United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
July 27, 2012 (May 15, 2012)
Date of Report (Date of earliest event Reported)
MESA LABORATORIES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Commission File Number: 0-11740
COLORADO |
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84-0872291 |
12100 WEST SIXTH AVENUE, LAKEWOOD, |
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80228 |
Issuers telephone number, including area code: (303) 987-8000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Explanatory Note
On May 21, 2012, the Registrant filed a Current Report on Form 8-K disclosing that on May 15, 2012, it entered into an Asset Acquisition Agreement to acquire the assets used or held for use and specific liabilities of Bios International Corporation. This first amendment provides the historical financial statements of Bios International Corporation and the pro forma financial information required by Item 9.01 of the Form 8-K The Current Report on Form 8-K filed on May 21, 2012, is hereby amended to include the required historical financial statements of Bios International Corporation and the required pro forma financial information. No other amendments to the Current Report on Form 8-K filed on May 21, 2012, are being made by this Form 8-K/A.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
The Audited Financial Statements of Bios International Corporation as of and for the years ended December 31, 2011 and 2010, are attached as Exhibit 99.1. The Unaudited Financial Statements of Bios International Corporation as of and for the three months ended March 31, 2012 and 2011, are attached as Exhibit 99.2.
(b) Pro Forma Financial Information.
The Unaudited Pro Forma Condensed Combined Balance Sheet of Registrant as of March 31, 2012 and 2011, and the Unaudited Pro Forma Condensed Combined Statements of Income of Registrant for the years ended March 31, 2012 and 2011, are attached as Exhibit 99.3.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MESA LABORATORIES, INC. |
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(Issuer) |
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DATED: July 27, 2012 |
BY: |
/s/ John J. Sullivan | |
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John J. Sullivan, Ph.D. | |
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Chief Executive Officer, President, Treasurer and Director |
INDEX TO EXHIBITS
Exhibit No. |
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Description |
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Method of Filing |
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99.1 |
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The Audited Financial Statements of Bios International Corporation as of and for the years ended December 31, 2011 and 2010. |
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Filed Herewith |
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99.2 |
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The Unaudited Financial Statements of Bios International Corporation as of and for the three months ended March 31, 2012 and 2011. |
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Filed Herewith |
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99.3 |
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Unaudited pro forma condensed combined balance sheets as of March 31, 2012 and 2011, and the unaudited pro forma condensed combined statements of operations for the years ended March 31, 2012 and 2011. |
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Filed Herewith |
Exhibit 99.1
BIOS INTERNATIONAL CORPORATION
Financial Statements
and
Independent Auditors Report
December 31, 2011 and 2010
BIOS INTERNATIONAL CORPORATION
Table of Contents
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Page |
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Independent Auditors Report |
1 |
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Financial Statements |
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Balance Sheets |
2 |
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Statements of Income |
3 |
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Statement of Changes in Stockholders Equity |
4 |
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Statements of Cash Flows |
5 |
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Notes to Financial Statements |
6 |
INDEPENDENT AUDITORS REPORT
Stockholders
Bios International Corporation
Butler, New Jersey
We have audited the accompanying balance sheets of Bios International Corporation (the Company) as of December 31, 2011 and 2010, and the related statements of income, changes in stockholders equity, and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bios International Corporation as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
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/s/ Ehrhardt Keefe Steiner & Hottman PC |
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Ehrhardt Keefe Steiner & Hottman PC |
July 27, 2012
Denver, Colorado
BIOS INTERNATIONAL CORPORATION
Balance Sheets
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December 31, |
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2011 |
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2010 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
40,320 |
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$ |
368,172 |
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Accounts receivable |
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806,491 |
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649,778 |
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Inventory, net |
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962,804 |
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798,057 |
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Other current assets |
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16,146 |
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Total current assets |
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1,825,761 |
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1,816,007 |
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Non-current assets |
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Property and equipment, net |
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67,637 |
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33,920 |
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Other long-term assets |
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28,993 |
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26,763 |
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Total non-current assets |
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96,630 |
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60,683 |
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Total assets |
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$ |
1,922,391 |
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$ |
1,876,690 |
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Liabilities and Stockholders Equity |
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Current liabilities |
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Accounts payable |
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$ |
107,168 |
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$ |
95,164 |
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Accrued expenses |
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146,577 |
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136,627 |
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Total current liabilities |
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253,745 |
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231,791 |
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Total liabilities |
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253,745 |
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231,791 |
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Commitments and contingencies (Note 6) |
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Stockholders equity |
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Common stock, $10 par value, 1,000 shares authorized, issued, and outstanding |
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10,000 |
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10,000 |
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Retained earnings |
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1,658,646 |
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1,634,899 |
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Total stockholders equity |
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1,668,646 |
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1,644,899 |
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Total liabilities and stockholders equity |
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$ |
1,922,391 |
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$ |
1,876,690 |
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See notes to financial statements.
BIOS INTERNATIONAL CORPORATION
Statements of Income
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For the Years Ended |
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December 31, |
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2011 |
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2010 |
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Revenues |
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$ |
6,786,460 |
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$ |
6,273,404 |
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Cost of revenue |
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2,277,491 |
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2,037,135 |
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Gross profit |
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4,508,969 |
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4,236,269 |
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Operating expenses |
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General and administrative |
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1,240,643 |
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1,037,658 |
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Research and development |
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492,860 |
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489,409 |
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Selling |
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806,248 |
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850,577 |
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Total operating expenses |
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2,539,751 |
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2,377,644 |
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Other income |
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Other income |
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(862 |
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577 |
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Total other income |
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(862 |
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577 |
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Net income |
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$ |
1,970,080 |
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$ |
1,858,048 |
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See notes to financial statements.
BIOS INTERNATIONAL CORPORATION
Statement of Changes in Stockholders Equity
For the Years Ended December 31, 2011 and 2010
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Total |
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Common Stock |
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Retained |
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Stockholders |
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Shares |
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Amount |
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Earnings |
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Equity |
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Balance - December 31, 2009 |
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1,000 |
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$ |
10,000 |
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$ |
1,268,904 |
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$ |
1,278,904 |
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Net income |
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1,858,048 |
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1,858,048 |
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Distributions |
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(1,492,053 |
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(1,492,053 |
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Balance - December 31, 2010 |
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1,000 |
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10,000 |
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1,634,899 |
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1,644,899 |
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Net income |
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1,970,080 |
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1,970,080 |
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Distributions |
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(1,946,333 |
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(1,946,333 |
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Balance - December 31, 2011 |
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1,000 |
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$ |
10,000 |
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$ |
1,658,646 |
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$ |
1,668,646 |
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See notes to financial statements.
BIOS INTERNATIONAL CORPORATION
Statements of Cash Flows
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For the Years Ended |
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December 31, |
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2011 |
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2010 |
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Cash flows from operating activities |
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Net income |
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$ |
1,970,080 |
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$ |
1,858,048 |
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Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities |
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Depreciation and amortization |
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8,499 |
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5,925 |
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Provision for inventory reserve |
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8,330 |
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30 |
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Changes in assets and liabilities |
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Accounts receivable |
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(156,713 |
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(59,089 |
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Inventory |
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(183,077 |
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(114,769 |
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Other current assets |
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(16,146 |
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Other long-term assets |
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(2,230 |
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7,000 |
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Accounts payable |
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12,004 |
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(17,772 |
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Accrued expenses |
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9,950 |
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10,006 |
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(319,383 |
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(168,669 |
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Net cash and cash equivalents provided by operating activities |
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1,650,697 |
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1,689,379 |
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Cash flows from investing activities |
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Purchase of property and equipment |
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(32,216 |
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Net cash and cash equivalents used in investing activities |
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(32,216 |
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Cash flows from financing activities |
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Distributions to owners |
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(1,946,333 |
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(1,492,053 |
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Stockholder loan repayment |
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(11,286 |
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Net cash and cash equivalents used in financing activities |
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(1,946,333 |
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(1,503,339 |
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Net (decrease) increase in cash and cash equivalents |
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(327,852 |
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186,040 |
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Cash and cash equivalents - beginning of year |
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368,172 |
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182,132 |
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Cash and cash equivalents - end of year |
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$ |
40,320 |
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$ |
368,172 |
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Supplemental disclosure of non-cash activity:
The Company traded $10,000 of inventory for $10,000 of fixed assets during the year ended December 31, 2011.
See notes to financial statements.
BIOS INTERNATIONAL CORPORATION
Notes to Financial Statements
Note 1 - Description of Business and Summary of Significant Accounting Policies
Bios International Corporation (Bios or the Company) was established in 1991. Bios is a recognized manufacturer of gas flow measurement, providing the industrys most reliable products, service, and solutions for professionals in environmental protection, workplace safety, industrial process control, and laboratory calibration. The Company serves its customers directly and through a vast network of distributors across the globe.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests.
Accounts Receivable
The Company estimates an allowance for doubtful accounts based on overall historic write-offs, the age of receivable balances, and the payment history and creditworthiness of the customer. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance. As of December 31, 2011 and 2010, the Company determined that no allowance was necessary as all accounts were deemed fully collectible.
Concentrations of Credit Risk
The Company grants credit in the normal course of business to customers. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk.
Inventory
Inventory consists of raw materials and finished products, which are stated at the lower of cost or market, determined using the first-in, first-out method. The Companys policy is to periodically evaluate the market value of the inventory and the stage of product lifecycle and record a reserve for any inventory considered slow-moving or obsolete.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets, ranging from 3 to 20 years, and the related lease terms for leasehold improvements.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, when title and risk of ownership passes, the sales price is fixed or determinable, and collectibility is probable. The Company recognizes revenues at the time products are shipped and risk of loss has transferred. Revenue from ongoing product service and repair is fully recognized upon completion and shipment of serviced product.
BIOS INTERNATIONAL CORPORATION
Notes to Financial Statements
Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)
Revenue Recognition (continued)
Other than normal and customary ongoing customer service, the Company does not have any post-shipment contractual obligations to its customers, such as installation or training.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2011 and 2010 was $54,290 and $24,509, respectively.
Research and Development Costs
Expenditures made for research and development are charged to expense as incurred.
Shipping and Handling Costs
For product sold, payments by customers to the Company for shipping and handling costs are included in revenue on the statements of income, while the Companys expense is included in cost of revenue. Shipping and handling for inventory and materials purchased by the Company is included as a component of inventory on the balance sheets, and in cost of revenue when the product is sold.
Income Taxes
The Company has elected to be treated as an S corporation for income tax purposes. Accordingly, taxable income and losses of the Company are reported on the income tax returns of the Companys stockholders, and no provision for federal income taxes has been recorded in the accompanying financial statements.
The Company applies guidance on accounting for uncertainty in income taxes. If taxing authorities were to disallow any tax positions taken by the Company, the additional income taxes, if any, would be imposed on the stockholders rather than the Company. Accordingly, there would be no effect on the Companys financial statements. If the Company were deemed to be other than an S corporation, additional taxes may be the responsibility of the Company.
Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. No interest or penalties have been assessed as of December 31, 2011. The Companys informational returns for tax years subject to examination by tax authorities included 2007 and 2008 through the current year for state and federal tax reporting purposes, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
BIOS INTERNATIONAL CORPORATION
Notes to Financial Statements
Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)
Warranties
The Company provides limited product warranty on its products and, accordingly, accrues an estimate of the related warranty expense at the time of sale. The Company recorded $21,000 for warranty reserve as of December 31, 2011 and 2010, which is included in accrued expenses on the balance sheets.
Commission
The Company paid $500,000 of commissions to a separate entity, owned by a common shareholder of the Company, during the years ended December 31, 2011 and 2010. This commission is included in selling expense in the accompanying statements of income.
Note 2 - Related Party Transactions
The Company pays its sole owner $200,000 in royalties annually for the use of patented technology. The related expense is recorded as cost of revenue within the statements of income for the years ended December 31, 2011 and 2010.
Note 3 - Inventory
Inventories are summarized as follows:
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December 31, |
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2011 |
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2010 |
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Finished goods and raw materials |
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$ |
971,324 |
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$ |
798,247 |
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Inventory reserve |
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(8,520 |
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(190 |
) | ||
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$ |
962,804 |
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$ |
798,057 |
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Finished goods include raw materials, direct labor, and manufacturing overhead at December 31, 2011 and 2010.
BIOS INTERNATIONAL CORPORATION
Notes to Financial Statements
Note 4 - Property and Equipment
Property and equipment consist of the following:
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December 31, |
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2011 |
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2010 |
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Machinery |
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$ |
32,980 |
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$ |
10,480 |
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Computer equipment |
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8,374 |
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6,194 |
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Furniture |
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10,870 |
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10,870 |
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Leasehold improvements |
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29,713 |
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29,713 |
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Office equipment |
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17,536 |
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99,473 |
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57,257 |
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Less accumulated depreciation |
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(31,836 |
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(23,337 |
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$ |
67,637 |
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$ |
33,920 |
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Depreciation expense for the years ended December 31, 2011 and 2010 was $8,499 and $5,925, respectively.
Note 5 - Accrued Expenses
Accrued expenses consist of the following:
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December 31, |
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2011 |
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2010 |
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Profit-sharing contribution |
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$ |
50,249 |
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$ |
48,000 |
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Payroll and benefits |
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38,644 |
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29,920 |
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Warranty liability |
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21,000 |
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21,000 |
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Customer deposits |
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10,089 |
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24,271 |
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Other |
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26,595 |
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13,436 |
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$ |
146,577 |
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$ |
136,627 |
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Note 6 - Commitments and Contingencies
Operating Leases
The Company leases equipment, storage, and vehicles under non-cancelable operating leases. Rent expense for the years ended December 31, 2011 and 2010 was $160,349 and $174,214, respectively.
BIOS INTERNATIONAL CORPORATION
Notes to Financial Statements
Note 6 - Commitments and Contingencies (continued)
Operating Leases (continued)
Future minimum lease payments under these leases are approximately as follows:
Year Ending December 31, |
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2012 |
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$ |
180,000 |
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2013 |
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180,000 |
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2014 |
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180,000 |
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2015 |
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15,000 |
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$ |
555,000 |
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Litigation
In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company.
Note 7 - Employee Benefit Plan
The Company sponsors a Section 401(k) retirement plan (the Plan). Eligible employees may make voluntary contributions to the Plan. In addition, the Company may make discretionary matching contributions to the Plan. The Company made matching contributions of $65,659 and $50,200 during the years ended December 31, 2011 and 2010, respectively.
Note 8 - Stockholders Equity
Stockholders Equity
Bios was incorporated in the state of New Jersey on January 2, 1991. The Company authorized 1,000 shares for issuance. As of December 31, 2011 and 2010, there were 1,000 shares issued and outstanding.
Note 9 - Subsequent Events
On May 15, 2012, substantially all of the assets and liabilities of the Company were acquired by Mesa Laboratories, Inc. (Mesa). Under the terms of the acquisition, certain assets and liabilities of the Company were acquired for a cash payment of $16,660,000, which includes $1 million held in escrow and contingent consideration of up to $6,710,000, depending on the results of a three-year earn period.
The Company has evaluated all subsequent events through July 27, 2012, which is the date the financial statements were available to be issued.
Exhibit 99.2
BIOS INTERNATIONAL CORPORATION
Condensed Financial Statements
March 31, 2012 and 2011
BIOS INTERNATIONAL CORPORATION
Table of Contents
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Page |
Condensed Financial Statements |
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Condensed Balance Sheets (Unaudited) |
1 |
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Condensed Statements of Income (Unaudited) |
2 |
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Condensed Statements of Cash Flows (Unaudited) |
3 |
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Notes to Condensed Financial Statements (Unaudited) |
4 |
BIOS INTERNATIONAL CORPORATION
Condensed Balance Sheets (Unaudited)
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March 31, |
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2012 |
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2011 |
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Assets |
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Current assets |
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|
|
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Cash and cash equivalents |
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$ |
271,630 |
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$ |
603,908 |
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Accounts receivable |
|
649,688 |
|
586,493 |
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Inventory, net |
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792,683 |
|
694,798 |
| ||
Total current assets |
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1,714,001 |
|
1,885,199 |
| ||
Non-current assets |
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|
|
|
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Property and equipment, net |
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72,643 |
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32,337 |
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Other long term assets |
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28,506 |
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26,763 |
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Total non-current assets |
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101,149 |
|
59,100 |
| ||
Total assets |
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$ |
1,815,150 |
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$ |
1,944,299 |
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Liabilities and Stockholders Equity |
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Current liabilities |
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|
|
|
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Accounts payable |
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$ |
81,652 |
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$ |
84,111 |
|
Accrued expenses |
|
87,718 |
|
215,127 |
| ||
Total current liabilities |
|
169,370 |
|
299,238 |
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Total liabilities |
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169,370 |
|
299,238 |
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Commitments and contingencies (Note 4) |
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|
|
|
| ||
Stockholders equity |
|
|
|
|
| ||
Common stock, $10 par value, 1,000 shares authorized, issued, and outstanding |
|
10,000 |
|
10,000 |
| ||
Retained earnings |
|
1,635,780 |
|
1,635,061 |
| ||
Total stockholders equity |
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1,645,780 |
|
1,645,061 |
| ||
Total liabilities and stockholders equity |
|
$ |
1,815,150 |
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$ |
1,944,299 |
|
See notes to financial statements.
BIOS INTERNATIONAL CORPORATION
Condensed Statements of Income (Unaudited)
|
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For the Three Month Period Ended |
| ||||
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|
March 31, |
| ||||
|
|
2012 |
|
2011 |
| ||
Revenues |
|
$ |
1,527,597 |
|
$ |
1,365,796 |
|
Cost of revenue |
|
741,151 |
|
575,540 |
| ||
Gross profit |
|
786,446 |
|
790,256 |
| ||
Operating expenses |
|
|
|
|
| ||
General and administrative |
|
288,740 |
|
309,889 |
| ||
Research and development |
|
110,701 |
|
140,556 |
| ||
Selling |
|
67,591 |
|
50,967 |
| ||
Total operating expenses |
|
467,032 |
|
501,412 |
| ||
Other income |
|
|
|
|
| ||
Other income |
|
(408 |
) |
(992 |
) | ||
Total other income |
|
(408 |
) |
(992 |
) | ||
Net income |
|
$ |
319,822 |
|
$ |
289,836 |
|
See notes to financial statements.
BIOS INTERNATIONAL CORPORATION
Condensed Statements of Cash Flows (Unaudited)
|
|
For the Three Month Period Ended |
| ||||
|
|
March 31, |
| ||||
|
|
2012 |
|
2011 |
| ||
Cash flows from operating activities |
|
|
|
|
| ||
Net income |
|
$ |
319,822 |
|
$ |
289,836 |
|
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities |
|
|
|
|
| ||
Depreciation and amortization |
|
2,395 |
|
1,583 |
| ||
Changes in assets and liabilities |
|
|
|
|
| ||
Accounts receivable |
|
156,803 |
|
63,285 |
| ||
Inventory |
|
127,433 |
|
46,585 |
| ||
Other current assets |
|
16,146 |
|
|
| ||
Other long term assets |
|
487 |
|
|
| ||
Accounts payable |
|
(25,516 |
) |
(11,053 |
) | ||
Accrued expenses |
|
(58,859 |
) |
78,500 |
| ||
|
|
218,889 |
|
178,900 |
| ||
Net cash and cash equivalents provided by operating activities |
|
538,711 |
|
468,736 |
| ||
Cash flows from investing activities |
|
|
|
|
| ||
Purchase of property and equipment |
|
(7,401 |
) |
|
| ||
Net cash and cash equivalents used in investing activities |
|
(7,401 |
) |
|
| ||
Cash flows from financing activities |
|
|
|
|
| ||
Distributions to owners |
|
(300,000 |
) |
(233,000 |
) | ||
Stockholder loan repayment |
|
|
|
|
| ||
Net cash and cash equivalents used in financing activities |
|
(300,000 |
) |
(233,000 |
) | ||
Net increase in cash and cash equivalents |
|
231,310 |
|
235,736 |
| ||
Cash and cash equivalents - beginning of year |
|
40,320 |
|
368,172 |
| ||
Cash and cash equivalents - end of year |
|
$ |
271,630 |
|
$ |
603,908 |
|
See notes to financial statements.
BIOS INTERNATIONAL CORPORATION
Notes to Condensed Financial Statements
Note 1 - Description of Business and Summary of Significant Accounting Policies
Bios International Corp (Bios) was established in 1991. Bios International is a recognized manufacturer of gas flow measurement, providing the industrys most reliable products, service and solutions for professionals in environmental protection, workplace safety, industrial process control and laboratory calibration. The Company serves its customers directly and through a vast network of distributors across the globe.
Accounts Receivable
The Company estimates an allowance for doubtful accounts based on overall historic write-offs, the age of receivable balances, and the payment history and creditworthiness of the customer. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance. As of March 31, 2012 and 2011, the Company determined that no allowance was necessary as all accounts were deemed fully collectible.
For product sold, payments by customers to the Company for shipping and handling costs are included in revenue on the statements of income, while the Companys expense is included in cost of revenue. Shipping and handling for inventory and materials purchased by the Company is included as a component of inventory on the balance sheets, and in cost of revenue when the product is sold.
Note 2 - Related Party Transactions
The Company pays the owner of the Company royalties for the use of patented technology. The related expense is recorded as cost of revenue within the statements of income for the three month period ended March 31, 2012.
Note 3 - Inventory
Inventories are summarized as follows:
|
|
March 31, |
| ||||
|
|
2012 |
|
2011 |
| ||
Finished goods and raw materials |
|
$ |
798,684 |
|
$ |
698,516 |
|
Inventory reserve |
|
(6,001 |
) |
(3,718 |
) | ||
|
|
$ |
792,683 |
|
$ |
694,798 |
|
Finished goods include raw materials, direct labor, and manufacturing overhead at March 31, 2012 and 2011.
BIOS INTERNATIONAL CORPORATION
Notes to Condensed Financial Statements
Note 4 - Commitments and Contingencies
Operating Leases
The Company leases equipment, storage and vehicles under non-cancelable operating leases. Rent expense for the three month period ended March 31, 2012 and 2011 was $61,279 and $44,032, respectively.
Future minimum lease payments under these leases are approximately as follows:
Year Ending March 31, |
|
|
| |
2012 |
|
$ |
135,000 |
|
2013 |
|
180,000 |
| |
2014 |
|
180,000 |
| |
2015 |
|
15,000 |
| |
|
|
$ |
510,000 |
|
Litigation
In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company.
Note 5 - Subsequent Events
On May 15, 2012, the Company was acquired by Mesa Laboratories, Inc. (Mesa). Under the terms of the acquisition, certain assets and liabilities of the Company were acquired for a cash payment of $16,660,000, which includes $1 million held in escrow, and contingent consideration of up to $6,710,000 depending on the results of a three-year earn period.
The Company has evaluated all subsequent events through July 20, 2012, which is the date the financial statements were available to be issued.
Exhibit 99.3
UNAUDITED MESA LABORATORIES, INC. PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
As used in this report, we, us, our, Mesa or Company refer to Mesa Laboratories, Inc. The unaudited pro forma condensed combined financial statements present the impact on our financial position and results of operations from our asset acquisition of Bios International Corporation, or Bios. We paid a purchase price of $16,660,000, subject to customary purchase price adjustments. We may pay up to an additional $6,710,000 to the sellers depending on the revenue growth after a three-year period. We acquired the assets used or held for use in connection with Bios and specific liabilities of Bios. We borrowed $11,000,000 under our Credit Facility to finance the acquisition, with the balance being paid from available cash.
The unaudited pro forma condensed combined financial statements as of and for the years ended March 31, 2012 and 2011, have been prepared based on certain pro forma adjustments to our historical financial statements as set forth in our Annual Report on Form 10-K for the years ended March 31, 2012 and 2011, as filed with the Securities and Exchange Commission, and are qualified in their entirety by reference to such historical financial statements and related notes contained in those reports. The historic financial statements for Bios were derived from the audited financial statements for Bios as of and for the years ended December 31, 2011 and 2010. The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes and with the historical financial statements and related notes thereto.
The unaudited pro forma condensed combined balance sheets as of March 31, 2012 and 2011, have been prepared as if the transaction had occurred on that date. The unaudited pro forma condensed combined statements of operations have been prepared as if this transaction had occurred on April 1, 2010.
These unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, and the pro forma adjustments are based on a preliminary valuation of the estimated fair value of the net assets acquired and the contingent consideration. Such information is not necessarily indicative of the operating results or financial position that would have occurred had the acquisition been completed at the dates indicated or what results would be for any future periods.
MESA LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 2012
(Dollars in thousands)
|
|
Mesa |
|
Bios |
|
Combined |
|
Pro Forma |
|
Mesa |
| |||||
ASSETS |
| |||||||||||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
7,191 |
|
$ |
40 |
|
$ |
7,231 |
|
$ |
(16,700 |
)(b) |
$ |
1,531 |
|
|
|
|
|
|
|
|
|
11,000 |
(c) |
|
| |||||
Accounts receivable, net |
|
6,486 |
|
807 |
|
7,293 |
|
(267 |
)(b) |
7,026 |
| |||||
Inventory, net |
|
4,438 |
|
963 |
|
5,401 |
|
(52 |
)(b) |
5,349 |
| |||||
Other |
|
1,046 |
|
16 |
|
1,062 |
|
(16 |
)(b) |
1,046 |
| |||||
Total current assets |
|
19,161 |
|
1,826 |
|
20,987 |
|
(6,035 |
) |
14,952 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property, plant and equipment, and other |
|
7,266 |
|
97 |
|
7,363 |
|
(6 |
)(b) |
7,357 |
| |||||
Intangibles, net |
|
9,819 |
|
|
|
9,819 |
|
8,228 |
(b) |
18,047 |
| |||||
Goodwill |
|
14,450 |
|
|
|
14,450 |
|
9,200 |
(b) |
23,650 |
| |||||
|
|
$ |
50,696 |
|
$ |
1,923 |
|
$ |
52,619 |
|
$ |
11,387 |
|
$ |
64,006 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
| |||||||||||||||
Current liabilities |
|
$ |
4,262 |
|
$ |
254 |
|
$ |
4,516 |
|
$ |
(184 |
)(b) |
$ |
4,332 |
|
Long-term debt |
|
|
|
|
|
|
|
11,000 |
(c) |
11,000 |
| |||||
Contingent purchase price |
|
|
|
|
|
|
|
2,240 |
(b) |
2,240 |
| |||||
Other long-term liabilities |
|
2,519 |
|
|
|
2,519 |
|
|
|
2,519 |
| |||||
Total liabilities |
|
6,781 |
|
254 |
|
7,035 |
|
13,056 |
|
20,091 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity: |
|
|
|
|
|
|
|
|
|
|
| |||||
Common stock |
|
6,303 |
|
|
|
6,303 |
|
|
|
6,303 |
| |||||
Members equity |
|
|
|
10 |
|
10 |
|
(10 |
)(b) |
|
| |||||
Retained earnings |
|
37,612 |
|
1,659 |
|
39,271 |
|
(1,659 |
)(b) |
37,612 |
| |||||
Total equity |
|
43,915 |
|
1,669 |
|
45,584 |
|
(1,669 |
) |
43,915 |
| |||||
|
|
$ |
50,696 |
|
$ |
1,923 |
|
$ |
52,619 |
|
$ |
11,387 |
|
$ |
64,006 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
MESA LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 2011
(Dollars in thousands)
|
|
Mesa |
|
Bios |
|
Combined |
|
Pro Forma |
|
Mesa |
| |||||
ASSETS |
| |||||||||||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
3,546 |
|
$ |
368 |
|
$ |
3,914 |
|
$ |
(17,028 |
)(b) |
$ |
(2,114 |
) |
|
|
|
|
|
|
|
|
11,000 |
(c) |
|
| |||||
Accounts receivable, net |
|
7,017 |
|
650 |
|
7,667 |
|
(110 |
)(b) |
7,557 |
| |||||
Inventory, net |
|
5,714 |
|
798 |
|
6,512 |
|
113 |
(b) |
6,625 |
| |||||
Other |
|
1,041 |
|
|
|
1,041 |
|
|
|
1,041 |
| |||||
Total current assets |
|
17,318 |
|
1,816 |
|
19,134 |
|
(6,025 |
) |
13,109 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property, plant and equipment, and other |
|
7,308 |
|
61 |
|
7,369 |
|
30 |
(b) |
7,399 |
| |||||
Intangibles, net |
|
11,484 |
|
|
|
11,484 |
|
8,228 |
(b) |
19,712 |
| |||||
Goodwill |
|
14,450 |
|
|
|
14,450 |
|
9,200 |
(b) |
23,650 |
| |||||
|
|
$ |
50,560 |
|
$ |
1,877 |
|
$ |
52,437 |
|
$ |
11,433 |
|
$ |
63,870 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
| |||||||||||||||
Current liabilities |
|
$ |
9,931 |
|
$ |
232 |
|
$ |
10,163 |
|
(162 |
)(b) |
$ |
10,001 |
| |
Long-term debt |
|
|
|
|
|
|
|
11,000 |
(c) |
11,000 |
| |||||
Contingent purchase price |
|
|
|
|
|
|
|
2,240 |
(b) |
2,240 |
| |||||
Other long-term liabilities |
|
4,212 |
|
|
|
4,212 |
|
|
|
4,212 |
| |||||
Total liabilities |
|
14,143 |
|
232 |
|
14,375 |
|
13,078 |
|
27,453 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity: |
|
|
|
|
|
|
|
|
|
|
| |||||
Common stock |
|
5,068 |
|
|
|
5,068 |
|
|
|
5,068 |
| |||||
Members equity |
|
|
|
10 |
|
10 |
|
(10 |
)(b) |
|
| |||||
Retained earnings |
|
31,349 |
|
1,635 |
|
32,984 |
|
(1,635 |
)(b) |
31,349 |
| |||||
Total equity |
|
36,417 |
|
1,645 |
|
38,062 |
|
(1,645 |
) |
36,417 |
| |||||
|
|
$ |
50,560 |
|
$ |
1,877 |
|
$ |
52,437 |
|
$ |
11,433 |
|
$ |
63,870 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
MESA LABORATORIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended March 31, 2012
(Amounts in thousands except earnings per share)
(Amounts in Thousands except |
|
Mesa |
|
Bios |
|
Combined |
|
Pro Forma |
|
Mesa |
| |||||
Revenue |
|
$ |
39,616 |
|
$ |
6,786 |
|
$ |
46,402 |
|
$ |
|
|
$ |
46,402 |
|
Cost of revenue |
|
16,105 |
|
2,277 |
|
18,382 |
|
|
|
18,382 |
| |||||
Gross profit |
|
23,511 |
|
4,509 |
|
28,020 |
|
|
|
28,020 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling |
|
3,909 |
|
806 |
|
4,715 |
|
|
|
4,715 |
| |||||
General and administrative |
|
5,416 |
|
1,241 |
|
6,657 |
|
1,108 |
(d) |
7,765 |
| |||||
Research and development |
|
1,359 |
|
493 |
|
1,852 |
|
|
|
1,852 |
| |||||
Impairment of intangible |
|
350 |
|
|
|
350 |
|
|
|
350 |
| |||||
Total operating expense |
|
11,034 |
|
2,540 |
|
13,574 |
|
1,108 |
|
14,682 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
|
12,477 |
|
1,969 |
|
14,446 |
|
(1,108 |
) |
13,338 |
| |||||
Other income (expense) |
|
(146 |
) |
1 |
|
(145 |
) |
(165 |
)(e) |
(310 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings before taxes |
|
12,331 |
|
1,970 |
|
14,301 |
|
(1,273 |
) |
13,028 |
| |||||
Income taxes |
|
4,412 |
|
|
|
4,412 |
|
485 |
(f) |
4,897 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income |
|
$ |
7,919 |
|
$ |
1,970 |
|
$ |
9,889 |
|
$ |
(1,758 |
) |
$ |
8,131 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income per share: |
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
$ |
2.41 |
|
|
|
|
|
|
|
$ |
2.48 |
| |||
Diluted |
|
2.29 |
|
|
|
|
|
|
|
2.35 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shares outstanding |
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
3,285 |
|
|
|
|
|
|
|
3,285 |
| |||||
Diluted |
|
3,462 |
|
|
|
|
|
|
|
3,462 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
MESA LABORATORIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended March 31, 2011
(Amounts in thousands except earnings per share)
(Amounts in Thousands except |
|
Mesa |
|
Bios |
|
Combined |
|
Pro Forma |
|
Mesa |
| |||||
Revenue |
|
$ |
34,227 |
|
$ |
6,273 |
|
$ |
40,500 |
|
$ |
|
|
$ |
40,500 |
|
Cost of revenue |
|
14,659 |
|
2,037 |
|
16,696 |
|
|
|
16,696 |
| |||||
Gross profit |
|
19,568 |
|
4,236 |
|
23,804 |
|
|
|
23,804 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling |
|
3,687 |
|
850 |
|
4,537 |
|
|
|
4,537 |
| |||||
General and administrative |
|
4,576 |
|
1,038 |
|
5,614 |
|
1,108 |
(d) |
6,722 |
| |||||
Research and development |
|
1,441 |
|
489 |
|
1,930 |
|
|
|
1,930 |
| |||||
Total operating expense |
|
9,704 |
|
2,377 |
|
12,081 |
|
1,108 |
|
13,189 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
|
9,864 |
|
1,859 |
|
11,723 |
|
(1,108 |
) |
10,615 |
| |||||
Other income (expense) |
|
(113 |
) |
(1 |
) |
(114 |
) |
(165 |
)(e) |
(279 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings before taxes |
|
9,751 |
|
1,858 |
|
11,609 |
|
(1,273 |
) |
10,336 |
| |||||
Income taxes |
|
3,568 |
|
|
|
3,568 |
|
455 |
(f) |
4,023 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income |
|
$ |
6,183 |
|
$ |
1,858 |
|
$ |
8,041 |
|
$ |
(1,728 |
) |
$ |
6,313 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income per share: |
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
$ |
1.91 |
|
|
|
|
|
|
|
$ |
1.95 |
| |||
Diluted |
|
1.86 |
|
|
|
|
|
|
|
1.90 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shares outstanding |
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
3,231 |
|
|
|
|
|
|
|
3,231 |
| |||||
Diluted |
|
3,330 |
|
|
|
|
|
|
|
3,330 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
NOTES TO UNAUDITED MESA LABORATORIES, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The historical financial information is derived from our historical financial statements and the historical financial statements of Bios International Corporation, or Bios. The pro forma adjustments have been prepared as if we acquired Bios on March 31, 2012 and 2011, for the balance sheets, and on April 1, 2010, for the statements of operations.
The pro forma combined financial statements reflect the following transactions:
· the acquisition of assets used or held for use in connection with Bios and specific liabilities of Bios; and
· the borrowing of $11,000,000 under our Credit Facility.
The unaudited pro forma condensed combined financial statements do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve.
Note 2. Pro Forma Adjustments and Assumptions
(a) Reflects 100% of the assets, liabilities, income and expenses of Bios.
(b) The following reflects the allocation of the consideration, subject to customary purchase price adjustments (dollars in thousands):
Cash consideration |
|
$ |
16,660 |
|
Preliminary contingent purchase price liability |
|
2,240 |
| |
Aggregate consideration |
|
$ |
18,900 |
|
|
|
|
| |
The purchase price was allocated as follows: |
|
|
| |
Accounts receivable, net |
|
$ |
540 |
|
Inventory |
|
911 |
| |
Property, plant and equipment |
|
63 |
| |
Other long-term assets |
|
28 |
| |
Intangibles |
|
8,228 |
| |
Goodwill |
|
9,200 |
| |
Current liabilities |
|
(70 |
) | |
Total purchase price allocation |
|
$ |
18,900 |
|
The acquisition of Bios was accounted for under the purchase method of accounting. The purchase price allocation was based on preliminary estimated fair values of the assets and liabilities acquired, including the preliminary contingent purchase price liability, which was estimated based on historic revenue growth rates. Our acquisition constitutes the acquisition of a business and was recognized at fair value. The allocation of purchase price is preliminary and subject to adjustments. Upon completing our valuation analysis, the preliminary contingent purchase price liability, and the allocation between intangibles and goodwill may change.
(c) Reflects $11,000,000 from borrowing against our Credit Facility.
(d) Reflects amortization of intangibles acquired over an estimated weighted-average useful life of 8 years. Since our valuation is preliminary, we have not completed an allocation of intangibles between the various categories of intellectual property, trade names, customer relationships, and non-compete agreements, which have different lives.
(e) Reflects the interest expense on the debt incurred to finance the acquisition, at 1.5%, based on the prevailing rate under our Credit Facility at the time of the transaction. As of March 31, 2012 and 2011, the effect of a 0.125% variance in the interest rates on pro forma interest expense would have been approximately $14,000 annually.
(f) To reflect income tax expense, because Bios was a pass-through entity for income tax purposes. Since this was an asset acquisition for tax purposes, the acquired intangibles and goodwill are deductible for tax purposes over 15 years. Estimated tax rates of 35.8% and 36.6%, respectively, were used for the years ended March 31, 2012 and 2011. These rates are based on Mesas effective tax rate and the impact of the asset acquisition of Bios.