10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended September 30, 2015

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to

Commission File Number 000-09273

MOCON, INC.

(Exact name of registrant as specified in its charter)

Minnesota	41-0903312
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)

7500 Mendelssohn Avenue North, Minneapolis, Minnesota 55428

(Address of principal executive offices)          (Zip code)

(763) 493-6370

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒NO ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES ☒ NO ☐

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 ☐ Accelerated filer ☒ Non-accelerated filer (do not check if a smaller reporting company) ☐ Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☒

As of November 3, 2015, we had 5,758,604 common shares issued and outstanding.

MOCON, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarter Ended September 30, 2015

		Page Number
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements Condensed Consolidated Balance Sheets September 30, 2015 (Unaudited) and December 31, 2014
	Condensed Consolidated Statements of Income (Unaudited) Three and nine-months ended September 30, 2015 and 2014	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three and nine-months ended September 30, 2015 and 2014	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine-months ended September 30, 2015 and 2014	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5-12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13-23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
Signatures		27
Exhibit Index		28
In this report, references to “MOCON,” “the Company,” “we,” “our,” or “us,” unless the context otherwise requires, refer to MOCON, Inc. and its subsidiaries. All trademarks or trade names referred to in this report are the property of their respective owners.

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

MOCON, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(expressed in thousands, except share amounts)

	September 30,
	2015			December 31,
	(Unaudited)			2014
ASSETS
Current assets:
Cash and cash equivalents	$	6,413		$	6,332
Trade accounts receivable, less allowance for doubtful accounts of $173 in 2015 and $181 in 2014		8,710			9,877
Other receivables		631			148
Inventories		8,390			8,705
Prepaid income taxes		435			771
Prepaid expenses, other		844			902
Deferred income taxes		919			766
Total current assets		26,342			27,501
Property, plant and equipment, net of accumulated depreciation of $8,225 in 2015 and $7,874 in 2014		6,028			5,562
Goodwill		7,626			8,147
Intangible assets, net		9,456			10,831
Other assets		90			194
Deferred income taxes		-			274
TOTAL ASSETS	$	49,542		$	52,509
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable	$	64		$	983
Revolving lines of credit		-			3,300
Accounts payable		3,417			4,402
Accrued compensation and related expenses		2,953			4,120
Other accrued expenses		1,683			731
Accrued product warranties		262			285
Dividends payable		633			631
Deferred revenue		1,025			997
Total current liabilities		10,037			15,449
Revolving lines of credit		3,493			-
Notes payable		111			307
Obligations to former employees		36			67
Deferred income taxes		1,730			1,856
Accrued income taxes		338			357
Total noncurrent liabilities		5,708			2,587
Total liabilities		15,745			18,036
Shareholders' equity:
Capital stock – undesignated. Authorized 3,000,000 shares; none issued and outstanding in 2015 and 2014		-			-
Common stock – $0.10 par value. Authorized 22,000,000 shares; issued and outstanding 5,753,874 shares in 2015 and 5,732,505 shares in 2014		575			573
Additional paid-in capital		7,072			6,427
Retained earnings		31,072			30,265
Accumulated other comprehensive loss		(4,922	)		(2,792	)
Total shareholders' equity		33,797			34,473
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	49,542		$	52,509

See accompanying notes to condensed consolidated financial statements.

-1-

MOCON, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited - expressed in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015		2014
Revenue:
Products	$	12,241		$	13,110		$	36,442	$	37,384
Services		2,496			2,745			7,338		7,983
Consulting		755			794			2,121		2,170
Total revenue		15,492			16,649			45,901		47,537
Cost of revenue:
Products		5,707			5,648			16,490		16,318
Services		1,010			992			3,074		3,133
Consulting		457			447			1,515		1,412
Total cost of revenue		7,174			7,087			21,079		20,863
Gross profit		8,318			9,562			24,822		26,674
Selling, general and administrative expenses		5,808			6,125			17,914		18,216
Research and development expenses		886			950			3,081		3,064
Operating income		1,624			2,487			3,827		5,394
Other income (expense), net		(48	)		(117	)		90		(267	)
Income before income taxes		1,576			2,370			3,917		5,127
Income tax expense		424			696			1,211		1,558
Net income	$	1,152		$	1,674		$	2,706	$	3,569
Net income per common share:
Basic	$	0.20		$	0.30		$	0.47	$	0.63
Diluted	$	0.20		$	0.29		$	0.46	$	0.62
Weighted average common shares outstanding:
Basic		5,753			5,668			5,748		5,655
Diluted		5,808			5,776			5,826		5,768
Cash dividends declared per common share	$	0.11		$	0.11		$	0.33	$	0.33

See accompanying notes to condensed consolidated financial statements.

-2-

MOCON, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited - expressed in thousands)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2015		2014			2015			2014
Net income	$	1,152	$	1,674		$	2,706		$	3,569
Other comprehensive income (loss):
Cumulative translation adjustment		13		(2,107	)		(2,130	)		(2,361	)
Comprehensive income (loss)	$	1,165	$	(433	)	$	576		$	1,208

See accompanying notes to condensed consolidated financial statements.

-3-

MOCON, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - expressed in thousands)

	Nine Months Ended
	September 30,
	2015			2014
Cash flows from operating activities:
Net income	$	2,706		$	3,569
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense		488			413
Change in fair value of derivative instrument		(3	)		172
Loss on disposition of long-term assets		4			16
Depreciation and amortization		1,834			1,924
Deferred income taxes		122			(309	)
Excess tax benefit from employee stock plans		(3	)		(16	)
Changes in operating assets and liabilities:
Trade accounts receivable, net		704			843
Other receivables		(487	)		(130	)
Inventories		113			(1,340	)
Prepaid income taxes		335			47
Prepaid expenses, other		140			33
Accounts payable		(1,471	)		253
Accrued compensation and related expenses		(1,006	)		(61	)
Other accrued expenses		548			77
Accrued product warranties		(12	)		(85	)
Accrued income taxes		360			436
Deferred revenue		45			588
Net cash provided by operating activities		4,417			6,430
Cash flows from investing activities:
Proceeds from maturities of marketable securities		-			205
Purchases of property, plant and equipment		(1,109	)		(999	)
Proceeds from sale of property and equipment		54			55
Cash paid for patents and other intangible assets		(185	)		(372	)
Other		96			(2	)
Net cash used in investing activities		(1,144	)		(1,113	)
Cash flows from financing activities:
Proceeds from the revolving lines of credit		16,466			18,384
Payments on the revolving lines of credit		(16,857	)		(18,144	)
Payments on notes payable and seller financed note payable		(692	)		(1,641	)
Proceeds from the exercise of stock options		161			285
Excess tax benefit from employee stock plans		3			16
Dividends paid		(1,897	)		(1,865	)
Net cash used in financing activities		(2,816	)		(2,965	)
Effect of exchange rate changes on cash and cash equivalents		(376	)		(344	)
Net increase in cash and cash equivalents		81			2,008
Cash and cash equivalents:
Beginning of period		6,332			4,133
End of period	$	6,413		$	6,141
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes	$	459		$	1,067
Cash paid during the period for interest	$	102		$	152
Supplemental schedule of noncash investing and financing activities:
Dividends accrued	$	633		$	624
Purchases of prepaid expenses, fixed assets and intangibles in accounts payable	$	276		$	174
Transfers of inventory to fixed assets	$	117		$	-
Purchases of fixed assets in notes payable	$	162		$	-
Transfer of note payable to Bank balance to the revolving line of credit	$	585		$	-

See accompanying notes to condensed consolidated financial statements.

-4-

MOCON, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED SEPTEMBER 30, 2015

(Unaudited)

Note 1 – Condensed Consolidated Financial Statements

The condensed consolidated balance sheet as of September 30, 2015, the condensed consolidated statements of income and comprehensive income (loss), for the three and nine-months ended September 30, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America. These interim unaudited condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows at September 30, 2015, and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.

The results of operations for the three and nine-month periods ended September 30, 2015 are not necessarily indicative of operating results for the full year. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, previously filed with the Securities and Exchange Commission.

MOCON Inc. and its subsidiaries, develops, manufacturers and markets measurement, analytical, monitoring and consulting services for customers in the barrier packaging, food, pharmaceutical, consumer products, industrial hygiene, environmental, air quality monitoring, oil and gas exploration and other industries throughout the world.

We report our operating segments as Permeation Products and Services (“Permeation”), Package Testing Products and Services (“Package Testing”), and Industrial Analyzers Products and Services and Other (“Industrial Analyzers and Other”) for financial reporting purposes.

Principles of Consolidation

The consolidated financial statements include our accounts and our wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Note 2 – Inventories

Inventories consist of the following (expressed in thousands):

	September 30,		December 31,
	2015		2014
Finished products	$	1,207	$	1,628
Work-in-process		2,739		2,574
Raw materials		4,444		4,503
	$	8,390	$	8,705

-5-

Note 3 – Net Income Per Common Share

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

The following table presents a reconciliation of the denominators used in the computation of net income per common share – basic, and net income per common share – diluted, for the three and nine-months ended September 30, 2015 and 2014 (expressed in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Weighted shares of common stock outstanding - basic		5,753		5,668		5,748		5,655
Dilutive impact of share-based awards		55		108		78		113
Weighted shares of common stock outstanding - diluted		5,808		5,776		5,826		5,768

Outstanding stock options totaling 431,560 for the three-months ended September 30, 2015 and 316,310 for the nine-months ended September 30, 2015 were excluded from the net income per common share calculation because the shares would be anti-dilutive. Outstanding stock options totaling 251,000 for the three-month period ended September 30, 2014 and none for the nine-months ended September 30, 2014 were excluded from the net income per common share calculation because the shares would be anti-dilutive.

Note 4 – Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2015 were as follows (expressed in thousands): 

	Package						Industrial Analyzers &
	Testing			Permeation			Other		Total
Balance as of December 31, 2014	$	5,508		$	2,029		$	610	$	8,147
Foreign currency translation		(396	)		(125	)		-		(521	)
Balance as of September 30, 2015	$	5,112		$	1,904		$	610	$	7,626

We test goodwill for impairment annually at the reporting unit level using a fair value approach. We will perform our annual impairment test for goodwill in the fourth quarter.

-6-

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

	As of September 30, 2015
			Accumulated
	Cost		Amortization			Net
Patents	$	1,821	$	(429	)	$	1,392
Trademarks and trade names		3,418		(727	)		2,691
Developed technology		6,314		(2,455	)		3,859
Customer relationships		738		(287	)		451
Internally developed software		1,085		(127	)		958
Other intangibles		214		(109	)		105
	$	13,590	$	(4,134	)	$	9,456

	As of December 31, 2014
			Accumulated
	Cost		Amortization			Net
Patents	$	1,719	$	(416	)	$	1,303
Trademarks and trade names		3,676		(644	)		3,032
Developed technology		6,843		(2,091	)		4,752
Customer relationships		800		(245	)		555
Internally developed software		1,085		(46	)		1,039
Other intangibles		255		(105	)		150
	$	14,378	$	(3,547	)	$	10,831

Total amortization expense for the three-months ended September 30, 2015 and 2014 was $298,000 and $323,000, respectively, and $894,000 and $964,000, respectively, for the nine-months ended September 30, 2015 and 2014. Projects in process are not amortized until the patent or trademark is granted by the regulatory agency or the asset is ready for use. Estimated amortization expense for the remainder of 2015 and each of the four succeeding fiscal years and thereafter based on the intangible assets as of September 30, 2015 is as follows (expressed in thousands):

2015	$	296
2016		1,178
2017		1,149
2018		1,116
2019		1,112
2020 & Thereafter		3,955
	$	8,806

-7-

Note 5 – Accumulated Other Comprehensive Income (Loss)

Adjustments to accumulated other comprehensive income (loss) consist of the following (expressed in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Beginning balance	$	(4,935	)	$	359		$	(2,792	)	$	613
Foreign currency translation adjustments		13			(2,107	)		(2,130	)		(2,361	)
Accumulated other comprehensive (loss)	$	(4,922	)	$	(1,748	)	$	(4,922	)	$	(1,748	)

Note 6 – Warranty

We provide a warranty for most of our products. Warranties are for periods ranging from ninety days to one year, and cover parts and labor for non-maintenance repairs.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. Generally, warranty reserves are also accrued for special rework campaigns for known major product modifications. We also offer extended warranty service contracts for select products when the factory warranty period expires.

Warranty provisions and claims for the three and nine-months ended September 30, 2015 and 2014 were as follows (expressed in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Beginning balance	$	293		$	231		$	285		$	336
Warranty provisions		46			112			263			157
Warranty claims		(77	)		(102	)		(286	)		(252	)
Ending Balance	$	262		$	241		$	262		$	241

Note 7 – Debt

Notes payable consists of the following (expressed in thousands):

	September 30, 2015		December 31, 2014
Note payable to bank, which was paid off on August 26, 2015	$	-	$	1,166
Seller financed note payable (Seller Note), which was paid off on April 2, 2015		-		95
Capital leases		175		29
Total long-term notes payable		175		1,290
Less current portion of long-term notes payable		64		983
Total long-term notes payable	$	111	$	307

-8-

In the U.S., we have a $10.0 million secured revolving line of credit which was amended on August 28, 2015 with a maturity date of August 26, 2018. As of September 30, 2015 the outstanding balance is classified as a noncurrent liability. The amendment increased the principal amount from $6.0 million to $10.0 million, modified the maturity date, decreased the interest rate from 1.75 basis plus one-month LIBOR to 1.50 basis plus one-month LIBOR and revised certain debt covenants. Interest is charged monthly at one-month LIBOR (0.20 percent) plus 1.50 basis points which totaled 1.70 percent at September 30, 2015 and 1.93 percent at December 31, 2014. The line of credit is secured by our assets with the exception of the number of shares of outstanding stock of Dansensor that exceeds 65 percent of the shares outstanding. We had $3.5 million and $3.3 million outstanding on the line of credit at September 30, 2015 and December 31, 2014. Additionally, Dansensor has a DKK 10 million (approximately $1.5 million) available line of credit of which no amounts were outstanding as of September 30, 2015 and December 31, 2014. Outstanding borrowings on the Denmark line of credit are charged interest at 4.35 percent per year.

We are subject to various financial and restrictive covenants in the bank Credit Agreement, including maintaining certain financial ratios and limits on incurring additional indebtedness, making capital and lease expenditures and making share repurchases. We are in compliance with our debt covenants at September 30, 2015 and expect to remain in compliance through the next twelve months.

As of September 30, 2015, the future minimum principal payments of the notes payable for the remainder of 2015 and each of the four succeeding fiscal years to the maturity of the note are as follows (expressed in thousands):

2015	$	16
2016		65
2017		57
2018		37
	$	175

Note 8 – Income Taxes

Our provision for income tax expense was 27 percent and 29 percent of income before income taxes for the three-months ended September 30, 2015 and 2014, respectively. Our provision for income tax expense was 31 percent and 30 percent of income before income taxes for the nine-months ended September 30, 2015 and 2014, respectively. The rate in the three and nine-months ended of 2015 and 2014 was lower than the statutory rate due primarily to the effect of foreign operations where tax rates tend to be lower, the domestic manufacturing deduction and the provision to return discrete items related to returns filed in the three month periods. The increase in the effective tax rate for 2015 as compared to 2014 is primarily due to the lower proportion of projected taxable income from domestic operations in 2015.

As of September 30, 2015 and December 31, 2014, the liability for gross unrecognized tax benefits was $338,000 and $357,000, respectively. Changes in gross unrecognized tax benefits during the nine-months ended September 30, 2015 were for interest accrued offset by statute limitations release during the third quarter. It is expected that the amount of unrecognized tax benefits for positions which we have identified will not materially change in the next twelve months.

Note 9 – Share-Based Compensation

Stock Option Plans

As of September 30, 2015, we have reserved 545,614 shares of common stock for options and other share-based incentive awards that are still available for grant under our 2006 and 2015 stock incentive plans, and 686,585 shares for options that have been granted under either the 2006 or 2015 stock incentive plan or the 1998 stock option plan but have not yet been exercised. We issue new shares of common stock upon exercise of stock options.

-9-

Amounts recognized in the condensed consolidated financial statements related to share-based compensation are as follows (expressed in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Total cost of share-based compensation	$	167		$	129		$	488		$	413
Amount of income tax benefit recognized in earnings		(20	)		(24	)		(81	)		(67	)
Amount charged against net income	$	147		$	105		$	407		$	346

The following assumptions were used to estimate the fair value of options granted during 2015 and 2014 using the Black-Scholes model:

	2015			2014
Dividend yield		3.40	%		3.40	%
Expected volatility		36	%		37	%
Risk-free interest rate		1.63	%		1.70	%
Expected lives (in years)		9.95			6.4

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). We use historical data to estimate the expected price volatility, expected option life and expected forfeiture rate. Our estimates are based on expected volatility for awards granted on daily historical trading data of our 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. We estimate the expected term consistent with historical exercise and cancellation activity of its previous share-based grants with a seven or ten year as applicable contractual term. Forfeitures are 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.

A summary of the option activity for the first nine months of 2015 is as follows (expressed in thousands, except share and per share amounts):

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual		Value
	Shares			Price		Term		(in thousands)
Options outstanding, December 31, 2014		722,675		$	14.35		4.57	$	2,555
Granted		15,300			13.26		9.89		-
Exercised		(44,115	)		12.58		-		-
Cancelled or expired		(7,275	)		16.34		-		-
Options outstanding, September 30, 2015		686,585		$	14.42		4.02	$	566
Options exercisable, September 30, 2015		498,935		$	13.74		3.32	$	562

The total intrinsic value of options exercised was $6,000 and $68,000 during the three-months ended September 30, 2015 and 2014, respectively, and $189,000 and $404,000 during the nine-months ended September 30, 2015 and 2014, respectively.

-10-

A summary of the status of our unvested option shares as of September 30, 2015 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2014		227,400		$	4.35
Options granted		15,300		$	3.71
Options cancelled		(6,300	)	$	3.63
Options vested		(48,750	)	$	5.41
Unvested at September 30, 2015		187,650		$	4.02

As of September 30, 2015, there was $521,000 of total unrecognized compensation cost related to unvested share-based compensation granted under our plans. That cost is expected to be recognized over a weighted-average period of 1.01 years. The total fair value of option shares vested during the three-months ended September 30, 2015 and 2014 was $88,000 and $77,000, respectively, and $264,000 and $230,000 during the nine-months ended September 30, 2015 and 2014, respectively.

Employee Stock Purchase Plan

On May 27, 2015, our shareholders approved the 2015 Employee Stock Purchase Plan (“Purchase Plan”) whereby 50,000 shares of common stock will be available for future sale. The first offering period will begin January 1, 2016 and provides participants an option to purchase shares of our common stock at a price per share equal to 85 percent of the value of the share of common stock at the beginning or end of the offering period (whichever is less).

Note 10 – Business Segments

We have four operating segments, structured by differences in products and services, that are regularly reviewed by our chief operating decision maker to make decisions about allocating resources and assessing segment performance. The segment performance is evaluated at segment operating income which is defined as gross profit less selling, general and administrative expenses and research and development expenses. General corporate expenses, including costs associated with various support functions such as human resources, information technology, finance and accounting, and general and administrative costs, are allocated to the reportable segments primarily on the basis of segment gross margin. Our four operating segments have been aggregated into three reportable segments. We aggregated our Other Products and Services operating segment into the Industrial Analyzers Products and Services segment based on minimal business activity and materiality.

The Permeation segment includes instruments and services that measure the rate at which various gases and vapors permeate through a variety of materials. The Package Testing segment provides customers with the ability to assess package performance, shelf-life, package improvement, cost reduction, sustainability and product safety using Modified Atmosphere Packaging and other technologies. The Industrial Analyzers and Other segment includes advanced gas analysis and monitoring instrumentation used in applications such as oil and gas exploration, beverage and specialty gas analysis, industrial hygiene and safety, food safety, environmental air monitoring and homeland security.

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The accounting policies of the reportable segments are the same as those described in Note 1 to the Consolidated Financial Statements found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Intersegment revenue for the three and nine months ended September 30, 2015 and 2014 were insignificant.

Financial information by reportable segment for the three and nine-months ended September 30, 2015 and 2014 is as follows (expressed in thousands):

	Three Months Ended September 30, 2015					Nine Months Ended September 30, 2015
	Revenue		Operating Income (loss)			Revenue		Operating Income (loss)
Package Testing	$	6,454	$	944		$	19,684	$	2,361
Permeation		6,482		1,006			18,550		2,755
Industrial Analyzers and Other		2,556		(326	)		7,667		(1,289	)
Total	$	15,492	$	1,624		$	45,901	$	3,827

	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
	Revenue		Operating Income		Revenue		Operating Income
Package Testing	$	7,342	$	993	$	21,320	$	1,702
Permeation		5,729		1,228		16,622		2,923
Industrial Analyzers and Other		3,578		266		9,595		769
Total	$	16,649	$	2,487	$	47,537	$	5,394

Note 11 – Subsequent Event

On October 27, 2015, we implemented a realignment plan ("Realignment Plan") to bring the sales and marketing functions of our Package Testing and Permeation business segments together under common leadership. The Realignment Plan is expected to reduce our cost structure by approximately $1.7 million annually by decreasing our U.S. headcount by 5 percent, including the elimination of several vacant positions within other areas of the Company. The realignment activities are expected to be completed no later than December 31, 2015 and will result in a non-recurring charge of approximately $500,000 in the fourth quarter of 2015 related to separation costs. The total estimated cash payout of separation benefits is $450,000. The estimated non-cash expense is expected to be $50,000.

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Item 2.     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 discussed below under the caption “Forward-Looking Statements.” The following discussion of the results of 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 report.

Overview

Description of Business

MOCON, Inc. designs, manufactures, markets and services products and provides consulting and testing 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 developing new products, and by acquiring new companies, new product lines, or rights to technologies.

We are headquartered in Minnesota and have operating locations in Minnesota, Denmark, and Colorado. We have offices and laboratories in Texas, Germany, France, Italy, Spain and China. We use a mix of a direct sales force and independent sales representatives to market our products and services in the United States, Canada, Europe and China, and we use a network of independent sales representatives and distributors to market and service our products and services in most other foreign countries.

Our ongoing plans for growth include continued substantial funding for research and development to drive new product introductions, together with strategic acquisitions and investments where appropriate.

On October 27, 2015, we implemented a Realignment Plan to bring the sales and marketing functions of our Package Testing and Permeation business segments together under common leadership. The Realignment Plan is expected to reduce our cost structure by approximately $1.7 million annually by decreasing our U.S. headcount by 5 percent, including the elimination of several vacant positions within other areas of the Company. The realignment activities are expected to be completed no later than December 31, 2015 and will result in a non-recurring charge of approximately $500,000 in the fourth quarter of 2015 related to separation costs. 

Products and Services

Package Testing Products and Services

We manufacture and sell three primary products in this group: headspace analyzers, leak detection equipment and gas mixers. 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^®, CheckMate^TM and CheckPoint^TM series of off-line headspace analyzers and the MAP Check 3™ series of on-line 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 sealed 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 leak detection products include the LeakMatic II^TM, LeakPointer II^TM and Lippke 4000/4500 series of instruments.

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Our gas mixers are used in the food production environment to assure that the package has been properly flushed with the correct mixture of gases. Our gas mixer products include the MAP Mix Provectus and MAP Mix 9001 on-line instruments.

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. Other customers include manufacturers of flat panel displays, solar panels, electronics, and other sophisticated materials.

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:

● wish to outsource their testing needs to us;

● are interested in evaluating our instrumentation prior to purchase; or

● have purchased our products but have a need for additional capacity.

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. During the second quarter 2014, we began shipping the OX-TRAN 2/22 for oxygen transmission measurement. In the fourth quarter 2014, we began shipping the PERMATRAN-W 3/34. Both the OX-TRAN 2/22 and the PERMATRAN-W 3/34 are part of our new series of technologically-advanced permeation instruments.

Industrial Analyzers Products and Services and Other

We manufacture and distribute advanced gas analysis and monitoring instrumentation used in applications such as oil and gas exploration, process and beverage gas analysis, industrial hygiene, safety, environmental air monitoring and indoor air quality.

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

Our industrial analyzers products, 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). Our newest GC offering measures trace levels of contaminants in beverage grade carbon dioxide which is used to carbonate soft drinks, beer and water.

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We market some of these products under the names PetroAlert®, piD-TECH®, and BevAlert®.

Microbial Detection Products

Our microbial detection products are designed to rapidly detect microbial growth in food and beverage samples. Using the total viable count (TVC) method, our GreenLight^® series of instruments perform rapid and precise measurements to determine the presence or absence of aerobic bacteria in food products or ingredients. There are two models of the GreenLight product line currently available; the GreenLight 930 and the GreenLight 910.

Results of Operations

The following table sets forth the relationship between various components of our results of operations, stated as a percent of revenue, for the three and nine-months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015		2014
Revenue		100.0			100.0			100.0		100.0
Cost of revenue		46.3			42.6			45.9		43.9
Gross profit		53.7			57.4			54.1		56.1
Selling, general and administrative expenses		37.5			36.8			39.1		38.3
Research and development expenses		5.7			5.7			6.7		6.4
Operating income		10.5			14.9			8.3		11.4
Other income (expense), net		(0.3	)		(0.7	)		0.2		(0.6	)
Income before income taxes		10.2			14.2			8.5		10.8
Income tax expense		2.8			4.1			2.6		3.3
Net income		7.4			10.1			5.9		7.5

Comparison of Financial Results for the Three and Nine-Months Ended September 30, 2015 and 2014

Revenue

Total revenue for the three-months ended September 30, 2015 was $15.5 million, which is 7 percent lower compared to $16.6 million reported in the same period in 2014. Total revenue for the nine-months ended September 30, 2015 was $45.9 million, which is slightly lower compared to $47.5 million reported in the same period in 2014. Foreign currency translation had an unfavorable impact of $1.9 million and $4.5 million for the three-months and nine-months ended September 30, 2015, respectively, compared to the prior year period. When excluding the effect of the currency rate impact, revenue grew 5 percent and 6 percent for the three-months and nine-months ended September 30, 2015, respectively, and continue to meet growth targets for the quarter for each of our Permeation and Package Testing segments. This growth was offset by the negative impact to our Industrial Analyzers and Other segment.

Revenue to foreign customers for the three-months ended September 30, 2015 and 2014, respectively, amounted to 62 percent and 67 percent of total consolidated revenue, and were down 14 percent in the current period. Revenue to foreign customers for the nine-months ended September 30, 2015 and 2014, respectively, amounted to 66 percent and 71 percent of total consolidated revenue, and were down 10 percent in the current period.

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The following table summarizes total revenue by reporting segments for the three and nine-months ended September 30, 2015 and 2014 (expressed in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Package Testing	$	6,454	$	7,342	$	19,684	$	21,320
Permeation		6,482		5,729		18,550		16,622
Industrial Analyzers and Other		2,556		3,578		7,667		9,595
Total Sales	$	15,492	$	16,649	$	45,901	$	47,537

The following table sets forth the relationship between various components of domestic and foreign revenue for the three and nine-months ended September 30, 2015 and 2014 (expressed in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Domestic Revenue	$	5,814	$	5,461	$	15,505	$	13,959
Foreign Revenue:
Europe		6,120		6,813		17,633		19,809
Asia		2,853		3,526		9,815		10,901
Other		705		849		2,948		2,868
Total Foreign Revenue		9,678		11,188		30,396		33,578
Total Revenue	$	15,492	$	16,649	$	45,901	$	47,537

Package Testing Products and Services – Revenue in our Package Testing segment decreased 12 percent for the three-months ended September 30, 2015, compared to the same period in the prior year, and accounted for 42 percent and 44 percent of our consolidated third quarter revenue in 2015 and 2014, respectively. Package Testing segment revenue for the current period was negatively impacted by $1.6 million due to currency rate fluctuations as compared to the prior year period. The negative impact from the currency rate fluctuations was offset by an increase in revenue from headspace and mixer products as compared to the prior year period. Excluding the impact of the currency rate fluctuations, the Package Testing segment revenue grew 10 percent as compared to the prior year period. Revenue from foreign destinations comprised 74 percent and 77 percent of total revenue in this segment for the three-months ended September 30, 2015 and 2014, respectively.

Revenue in our Package Testing segment decreased 8 percent for the nine-months ended September 30, 2015, compared to the same period in the prior year, and accounted for 43 percent and 45 percent of our consolidated nine-months revenue in 2015 and 2014, respectively. Package Testing segment revenue for the current nine-month period was negatively impacted by $3.8 million due to currency rate fluctuations as compared to the prior year period. Excluding the impact of the currency rate fluctuations, the Package Testing segment revenue grew 10 percent as compared to the prior year. This growth is a result in continued increased revenue from headspace and mixer products. Revenue from foreign destinations comprised 74 percent and 78 percent of total revenue in this segment for the nine-months ended September 30, 2015 and 2014, respectively.

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Permeation Testing Products and Services – Revenue in our Permeation segment increased 13 percent for the three-months ended September 30, 2015 compared to the same period in the prior year, and accounted for 42 percent and 34 percent of our consolidated third quarter revenue in 2015 and 2014, respectively. Permeation segment revenue for the current period was negatively impacted by $276,000 due to currency rate fluctuations as compared to the prior year period. Excluding the impact of the currency rate fluctuations, the Permeation segment revenue grew 18 percent as compared to the prior year period. Consistent with the increase in the first and second quarters of 2015, the increase in the current period is largely attributable to increased demand in the domestic markets for the new generation of oxygen permeation instrumentation, which was introduced to the market during the last half of 2014. Foreign revenue comprised 62 percent and 70 percent of the shipments in this segment in the third quarter of 2015 and 2014, respectively.

Revenue in our Permeation segment increased 12 percent for the nine-months ended September 30, 2015 compared to the same period in the prior year, and accounted for 40 percent and 35 percent of our consolidated nine-months revenue in 2015 and 2014, respectively. Permeation segment revenue for the current period was negatively impacted by $764,000 due to currency rate fluctuations as compared to the prior year period. Excluding the impact of the currency rate fluctuations, the Permeation segment revenue grew 16 percent as compared to the prior year. As noted above, the year to date increase in revenue is largely attributable to an increase demand in the domestic markets for the new generation of oxygen permeation instrumentation. Foreign revenue comprised 65 percent of the shipments in this segment in the for the nine-months ended September 30, 2015, compared to 71 percent from the same period in the prior year.

Industrial Analyzers Products and Services and Other – Revenue in our Industrial Analyzers and Other segment, which accounted for 16 percent and 22 percent of our consolidated third quarter revenue in 2015 and 2014, respectively, decreased 29 percent during the third quarter 2015 compared to the same period in 2014. Revenue in this segment is comprised mainly of instruments and services provided by our Industrial Analyzer products. The decline in revenue for the three month period ended September 30, 2015 compared to the prior year period was primarily due to the declines in the oil and gas exploration markets. Substantially all revenue in this segment is denominated in U.S. dollars. Revenue to foreign destinations comprised 33 percent and 41 percent of total revenue in this segment for the three-months ended September 30, 2015 and 2014, respectively.

Revenue in our Industrial Analyzers and Other segment, which accounted for 17 percent and 20 percent of our consolidated nine-months revenue in 2015 and 2014, respectively, decreased 20 percent during the consolidated nine-months 2015 compared to the same period in 2014. The decline in revenue for the nine-month period ended September 30, 2015 compared to the prior year period was primarily due to the declines in the oil and gas exploration markets. This decline was partially offset by an increase in revenue from the environmental monitoring and beverage safety markets, as described above, in addition to increased demand for our food safety products. Revenue to foreign destinations comprised 49 percent and 53 percent of total revenue in this segment for the nine-months ended September 30, 2015 and 2014, respectively.

Gross Profit

For the three-months ended September 30, 2015 and 2014, the consolidated gross profit margins were 54 percent and 57 percent, respectively. The gross profit as a percentage of revenue for the Package Testing segment increased by two percentage points to 55 percent in the current quarter, compared to 53 percent in the prior year quarter, due to an increase in revenue volume from headspace and accessory products which have a higher level of gross profit. The gross profit as a percentage of revenue in the Permeation segment decreased to 55 percent from 65 percent as compared to the prior year quarter due to additional costs associated with the increased production of the next generation products and the foreign exchanged pricing impacts on instruments made in the U.S.A and sold in foreign currencies. The gross profit as a percentage of revenue for the Industrial Analyzers and Other segment for the current quarter declined by nine percentage points to 47 percent compared to 56 percent in the prior year quarter, due to primarily reduced production volume to absorb the semi-variable and fixed production related costs.

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For the nine-months ended September 30, 2015 and 2014, the consolidated gross profit margins were 54 percent and 56 percent, respectively. The gross profit as a percentage of revenue for the Package Testing segment increased by four percentage points to 54 percent in the current nine-month period, compared to 50 percent in the prior year nine-month period, due to an increase in revenue volume from headspace and accessory products which have a higher level of gross profit. The gross profit as a percentage of revenue in the Permeation segment decreased to 57 percent from 64 percent as compared to the prior year period due to foreign exchange pricing impacts on instruments made in the U.S.A. and sold in foreign currencies and additional production costs related to the next generation instruments. The gross profit as a percentage of revenue for the Industrial Analyzers and Other segment for the current nine-month period declined by ten percentage points to 46 percent compared to 56 percent in the prior year nine-month period, due to a decrease in volume to absorb semi-variable and fixed production related costs and an increase in our warranty reserve for a quality issue identified with sensor components in the latest release of gas chromatograph instruments.

We expect future gross profit percentages to fluctuate depending on the mix of product, service and consulting revenue and the impact of foreign currency fluctuations.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses were $5.8 million, or approximately 37 percent of consolidated revenue, in the three-months ended September 30, 2015, compared to $6.1 million, or approximately 37 percent of consolidated revenue, in the same period of 2014. The dollar decrease in the current quarter was primarily related a decline in foreign currency rates partially offset by increased personnel and professional fees related to our initiative to reduce the number of legal entities that we have.

SG&A expenses were $17.9 million, or approximately 39 percent of consolidated revenue, in the nine-months ended September 30, 2015, compared to $18.2 million, or approximately 38 percent of consolidated revenue, in the same period of 2014. SG&A expenses for the nine-months ended included an increase in domestic commissions due to an higher percentage of revenue to domestic destinations, additional personnel costs due to additional headcount and increased professional fees as described above. The increased SG&A costs were offset by a decline in the foreign currency rates as compared to the year ago period.

Research and Development Expenses

Research and development (R&D) expenses were $886,000, or 6 percent of consolidated revenue, in the third quarter 2015, compared to $950,000, or 6 percent of revenue, in the same period of 2014.

R&D expenses were $3.1 million, or 7 percent of consolidated revenue, in the first nine month period of 2015, compared to $3.1 million, or 6 percent of revenue, in the same period of 2014. The spending levels in all periods described above are within our planned level of spending which we project to be between 6 percent and 8 percent of revenue each year.

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Other Income (Expense), net

Other income (expense), net for the three and nine-months ended September 30, 2015 and 2014 was as follows (expressed in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Interest income	$	-		$	1		$	-		$	3
Interest expense		(31	)		(46	)		(96	)		(149	)
Foreign currency exchange gain (loss)		(17	)		(72	)		186			(121	)
Total other income (expense)	$	(48	)	$	(117	)	$	90		$	(267	)

Income Tax Expense

Our provision for income tax expense was 27 percent and 29 percent of income before income taxes for the three months ended September 30, 2015 and 2014, respectively. Our provision for income tax expense was 31 percent and 30 percent of income before income taxes for the nine-months ended September 30, 2015 and 2014, respectively. The rates in the three and nine-months of 2015 and 2014 were lower than the statutory rate due primarily to the effect of foreign operations where tax rates tend to be lower, the domestic manufacturing deduction, and the provision to return discrete items related to returns filed in the three month periods. The increase in the effective tax rate for 2015 as compared to 2014 is primarily due to the lower proportion of projected taxable income from domestic operations in 2015.

Based on current projected annual operating results, current income tax rates, and current legislation, we expect the effective tax rate for the remainder of 2015 to be consistent with our experience in the first nine-months. It is possible, however, that legislation will be enacted allowing for the research and development credit. If legislation is passed re-enacting the research and development credit for 2015 our effective tax rate would be favorably impacted. The benefit of the research and development credit in 2014 reduced the effective tax rate by 4 percentage points. We would expect similar results for 2015. The overall effective tax rate may fluctuate over time based on the income tax rates in the various jurisdictions in which we operate, and also the level of pre-tax profits in those jurisdictions.

Operating Income and Net Income 

While the strengthening of the U.S. dollar negatively impacted our revenue for the three and nine-month periods, there is much less of an effect to our operating income due to a large portion of the costs to support our international businesses are denominated in foreign currencies, which provides a natural hedge mitigating the negative effect of a strengthening dollar to operating profits. Operating income was $1.6 million in the third quarter 2015 compared to $2.5 million in the third quarter 2014. Operating income was $3.8 million for the nine-months ended September 20, 2015 compared to $5.4 million in the nine-month comparable period of 2014. The decline in the three and nine-month periods is primarily due to the decline in gross profit contribution as discussed above.

Net income was approximately $1.2 million in the third quarter 2015, compared to a net income of approximately $1.7 million in the third quarter 2014. Diluted net income per share was $0.20 and $0.29 in the three-months ended September 30, 2015 and 2014, respectively. Net income was approximately $2.7 million in the nine-months of 2015, compared to a net income of approximately $3.6 million in the nine-months of 2014. Diluted net income per share was $0.46 and $0.62 in the nine-months ended September 30, 2015 and 2014, respectively.

Liquidity and Capital Resources

Total cash and cash equivalents increased $81,000 to $6.4 million during the nine-months ended September 30, 2015, compared to $6.3 million at December 31, 2014. Included in the September 30, 2015 total was $5.6 million held outside of the United States. The year-to-date increase in cash and cash equivalents was primarily due to cash provided from operations of approximately $4.4 million, offset by dividend payments of $1.9 million, and purchases of fixed assets totaling $1.1 million. Of the $10.0 million available, we had $3.5 million and $3.3 million, respectively, outstanding on the revolving lines of credit as of September 30, 2015 and December 31, 2014. The U.S. revolving line of credit accrues interest at 1.50 percent over the one-month LIBOR rate, which totaled 1.70 percent at September 30, 2015. The revolving line of credit related to our U.S. borrowings are due on August 26, 2018, and we are subject to certain financial and restrictive covenants.

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Our working capital, current assests minus current liabilities, went up $4.2 million to $16.3 million compared to $12.1 million as of September 30, 2015 and December 31, 2014, respectively. Our cash and cash equivalents balance was negatively impacted during the nine-months ended September 30, 2015 by approximately $376,000 due to the currency rate fluctuations.

On October 27, 2015, we implemented a Realignment Plan which is expected to reduce our cost structure by approximately $1.7 million annually by decreasing our U.S. headcount by 5 percent, including eliminating a number of recently vacant positions. The realignment activities are expected to be completed no later than December 31, 2015 and will result in a non-recurring charge of approximately $500,000 in the fourth quarter of 2015 related to separation costs. The total estimated cash payout of separation benefits is $450,000. The estimated non-cash expense is expected to be $50,000.

 One of our strategic objectives is, as market and business conditions warrant, to consider acquisitions of, or investments in, businesses, products and/or technologies. If we wish to pursue one or more additional acquisition opportunities, this may require the consent of the Bank under the credit agreement we have executed, and we may need to fund such activities with a portion of our cash balances and debt 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 additional restrictive covenants that could limit our operational flexibility and higher interest expense could dilute earnings per share.

We may invest a portion of our available cash in highly liquid marketable securities consisting primarily of certificates of deposits, 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.

A significant amount of our earnings are generated outside of the U.S.A and are indefinitely reinvested in non-U.S.A subsidiaries, resulting in the majority of our cash being held outside the U.S.A. which are available for use by our non-U.S.A. operations. If these funds were repatriated to the U.S.A or used for U.S.A. operations, the amounts would be subject to U.S.A. tax. Therefore, as we continue to accumulate earnings outside of the U.S.A, and use the cash generated from U.S.A operations as well as borrowings to meet our U.S.A. cash needs. Should we require more capital in the U.S.A. than is generated by our U.S.A. operations, we could elect to repatriate earnings from our non-U.S.A. subsidiaries, seek additional borrowing capacity or to raise additional capital in the U.S.A. These alternatives could result in higher effective income tax rates, additional interest expense or other dilution of our earnings.

Cash Flow

Cash Flow from Operating Activities

Our primary source of funds has historically been cash provided by operating activities. In the first nine-months of 2015, cash provided by operations totaled approximately $4.4 million, due primarily to net income of $2.7 million, adjusted by non-cash depreciation and amortization of $1.8 million, and a decrease in accounts receivable of $704,000, a decrease in inventory of $113,000 which was offset by a decrease in accrued compensation of $1.0 million and a decrease in accounts payable of $1.5 million. 

In the first nine-months of 2014, cash provided by operations totaled approximately $6.4 million, due primarily to net income of $3.6 million, non-cash depreciation and amortization of $1.9 million, an increase in deferred revenue of $588,000, and an decrease in trade accounts receivable of $843,000. These increases in cash from operating activities were partially offset from an increase in inventories of $1.3 million, and a reduction in deferred income taxes of $309,000.

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Cash Flow from Investing Activities

Cash used in investing activities totaled approximately $1.1 million in the first nine-months of 2015 due primarily to the purchase of property, plant and equipment and intangible assets totaling $1.1 million. 

Cash used in investing activities totaled approximately $1.1 million in the first nine-months of 2014 due primarily to the purchase of property, plant and equipment and intangible assets of $1.4 million, partially offset by the receipt of proceeds from maturities of marketable securities of $205,000.

Cash Flow from Financing Activities

Cash used in financing activities in the first nine-months of 2015 totaled approximately $2.8 million due primarily to dividends paid of $1.9 million and payment for term debt of $692,000. These uses of cash were partially offset by the proceeds received from stock option exercises of $161,000.

Cash used in financing activities in the first nine-months of 2014 totaled approximately $3.0 million due primarily to a reduction of our term notes payable of $1.6 million and dividends paid of $1.9 million. These uses of cash were partially offset by the proceeds received from stock option exercises of $285,000 and net proceeds from our revolving line of credit of $240,000.

Although we have repurchased shares of our common stock in the past, we currently are not authorized by our Board of Directors to make repurchases of our common stock. Under the credit agreement with the Bank, we are able to purchase up to $2.0 million in shares of our common stock without the Bank’s approval.

Contractual Obligations

The following table summarizes our future contractual cash obligations as of September 30, 2015 (expressed in thousands):

	Payments Due By Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Revolving lines of credit	$	3,563	$	-	$	3,563	$	-	$	-
Operating and capital leases		6,570		1,076		1,651		986		2,857
Purchase obligations		3,960		3,960		-		-		-
Total contractual cash obligations	$	14,093	$	5,036	$	5,214	$	986	$	2,857

In August 2015 the Company entered into a 3 year capital lease for a new phone system. The capital lease has an imputed interest rate of 1.70 percent per annum.

In connection with our Realignment Plan, we expect to make separation benefit payments of approximately $450,000 in the fourth quarter of 2015. These amounts are not included in the contractual obligations table.

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 financing, liquidity, market or credit risk that could arise if we had engaged in these arrangements.

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Recently Issued Accounting Guidance

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board issued new accounting requirements for the recognition of revenue from contracts with customers. The requirements of the new standard are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. We are currently evaluating the impact of this guidance on our results of operations and financial position.

Inventory – Simplifying the Measurement of Inventory

In July 2015, the Financial Accounting Standards Board issued new accounting guidance in an effort to simplify the measurement of inventory. The requirements of the new standard are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. We are currently evaluating the impact of this guidance on our results of operations and financial position.

Critical Accounting Policies

Our most critical accounting policies, which are those that require significant judgment, include policies related to revenue recognition, allowance for doubtful accounts, accrual for excess and obsolete inventories, recoverability of long-lived assets, goodwill and income taxes. An in-depth description of these can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Management has not changed the method of calculating and using estimates and assumptions in preparing our condensed consolidated financial statements in accordance with generally accepted accounting principles. There have been no changes in the policies for our accounting estimates for the quarter ended September 30, 2015.

Forward-Looking Statements

This report contains forward-looking statements that involve future events, our future performance and our future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. These forward-looking statements may be contained in the notes to our consolidated financial statements and elsewhere in this report, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Some of the factors known to us that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements are described below.

● Failure to maintain effective internal controls over financial reporting;

● Failure to realize the expected results from the 2012 Dansensor acquisition;

● Decline in overall economic or business conditions;

● Failure to comply with our bank covenants;

● Failure to develop new products and technologies, delays in new product introduction and lack of market acceptance of new products;

● Failure to attract and retain qualified managerial and technical personal;

● The impact of technological changes that could render our products obsolete;

● Risks inherent in operating internationally and selling and shipping our products and purchasing our products and components internationally;

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● Fluctuations in foreign currency exchange rates and interest rates;

● The impact of the Euro value decline against the United States dollar;

● Highly competitive nature of the markets in which we sell our products and the introduction of competing products;

● Reliance on patents, domestic trademarks laws, trade secrets and contractual provisions;

● Exposure to the fluctuation of our common stock market price;

● Compliance with securities laws and regulations;

● Increases in prices for raw materials;

● Effects of introducing new products into the marketplace with minimal acceptance concurrently;

● Declining oil prices adversely affecting our revenue in Industrial Analyzers and Other segment;

● Effects of any potential litigation;

● Failure to comply with applicable laws and regulations and adverse changes in applicable laws or regulations; or

● Changes in generally accepted accounting principles

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

Today, nearly 66 percent of our consolidated revenue is generated from international customers. In our U.S. operations, we invoice most of these customers in U.S, dollars, so we do not have significant exposure to foreign currency transaction risk. In our European based operations, we have some exposure to foreign currency fluctuations as we invoice our customers primarily in euros, Danish krone and U.S. dollars. From time to time we use foreign exchange hedging contracts to reduce our exposure in these transactions. We also pay a number of our employees, international suppliers and service providers in their local currency which exposes us to transaction gain or loss. These have not resulted in material amounts in the past. Our foreign operations expose us to foreign currency exchange risk when the Danish krone, euro and yuan currency results of operations are translated to U.S. dollars. Except for the current period, we historically have not experienced any material foreign currency translation gains or losses. During the nine months ended September 30, 2015, we recognized a foreign translation gain of $186,000. Further, foreign currency translation had an unfavorable impact of $4.5 million on our revenue for the nine-month period ended September 30, 2015 compared to the prior year period.   

To mitigate the effect of any further currency fluctuations in our loan obligations for Dansensor, we purchased a foreign currency contract which acted as an economic hedge against any additional gains or losses. We experienced a net $11,000 foreign currency transactional loss during the nine months ended September 30, 2015 primarily due to the weakening of European currencies affecting long lived assets on the consolidated balance sheet. Our balance sheet related translation loss is recorded in accumulated other comprehensive income (loss) on the consolidated balance sheet.

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

-23-

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (Exchange Act), 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. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered in this Quarterly Report on Form 10-Q. Based on the evaluation, the Chief Executive Officer and the 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 and our consolidated subsidiaries 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.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.     OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

We are affected by risks specific to us as well as factors that affect all businesses operating in a global market. The significant factors known to us that could materially adversely affect our business, financial condition or operating results or could cause our actual results to differ materially from our expectations are described in our annual report on Form 10-K for the fiscal year ended December 31, 2014 under the heading “Part I – Item 1A. Risk Factors.” There has been no material change in those risk factors, except for the addition of the following:

We recently implemented a realignment plan, which may result in additional or unanticipated non-recurring charges, and we may not be able to achieve the cost savings expected from these realignment efforts.

To improve our profitability, we implemented a realignment plan during the fourth quarter of 2015. These changes were made primarily to bring the Package Testing and Permeation segment sales and marketing functions under common leadership and also decrease our U.S. head count by 5 percent. These changes were also designed to strengthen our market presence and provide a cost-effective approach to achieving our objectives.

However, we may not be able to achieve the level of benefits that we expect to realize from these or any future realignment activities, within expected timeframes, or at all. Changes in the amount, timing and character of charges related to our current or future realignment activities and the failure to complete, or a substantial delay in completing, our current and any future realignment plan could have a material adverse effect on our financial results.

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

Unregistered Sales of Equity Securities

We did not sell any equity securities of MOCON, Inc. during the three and nine-month period ended September 30, 2015 that were not registered under the Securities Act of 1933.

Issuer Repurchases of Equity Securities

We did not repurchase any equity securities of MOCON, Inc. during the three-months ended September 30, 2015.

Item 3. Defaults Upon Senior Securities

None.

Items 4. Mine Safety Disclosures

None.

Item 5. Other Information

On November 6, 2015, MOCON entered into an Employment and Transition Agreement( “Transition Agreement”) with Daniel W. Mayer, Chief Technology Officer and Executive Vice President, effective December 31, 2015. Pursuant to the terms of the Transition Agreement, Mr. Mayer's previously executed severance agreement will no longer be in effect and Mr. Mayer’s title will be Chief Technology Adviser. Further, effective January 1, 2016, Mr. Mayer will continue employment with MOCON, Inc. as a part-time employee through December 31, 2016.

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Item 6.  Exhibits

The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:

Exhibit No.	Description
10.1	Transition Agreement with Daniel W. Mayer
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101	The following materials from MOCON, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Income, (iii) the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. (filed herewith)

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SIGNATURES

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

	MOCON, INC.
Date: November 6, 2015	/s/ Robert L. Demorest
	Robert L. Demorest
	Chairman, President and Chief
	Executive Officer
	(Principal Executive Officer)
Date: November 6, 2015	/s/ Elissa Lindsoe
	Elissa Lindsoe
	Chief Financial Officer, Vice President, Treasurer and Secretary
	(Principal Financial and Accounting Officer)

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MOCON, INC.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2015

EXHIBIT INDEX

Exhibit No.	Description
10.1	Transition Agreement with Daniel W. Mayer
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101	The following materials from MOCON, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Income, (iii) the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

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EX-10.1

Exhibit 10.1

Employment & Transition Agreement

This Agreement is entered into, effective November 6, 2015, by and between MOCON Inc., with corporate headquarters at 7500 Mendelssohn Avenue North, Minneapolis, MN 55428 (the “Company”) and Daniel W. Mayer (“Mayer”). The Company and Mayer are the “Parties.”

Whereas, Mayer is currently the Chief Technology Officer and Executive Vice President of the Company as well as a director of the Company; and

Whereas, Mayer and the Company have agreed that Mayer’s employment with the Company will transition to a part-time basis beginning January 1, 2016.

Therefore, in consideration of the foregoing premises and the mutual exchange of promises contained herein, the Parties mutually agree to the following:

1. Employment Terms.

a. Subject to Section 8 below, from and after the date hereof through December 31, 2015, the Company will continue to employ Mayer on a full time basis in the same capacity in which he is currently employed.

b. Subject to Section 8 below, Company will employ Mayer on a part-time basis beginning January 1, 2016 and continuing through December 31, 2016, at which time (unless the Parties agree no later September 30, 2016 to extend Mayer’s employment with the Company) Mayer will voluntarily retire and his employment with the Company shall terminate (the period between January 1, 2016 and Mayer’s last day of employment is the “Transition Term”).

c. During his period of employment with the Company during the Transition Term, Mayer will be paid a base salary of $133,133 (less payroll deductions and withholdings as reasonably determined by the Company), which will be paid in accordance with the Company’s standard payroll practices.

d. During his period of employment with the Company during the Transition Term, Mayer will be able to use any vacation time that was accrued and unused as of January 1, 2016 and Mayer will accrue vacation time during 2016 in accordance with the Company’s policies. Any accrued and unused vacation at the end of the Transition Term will be treated in accordance with Company policy and applicable law.

2. Title. During the Transition Term, Mayer’s title will be “Chief Technology Adviser” and Mayer will report directly to the Company’s Chief Executive Officer (“CEO”).

Page 1 of 5

3. Duties.

a. During his period of employment with the Company during the Transition Term, CEO will from time to time, with input from Mayer and the Company’s CFO and COO, determine the priorities and projects that Mayer will work on during such time and will communicate the same to Mayer along with budgets for each project. It is currently expected that Mayer’s primary activities will involve intellectual property matters (including assistance with patent prosecution, enhancing existing technology and developing new technology), including a role in applied technology around sensors, testing methods and miniaturization. All work product of Mayer during his employment will be subject to the Agreement Relating to Inventions, Secret Processes, Copyrights, Trademarks, Trade Names, Confidentiality and Non-Competition dated November 20, 1997 (the “Employee NDA”).

b. During his period of employment with the Company during the Transition Term, Mayer will work an average of approximately 20 hours each week (subject to the use of vacation days, as contemplated above), with substantially all of his working hours being done from Mayer’s home. The Company and Mayer will cooperate to send the necessary files to Mayer’s house and Mayer will keep all Company’s files in a secure and locked location while they are in his home. Upon Mayer’s termination of employment with the Company, Mayer will arrange, at the Company’s expense, to have all files delivered to the Company’s headquarters.

4. Benefits. During the Transition Term, Mayer will not be eligible to participate in any benefit programs offered by the Company that are limited to full time employees.

5. COBRA Reimbursements. Upon the commencement of the Transition Term, if Mayer timely elects COBRA continuation coverage, the Company will reimburse him for the first three months of 2016 for the difference between the amount Mayer pays for COBRA continuation coverage for himself compared to what Mayer would pay if he were eligible for active employee coverage for himself in each such month (“COBRA Reimbursements”). The Company will make such COBRA Reimbursement payments no later than ten (10) days after the date Mayer submits the reimbursement request to the Company; provided, Mayer must submit requests (if at all) so that payment is made no later than the end of the Transition Term.

6. Incentive Pay. During the Transition Term, Mayer will not be eligible to participate in the Company’s annual incentive compensation programs or special performance bonus plan, nor will Mayer receive any equity awards, although any unvested equity awards received by Mayer prior to the commencement of the Transition Term will vest during the Transition Term in accordance with the terms of the plan under which any such award was made. Mayer will be eligible for equity awards and incentive payments earned or awarded during 2015 consistent in accordance with the terms of such plans as administered by the Compensation Committee of the Company’s Board of Directors. Notwithstanding the foregoing, the CEO may, in his discretion and subject to approval by the Company’s Compensation Committee, set individual performance goals for Mayer during the Transition Term and if such goals are set and met (as determined by CEO), then Mayer will be eligible to receive any compensation tied to the achievement of such goals.

Page 2 of 5

7. Vehicle. During his period of employment with the Company during the Transition Term, Mayer will continue to have access to the vehicle that he currently uses that is paid for by the Company. At the end of the Transition Term, Mayer will have the opportunity to purchase the vehicle at the then current book value, consistent with Company policy. Mayer will be responsible for any taxes that become owing as a result of any such purchase.

8. Early Termination of Employment. This Agreement and Mayer’s employment with the Company shall terminate in accordance with the following:

a. This Agreement and Mayer’s employment shall automatically terminate upon Mayer’s death. Any unpaid salary amount owed to Mayer as of the date of his death shall be paid to Mayer’s estate.

b. This Agreement and Mayer’s employment shall terminate upon his voluntary resignation as an employee of the Company.

c. This Agreement and Mayer’s employment shall automatically terminate immediately upon the giving of written notice by the Company to Mayer of: (i) Mayer’s violation of any laws or regulations; (ii) any misrepresentation, malfeasance, criminal act, or act of dishonesty or insubordination by Mayer; or (iii) Mayer’s breach of any provision of this Agreement. Any unpaid salary amount owed to Mayer as of the date of his termination of employment shall be paid to Mayer.

d. If neither a., b. nor c. above occurs, then Mayer’s employment with the Company will continue, in accordance with the terms of this Agreement, through the Transition Term as provided in Section 1 above.

9. Board of Directors. Mayer’s membership on the Company’s Board of Directors is separate and apart from his employment. Mayer shall continue to be a member of the Board of Directors of the Company so long as he does not resign from the Board and so long as he continues to be elected to the Board of Directors by the shareholders of the Company. Each of Mayer and the Company acknowledges that it is the decision of the Company’s Board of Directors, on the recommendation of the Company’s Nominating and Governance Committee, whether or not to nominate Mayer for election to the Board of Directors at the 2016 Annual Meeting of the Company and Mayer agrees he will not take any action against the Company or any directors of the Company in the event he is not nominated for election to the Board of Directors at the 2016 Annual Meeting.

Page 3 of 5

10. Construction. This Agreement shall be interpreted and enforced in accordance with the laws of the state of Minnesota.

11. Successors. This Agreement shall be binding upon and inure to the benefit of the Company and its respective successors and assigns.

12. Notice. Any notice required or permitted to be given under this Agreement or by law shall be sufficient if it is in writing and either personally delivered or mailed by certified or registered mail with return receipt requested, postage prepaid, to the other Party at the address listed above. Either Party may change its address for the purpose of this Agreement by written notice to the other in the manner described in this section.

13. Modification and Non-Waiver. No amendment or modification of this Agreement shall be valid or binding, nor shall any waiver of any provision of this Agreement be valid or binding, unless in writing and signed by Mayer and the President of the Company. No valid waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement, or of the same provision at any other time.

14. Drafting. This Agreement shall not be construed more strictly against one Party than the other merely by virtue of the fact that it has been prepared initially by counsel for one of the Parties, it being recognized that both Mayer and the Company and their respective counsel have had a full and fair opportunity to negotiate and review the terms and provisions of this Agreement and to contribute to its substance and form.

15. Severability. In case any part of this Agreement is held invalid or unenforceable, the validity, and enforceability of the remaining provisions will not be affected in any way, it being intended that the provisions of this Agreement are severable; however, if Section 1 of this Agreement is held invalid, illegal, or unenforceable, this Agreement will be considered voidable by the Company.

15. Entire Agreement. The Parties expressly acknowledge that they have read this Agreement, understand it, and agree to be bound by its terms. The Parties do further acknowledge that this Agreement contains the entire understanding of the Parties regarding the terms and conditions of Mayer’s employment by the Company, superseding any and all previous oral and written agreements or understandings regarding such employment except for the Employee NDA which shall remain in effect in accordance with its terms. Without limiting the generality of the foregoing, the Executive Severance Agreement between the Company and Mayer dated November 14, 2007 is hereby terminated and neither the Company nor Mayer shall have any further rights or obligations thereunder. The Parties acknowledge and agree that, except as stated herein, the Parties have offered no promise or inducement for this Agreement and the Parties execute this Agreement without relying on any statement or representation by any other party, or its representatives.

Page 4 of 5

16. Counterparts. This Agreement may be signed in counterparts. Scanned copies shall have the same force and effect as original copies.

IN WITNESS WHEREOF, the Parties have reviewed this Agreement, understand and agree to be bound by its terms, and have signed this Agreement knowingly, as a voluntary act of their own free will and deed, and after having had the opportunity to consult with legal counsel.

Daniel W. Mayer	MOCON, Inc.
/s/ Daniel W. Mayer	/s/ Elissa Lindsoe
Name	By: Elissa Lindsoe
Title	Its: Chief Financial Officer
Date: November 6, 2015	Date: November 6, 2015

Page 5 of 5

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert L. Demorest, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of MOCON, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2015

/s/ Robert L. Demorest

Robert L. Demorest

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Elissa Lindsoe, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of MOCON, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2015

/s/ Elissa Lindsoe

Elissa Lindsoe

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MOCON, Inc. on Form 10-Q for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert L. Demorest, Chief Executive Officer of MOCON, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of MOCON, Inc.

Date: November 6, 2015

/s/ Robert L. Demorest

Robert L. Demorest

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MOCON, Inc. on Form 10-Q for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elissa Lindsoe, Chief Financial Officer of MOCON, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of MOCON, Inc.

Date: November 6, 2015

/s/ Elissa Lindsoe

Elissa Lindsoe

Chief Financial Officer

XML

Note 7 - Future Minimum Principal Payments of the Long-term Notes Payable (Details) $ in Thousands	Sep. 30, 2015 USD ($)
Notes Payable [Member]
2015	$ 16
2016	65
2017	57
2018	37
	175
	$ 175

XML

Note 11 - Subsequent Event (Details Textual) - Realignment Plan [Member] - USD ($)		3 Months Ended
	Oct. 27, 2015	Dec. 31, 2015
Subsequent Event [Member] | UNITED STATES
Restructuring Reserve, Period Increase (Decrease)	$ (1,700,000)
Restructuring and Related Cost, Number of Positions Eliminated, Period Percent	(5.00%)
Scenario, Forecast [Member] | One-time Termination Benefits [Member]
Payments for Restructuring		$ 450,000
Scenario, Forecast [Member]
Other Nonrecurring Expense		500,000
Restructuring Estimated Non-cash Charges		$ 50,000

XML

Note 10 - Business Segments (Details Textual)	9 Months Ended
	Sep. 30, 2015
Number of Operating Segments	4
Number of Reportable Segments	3

XML

Note 4 - Estimated Amortization Expense (Details) $ in Thousands	Sep. 30, 2015 USD ($)
2015	$ 296
2016	1,178
2017	1,149
2018	1,116
2019	1,112
2020 & Thereafter	3,955
	$ 8,806

XML

Note 9 - Share-based Compensation (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Total cost of share-based compensation	$	167		$	129		$	488		$	413
Amount of income tax benefit recognized in earnings		(20	)		(24	)		(81	)		(67	)
Amount charged against net income	$	147		$	105		$	407		$	346

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2015			2014
Dividend yield		3.40	%		3.40	%
Expected volatility		36	%		37	%
Risk-free interest rate		1.63	%		1.70	%
Expected lives (in years)		9.95			6.4

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual		Value
	Shares			Price		Term		(in thousands)
Options outstanding, December 31, 2014		722,675		$	14.35		4.57	$	2,555
Granted		15,300			13.26		9.89		-
Exercised		(44,115	)		12.58		-		-
Cancelled or expired		(7,275	)		16.34		-		-
Options outstanding, September 30, 2015		686,585		$	14.42		4.02	$	566
Options exercisable, September 30, 2015		498,935		$	13.74		3.32	$	562

Schedule of Share-based Compensation Stock Options Unvested Activity [Table Text Block]

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2014		227,400		$	4.35
Options granted		15,300		$	3.71
Options cancelled		(6,300	)	$	3.63
Options vested		(48,750	)	$	5.41
Unvested at September 30, 2015		187,650		$	4.02

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Note 9 - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Total cost of share-based compensation	$ 167	$ 129	$ 488	$ 413
Amount of income tax benefit recognized in earnings	(20)	(24)	(81)	(67)
Amount charged against net income	$ 147	$ 105	$ 407	$ 346

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Note 7 - Debt (Details Textual) DKK in Millions		8 Months Ended	9 Months Ended	12 Months Ended
	Aug. 28, 2015 USD ($)	Aug. 27, 2015 USD ($)	Sep. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 30, 2015 DKK
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	0.015%	0.0175%	0.015%	0.015%
Revolving Credit Facility [Member]
Debt Instrument, Maturity Date	Aug. 26, 2018
Long-term Line of Credit			$ 3,500,000	$ 3,300,000
London Interbank Offered Rate LIBOR			0.20%	0.20%
Line of Credit Facility, Maximum Borrowing Capacity	$ 10,000,000	$ 6,000,000
Line of Credit Facility, Interest Rate at Period End			1.70%	1.93%	1.70%
Debt Instrument Percentage of Common Stock Secured			65.00%
Dansensor [Member]
Long-term Line of Credit			$ 0	$ 0
Line of Credit Facility, Maximum Borrowing Capacity			$ 1,500,000		DKK 10
Debt Instrument, Interest Rate, Stated Percentage			4.35%		4.35%

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Note 10 - Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Package Testing Segment [Member]
Revenue	$ 6,454	$ 7,342	$ 19,684	$ 21,320
Operating Income ( loss)	944	993	2,361	1,702
Permeation Segment [Member]
Revenue	6,482	5,729	18,550	16,622
Operating Income ( loss)	1,006	1,228	2,755	2,923
Industrial Analyzers and Other Segment [Member]
Revenue	2,556	3,578	7,667	9,595
Operating Income ( loss)	(326)	266	(1,289)	769
Revenue	15,492	16,649	45,901	47,537
Operating Income ( loss)	$ 1,624	$ 2,487	$ 3,827	$ 5,394

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Note 3 - Net Income Per Common Share

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Earnings Per Share [Text Block]

Note 3 – Net Income Per Common Share

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

The following table presents a reconciliation of the denominators used in the computation of net income per common share – basic, and net income per common share – diluted, for the three and nine-months ended September 30, 2015 and 2014 (expressed in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Weighted shares of common stock outstanding - basic		5,753		5,668		5,748		5,655
Dilutive impact of share-based awards		55		108		78		113
Weighted shares of common stock outstanding - diluted		5,808		5,776		5,826		5,768

Outstanding stock options totaling 431,560 for the three-months ended September 30, 2015 and 316,310 for the nine-months ended September 30, 2015 were excluded from the net income per common share calculation because the shares would be anti-dilutive. Outstanding stock options totaling 251,000 for the three-month period ended September 30, 2014 and none for the nine-months ended September 30, 2014 were excluded from the net income per common share calculation because the shares would be anti-dilutive.

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Note 9 - Valuation Assumptions (Details) - Employee Stock Option [Member]	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Dividend yield	3.40%	3.40%
Expected volatility	36.00%	37.00%
Risk-free interest rate	1.63%	1.70%
Expected lives (in years)	9 years 346 days	6 years 146 days

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Note 3 - Reconciliation of Denominators Used in Computation of Net Income per Common Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Basic (in shares)	5,753	5,668	5,748	5,655
Dilutive impact of share-based awards (in shares)	55	108	78	113
Diluted (in shares)	5,808	5,776	5,826	5,768

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Note 3 - Net Income Per Common Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	431,560	251,000	316,310	0

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Note 9 - Information Regarding Company's Stock Option Plans (Details) - Employee Stock Option [Member] - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Options outstanding (in shares)	722,675
Options outstanding, Weighted Average Exercise Price (in dollars per share)	$ 14.35
Options outstanding, Weighted Average Remaining Contractual Term	4 years 7 days	4 years 208 days
Options outstanding, Aggregate Intrinsic Value	$ 2,555
Granted, Shares (in shares)	15,300
Granted, Weighted Average Exercise Price (in dollars per share)	$ 13.26
Exercised, Shares (in shares)	(44,115)
Exercised, Weighted Average Exercise Price (in dollars per share)	$ 12.58
Cancelled or expired, Shares (in shares)	(7,275)
Cancelled or expired, Weighted Average Exercise Price (in dollars per share)	$ 16.34
Options outstanding (in shares)	686,585	722,675
Options outstanding, Weighted Average Exercise Price (in dollars per share)	$ 14.42	$ 14.35
Options outstanding, Aggregate Intrinsic Value	$ 566	$ 2,555
Options exercisable, Shares (in shares)	498,935
Options exercisable, Weighted Average Exercise Price (in dollars per share)	$ 13.74
Options exercisable, Weighted Average Remaining Contractual Term	3 years 116 days
Options exercisable, Aggregate Intrinsic Value	$ 562

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Note 4 - Goodwill and Intangible Assets (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Amortization of Intangible Assets	$ 298,000	$ 323,000	$ 894,000	$ 964,000

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Note 4 - Changes in Carrying Amount of Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($)
Package Testing Segment [Member]
Balance as of December 31, 2014	$ 5,508
Foreign currency translation	(396)
Balance as of September 30, 2015	5,112
Permeation Segment [Member]
Balance as of December 31, 2014	2,029
Foreign currency translation	(125)
Balance as of September 30, 2015	1,904
Industrial Analyzers and Other Segment [Member]
Balance as of December 31, 2014	$ 610
Foreign currency translation
Balance as of September 30, 2015	$ 610
Balance as of December 31, 2014	8,147
Foreign currency translation	(521)
Balance as of September 30, 2015	$ 7,626

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Note 2 - Inventories

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note 2 – Inventories

Inventories consist of the following (expressed in thousands):

	September 30,		December 31,
	2015		2014
Finished products	$	1,207	$	1,628
Work-in-process		2,739		2,574
Raw materials		4,444		4,503
	$	8,390	$	8,705

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Note 4 - Other Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Patents [Member]
Cost	$ 1,821	$ 1,719
Accumulated Amortization	(429)	(416)
Intangible assets, net	1,392	1,303
Trademarks and Trade Names [Member]
Cost	3,418	3,676
Accumulated Amortization	(727)	(644)
Intangible assets, net	2,691	3,032
Developed Technology Rights [Member]
Cost	6,314	6,843
Accumulated Amortization	(2,455)	(2,091)
Intangible assets, net	3,859	4,752
Customer Relationships [Member]
Cost	738	800
Accumulated Amortization	(287)	(245)
Intangible assets, net	451	555
Internally Developed Software [Member]
Cost	1,085	1,085
Accumulated Amortization	(127)	(46)
Intangible assets, net	958	1,039
Other Intangible Assets [Member]
Cost	214	255
Accumulated Amortization	(109)	(105)
Intangible assets, net	105	150
Cost	13,590	14,378
Accumulated Amortization	(4,134)	(3,547)
Intangible assets, net	$ 9,456	$ 10,831

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Note 8 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Effective Income Tax Rate Reconciliation, Percent	27.00%	29.00%	31.00%	30.00%
Unrecognized Tax Benefits	$ 338,000		$ 338,000		$ 357,000

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Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 6,413	$ 6,332
Trade accounts receivable, less allowance for doubtful accounts of $173 in 2015 and $181 in 2014	8,710	9,877
Other receivables	631	148
Inventories	8,390	8,705
Prepaid income taxes	435	771
Prepaid expenses, other	844	902
Deferred income taxes	919	766
Total current assets	26,342	27,501
Property, plant and equipment, net of accumulated depreciation of $8,225 in 2015 and $7,874 in 2014	6,028	5,562
Goodwill	7,626	8,147
Intangible assets, net	9,456	10,831
Other assets	$ 90	194
Deferred income taxes		274
TOTAL ASSETS	$ 49,542	52,509
Current liabilities:
Current maturities of notes payable	$ 64	983
Revolving lines of credit		3,300
Accounts payable	$ 3,417	4,402
Accrued compensation and related expenses	2,953	4,120
Other accrued expenses	1,683	731
Accrued product warranties	262	285
Dividends payable	633	631
Deferred revenue	1,025	997
Total current liabilities	10,037	$ 15,449
Revolving lines of credit	3,493
Notes payable	111	$ 307
Obligations to former employees	36	67
Deferred income taxes	1,730	1,856
Accrued income taxes	338	357
Total noncurrent liabilities	5,708	2,587
Total liabilities	$ 15,745	$ 18,036
Shareholders' equity:
Capital stock – undesignated. Authorized 3,000,000 shares; none issued and outstanding in 2015 and 2014
Common stock – $0.10 par value. Authorized 22,000,000 shares; issued and outstanding 5,753,874 shares in 2015 and 5,732,505 shares in 2014	$ 575	$ 573
Additional paid-in capital	7,072	6,427
Retained earnings	31,072	30,265
Accumulated other comprehensive (loss)	(4,922)	(2,792)
Total shareholders' equity	33,797	34,473
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 49,542	$ 52,509

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Note 9 - Summary of Status of Company's Unvested Option Shares (Details) - Employee Stock Option [Member]	9 Months Ended
	Sep. 30, 2015 $ / shares shares
Unvested (in shares)	227,400
Unvested (in dollars per share) | $ / shares	$ 4.35
Options granted (in shares)	15,300
Options granted (in dollars per share) | $ / shares	$ 3.71
Options cancelled (in shares)	(6,300)
Options cancelled (in dollars per share) | $ / shares	$ 3.63
Options vested (in shares)	(48,750)
Options vested (in dollars per share) | $ / shares	$ 5.41
Unvested (in shares)	187,650
Unvested (in dollars per share) | $ / shares	$ 4.02

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net income	$ 2,706	$ 3,569
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense	488	413
Change in fair value of derivative instrument	(3)	172
Loss on disposition of long-term assets	4	16
Depreciation and amortization	1,834	1,924
Deferred income taxes	122	(309)
Excess tax benefit from employee stock plans	(3)	(16)
Changes in operating assets and liabilities:
Trade accounts receivable, net	704	843
Other receivables	(487)	(130)
Inventories	113	(1,340)
Prepaid income taxes	335	47
Prepaid expenses, other	140	33
Accounts payable	(1,471)	253
Accrued compensation and related expenses	(1,006)	(61)
Other accrued expenses	548	77
Accrued product warranties	(12)	(85)
Accrued income taxes	360	436
Deferred revenue	45	588
Net cash provided by operating activities	$ 4,417	6,430
Cash flows from investing activities:
Proceeds from maturities of marketable securities		205
Purchases of property, plant and equipment	$ (1,109)	(999)
Proceeds from sale of property and equipment	54	55
Cash paid for patents and other intangible assets	(185)	(372)
Other	96	(2)
Net cash used in investing activities	(1,144)	(1,113)
Cash flows from financing activities:
Proceeds from the revolving lines of credit	16,466	18,384
Payments on the revolving lines of credit	(16,857)	(18,144)
Payments on notes payable and seller financed note payable	(692)	(1,641)
Proceeds from the exercise of stock options	161	285
Excess tax benefit from employee stock plans	3	16
Dividends paid	(1,897)	(1,865)
Net cash used in financing activities	(2,816)	(2,965)
Effect of exchange rate changes on cash and cash equivalents	(376)	(344)
Net increase in cash and cash equivalents	81	2,008
Beginning of period	6,332	4,133
End of period	6,413	6,141
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes	459	1,067
Cash paid during the period for interest	102	152
Supplemental schedule of noncash investing and financing activities:
Dividends accrued	633	624
Purchases of prepaid expenses, fixed assets and intangibles in accounts payable	276	$ 174
Transfers of inventory to fixed assets	117
Purchases of fixed assets in notes payable	162
Transfer of note payable to Bank balance to the revolving line of credit	$ 585

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Note 6 - Warranty (Details Textual)	9 Months Ended
	Sep. 30, 2015
Product Warranty Period Low End of Range	90 days
Product Warranty Period High End of Range	1 year

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Note 5 - Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Beginning balance	$	(4,935	)	$	359		$	(2,792	)	$	613
Foreign currency translation adjustments		13			(2,107	)		(2,130	)		(2,361	)
Accumulated other comprehensive (loss)	$	(4,922	)	$	(1,748	)	$	(4,922	)	$	(1,748	)

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Note 6 - Warranty Provisions and Claims (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Beginning balance	$ 293	$ 231	$ 285	$ 336
Warranty provisions	46	112	263	157
Warranty claims	(77)	(102)	(286)	(252)
Ending Balance	$ 262	$ 241	$ 262	$ 241

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Note 7 - Debt (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

	September 30, 2015		December 31, 2014
Note payable to bank, which was paid off on August 26, 2015	$	-	$	1,166
Seller financed note payable (Seller Note), which was paid off on April 2, 2015		-		95
Capital leases		175		29
Total long-term notes payable		175		1,290
Less current portion of long-term notes payable		64		983
Total long-term notes payable	$	111	$	307

Schedule of Maturities of Long-term Debt and Future Minimum Payments Under Capital Leases [Table Text Block]

2015	$	16
2016		65
2017		57
2018		37
	$	175

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Note 1 - Condensed Consolidated Financial Statements

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

Note 1 – Condensed Consolidated Financial Statements

The condensed consolidated balance sheet as of September 30, 2015, the condensed consolidated statements of income and comprehensive income (loss), for the three and nine-months ended September 30, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America. These interim unaudited condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows at September 30, 2015, and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.

The results of operations for the three and nine-month periods ended September 30, 2015 are not necessarily indicative of operating results for the full year. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, previously filed with the Securities and Exchange Commission.

MOCON Inc. and its subsidiaries, develops, manufacturers and markets measurement, analytical, monitoring and consulting services for customers in the barrier packaging, food, pharmaceutical, consumer products, industrial hygiene, environmental, air quality monitoring, oil and gas exploration and other industries throughout the world.

We report our operating segments as Permeation Products and Services (“Permeation”), Package Testing Products and Services (“Package Testing”), and Industrial Analyzers Products and Services and Other (“Industrial Analyzers and Other”) for financial reporting purposes.

Principles of Consolidation

The consolidated financial statements include our accounts and our wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Trade accounts receivable, allowance for doubtful accounts	$ 173	$ 181
Property, plant and equipment, accumulated depreciation	$ 8,225	$ 7,874
Capital stock, authorized shares (in shares)	3,000,000	3,000,000
Capital stock, shares issued (in shares)	0	0
Capital stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	22,000,000	22,000,000
Common stock, shares issued (in shares)	5,753,874	5,732,505
Common stock, shares outstanding (in shares)	5,753,874	5,732,505

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Note 11 - Subsequent Event

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Subsequent Events [Text Block]

Note 11 – Subsequent Event

On October 27, 2015, we implemented a realignment plan ("Realignment Plan") to bring the sales and marketing functions of our Package Testing and Permeation business segments together under common leadership. The Realignment Plan is expected to reduce our cost structure by approximately $1.7 million annually by decreasing our U.S. headcount by 5 percent, including the elimination of several vacant positions within other areas of the Company. The realignment activities are expected to be completed no later than December 31, 2015 and will result in a non-recurring charge of approximately $500,000 in the fourth quarter of 2015 related to separation costs. The total estimated cash payout of separation benefits is $450,000. The estimated non-cash expense is expected to be $50,000.

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 03, 2015
Entity Registrant Name	MOCON INC
Entity Central Index Key	0000067279
Trading Symbol	moco
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		5,758,604
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include our accounts and our wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

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Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenue:
Products	$ 12,241	$ 13,110	$ 36,442	$ 37,384
Services	2,496	2,745	7,338	7,983
Consulting	755	794	2,121	2,170
Total revenue	15,492	16,649	45,901	47,537
Cost of revenue:
Products	5,707	5,648	16,490	16,318
Services	1,010	992	3,074	3,133
Consulting	457	447	1,515	1,412
Total cost of revenue	7,174	7,087	21,079	20,863
Gross profit	8,318	9,562	24,822	26,674
Selling, general and administrative expenses	5,808	6,125	17,914	18,216
Research and development expenses	886	950	3,081	3,064
Operating income	1,624	2,487	3,827	5,394
Other income (expense), net	(48)	(117)	90	(267)
Income before income taxes	1,576	2,370	3,917	5,127
Income tax expense	424	696	1,211	1,558
Net income	$ 1,152	$ 1,674	$ 2,706	$ 3,569
Basic (in dollars per share)	$ 0.20	$ 0.30	$ 0.47	$ 0.63
Diluted (in dollars per share)	$ 0.20	$ 0.29	$ 0.46	$ 0.62
Basic (in shares)	5,753	5,668	5,748	5,655
Diluted (in shares)	5,808	5,776	5,826	5,768
Cash dividends declared per common share (in dollars per share)	$ 0.11	$ 0.11	$ 0.33	$ 0.33

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Note 6 - Warranty

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

Note 6 – Warranty

We provide a warranty for most of our products. Warranties are for periods ranging from ninety days to one year, and cover parts and labor for non-maintenance repairs.

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. Generally, warranty reserves are also accrued for special rework campaigns for known major product modifications. We also offer extended warranty service contracts for select products when the factory warranty period expires.

Warranty provisions and claims for the three and nine-months ended September 30, 2015 and 2014 were as follows (expressed in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Beginning balance	$	293		$	231		$	285		$	336
Warranty provisions		46			112			263			157
Warranty claims		(77	)		(102	)		(286	)		(252	)
Ending Balance	$	262		$	241		$	262		$	241

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Note 5 - Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

Note 5 – Accumulated Other Comprehensive Income (Loss)

Adjustments to accumulated other comprehensive income (loss) consist of the following (expressed in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Beginning balance	$	(4,935	)	$	359		$	(2,792	)	$	613
Foreign currency translation adjustments		13			(2,107	)		(2,130	)		(2,361	)
Accumulated other comprehensive (loss)	$	(4,922	)	$	(1,748	)	$	(4,922	)	$	(1,748	)

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Note 6 - Warranty (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Beginning balance	$	293		$	231		$	285		$	336
Warranty provisions		46			112			263			157
Warranty claims		(77	)		(102	)		(286	)		(252	)
Ending Balance	$	262		$	241		$	262		$	241

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Note 2 - Inventories (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30,		December 31,
	2015		2014
Finished products	$	1,207	$	1,628
Work-in-process		2,739		2,574
Raw materials		4,444		4,503
	$	8,390	$	8,705

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Note 9 - Share-based Compensation

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 9 – Share-Based Compensation

Stock Option Plans

As of September 30, 2015, we have reserved 545,614 shares of common stock for options and other share-based incentive awards that are still available for grant under our 2006 and 2015 stock incentive plans, and 686,585 shares for options that have been granted under either the 2006 or 2015 stock incentive plan or the 1998 stock option plan but have not yet been exercised. We issue new shares of common stock upon exercise of stock options.

Amounts recognized in the condensed consolidated financial statements related to share-based compensation are as follows (expressed in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Total cost of share-based compensation	$	167		$	129		$	488		$	413
Amount of income tax benefit recognized in earnings		(20	)		(24	)		(81	)		(67	)
Amount charged against net income	$	147		$	105		$	407		$	346

The following assumptions were used to estimate the fair value of options granted during 2015 and 2014 using the Black-Scholes model:

	2015			2014
Dividend yield		3.40	%		3.40	%
Expected volatility		36	%		37	%
Risk-free interest rate		1.63	%		1.70	%
Expected lives (in years)		9.95			6.4

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). We use historical data to estimate the expected price volatility, expected option life and expected forfeiture rate. Our estimates are based on expected volatility for awards granted on daily historical trading data of our 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. We estimate the expected term consistent with historical exercise and cancellation activity of its previous share-based grants with a seven or ten year as applicable contractual term. Forfeitures are 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.

A summary of the option activity for the first nine months of 2015 is as follows

(expressed in thousands, except share and per share amounts)

:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual		Value
	Shares			Price		Term		(in thousands)
Options outstanding, December 31, 2014		722,675		$	14.35		4.57	$	2,555
Granted		15,300			13.26		9.89		-
Exercised		(44,115	)		12.58		-		-
Cancelled or expired		(7,275	)		16.34		-		-
Options outstanding, September 30, 2015		686,585		$	14.42		4.02	$	566
Options exercisable, September 30, 2015		498,935		$	13.74		3.32	$	562

The total intrinsic value of options exercised was $6,000 and $68,000 during the three-months ended September 30, 2015 and 2014, respectively, and $189,000 and $404,000 during the nine-months ended September 30, 2015 and 2014, respectively.

A summary of the status of our unvested option shares as of September 30, 2015 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2014		227,400		$	4.35
Options granted		15,300		$	3.71
Options cancelled		(6,300	)	$	3.63
Options vested		(48,750	)	$	5.41
Unvested at September 30, 2015		187,650		$	4.02

As of September 30, 2015, there was $521,000 of total unrecognized compensation cost related to unvested share-based compensation granted under our plans. That cost is expected to be recognized over a weighted-average period of 1.01 years. The total fair value of option shares vested during the three-months ended September 30, 2015 and 2014 was $88,000 and $77,000, respectively, and $264,000 and $230,000 during the nine-months ended September 30, 2015 and 2014, respectively.

Employee Stock Purchase Plan

On May 27, 2015, our shareholders approved the 2015 Employee Stock Purchase Plan (“Purchase Plan”) whereby 50,000 shares of common stock will be available for future sale. The first offering period will begin January 1, 2016 and provides participants an option to purchase shares of our common stock at a price per share equal to 85 percent of the value of the share of common stock at the beginning or end of the offering period (whichever is less).

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Note 7 - Debt

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 7 – Debt

Notes payable consists of the following (expressed in thousands):

	September 30, 2015		December 31, 2014
Note payable to bank, which was paid off on August 26, 2015	$	-	$	1,166
Seller financed note payable (Seller Note), which was paid off on April 2, 2015		-		95
Capital leases		175		29
Total long-term notes payable		175		1,290
Less current portion of long-term notes payable		64		983
Total long-term notes payable	$	111	$	307

In the U.S., we have a $10.0 million secured revolving line of credit which was amended on August 28, 2015 with a maturity date of August 26, 2018. As of September 30, 2015 the outstanding balance is classified as a noncurrent liability. The amendment increased the principal amount from $6.0 million to $10.0 million, modified the maturity date, decreased the interest rate from 1.75 basis plus one-month LIBOR to 1.50 basis plus one-month LIBOR and revised certain debt covenants

. Interest is charged monthly at one-month LIBOR (0.20 percent) plus 1.50 basis points which totaled 1.70 percent at September 30, 2015 and 1.93 percent at December 31, 2014. The line of credit is secured by our assets with the exception of the number of shares of outstanding stock of Dansensor that exceeds 65 percent of the shares outstanding. We had $3.5 million and $3.3 million outstanding on the line of credit at September 30, 2015 and December 31, 2014. Additionally, Dansensor has a DKK 10 million (approximately $1.5 million) available line of credit of which no amounts were outstanding as of September 30, 2015 and December 31, 2014

. Outstanding borrowings on the Denmark line of credit are charged interest at 4.35 percent per year.

We are subject to various financial and restrictive covenants in the bank Credit Agreement, including maintaining certain financial ratios and limits on incurring additional indebtedness, making capital and lease expenditures and making share repurchases. We are in compliance with our debt covenants at September 30, 2015 and expect to remain in compliance through the next twelve months

.

As of September 30, 2015, the future minimum principal payments of the notes payable for the remainder of 2015 and each of the four succeeding fiscal years to the maturity of the note are as follows (expressed in thousands):

2015	$	16
2016		65
2017		57
2018		37
	$	175

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Note 8 - Income Taxes

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 8 – Income Taxes

Our provision for income tax expense was 27 percent and 29 percent of income before income taxes for the three-months ended September 30, 2015 and 2014, respectively. Our provision for income tax expense was 31 percent and 30 percent of income before income taxes for the nine-months ended September 30, 2015 and 2014, respectively. The rate in the three and nine-months ended of 2015 and 2014 was lower than the statutory rate due primarily to the effect of foreign operations where tax rates tend to be lower, the domestic manufacturing deduction and the provision to return discrete items related to returns filed in the three month periods. The increase in the effective tax rate for 2015 as compared to 2014 is primarily due to the lower proportion of projected taxable income from domestic operations in 2015.

As of September 30, 2015 and December 31, 2014, the liability for gross unrecognized tax benefits was $338,000 and $357,000, respectively. Changes in gross unrecognized tax benefits during the nine-months ended September 30, 2015 were for interest accrued offset by statute limitations release during the third quarter. It is expected that the amount of unrecognized tax benefits for positions which we have identified will not materially change in the next twelve months.

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Note 10 - Business Segments

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note 10 – Business Segments

We have four operating segments, structured by differences in products and services, that are regularly reviewed by our chief operating decision maker to make decisions about allocating resources and assessing segment performance.

The segment performance is evaluated at segment operating income which is defined as gross profit less selling, general and administrative expenses and research and development expenses. General corporate expenses, including costs associated with various support functions such as human resources, information technology, finance and accounting, and general and administrative costs, are allocated to the reportable segments primarily on the basis of segment gross margin. Our four operating segments have been aggregated into three reportable segments. We aggregated our Other Products and Services operating segment into the Industrial Analyzers Products and Services segment based on minimal business activity and materiality.

The Permeation segment includes instruments and services that measure the rate at which various gases and vapors permeate through a variety of materials. The Package Testing segment provides customers with the ability to assess package performance, shelf-life, package improvement, cost reduction, sustainability and product safety using Modified Atmosphere Packaging and other technologies. The Industrial Analyzers and Other segment includes advanced gas analysis and monitoring instrumentation used in applications such as oil and gas exploration, beverage and specialty gas analysis, industrial hygiene and safety, food safety, environmental air monitoring and homeland security.

The accounting policies of the reportable segments are the same as those described in Note 1 to the Consolidated Financial Statements found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Intersegment revenue for the three and nine months ended September 30, 2015 and 2014 were insignificant.

Financial information by reportable segment for the three and nine-months ended September 30, 2015 and 2014 is as follows (expressed in thousands):

	Three Months Ended September 30, 2015					Nine Months Ended September 30, 2015
	Revenue		Operating Income (loss)			Revenue		Operating Income (loss)
Package Testing	$	6,454	$	944		$	19,684	$	2,361
Permeation		6,482		1,006			18,550		2,755
Industrial Analyzers and Other		2,556		(326	)		7,667		(1,289	)
Total	$	15,492	$	1,624		$	45,901	$	3,827

	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
	Revenue		Operating Income		Revenue		Operating Income
Package Testing	$	7,342	$	993	$	21,320	$	1,702
Permeation		5,729		1,228		16,622		2,923
Industrial Analyzers and Other		3,578		266		9,595		769
Total	$	16,649	$	2,487	$	47,537	$	5,394

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Note 5 - Adjustments to Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Beginning balance	$ (4,935)	$ 359	$ (2,792)	$ 613
Foreign currency translation adjustments	13	(2,107)	(2,130)	(2,361)
Accumulated other comprehensive (loss)	$ (4,935)	$ 359	$ (2,792)	$ 613

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Note 4 - Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Goodwill [Table Text Block]

	Package						Industrial Analyzers &
	Testing			Permeation			Other		Total
Balance as of December 31, 2014	$	5,508		$	2,029		$	610	$	8,147
Foreign currency translation		(396	)		(125	)		-		(521	)
Balance as of September 30, 2015	$	5,112		$	1,904		$	610	$	7,626

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	As of September 30, 2015
			Accumulated
	Cost		Amortization			Net
Patents	$	1,821	$	(429	)	$	1,392
Trademarks and trade names		3,418		(727	)		2,691
Developed technology		6,314		(2,455	)		3,859
Customer relationships		738		(287	)		451
Internally developed software		1,085		(127	)		958
Other intangibles		214		(109	)		105
	$	13,590	$	(4,134	)	$	9,456

	As of December 31, 2014
			Accumulated
	Cost		Amortization			Net
Patents	$	1,719	$	(416	)	$	1,303
Trademarks and trade names		3,676		(644	)		3,032
Developed technology		6,843		(2,091	)		4,752
Customer relationships		800		(245	)		555
Internally developed software		1,085		(46	)		1,039
Other intangibles		255		(105	)		150
	$	14,378	$	(3,547	)	$	10,831

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2015	$	296
2016		1,178
2017		1,149
2018		1,116
2019		1,112
2020 & Thereafter		3,955
	$	8,806

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Note 10 - Business Segments (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended September 30, 2015					Nine Months Ended September 30, 2015
	Revenue		Operating Income (loss)			Revenue		Operating Income (loss)
Package Testing	$	6,454	$	944		$	19,684	$	2,361
Permeation		6,482		1,006			18,550		2,755
Industrial Analyzers and Other		2,556		(326	)		7,667		(1,289	)
Total	$	15,492	$	1,624		$	45,901	$	3,827

	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
	Revenue		Operating Income		Revenue		Operating Income
Package Testing	$	7,342	$	993	$	21,320	$	1,702
Permeation		5,729		1,228		16,622		2,923
Industrial Analyzers and Other		3,578		266		9,595		769
Total	$	16,649	$	2,487	$	47,537	$	5,394

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Note 9 - Share-based Compensation (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	May. 27, 2015	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Stock Incentive Plan 2006 and 2015 [Member]
Common Stock, Capital Shares Reserved for Future Issuance		545,614		545,614
Stock Incentive Plan 2006 and Stock Option Plan 1998 [Member]
Common Stock, Capital Shares Reserved for Future Issuance		686,585		686,585
Two Thousand Fifteen Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	50,000
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	85.00%
Employee Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award Fair Value Assumptions Contractual Term				7 years
Employee Stock Option [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award Fair Value Assumptions Contractual Term				10 years
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value		$ 6,000	$ 68,000	$ 189,000	$ 404,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		521,000		$ 521,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				1 year 3 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value		$ 88,000	$ 77,000	$ 264,000	$ 230,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		15,300		15,300

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Net income	$ 1,152	$ 1,674	$ 2,706	$ 3,569
Other comprehensive income (loss):
Cumulative translation adjustment	13	(2,107)	(2,130)	(2,361)
Comprehensive income (loss)	$ 1,165	$ (433)	$ 576	$ 1,208

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Note 4 - Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note 4 – Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2015 were as follows (expressed in thousands): 

	Package						Industrial Analyzers &
	Testing			Permeation			Other		Total
Balance as of December 31, 2014	$	5,508		$	2,029		$	610	$	8,147
Foreign currency translation		(396	)		(125	)		-		(521	)
Balance as of September 30, 2015	$	5,112		$	1,904		$	610	$	7,626

We test goodwill for impairment annually at the reporting unit level using a fair value approach. We will perform our annual impairment test for goodwill in the fourth quarter.

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

	As of September 30, 2015
			Accumulated
	Cost		Amortization			Net
Patents	$	1,821	$	(429	)	$	1,392
Trademarks and trade names		3,418		(727	)		2,691
Developed technology		6,314		(2,455	)		3,859
Customer relationships		738		(287	)		451
Internally developed software		1,085		(127	)		958
Other intangibles		214		(109	)		105
	$	13,590	$	(4,134	)	$	9,456

	As of December 31, 2014
			Accumulated
	Cost		Amortization			Net
Patents	$	1,719	$	(416	)	$	1,303
Trademarks and trade names		3,676		(644	)		3,032
Developed technology		6,843		(2,091	)		4,752
Customer relationships		800		(245	)		555
Internally developed software		1,085		(46	)		1,039
Other intangibles		255		(105	)		150
	$	14,378	$	(3,547	)	$	10,831

Total amortization expense for the three-months ended September 30, 2015 and 2014 was $298,000 and $323,000, respectively, and $894,000 and $964,000, respectively, for the nine-months ended September 30, 2015 and 2014. Projects in process are not amortized until the patent or trademark is granted by the regulatory agency or the asset is ready for use. Estimated amortization expense for the remainder of 2015 and each of the four succeeding fiscal years and thereafter based on the intangible assets as of September 30, 2015 is as follows (expressed in thousands):

2015	$	296
2016		1,178
2017		1,149
2018		1,116
2019		1,112
2020 & Thereafter		3,955
	$	8,806

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Note 2 - Major Components of Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Finished products	$ 1,207	$ 1,628
Work-in-process	2,739	2,574
Raw materials	4,444	4,503
	$ 8,390	$ 8,705

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Note 7 - Long-term Notes Payable (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Seller Financed Secured Note Payable [Member]
Seller financed note payable (Seller Note), which was paid off on April 2, 2015		$ 95
Note payable to bank, which was paid off on August 26, 2015		1,166
Capital leases	$ 175	29
	175	1,290
Less current portion of long-term notes payable	64	983
Total long-term notes payable	$ 111	$ 307

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Note 3 - Net Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

Schedule of Weighted Average Number of Shares [Table Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Weighted shares of common stock outstanding - basic		5,753		5,668		5,748		5,655
Dilutive impact of share-based awards		55		108		78		113
Weighted shares of common stock outstanding - diluted		5,808		5,776		5,826		5,768