Exhibit 99.3
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS AND UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
The following unaudited pro forma combined balance sheet as of March 31, 2010 and the unaudited pro forma combined statement of operations for the year ended March 31, 2010 give effect to Mesa Laboratories, Inc.’s (“Mesa”) acquisition of all the issued and outstanding shares of common stock of SGM Biotech, Inc. and the purchase of real estate held by SGM’s affiliate, Surreal, LLC, (“SGM”) effective April 27, 2010, including the related pro forma adjustments described in the notes thereto.
The unaudited pro forma balance sheet has been prepared as if the transaction was recorded on Mesa’s books as of March 31, 2010. The unaudited pro forma combined statement of operation has been prepared as if the proposed transaction occurred on the first day of the fiscal year presented. These pro forma statements are not necessarily indicative of the results of operations or the financial position as they may be in the future or as they might have been had the transaction become effective on the above mentioned date.
The historical data for Mesa as of and for the fiscal year ended March 31, 2010 has been derived from the audited financial statements of Mesa. The historical data for SGM as of March 31, 2010 has been derived from the unaudited consolidated financial statements for SGM. The historical data for the twelve months ended March 31, 2010 was derived from the audited financial statement of Mesa for the twelve months ended March 31, 2010, and the audited consolidated financial statements of SGM for the twelve months ended December 31, 2009.
The unaudited pro forma combined statements of operations and the unaudited pro forma combined balance sheets should be read in conjunction with the separate historical financial statements and notes thereto of Mesa Laboratories, Inc. and SGM Biotech, Inc.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 2010
| | Mesa | | SGM | | Subtotal | | | | | |
| | Laboratories, | | Biotech | | Pro Forma | | Pro Forma | | Pro Forma | |
| | Inc. | | Inc. | | Combined | | Adjustments | | Combined | |
Assets | | | | | | | | | | | |
Current assets | | | | | | | | | | | |
Cash and cash equivalents | | $ | 10,471,000 | | $ | 794,000 | | $ | 11,265,000 | | $ | (1) (12,000,000 | ) | $ | 842,000 | |
| | | | | | | | $ | (4) 4,521,000 | | | |
| | | | | | | | $ | (1) (2,150,000 | ) | | |
| | | | | | | | $ | (2) (794,000 | ) | | |
Accounts receivable, net | | 4,421,000 | | 1,113,000 | | 5,534,000 | | | | 5,534,000 | |
Other current receivables | | 5,000 | | | | 5,000 | | | | 5,000 | |
Inventories, net | | 4,820,000 | | 706,000 | | 5,526,000 | | | | 5,526,000 | |
Prepaid expenses and other current assets | | 381,000 | | 8,000 | | 389,000 | | | | 389,000 | |
Deferred income taxes | | 376,000 | | 45,000 | | 421,000 | | | | 421,000 | |
| | | | | | | | | | | |
Total current assets | | 20,474,000 | | 2,666,000 | | 23,140,000 | | (10,423,000 | ) | 12,717,000 | |
| | | | | | | | | | | |
Non-current assets | | | | | | | | | | | |
Property, plant and equipment | | 4,239,000 | | 1,746,000 | | 5,985,000 | | (1) 1,593,000 | | 7,518,000 | |
| | | | | | | | (2) (60,000 | ) | | |
Other long term receivables | | | | 45,000 | | 45,000 | | | | 45,000 | |
Goodwill | | 6,265,000 | | | | 6,265,000 | | (1) 5,621,000 | | 11,886,000 | |
Other intangible assets, net | | 2,661,000 | | | | 2,661,000 | | (1) 6,491,000 | | 9,152,000 | |
| | | | | | | | | | | |
Total non-current assets | | 13,165,000 | | 1,791,000 | | 14,956,000 | | 13,645,000 | | 28,601,000 | |
| | | | | | | | | | | |
Total assets | | $ | 33,639,000 | | $ | 4,457,000 | | $ | 38,096,000 | | $ | 3,222,000 | | $ | 41,318,000 | |
| | Mesa | | SGM | | Subtotal | | | | | |
| | Laboratories, | | Biotech | | Pro Forma | | Pro Forma | | Pro Forma | |
| | Inc. | | Inc. | | Combined | | Adjustments | | Combined | |
Liabilities and Stockholders’ (Deficit) Equity | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | |
Accounts payable, trade | | $ | 480,000 | | $ | 278,000 | | $ | 758,000 | | | | | $ | 758,000 | |
Accrued salaries and payroll taxes | | 1,190,000 | | 241,000 | | 1,431,000 | | | | 1,431,000 | |
Accrued warranty expense | | 30,000 | | | | 30,000 | | | | 30,000 | |
Due to Vibrac, LLC | | 100,000 | | | | 100,000 | | | | 100,000 | |
Current portion of long-term debt | | | | 338,000 | | 338,000 | | (4) 940,000 | | 1,000,000 | |
| | | | | | | | (2) (278,000 | ) | | |
Current portion of capital lease obligation | | | | 19,000 | | 19,000 | | | | 19,000 | |
Other accrued liabilities | | 11,000 | | | | 11,000 | | (5) 147,000 | | 158,000 | |
Taxes payable | | 133,000 | | | | 133,000 | | | | 133,000 | |
| | | | | | | | | | | |
Total current liabilities | | 1,944,000 | | 876,000 | | 2,820,000 | | 809,000 | | 3,629,000 | |
Long-term debt, less current portion | | | | 1,067,000 | | 1,067,000 | | (4) 3,521,000 | | 3,521,000 | |
| | | | | | | | (2) (1,067,000 | ) | | |
Deferred income taxes | | 498,000 | | 163,000 | | 661,000 | | (1) 2,310,000 | | 2,971,000 | |
| | | | | | | | | | | |
Total liabilities | | 2,442,000 | | 2,106,000 | | 4,548,000 | | 5,573,000 | | 10,121,000 | |
| | | | | | | | | | | |
Stockholders’ equity | | | | | | | | | | | |
Common stock | | 4,883,000 | | — | | 4,883,000 | | | | 4,883,000 | |
Members’ equity | | | | 589,000 | | 589,000 | | (1) (589,000 | ) | — | |
Retained earnings | | 26,314,000 | | 1,762,000 | | 28,076,000 | | (2) (1,762,000 | ) | 26,314,000 | |
| | | | | | | | | | | |
Total stockholders’ equity | | 31,197,000 | | 2,351,000 | | 33,548,000 | | (2,351,000 | ) | 31,197,000 | |
| | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 33,639,000 | | $ | 4,457,000 | | $ | 38,096,000 | | $ | 3,222,000 | | $ | 41,318,000 | |
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended March 31, 2010
| | Mesa | | SGM | | Subtotal | | | | | |
| | Laboratories, | | Biotech | | Pro Forma | | Pro Forma | | Pro Forma | |
| | Inc. | | Inc. | | Combined | | Adjustments | | Combined | |
| | (March 31, 2010) | | (December 31, 2009) | | | | | | | |
| | | | | | | | | | | |
Sales | | $ | 21,929,000 | | $ | 6,230,000 | | $ | 28,159,000 | | | | $ | 28,159,000 | |
Cost of goods sold | | 8,735,000 | | 3,214,000 | | 11,949,000 | | | | 11,949,000 | |
| | | | | | | | | | | |
Gross margin | | 13,194,000 | | 3,016,000 | | 16,210,000 | | | | 16,210,000 | |
| | | | | | | | | | | |
Selling | | 2,616,000 | | 399,000 | | 3,015,000 | | | | 3,015,000 | |
| | | | | | | | (3) 670,000 | | | |
General and administrative | | 2,541,000 | | 1,465,000 | | 4,006,000 | | (7) (34,000 | ) | 4,642,000 | |
Research and development | | 669,000 | | 322,000 | | 991,000 | | | | 991,000 | |
| | | | | | | | | | | |
Total operating expenses | | 5,826,000 | | 2,186,000 | | 8,012,000 | | 636,000 | | 8,648,000 | |
| | | | | | | | | | | |
Income (loss) from operations | | 7,368,000 | | 830,000 | | 8,198,000 | | (636,000 | ) | 7,562,000 | |
Other income (expense) | | | | | | | | | | | |
| | | | | | | | (5)(147,000 | ) | | |
Interest income (expense) | | 36,000 | | (98,000 | ) | (62,000 | ) | (6) 98,000 | | (111,000 | ) |
Other income | | | | 3,000 | | 3,000 | | | | 3,000 | |
| | | | | | | | | | | |
Total other income (expense) | | 36,000 | | (95,000 | ) | (59,000 | ) | (49,000 | ) | (108,000 | ) |
| | | | | | | | | | | |
Net income (loss) before income taxes | | 7,404,000 | | 735,000 | | 8,139,000 | | (685,000 | ) | 7,454,000 | |
Income tax expense | | 2,635,000 | | 164,000 | | 2,799,000 | | (8)(146,000 | ) | 2,653,000 | |
| | | | | | | | | | | |
Net income | | $ | 4,769,000 | | $ | 571,000 | | $ | 5,340,000 | | $ | (539,000 | ) | $ | 4,801,000 | |
| | | | | | | | | | | |
Net income per share (basic) | | $ | 1.49 | | $ | 11.42 | | | | | | $ | 1.50 | |
| | | | | | | | | | | |
Net income per share (diluted) | | $ | 1.45 | | $ | 11.42 | | | | | | $ | 1.46 | |
| | | | | | | | | | | |
Shares outstanding — basic | | 3,194,000 | | 50,000 | | | | 50,000 | | 3,194,000 | |
| | | | | | | | | | | |
Shares outstanding — diluted | | 3,293,000 | | 50,000 | | | | 50,000 | | 3,293,000 | |
| | | | | | | | | | | | | | | | |
Notes to Unaudited Pro Forma Combined Financial Statements
The following notes and adjustments are related to Mesa Laboratories, Inc.’s acquisition of certain assets of SGM Biotech, Inc.
(1) The acquisition price of $12,000,000 for the stock of SGM Biotech, Inc. was comprised of $11,722,000 in cash and $278,000 of loans repaid to the shareholders of SGM Biotech, Inc. following the acquisition. The purchase price has been preliminarily allocated to the assets and liabilities based on management’s estimates as follows:
Property plant and equipment | | 2,073,000 | |
Goodwill | | 3,311,000 | |
Other intangible assets | | 6,491,000 | |
The other intangible assets acquired during the acquisition created a deferred tax liability and increased goodwill by $2,310,000 using an effective tax rate of 35.5%.
The purchase price for the building housing SGM Biotech, Inc. was $2,150,000 and was allocated to property, plant and equipment.
The Company is in the process of obtaining a valuation from a third party to be used to allocate the purchase price. The Company will adjust its allocation estimate when the valuation is complete.
(2) To record the effect of assets and liabilities purchased or paid off prior to closing.
(3) To record depreciation of property, plant and equipment and intangible assets acquired in the acquisition: property, plant and equipment over 7 years and intangible assets over 5 to 7 years.
(4) Mesa Labs, Inc. incurred $4,521,000 in debt to acquire SGM Biotech, Inc. and Affiliate consisting of $3,000,000 payable in quarterly installments of $250,000 maturing 4/27/2013 and $1,521,000 maturing 4/27/2011.
(5) To reflect interest expense on debt incurred to acquire SGM Biotech, Inc. and Affiliate.
(6) To eliminate interest expense on shareholder notes and mortgage payable that were paid off when SGM was acquired
(7) To eliminate SGM acquisition costs recorded on the historical financial statements of Mesa Laboratories, Inc.
(8) Pro forma income tax adjustment at a 35.5% effective tax rate.
