, general and administrative expenses were $11,195,000 and $9,858,000, or 35.4% and 37.0% of sales in 2010 and 2009,
respectively. The increase of $1,337,000 was due primarily to increased headcount which resulted in higher salaries and benefits, and increased
incentive compensation due to higher profitability. In addition, higher domestic sales commissions, travel and entertainment, and marketing expense contributed to the increase.



Selling, general and administrative expenses were $9,858,000 and $10,170,000, or 37.0% and 34.2% of sales in 2009 and 2008,
respectively. The decrease of $312,000 was due primarily to the following: lower travel, promotion and advertising due to cost reductions implemented during 2009; decreased stock option expense due to
the lower computed fair value; and lower incentive compensation as a result of lower profitability.

Research and Development Expenses



Research and development (R&D) expenses were $2,135,000 and $1,848,000 in 2010 and 2009, or 6.8% and 6.9% of sales, respectively. The
increased expense in 2010 is primarily related to the development of new products for the food safety market, and is net of approximately $165,000 received from Luxcel for collaborative research
efforts. For the foreseeable future, we intend to continue to allocate on an annual basis approximately 6% to 8% of sales to research and development. We believe continued R&D expenditures are
necessary as we develop new products to expand revenue opportunities in our niche markets and remain competitive.



R&D expenses were $1,848,000 and $1,951,000 in 2009 and 2008, or 6.9% and 6.6% of sales, respectively. The lower expense in 2009 was
the result of our decision to delay certain expenditures due to the economic slowdown.

Other Income, Net

Other income, net for 2010, 2009 and 2008 was as follows:

Years Ended December 31,2010

2009

2008Interest income on investments

$
84,199

$
369,176

$
575,094Foreign currency exchange gain (loss)


542,108


(2,956
)

12,500Other


2,605


(168
)

1,317Total other income

$
628,912

$
366,052

$
588,911


Interest
income decreased in 2010, as compared to 2009, due to both lower average invested balances of cash and marketable securities and lower average yields. Total cash and marketable
securities decreased approximately $1,930,000 from December 31, 2009 to December 31, 2010, which decline is attributable to a €2,500,000 investment we made in January
2010 to acquire a minority interest in Luxcel Biosciences Limited. This decrease was partially offset by an increase in cash flow from operations. Interest income decreased in 2009, as compared to
2008, also due to both lower average invested balances of cash and marketable securities and lower average yields. Total cash and

24

---



marketable
securities decreased approximately $1,778,000 from December 31, 2008 to December 31, 2009.

Included
in the foreign currency exchange gain for 2010 is $562,000 relating to the re-measurement of a euro-based intercompany loan obligation to market value.
The loan was settled in January 2011.

Income Tax Expense

Our provision for income taxes for 2010 was $1,945,000, or 30.1% of income before income taxes, compared to $1,319,000, or 31.2% of
income before income taxes for 2009. This year over year decrease in the effective tax rate was due primarily to foreign tax credits generated by the repatriation of funds from our German subsidiary,
and an increase in the allowable deduction for domestic production activity for federal income tax purposes.

Our
provision for income taxes for 2009 was $1,319,000, or 31.2% of income before income taxes, compared to $1,990,000, or 32.9% of income before income taxes for 2008. This year over
year decrease in the effective tax rate was due primarily to lower state income taxes, a reduction in the valuation allowance, and the effect of lower statutory tax rates in our foreign entities.

We
anticipate our effective tax rate for the full year 2011 will range between 30% and 34%.

Inflation

We do not believe that inflation has had a material effect on our results of operations in recent years; however, there can be no
assurance that our business will not be adversely affected by inflation in the future.

Liquidity and Capital Resources

Total cash, cash equivalents and marketable securities decreased $1,930,000 during 2010 to $12,401,000 as of December 31, 2010,
compared to $14,331,000 at December 31, 2009. We describe the reasons for this decrease in the "Cash Flow" section below. Our
working capital as of December 31, 2010 decreased $5,850,000 to $13,767,000, compared to $19,617,000 at December 31, 2009.

We
invest a large portion of our available cash in highly liquid certificates of deposit, municipal bonds and money market funds. Our investment policy is to manage these assets to
preserve principal, maintain adequate liquidity at all times, and maximize returns subject to investment guidelines we maintain. We do not have any investments in auction rate or
hard-to-value securities.

We
have historically financed our operations, capital equipment and other cash requirements through cash flows generated from operations. We believe that a combination of our existing
cash, cash equivalents and marketable securities, plus an expected continuation of cash flow from operations, will continue to be adequate to fund operations and working capital, capital expenditures,
dividend payments and any stock repurchase programs that may be authorized in the future. Our belief is based on current business operations and economic conditions and assumes that we continue to
operate our business in the ordinary course. During 2009, we borrowed and repaid a short-term loan to supplement our working capital requirements. We currently do not have any committed
lines of credit or other credit facilities, and it is uncertain whether such facilities could be obtained in sufficient amounts or on acceptable terms. As of December 31, 2010, we had no
commitments for any material capital expenditures.

One
of our strategic objectives is, as market and business conditions warrant, to consider acquisitions of, or investments in, businesses, products and/or technologies. In this regard,
in January 2010, we made the investment in Luxcel noted above, to help us establish a stronger presence in the food safety market. If we consummate one or more additional acquisition opportunities,
the cost of

25

---



which
exceeds our existing cash resources, we may need to fund such activities with a portion of our cash balances and debt and/or equity financing. If we need to raise additional capital, an
equity-based or equity-linked financing may be used which could be dilutive to existing shareholders. If we raise additional funds by issuing debt, we may be subject to restrictive covenants that
could limit our operational flexibility and higher interest expense could dilute earnings per share.

Cash Flow



Our primary source of funds is cash provided by operating activities. Cash flow from operating activities totaled $5,226,000,
$4,153,000 and $3,602,000 in 2010, 2009 and 2008, respectively. In 2010, cash provided by operating activities increased by $1,073,000 compared to 2009. This increase was due primarily to higher net
income, together with year-over-year increases in accounts payable and accrued compensation and related expenses, partially offset by an increase in trade accounts receivable.
In 2009, cash provided by operating activities increased by $551,000 compared to 2008. This increase was due primarily to the year-over-year decreases in inventories, prepaid
income taxes and other receivables, and the increase in deferred revenue, partially offset by an increase in trade accounts receivable. Working capital requirements typically will increase or decrease
with changes in the level of sales. In addition, the timing of certain accrued payments will affect the annual cash flow. Income tax payments and any employee incentive payments affect the timing of
our operating cash flow as they are accrued throughout the year but paid on a quarterly, semi-annual or annual basis.



Cash used in investing activities totaled $5,904,000 in 2010 as compared to cash provided of $6,161,000 in 2009 and cash used of
$2,694,000 in 2008. The primary reasons for cash used in 2010 were the investment of approximately $3,625,000 (€2,500,000) to acquire a minority equity ownership interest in Luxcel
Biosciences Limited in Ireland, and capital expenditures of $1,646,000, the majority of which relates to our move to new offices in Minnesota. This compares to purchases of property, plant and
equipment totaling $307,000 and $720,000 in 2009 and 2008, respectively. We do not believe that any major property, plant and equipment expenditures are required to accommodate our current level of
operations. Cash used for purchases of marketable securities, net of maturities, was $507,000 in 2010; cash provided by maturities of marketable securities, net of purchases, was $6,615,000 in 2009,
and cash used for marketable security purchases, net of maturities, was $1,760,000 in 2008.



Cash used in financing activities totaled $1,397,000 in 2010 as compared to $5,551,000 in 2009 and $1,391,000 in 2008. In 2010, 2009
and 2008 we used $1,953,000, $1,959,000 and $1,836,000, respectively, for payment of dividends to our shareholders. The primary use of cash for financing activities in 2009 was the repurchase of an
aggregate of 424,000 shares of common stock for a total amount of $3,602,000.

Cash
flow from the exercise of stock options generated $454,000, $10,000 and $479,000, for the years 2010, 2009 and 2008, respectively.

26

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Contractual Obligations

The following table summarizes our future contractual cash obligations as of December 31, 2010 (in thousands):

Payments Due By PeriodTotal

Less than
1 year

1-3 years

4-5 years

After 5 yearsOperating leases

$
7,434


551


1,502


1,040


4,341Inventory purchase obligations


1,634


1,634








Total contractual cash obligations

$
9,068


2,185


1,502


1,040


4,341


In
March 2010, we signed a 15-year lease for a property which replaced our old Minneapolis headquarters and operations center. The new lease commenced on June 1, 2010.
The required future minimum lease payments, starting at $367,000 per year and subject to annual increases, have been included in the above table.

In
May 2010, we entered into a foreign currency forward exchange contract to act as a hedge against fluctuations in a euro-denominated intercompany note. This contract had a
notional amount totaling approximately $3,089,000, bearing an exchange rate of 1.2358 U.S. dollars per euro, and matured in January 2011. At December 31, 2010, the contract had a fair value of
$3,340,000.

In
relation to our accrual for uncertain tax positions, we had $289,000 of gross unrecognized tax benefits as of the date of adoption and $248,000 and $202,000 at December 31,
2010 and 2009, respectively. The timing of any payments which could result from these unrecognized tax benefits will depend on a number of factors. Accordingly, we cannot make reasonably reliable
estimates of the period of potential cash settlement, if any, with taxing authorities. Due to the uncertainty regarding the timing of these liabilities, we have excluded these amounts from the
contractual obligations table.

We
have a severance agreement with five of our executive officers which provides for the payment to the executive of a lump sum amount upon the occurrence of certain termination events.
The payment could amount to one or two times the executive's current annual salary depending on the reason for termination.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by the rules and regulations of the SEC, that have or are
reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these arrangements.

Recently Issued Accounting Pronouncements

In January 2010, the FASB updated the disclosure requirements for fair value measurements. The updated guidance requires companies to
disclose separately the investments that transfer in and out of Levels 1 and 2 and the reasons for those transfers. Additionally, in the reconciliation for fair value measurement using
significant unobservable inputs (Level 3), companies should present separately information about purchases, sales, issuances and settlements. We adopted the updated guidance on
January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which are effective for fiscal years beginning after
December 15, 2010. We will adopt the remaining guidance on January 1, 2011. The adoption of the required guidance did not have an impact on our consolidated financial statements. We do
not expect that the adoption of the remaining guidance will have a significant impact on our consolidated financial statements.

27

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Substantially all of our marketable securities, some of which are insured by the FDIC, are at fixed interest rates and mature within
two and one-half years; therefore, we believe that the market risk arising from the holding of these financial instruments is minimal. Based on our average invested cash balances during
2010, a 1% (100 basis points) decrease in the interest rate on such balances would result in a reduction in interest income of approximately $134,000 on an annual basis.

Foreign Currency Exchange Risk

Historically, in excess of 50% of our consolidated sales have been to international destinations. Since we invoice most of these
customers in U.S. dollars, we do not have significant exposure to foreign currency transaction risk. We invoice a small amount to our international customers in their local currency which exposes us
to some transaction gain or loss when converting their payments into U.S. dollars. We also pay a small number of our international suppliers in their local currency which exposes us to transaction
gain or loss. However, these have not resulted in material amounts in the past.

Our
foreign operations expose us to foreign currency exchange risk when the euro and yuan currency results of operations are translated to U.S. dollars. We historically have not
experienced any material foreign currency translation gains or losses, however, we realized a foreign currency transaction gain in the first half of 2010 relating to the valuation of a
euro-denominated intercompany loan which originated in the first quarter 2010. To mitigate the effect of any further currency fluctuations, we purchased a foreign currency forward contract
which acted as a hedge against any additional gains or losses.

Our
investments in foreign subsidiaries translated into U.S. dollars are not hedged. Any changes in foreign currency exchange rates would be reflected as a foreign currency translation
adjustment, a component of accumulated other comprehensive income in stockholders' equity, and would not impact our net income.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and Report of Independent Registered Public Accounting Firm are included beginning on
page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.

28

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SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)  (in thousands, except per share data)

Quarter1st

2nd

3rd

4th2010:Sales

$
7,093

$
7,351

$
7,749

$
9,355Gross profit


4,326


4,494


4,641


5,703Net income


922


1,092


1,029


1,476Net income per common share:Basic

$
0.18

$
0.21

$
0.20

$
0.28Diluted


0.17


0.20


0.19


0.272009:Sales

$
6,172

$
6,421

$
6,601

$
7,444Gross profit


3,591


3,627


3,918


4,434Net income


399


516


874


1,122Net income per common share:Basic

$
0.07

$
0.09

$
0.17

$
0.22Diluted


0.07


0.09


0.16


0.21


Note:
The sum of the quarterly amounts above may not agree with annual amounts due to rounding.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A(T).    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) that are designed to reasonably 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 Annual Report on Form 10-K. 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 to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that material information relating to our company is made known to management, including our
Chief Executive Officer and Chief Financial Officer, particularly during the period when our periodic reports are being prepared.

29

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Management's Report on Internal Control over Financial Reporting

MOCON's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our
management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over
financial reporting was effective as of December 31, 2010.

This
annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by the company's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the company to provide only management's
report in this annual report.

Inherent Limitations of Disclosure Controls and Procedures and Internal Control over Financial Reporting

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute,
assurance that the objectives of the system will be met. In designing and operating a control system, one must consider the potential benefits of controls relative to their costs and the reality of
limited resources available to allocate to control activities, particularly in smaller companies. In addition, the design of any control system is based in part upon certain assumptions about the
likelihood of future events and there can be no assurance that any control will meet its objectives under all potential future conditions. Because of such inherent limitations in any control system,
there can be no absolute assurance that control issues, misstatements, and/or fraud will be prevented or detected.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our fourth quarter of the year ended
December 31, 2010 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

30

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under Item 10 of this Annual Report on Form 10-K is to be contained under the
headings "Proposal OneElection of DirectorsInformation About Board Nominees," "Proposal OneElection of DirectorsAdditional Information About Board
Nominees," "Corporate GovernanceInformation About our Board and its Committees" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement to
be filed with the SEC with respect to our next annual meeting of shareholders, which involves the election of directors and is incorporated herein by reference, or, if such proxy statement is not
filed with the SEC within 120 days after the end of the fiscal year covered by this report, such information will be filed as part of an amendment to this report not later than the end of the
120-day period.

The
information concerning our executive officers is included in this Annual Report under Item 1, "Executive Officers" and is incorporated herein by reference.

During
the fourth quarter 2010, we made no material changes to the procedures by which shareholders may recommend nominees to the board of directors, as described in our most recent
proxy statement.

Our
Code of Ethics applies to all of our officers, directors and employees, including our principal executive officer and principal financial officer, and meets the requirements of the
rules and regulations of the Securities and Exchange Commission. We will disclose any amendments to, and any waivers from a provision of, our Code of Ethics on a Form 8-K filed with
the Securities and Exchange Commission. We make available, free of charge and through our website, to any shareholder who requests, the charters of our board committees and our Code of Ethics. Our
website iswww.mocon.com.

To
request a copy of the charters of our board committees or our Code of Ethics, write to us at:



ITEM 11.    EXECUTIVE COMPENSATION

The information required under Item 11 of this Annual Report on Form 10-K is to be contained under the
headings "Director Compensation," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report" in our definitive proxy statement to be
filed with the SEC with respect to our next annual meeting of shareholders, which involves the election of directors and is incorporated herein by reference, or, if such proxy statement is not filed
with the SEC within 120 days after the end of the fiscal year covered by this report, such information will be filed as part of an amendment to this report not later than the end of the
120-day period.

31

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ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required under Item 12 of this Annual Report on Form 10-K is to be contained under the
headings "Principal Shareholders and Beneficial Ownership of Management" in our definitive proxy statement to be filed with the SEC with respect to our next annual meeting of shareholders, which
involves the election of directors and is incorporated herein by reference, or, if such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by
this report, such information will be filed as part of an amendment to this report not later than the end of the 120-day period.

The
following table summarizes outstanding options under our equity compensation plans as of December 31, 2010. Our only equity compensation plans as of December 31, 2010
were the MOCON, Inc. 2006 Stock Incentive Plan and the MOCON, Inc. 1998 Stock Option Plan. The MOCON, Inc. 1998 Stock Option Plan has terminated with respect to future grants.
Options and other stock incentive awards to be granted in the future under the MOCON, Inc. 2006 Stock Incentive Plan are within the discretion of our Board of Directors and the Compensation
Committee of our Board of Directors and therefore cannot be ascertained at this time.

Plan Category

Number of Securities to be
Issued upon Exercise
of Outstanding Options,
Warrants and Rights

Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in First Column)Equity compensation plans approved by security holders


912,562

$
9.71


22,200Equity compensation plans not approved by security holders








Total


912,562





22,200


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required under Item 13 of this Annual Report on Form 10-K is to be contained under the
heading "Related Party Relationships and Transactions" and "Corporate GovernanceDirector Independence" in our definitive proxy statement to be filed with the SEC with respect to our next
annual meeting of shareholders, which involves the election of directors and is incorporated herein by reference, or, if such proxy statement is not filed with the SEC within 120 days after the
end of the fiscal year covered by this
report, such information will be filed as part of an amendment to this report not later than the end of the 120-day period.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under Item 14 of this Annual Report on Form 10-K is to be contained under the
headings "Proposal TwoRatification of Selection of Independent Registered Public Accounting FirmAudit, Audit-Related, Tax and Other Fees" and "Proposal
TwoRatification of Selection of Independent Registered Public Accounting FirmPre-Approval Policies and Procedures" in our definitive proxy statement to be filed
with the SEC with respect to our next annual meeting of shareholders, which involves the election of directors and is incorporated herein by reference, or, if such proxy statement is not filed with
the SEC within 120 days after the end of the fiscal year covered by this report, such information will be filed as part of an amendment to this report not later than the end of the
120-day period.

32

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



The
following consolidated financial statements of MOCON, Inc. and its subsidiaries are included herein:

PageReport of Independent Registered Public Accounting Firm

F-1Consolidated Balance Sheets as of December 31, 2010 and 2009

F-2Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008

F-3Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31, 2010, 2009
and 2008

F-4Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008

F-5Notes to Consolidated Financial Statements

F-6




The
following financial statement schedule is included herein and should be read in conjunction with the consolidated financial statements referred to above:

Schedule II: Valuation and Qualifying Accounts

S-1




The
exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index.

A
copy of any of the exhibits listed or referred to above will be furnished at a reasonable cost to any person who was a shareholder of MOCON as of March 28, 2011, upon receipt
from any such person of a written request for any such exhibit. Such request should be sent to MOCON, Inc., 7500 Mendelssohn Avenue North, Minneapolis, Minnesota 55428; Attn:
Shareholder Information.

The
following is a list of each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant
to Item 15(a):



33

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The
exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index.



See
Item 15(a)(2) above for the financial statement schedule filed herewith.

34

---





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: March 30, 2011

MOCON, Inc.By:

/s/ ROBERT L. DEMOREST Robert L. Demorest,Chairman of the Board,
President and Chief Executive Officer
(principal executive officer)By:

/s/ DARRELL B. LEE Darrell B. Lee,Vice President,
Chief Financial Officer, Treasurer and Secretary
(principal financial and accounting officer)


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities
indicated and on March 30, 2011.

Signature and Title/s/ ROBERT L. DEMOREST Robert L. Demorest, Chairman of the Board, President and
Chief Executive Officer/s/ DEAN B. CHENOWETH Dean B. Chenoweth, Director/s/ DONALD N. DEMORETT Donald N. DeMorett, Director/s/ J. LEONARD FRAME J. Leonard Frame, Director/s/ ROBERT F. GALLAGHER Robert F. Gallagher, Director/s/ DANIEL W. MAYER Daniel W. Mayer, Director/s/ RONALD A. MEYER Ronald A. Meyer, Director/s/ RICHARD A. PROULX Richard A. Proulx, Director/s/ TOM C. THOMAS Tom C. Thomas, Director


35

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MOCON, INC. AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 2010, 2009 and 2008

Table of Contents

PageReport of Independent Registered Public Accounting Firm


F-1Consolidated Balance Sheets


F-2Consolidated Statements of Income


F-3Consolidated Statements of Stockholders' Equity and Comprehensive Income


F-4Consolidated Statements of Cash Flows


F-5Notes to Consolidated Financial Statements


F-6


36

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Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
MOCON, Inc.:

We
have audited the accompanying consolidated balance sheets of MOCON, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of
income, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010. In connection with our audits of the
consolidated financial statements, we also have audited the accompanying financial statement schedule. These consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MOCON, Inc. and subsidiaries as of
December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity
with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, taken as a whole, presents fairly, in all material respects, the information set
forth therein.

/s/ KPMG LLPMinneapolis, Minnesota
March 30, 2011


F-1

---



MOCON, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2010 and 2009

2010

2009AssetsCurrent assets:Cash and cash equivalents

$
6,955,248

$
9,393,127Marketable securities, current


1,058,275


4,371,119Trade accounts receivable, less allowance for doubtful accounts of $183,291 in 2010 and $162,315 in 2009


5,646,501


4,589,998Other receivables


449,464


92,738Inventories


4,141,496


4,265,470Prepaid income taxes


392,436


223,648Prepaid expensesother


415,981


357,911Deferred income taxes


339,526


411,549Total current assets


19,398,927


23,705,560Marketable securities, noncurrent


4,387,449


567,163Property, plant, and equipment, net


2,842,955


1,655,187Goodwill


3,160,858


3,300,088Investment in affiliated company


3,313,250


Technology rights and other intangibles, net


765,896


738,035Deferred income taxes


385,227


280,548Other assets


83,948


80,427Total assets

$
34,338,510

$
30,327,008Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable

$
1,926,982

$
1,343,739Compensation and related expenses


2,093,085


1,479,398Other accrued expenses


329,304


163,640Accrued product warranties


217,819


209,710Dividends payable


500,235


465,302Deferred revenue


564,790


426,277Total current liabilities


5,632,215


4,088,066Obligations to former employees


50,055


54,141Accrued income taxes


247,629


202,418Total noncurrent liabilities


297,684


256,559Total liabilities


5,929,899


4,344,625Commitments and contingencies (Note 7)Stockholders' equity:Capital stockundesignated. Authorized 3,000,000 shares





Common stock$0.10 par value. Authorized 22,000,000 shares; issued and outstanding 5,265,636 shares in 2010 and 5,170,018 shares in 2009


526,564


517,002Capital in excess of par value


922,272


114,021Retained earnings


27,220,871


24,690,293Accumulated other comprehensive income (loss)


(261,096
)

661,067Total stockholders' equity


28,408,611


25,982,383Total liabilities and stockholders' equity

$
34,338,510

$
30,327,008


See
accompanying notes to consolidated financial statements.

F-2

---



MOCON, INC. AND SUBSIDIARIES

Consolidated Statements of Income

Years ended December 31, 2010, 2009 and 2008

2010

2009

2008Sales:Products

$
28,858,044

$
24,791,998

$
28,016,390Consulting services


2,690,585


1,846,100


1,679,316Total sales


31,548,629


26,638,098


29,695,706Cost of sales:Products


11,001,813


10,011,394


11,136,392Consulting services


1,382,196


1,056,916


978,529Total cost of sales


12,384,009


11,068,310


12,114,921Gross profit


19,164,620


15,569,788


17,580,785Selling, general and administrative expenses


11,194,797


9,858,493


10,170,083Research and development expenses


2,135,365


1,847,993


1,950,754Operating income


5,834,458


3,863,302


5,459,948Other income, net


628,912


366,052


588,911Income before income taxes


6,463,370


4,229,354


6,048,859Income taxes


1,944,986


1,318,867


1,990,000Net income

$
4,518,384

$
2,910,487

$
4,058,859Net income per common share:Basic

$
0.87

$
0.54

$
0.73Diluted

$
0.84

$
0.53

$
0.72Weighted average common shares outstanding:Basic


5,208,873


5,393,066


5,565,801Diluted


5,364,253


5,457,964


5,649,208


See
accompanying notes to consolidated financial statements.

F-3

---



MOCON, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity and Comprehensive Income

Years ended December 31, 2010, 2009 and 2008

Common stockAccumulated
other
comprehensive
income (loss)Number
of shares

Amount

Capital in
excess of
par value

Retained
earnings

TotalBalance, December 31, 2007


5,528,051

$
552,805

$
2,127,183

$
22,106,178

$
599,101

$
25,385,267Stock options exercised


79,183


7,918


553,460








561,378Purchase and retirement of common stock


(14,920
)

(1,492
)

(139,836
)







(141,328
)Dividends declared ($0.34 per share)











(1,896,771
)




(1,896,771
)Stock-based compensation expense








303,292








303,292Tax benefit on stock plans








24,570








24,570Net income











4,058,859





4,058,859Cumulative translation adjustment














(54,518
)

(54,518
)Amortization of cumulative unrealized gain on marketable securities














(22,756
)

(22,756
)Comprehensive income

















3,981,585Balance, December 31, 2008


5,592,314


559,231


2,868,669


24,268,266


521,827


28,217,993Stock options exercised


1,275


128


9,903








10,031Purchase and retirement of common stock


(423,571
)

(42,357
)

(2,992,010
)

(567,716
)




(3,602,083
)Dividends declared ($0.36 per share)











(1,920,744
)




(1,920,744
)Stock-based compensation expense








227,434








227,434Tax benefit on stock plans








25








25Net income











2,910,487





2,910,487Cumulative translation adjustment














141,767


141,767Amortization of cumulative unrealized gain on marketable securities














(2,527
)

(2,527
)Comprehensive income

















3,049,727Balance, December 31, 2009


5,170,018


517,002


114,021


24,690,293


661,067


25,982,383Stock options exercised, net of shares surrendered


95,618


9,562


444,562








454,124Dividends declared ($0.38 per share)











(1,987,806
)




(1,987,806
)Stock-based compensation expense








261,859








261,859Tax benefit on stock plans








101,830








101,830Net income











4,518,384





4,518,384Cumulative translation adjustment














(922,163
)

(922,163
)Comprehensive income

















3,596,221Balance, December 31, 2010


5,265,636

$
526,564

$
922,272

$
27,220,871

$
(261,096
)
$
28,408,611


See accompanying notes to consolidated financial statements.

F-4

---



MOCON, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2010, 2009 and 2008

2010

2009

2008Cash flows from operating activities:Net income

$
4,518,384

$
2,910,487

$
4,058,859Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation expense


261,859


227,434


303,292Loss on disposition of long-term assets


11,627


9,459


33,967Depreciation and amortization


544,341


577,530


582,767Deferred income taxes


(234,390
)

(31,230
)

(118,456
)Excess tax benefit from employee stock plans


(101,830
)

(25
)

(24,570
)Changes in operating assets and liabilities:Trade accounts receivable


(1,158,951
)

(506,210
)

(12,146
)Other receivables


(356,793
)

163,047


(70,230
)Inventories


72,314


477,724


(796,400
)Prepaid income taxes


22,680


243,058


(476,565
)Prepaid expensesother


(61,135
)

27,777


(52,948
)Accounts payable


609,985


84,797


61,065Compensation and related expenses


632,832


(25,295
)

167,393Other accrued expenses


167,022


(147,548
)

8,962Accrued product warranties


12,207


(20,228
)

30,280Accrued income taxes


147,113


(18,095
)

(105,441
)Deferred revenue


138,506


180,484


12,501Net cash provided by operating activities


5,225,771


4,153,166


3,602,330Cash flows from investing activities:Purchases of marketable securities


(4,897,036
)

(979,101
)

(8,916,510
)Proceeds from maturities of marketable securities


4,389,594


7,593,729


7,156,094Purchases of property, plant and equipment


(1,645,628
)

(306,572
)

(719,641
)Cash paid for investment in affiliated company


(3,633,909
)




Proceeds from sale of property and equipment


7,590


4,491


7,554Cash paid for patent and trademark registrations


(120,659
)

(148,064
)

(218,486
)Other


(3,521
)

(3,522
)

(3,387
)Net cash provided by (used in) investing activities


(5,903,569
)

6,160,961


(2,694,376
)Cash flows from financing activities:Proceeds from the exercise of stock options


454,124


10,031


478,878Purchases and retirement of common stock





(3,602,083
)

(58,828
)Excess tax benefit from employee stock plans


101,830


25


24,570Dividends paid


(1,952,872
)

(1,958,750
)

(1,835,707
)Net cash used in financing activities


(1,396,918
)

(5,550,777
)

(1,391,087
)Effect of exchange rate changes on cash and cash equivalents


(363,163
)

76,298


(170,493
)Net increase (decrease) in cash and cash equivalents


(2,437,879
)

4,839,648


(653,626
)Cash and cash equivalents:Beginning of year


9,393,127


4,553,479


5,207,105End of year

$
6,955,248

$
9,393,127

$
4,553,479Supplemental disclosures of cash flow information:Cash paid during the year for income taxes

$
2,009,582

$
1,367,575

$
2,457,312Cash paid during the year for interest





4,046


Supplemental schedule of noncash investing and financing activities:Dividends accrued

$
500,235

$
465,302

$
503,308Amortization of cumulative unrealized gain on marketable securities





(2,527
)

(22,756
)Purchases of fixed assets and intangibles in accounts payable


28,162


25,626


23,583


See accompanying notes to consolidated financial statements.

F-5

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies

MOCON, Inc. (the Company) is involved with the developing, manufacturing and marketing of measurement, analytical, monitoring and consulting products for customers in the barrier
packaging, food, pharmaceutical, consumer products, industrial hygiene, air quality monitoring, oil and gas exploration and other industries throughout the world. The Company reports its operating
segments in
accordance with accounting standards codified in ASC 280,Segment Reporting, with two operating segments (Lab Instruments and Field Instruments)
that have been aggregated into one reporting segment for financial reporting purposes.

The
following is a summary of the significant accounting policies used in the preparation of the Company's consolidated financial statements.











F-6

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)











F-7

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)







F-8

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)







F-9

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)











F-10

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)





(2) Marketable Securities

The amortized cost and fair value for held-to-maturity securities by major security type at December 31, 2010 and 2009 were as follows:

2010

2009Amortized
Cost

Fair
Value

Amortized
Cost

Fair
ValueHeld-to-maturity:Municipal bonds

$
2,220,724

$
2,215,167

$
2,550,294

$
2,584,917Certificates of deposit


3,225,000


3,225,000


2,387,988


2,388,000$
5,445,724

$
5,440,167

$
4,938,282

$
4,972,917


There
were no gross realized gains or losses for the years ended December 31, 2010, 2009 and 2008.

Maturities
of investment securities at December 31, 2010 and 2009 were as follows:

2010

2009Amortized
Cost

Fair
Value

Amortized
Cost

Fair
ValueDue within one year

$
1,058,275

$
1,059,981

$
4,371,119

$
4,399,293Due after one year


4,387,449


4,380,186


567,163


573,624$
5,445,724

$
5,440,167

$
4,938,282

$
4,972,917


F-11

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(3) Inventories

The major components of inventories at December 31, 2010 and 2009 were as follows:

2010

2009Finished products

$
727,718

$
939,385Work-in-process


1,652,605


1,404,012Raw materials


1,761,173


1,922,073$
4,141,496

$
4,265,470


(4) Property, Plant and Equipment

Property, plant and equipment at December 31, 2010 and 2009 consisted of the following:

2010

2009

Estimated useful
livesLand

$
200,000

$
200,000

Buildings


759,281


759,281

27 yearsMachinery and equipment


3,285,424


3,209,227

3 to 10 yearsOffice equipment


1,190,443


1,192,958

2 to 15 yearsLeasehold improvements


1,214,932


634,166

1 to 15 yearsVehicles


285,453


261,035

3 to 5 yearsTotal property, plant and equipment


6,935,533


6,256,667Less accumulated depreciation


(4,092,578
)

(4,601,480
)Net property, plant and equipment

$
2,842,955

$
1,655,187


Depreciation
of property, plant and equipment was $453,810, $475,673 and $464,015 for the years ended December 31, 2010, 2009 and 2008, respectively.

(5) Goodwill and Other Intangible Assets



As of December 31, 2010 and 2009, goodwill amounted to $3,160,858 and $3,300,088, respectively. The decrease was due to foreign
currency translation. The Company completed
its annual impairment tests during the fourth quarters of 2010 and 2009 and determined there was no impairment.



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

As of December 31, 2010Cost

Accumulated
Amortization

NetPatents

$
1,075,437

$
(412,678
)
$
662,759Trademarks and trade names


495,850


(419,380
)

76,470Other intangibles


778,596


(751,929
)

26,667$
2,349,883

$
(1,583,987
)
$
765,896


F-12

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Goodwill and Other Intangible Assets (Continued)



As of December 31, 2009Cost

Accumulated
Amortization

NetPatents

$
1,008,032

$
(402,392
)
$
605,640Trademarks and trade names


477,486


(398,424
)

79,062Other intangibles


778,596


(725,263
)

53,333$
2,264,114

$
(1,526,079
)
$
738,035


Amortization
expense was $90,531, $101,857 and $118,752 in 2010, 2009 and 2008, respectively.

Estimated
amortization expense for the fiscal years 2011 to 2015 and thereafter is $81,561, $49,136, $44,821, $34,397 and $240,258, respectively.

(6) Warranty

The Company provides a warranty for most of its products. Warranties are for periods ranging from ninety days to one year, and cover parts and labor for non-maintenance
repairs, at the Company 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. Warranty reserves are also accrued for special rework campaigns for known major product
modifications. The Company also offers extended warranty service contracts for select products when the factory warranty period expires.

Warranty
provisions and claims for the years ended December 31, 2010, 2009 and 2008 were as follows:

Description

Balance at
Beginning of
Year

Warranty
Provisions

Warranty
Claims

Balance at
End of YearYear ended December 31, 2010:Allowance for product warranties

$
209,710


305,167


297,058


217,819Year ended December 31, 2009:Allowance for product warranties

$
229,087


294,579


313,956


209,710Year ended December 31, 2008:Allowance for product warranties

$
201,373


416,043


388,329


229,087


(7) Commitments and Contingencies



The Company leases its facilities and certain equipment pursuant to operating leases. The facility leases expire at various times
through October 2025 and require the Company to pay operating costs, including real estate taxes.

Rental
expense, including charges for operating costs, was $533,828, $462,131 and $450,725 in 2010, 2009 and 2008, respectively.

F-13

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(7) Commitments and Contingencies (Continued)

The
following is a schedule of future minimum lease payments, excluding charges for operating costs, for operating leases as of December 31, 2010:

Year Ending December 312011

$
550,5872012


495,4642013


498,6772014


508,3912015 and thereafter


5,380,935$
7,434,054


In
March 2010, the Company signed a 15-year lease for a property which replaced its old Minneapolis headquarters and operations center. The lease agreement
contains an option to extend the lease for one five-year period where the base rent will be equal to the market rate upon expiration of the initial lease term. The new lease commenced on
June 1, 2010. The required future minimum lease payments, starting at $367,000 per year and subject to annual increases, have been included in the above table.

In
May 2010, we executed a standby letter of credit agreement in the amount of $25,000 which serves as a performance bank guarantee covering potential warranty claims for orders from one
of our foreign customers. This letter of credit will expire in November 2011.



The Company has a severance agreement with five of its executive officers which provides for the payment to the executive of a lump sum
amount upon the occurrence of certain termination events. The payment could amount to one or two times the executive's current annual salary depending on the reason for termination.



At December 31, 2010, the Company had approximately $1.6 million of purchase order commitments to suppliers of the
Company for delivery of inventory primarily during 2011.

F-14

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(8) Income Taxes

Income before income taxes was as follows:

2010

2009

2008Income before income taxes:Domestic

$
5,060,000

$
2,824,000

$
4,901,000Foreign


1,403,000


1,405,000


1,148,000Total

$
6,463,000

$
4,229,000

$
6,049,000


The
provision (benefit) for income taxes consists of the following:

2010

2009

2008Current tax expense:Federal

$
1,549,506

$
892,905

$
1,502,000State


175,814


106,816


170,000Foreign


443,908


352,512


414,000Total current expense


2,169,228


1,352,233


2,086,000Deferred tax expense:Federal


(223,484
)

(42,277
)

(66,000
)State


(1,124
)

(4,727
)

(7,000
)Foreign


366


13,638


(23,000
)Total deferred expense (benefit)


(224,242
)

(33,366
)

(96,000
)Provision for income taxes

$
1,944,986

$
1,318,867

$
1,990,000


The
effective income tax rate varies from the federal statutory tax rate for the following reasons:

Percentage of pretax income
for years ended December 31,2010

2009

2008Tax at statutory federal income tax rate


34.0
%

34.0
%

34.0
%Increases (reductions) in taxes resulting from:State income taxes, net of federal benefit


1.8


1.6


2.1Change in valuation allowance





(1.0
)

0.7Domestic manufacturing deduction


(2.5
)

(1.5
)

(1.6
)Effect of foreign operations


(0.5
)

(1.6
)

(0.7
)Foreign dividend income


(2.9
)




Tax-exempt interest


(0.2
)

(0.9
)

(1.3
)Changes in unrecognized tax benefits


0.6


(0.3
)

(0.7
)Stock option compensation


0.7


1.6


1.0Research credit


(1.1
)

(1.2
)

(0.8
)Other


0.2


0.5


0.2Effective income tax rate


30.1
%

31.2
%

32.9
%


F-15

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(8) Income Taxes (Continued)

The
tax effect of significant temporary differences representing deferred tax assets and liabilities at December 31, 2010 and 2009 were as follows:

2010

2009Deferred tax assets:Allowance for doubtful accounts

$
53,708

$
42,273Inventory items


129,073


117,039Reserves and accruals


445,905


377,191Capital loss carryforward


317,691


319,873Compensation expensestock options


101,170


89,837Foreign tax credit carryover


184,672


Intangibles


54,332


53,019Other


132,569


64,374Subtotal


1,419,120


1,063,606Less: Valuation allowance


(317,691
)

(319,873
)Total deferred tax assets


1,101,429


743,733Deferred tax liabilities:Fixed assets


(174,942
)

(51,636
)Unrealized currency gain


(201,734
)

Total deferred tax liabilities


(376,676
)

(51,636
)Net deferred tax asset

$
724,753

$
692,097


As
of December 31, 2010, the Company has determined that establishing a valuation allowance against the deferred tax assets is required since it is more likely
than not that the tax benefits of $317,691 from the capital loss carryforward will not be realized through generating of future capital gain income. However, the Company believes it is more likely
than not that the remainder of its deferred tax assets at December 31, 2010 will be realized either through future taxable income or net operating loss carrybacks.

As
of December 31, 2010, there was approximately $6,500,000 of accumulated undistributed earnings from the Company's German subsidiary. In January 2011, the subsidiary repatriated
to the Company 2.5 million euros (approximately $3.3 million). No deferred tax liability has been provided on the remaining foreign earnings. If they were remitted to the Company,
applicable U.S. Federal and foreign withholding taxes would be partially offset by available foreign tax credits.

A
reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

Balance at January 1, 2010

$
175,000Additions based on tax positions related to the current year


67,000Additions based on tax positions related to the prior year


1,000Reductions due to closing of statute of limitations


Reductions based on tax positions related to the prior year


(26,000
)Balance at December 31, 2010

$
217,000


F-16

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(8) Income Taxes (Continued)

Included
in the balance of total unrecognized tax benefits at December 31, 2010 are potential benefits of $163,000 that if recognized would affect the effective
tax rate on income before income taxes. The difference between this amount and the corresponding amount of gross unrecognized tax benefits related primarily to the deferred federal benefit for state
income tax related amounts.

The
Company does not anticipate that the total amount of unrecognized tax benefits will change significantly in the next twelve months.

The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Total accrued interest and penalties amounted to $31,000
and $27,000 on a gross basis at December 31, 2010 and 2009, respectively, and are excluded from the reconciliation of unrecognized tax benefits presented above.

The
Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, several state jurisdictions, China, Germany and the Netherlands. With limited
exceptions, the Company is no longer subject to income tax examinations by taxing authorities for taxable years before 2007. The year 2009 is currently under review by the Internal Revenue Service.

(9) Stock-Based Compensation

As of December 31, 2010, the Company has reserved 22,200 shares of common stock for options and other stock-based incentive awards that are still available for grant under the
Company's 2006 stock incentive plan, and 912,562 shares for options that have been granted under either the Company's 2006 stock incentive plan or 1998 stock option plan but have not yet been
exercised. The Company issues new shares of common stock upon exercise of stock options.

Under
the Company's stock-based incentive plans, option exercise prices are 100% of the market value of the common stock at the date of grant, except if incentive options granted under
the 1998 and 2006 plans were granted to persons owning more than 10% of the Company's stock, in which case the option price would be 110% of the market value. Exercise periods are generally for seven
to ten years. Certain of the plans allow for the granting of nonqualified stock options. Upon the exercise of these nonqualified options, the Company may realize a compensation deduction allowable for
income tax purposes. The after-tax effect of these tax deductions is included in the accompanying consolidated financial statements as an addition to capital in excess of par value.

Stock-based
compensation expense is calculated and recognized primarily on a straight-line basis over the vesting periods of the related stock-based reward. The Company
generally provides for the vesting of stock options in equal annual installments over a four-year period commencing on the one-year anniversary of the date of grant, or over a
one-year period with one-fourth of the underlying shares vesting at the end of each three-month period following the grant date. Stock-based compensation expense recognized in
the consolidated financial statements for 2010, 2009 and 2008 was as shown below:

Years Ended December 31,2010

2009

2008Total cost of stock-based compensation

$
261,859

$
227,434

$
303,292Amount of income tax benefit recognized in earnings


(28,646
)

(10,964
)

(44,896
)Amount charged against net income

$
233,213

$
216,470

$
258,396


F-17

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(9) Stock-Based Compensation (Continued)

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). The Company uses historical data to
estimate the expected price volatility, expected option life and expected forfeiture rate. The Company based its estimate of expected volatility for awards granted in 2010, 2009 and 2008 on daily
historical trading data of its common stock for a period equivalent to the expected term of the award. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant for the estimated life of the option. The Company estimated the expected term consistent with historical exercise and cancellation activity of its previous share-based grants with a
seven-year contractual term. Forfeitures were based on historical experience. The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a
percent of the average stock price for that period. The following assumptions were used to estimate the fair value of options granted during 2010, 2009 and 2008 using the Black-Scholes model:

2010

2009

2008Dividend yield


3.3
%

4.1
%

3.1
%Expected volatility


41
%

41
%

37
%Risk-free interest rate


2.0
%

3.0
%

2.1
%Expected lives (in years)


5.7


5.5


5.4


Information
regarding the Company's stock option plans for 2008, 2009 and 2010 was as follows:

Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
ValueOptions outstanding, December 31, 2007


856,437

$
8.73


5.4

$
2,061,171Granted


91,500


8.58Exercised


(79,183
)

7.09Cancelled or expired


(20,192
)

10.96Options outstanding, December 31, 2008


848,562


8.81


4.9

$
567,879Granted


96,500


9.21Exercised


(1,275
)

7.87Cancelled or expired


(6,537
)

10.37Options outstanding, December 31, 2009


937,250


8.84


4.2

$
881,656Granted


123,600


12.96


7.0Exercised


(134,865
)

6.76Cancelled or expired


(13,423
)

8.41Options outstanding, December 31, 2010


912,562

$
9.71


4.1

$
2,962,426Options exercisable, December 31, 2010


726,750

$
9.20


3.4

$
2,730,605


F-18

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(9) Stock-Based Compensation (Continued)

The
weighted average grant date fair value based on the Black-Scholes model for options granted in 2010, 2009 and 2008 was $3.73, $2.53 and $2.16, respectively. The total intrinsic value
of options exercised was $676,717, $1,151 and $296,904 during the years ended December 31, 2010, 2009 and 2008, respectively. The aggregate intrinsic values are based upon the closing price of
our common stock on the last day of the respective fiscal year.

A
summary of the status of the Company's unvested option shares as of December 31, 2010 is as follows:

Number of
Shares

Weighted
Average
Grant Date
Fair ValueUnvested at December 31, 2009


162,312

$
2.50Options granted


123,600


3.73Options cancelled


(2,300
)

2.46Options vested


(97,800
)

2.68Unvested at December 31, 2010


185,812

$
3.23


As
of December 31, 2010, there was $600,002 of total unrecognized compensation cost related to unvested stock-based compensation granted under the Company's plans. That cost is
expected to be recognized over a weighted-average period of 1.6 years. The total fair value of option shares vested during the years 2010, 2009 and 2008 was $261,860, $230,365 and $304,302,
respectively.

(10) Other Income

Other income, net for 2010, 2009 and 2008 was as follows:

Years Ended December 31,2010

2009

2008Interest income on investments

$
84,199

$
369,176

$
575,094Foreign currency exchange gain (loss)


542,108


(2,956
)

12,500Other


2,605


(168
)

1,317Total other income

$
628,912

$
366,052

$
588,911


(11) Stockholders' Equity

In the period from March through June 2009, the Company repurchased 181,171 shares of its outstanding common stock. These purchases exhausted the authorization which had been in place
since November, 2005. On June 23, 2009, the Board of Directors authorized the repurchase of up to an additional $2,000,000 of its common stock. In August 2009, the Company repurchased a total
of 242,400 shares of the Company's common stock which exhausted the existing authorization. Currently, there is no authorization in place to repurchase any of the Company's common stock.

In
fiscal 2010 and 2009, the Company paid cash dividends of $1,952,872 and $1,958,750 respectively.

F-19

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(12) Net Income per Common Share

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 years ended December 31, 2010, 2009 and 2008:

Years Ended December 31,2010

2009

2008Weighted shares of common stock outstandingbasic


5,208,873


5,393,066


5,565,801Weighted shares of common stock assumed upon exercise of stock options


155,380


64,898


83,407Weighted shares of common stock outstandingdiluted


5,364,253


5,457,964


5,649,208


Outstanding
stock options totaling 251,687, 574,387 and 484,574 at December 31, 2010, 2009 and 2008, have been excluded from the net income per common share calculations because
the effect on net income per common share would not have been dilutive.

(13) Product Line, Geographical and Significant Customer Information

MOCON, Inc. (the Company) is involved with the developing, manufacturing and marketing of measurement, analytical, monitoring and consulting products for customers in the barrier
packaging, food, pharmaceutical, consumer products, industrial hygiene, air quality monitoring, oil and gas exploration and other industries throughout the world.

The
following table summarizes total sales by product line for 2010, 2009 and 2008 respectively:

Years Ended December 31,2010

2009

2008Permeation products and services

$
18,077,953

$
15,126,259

$
15,850,027Gas analyzers, sensors and detectors


5,738,948


4,933,256


6,678,982Packaging products and services


5,062,414


4,701,279


4,822,009Other instruments and services


2,669,314


1,877,304


2,344,688Total sales

$
31,548,629

$
26,638,098

$
29,695,706


The
following table summarizes total sales, based upon the country to which sales to external customers were made for fiscal years 2010, 2009 and 2008. All of the Company's tangible
assets are

F-20

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(13) Product Line, Geographical and Significant Customer Information (Continued)

located
in the United States, except for an insignificant amount of property and equipment in Germany and China.

Years Ended December 31,2010

2009

2008Domestic sales

$
13,806,660

$
11,790,911

$
12,960,723Foreign sales:Europe


7,148,879


6,591,749


7,836,335Asia


8,482,788


5,996,005


6,144,822Other


2,110,302


2,259,433


2,753,826Total foreign sales


17,741,969


14,847,187


16,734,983Total sales

$
31,548,629

$
26,638,098

$
29,695,706


The
Company's products are marketed outside of North America through various independent representatives. One independent representative accounted for approximately 10% of the
consolidated sales in 2010, and 15% of the consolidated trade accounts receivable balance at December 31, 2010. Another independent representative accounted for 6% of the consolidated sales in
each of the years 2009 and 2008.

(14) Savings and Retirement Plan

The Company has a 401(k) Savings and Retirement Plan covering substantially all of its employees. The Company provides matching contributions in accordance with the plan. The Company's
contributions to this plan in 2010, 2009 and 2008 were $196,993, $193,115 and $169,465, respectively.

(15) Investment in Affiliated Company

In January 2010, the Company acquired a minority equity ownership interest in Luxcel Biosciences Limited (Luxcel) based in Cork, Ireland. The investment of €2,500,000
(approximately $3,625,000) amounted to a 16.9% equity interest in Luxcel. The Company has evaluated the cost versus equity method of accounting for its investment in Luxcel and determined that it does
not have the ability to exercise significant influence over the operating and financial policies of Luxcel and, therefore, accounts for its investment on a cost basis. In addition, the Company
acquired warrants to purchase an additional 375,000 shares at €2.24 per share at any time within three years from the date of the initial investment.

Luxcel
has developed phosphorescence-based sensors that enable rapid, high-throughput screening and detection of bacterial contamination of food samples,
non-invasive analysis of gas in food, beverage and pharmaceutical packaging, and one of the most specific measures of drug toxicity and metabolism within pharmaceutical research and
development.

The
investment in Luxcel is carried on our balance sheet at the original purchase price, adjusted for currency fluctuations. The Company believes that it is not feasible to readily
estimate the fair value of its investment in Luxcel. Information related to future cash flows of Luxcel is not readily available as the entity is a start-up research and development
company and future cash flows are highly dependent

F-21

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(15) Investment in Affiliated Company (Continued)

on
their ability to obtain additional funding, gain acceptance of its products in the marketplace, and obtain regulatory approvals. Luxcel has provided reimbursement for certain research and
development costs incurred by the Company in the amount of approximately $165,000 which has been reflected in the Consolidated Statements of Income as a reduction of research and development expenses.

As
part of the relationship with Luxcel, we purchase sensors which accompany our instruments for sale to an end user and are required to pay a royalty to Luxcel on the sale of such
instruments.

(16) Derivatives

The Company has entered into a foreign currency forward exchange contract, principally to hedge an intercompany loan denominated in euros. The Company has elected not to apply the hedge
accounting guidance under the Derivatives and Hedging Topic of the Codification. As a result, gains or losses related to mark-to-market adjustments on the foreign currency
forward exchange contract are recognized as other income or expense in the income statement during the period in which the instrument is outstanding. The fair value of the foreign currency forward
exchange contract represents the amount we would receive or pay to terminate the contract at the reporting date and is recorded in other current assets or liabilities depending on whether the net
amount is a gain or a loss. We do not utilize derivative instruments for trading or other speculative purposes.

At
December 31, 2010, we had one outstanding foreign currency forward contract with a notional amount totaling approximately $3,089,000. The contract matured in January 2011 which
coincided with the settlement of the intercompany loan. As of December 31, 2010, the fair value of this contract resulted in a receivable of approximately $250,000 and was recorded in other
income and other current receivables. There were no outstanding foreign currency contracts as of December 31, 2009. While the currency contract does not qualify for hedge accounting, we believe
it is effective in economically hedging the currency exposure on the intercompany loan to which it relates.

(17) Fair Value Measurements

A hierarchy for inputs used in measuring fair value is in place that distinguishes market data between observable independent market inputs and unobservable market assumptions by the
reporting entity. The hierarchy is intended to maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available.
Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:



F-22

---



MOCON, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(17) Fair Value Measurements (Continued)

The
population of financial assets and liabilities subject to fair value measurement at December 31, 2010 is as follows:

Fair Value

Level 2Assets:Foreign currency forward exchange contract

$
250,000

$
250,000


Foreign
currency forward exchange contracts are carried at fair value based on significant other observable market inputs, in this case, quoted foreign currency exchange rates. Such
valuation represents the amount we would receive or pay to terminate the forward exchange contract at the reporting date.

F-23

---





MOCON, INC.  EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K  FOR THE YEAR ENDED DECEMBER 31, 2010

Exhibit No.

Exhibit

Method of Filing3.1

Restated Articles of Incorporation of MOCON, Inc.

Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 000-09273)3.2

Third Restated Bylaws of MOCON, Inc.

Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on December 20, 2007 (File No. 000-09273)10.1

Office/Warehouse Lease, dated July 29, 1994,
by and between MOCON, Inc. and
DRESCO III, Inc.

Incorporated by reference to Exhibit 10.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 000-09273)10.2

Lease Notification and Extension Agreement, dated June 6, 1997, by and between MOCON, Inc. and DRESCO III, Inc.

Incorporated by reference to Exhibit 10.2 to our Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 000-09273)10.3

Second Lease Notification and Extension Agreement, dated November 17, 1999, by and between MOCON, Inc. and Boone Associates LLC

Incorporated by reference to Exhibit 10.3 to our Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-09273)10.4

Office/Warehouse Lease, dated March 9, 2010, by and between MOCON, Inc. and Minnesota Industrial Properties Limited Partnership

Incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 000-09273)10.5

MOCON, Inc. 1998 Stock Option Plan, as amended

Incorporated by reference to Appendix A to our Definitive Proxy Statement on Form DEF-14A filed on April 9, 2002 (File No. 000-09273)10.6

Form of Incentive Stock Option Agreement between MOCON, Inc. and its Executive Officers under the MOCON, Inc. 1998 Stock Option Plan, as amended

Incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K filed on December 29, 2004 (File No. 000-09273)10.7

Form of Non-Statutory Stock Option Agreement between MOCON, Inc. and its Non-Employee Directors and Executive Officers under the MOCON, Inc. 1998 Stock Option Plan, as amended

Incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K filed on December 29, 2004 (File No. 000-09273)


---



Exhibit No.

Exhibit

Method of Filing10.8

MOCON, Inc. 2006 Stock Incentive Plan

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 23, 2006 (File No. 000-09273)10.9

Form of Incentive Stock Option Agreement between MOCON, Inc. and its Executive Officers under the MOCON, Inc. 2006 Stock Incentive Plan

Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 23, 2006 (File No. 000-09273)10.10

Form of Non-Statutory Stock Option Agreement between MOCON, Inc. and its Non-Employee Directors and Executive Officers under the MOCON, Inc. 2006 Stock Incentive Plan

Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on May 23, 2006 (File No. 000-09273)10.11

Form of Executive Severance Agreement

Incorporated by reference to Exhibit 10.11 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (File No. 000-09273)10.12

2003 Compensation Committee resolution setting forth the MOCON Incentive Pay Plan

Incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-09273)10.13

Description of Non-Employee Director Retirement Plan

Incorporated by reference to Exhibit 10.20 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (File No. 000-09273)10.14

Subscription and Shareholders Agreement dated December 21, 2009 among MOCON, Inc., Luxcel Biosciences, Enterprise Ireland, Glanbia Enterprise Fund, and certain other parties named therein

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed December 23, 2009 (File No. 000-09273)10.15

Description of Non-Employee Director Compensation Arrangements

Filed herewith10.16

Description of Executive Officer Compensation Arrangements

Filed herewith21.1

Subsidiaries of MOCON, Inc.

Filed herewith23.1

Consent of Independent Registered Public Accounting Firm

Filed herewith31.1

Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith31.2

Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)

Furnished herewith32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)

Furnished herewith


---



Financial Statement Schedule:

IIValuation and Qualifying Accounts

All other schedules are omitted as the required information is inapplicable or the information is presented in our consolidated
financial statements or related notes.

Description

Balance at
Beginning of
Year

Charged to
Costs and
Expenses

Deductions

Balance at
End of YearYear ended December 31, 2010:Allowance for doubtful accounts and sales returns

$
162,315


102,860


81,884


183,291Year ended December 31, 2009:Allowance for doubtful accounts and sales returns

$
137,182


113,521


88,388


162,315Year ended December 31, 2008:Allowance for doubtful accounts and sales returns

$
125,797


158,133


146,748


137,182


S-1

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