What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-16 compared with 2020-03-27 · 43 added, 43 removed, 125 unchanged (41% of the section changed)

2 unchanged sentences

Pursuant to Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls (as defined in Rule 13a-15(e) of the Exchange Act) and procedures.

Based upon that evaluation, our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer concluded that, as of December 31, 2019, our disclosure controls and procedures were not effective, due to material weaknesses in our internal control over financial reporting as discussed below.

However, giving full consideration to the material weaknesses, management has concluded that the Consolidated Financial Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods disclosed in conformity with U.S.

generally accepted accounting principles.

Based upon that evaluation, our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer concluded that, as of December 31, 2020, our disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the Exchange Act).

Our internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer, and effected by the Company’s board of directors, management and other personnel 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.

Our internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and our

Table o f Contents

Executive Vice President, Chief Financial Officer and Treasurer, and effected by the Company’s board of directors, management and other personnel 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

3 unchanged sentences

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the updated Internal Control — Integrated Framework issued in 2013 .

As part of that assessment, the Company identified material weaknesses as our risk assessment did not sufficiently consider changes in our business processes and we did not have a sufficient complement of trained resources with knowledge of our financial reporting processes and internal control related to accounting for income taxes.

Based on that assessment, our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2019, we identified material weaknesses with our internal controls related to the accounting and financial reporting for income taxes.

As a consequence, process level controls over the completeness, existence, accuracy, valuation and presentation of the income tax provision, including deferred tax assets and liabilities and valuation allowance, were not effective.

Based on the material weaknesses described above, management concluded that, as of December 31, 2019, our internal control over financial reporting was ineffective.

The control deficiencies described above resulted in immaterial misstatements in the preliminary consolidated financial statements as of and for the fiscal year ended December 31, 2019 related to income taxes that were corrected in the December 31, 2019 consolidated financial statements.

However, these control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent material weaknesses in internal control over financial reporting.

The Company’s independent registered public accounting firm, KPMG LLP, has audited the financial statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, which appears in Part II, Item 8, “Financial Statements and Supplementary Data – Report of Independent Registered Public Accounting Firm” of this Annual Report on Form 10-K.

The Company acquired one entity during 2019, accounting for total assets of 0.2% and total revenues of 0.3% included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019.

Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, this acquired entity's internal control over financial reporting associated with its assets and revenues that are included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019.

Remediation Plans

Our management, with oversight from the Audit Committee of the Board of Directors, is actively engaged in remediation efforts to address the identified material weaknesses over income taxes.

We have identified the following preliminary steps:

Based on the material weaknesses described above, management concluded that, as of December 31, 2019, our internal control over financial reporting were ineffective.

In connection with the preparation of the annual consolidated financial statements as of and for the year ended December 31, 2020, management designed and implemented effective internal controls surrounding the preparation of the income tax provision including engaging a third party accounting firm to assist with the documentation of these enhanced processes and controls including:

• Accelerate the risk assessment process related to changes in the business;

1 unchanged sentence

• Accelerate all key activities within the income tax accounting and reporting process and controls by further increasing and expanding the capabilities of the income tax accounting resources in order to devote additional time and resources to the consolidated income tax accounting and reporting processes and controls.

The Company remains committed to an effective internal control environment and management believes that these actions, and the improvements management expects to achieve as a result, will remediate the material weakness.

However, the material weaknesses will not be considered remediated until the controls operate for a sufficient period of time and management has concluded through testing that these controls operate effectively.

Changes in Internal Control over Financial Reporting

Except for the material weaknesses described above, there have been no changes in our internal control over financial reporting during the quarter ended December 31, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have determined that the actions taken to date have sufficiently improved the Company’s internal control over financial reporting such that as of December 31, 2020, there is not a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Based on the remediation of the material weaknesses identified, we concluded that our internal control over financial reporting was effective as of December 31, 2020.

Other than the changes noted above, there has been no change in our internal control over financial reporting during the quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Table o f Contents

Certain of the information concerning our executive officers required by this Item 10 is provided under the caption “Executive Officers of the Registrant” in Part I of this Annual Report.

30 unchanged sentences

(1) The following financial statements are filed herewith in Item 8 of Part II above:

Table o f Contents

Report of independent registered public accounting firm

12 unchanged sentences

listed in Schedule A thereto, and Onstream Holdings, Inc.

(filed as Exhibit 2.1 to Current Report on Form 8-K filed December 13, 2018 and incorporated herein by reference)

(filed as Exhibit 2.1 to the Current Report on Form 8-K filed December 13, 2018 and incorporated herein by reference)

2.3 Form of share purchase agreement for the purchase of Onstream Holdings, Inc.

shares from each member of the group of shareholders collectively owning 5% of the shares of Onstream Holdings, Inc.

(filed as Exhibit 2.2 to Current Report on Form 8-K filed December 13, 2018 and incorporated herein by reference)

(filed as Exhibit 2.2 to the Current Report on Form 8-K filed December 13, 2018 and incorporated herein by reference)

3.1 Second Amended and Restated Certificate of Incorporation (filed as exhibit 3.1 to Registration Statement on Form S-1 (Amendment No.

3 unchanged sentences

3.3 Amended and Restated Bylaws, effective July 20, 2016 (filed as exhibit 3.1 to the Quarterly Report on Form 10-Q filed on October 7, 2016 and incorporated herein by reference)

4.1 Specimen certificate evidencing shares of common stock (filed as exhibit 4.1 to Registration Statement on Form S-1 (Amendment No.

5) filed on September 23, 2009 (Registration No.

333-151559) and incorporated herein by reference.

4.2* Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934

10.1 Fourth Amended and Restated Credit Agreement dated December 8, 2017 (filed as Exhibit 10.3 to Annual Report on Form 10-K filed March 14, 2018 and incorporated herein by reference)

10.2 Fifth Amended and Restated Credit Agreement dated December 13, 2017 (filed as Exhibit 10.1 to Current Report on Form 8-K filed December 13, 2018 and incorporated herein by reference)

10.3* First Amendment, dated October 11, 2019, to Fifth Amended and Restated Credit Agreement dated December 13, 2018

10.4 Form of Indemnification Agreement for directors and officers (filed as exhibit 10.1 to Registration Statement on Form S-1 (Amendment No.

4) filed on September 21, 2009 (Registration No.

333-151559) and incorporated herein by reference)

10.5 2007 Stock Option Plan and form of Stock Option Agreement (filed as exhibit 10.5 to Registration Statement on Form S-1 (Amendment No.

4.1 Specimen certificate evidencing shares of common stock (filed as exhibit 4.1 to the Registration Statement on Form S-1 (Amendment No.

5) filed on September 23, 2009 (Registration No.

333-151559) and incorporated herein by reference.

10.6 2009 Long-Term Incentive Plan (filed as exhibit 10.6 to Registration Statement on Form S-1 (Amendment No.

4.2 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.2 to the Annual Report on Form 10-K filed March 27, 2020)

10.1 Fifth Amended and Restated Credit Agreement dated December 13, 2018 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed December 13, 2018 and incorporated herein by reference)

10.2 First Amendment, dated October 11, 2019, to Fifth Amended and Restated Credit Agreement dated December 13, 2018 (filed as Exhibit 10.3 to the Annual Report on Form 10-K filed March 27, 2020 and incorporated herein by reference)

Table o f Contents

10.3 Second Amendment, dated March 9, 2020, to Fifth Amended and Restated Credit Agreement dated December 13, 2018 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed March 13, 2020 and incorporated herein by reference

10.4 Third Amendment, dated May 15, 2020, to Fifth Amended and Restated Credit Agreement dated December 13, 2018 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed May 15, 2020 and incorporated herein by reference

10.5 Form of Indemnification Agreement for directors and officers (filed as exhibit 10.1 to the Registration Statement on Form S-1 (Amendment No.

4) filed on September 21, 2009 (Registration No.

333-151559) and incorporated herein by reference)

10.7 Form of 2009 Long-Term Incentive Plan Stock Option Agreement (filed as exhibit 10.7 to Registration Statement on Form S-1 (Amendment No.

10.6 2009 Long-Term Incentive Plan (filed as exhibit 10.6 to the Registration Statement on Form S-1 (Amendment No.

4) filed on September 21, 2009 (Registration No.

333-151559) and incorporated herein by reference)

10.8 Form of 2009 Long-Term Incentive Plan Restricted Stock Agreement (filed as exhibit 10.8 to Registration Statement on Form S-1 (Amendment No.

10.7 Form of 2009 Long-Term Incentive Plan Stock Option Agreement (filed as exhibit 10.7 to the Registration Statement on Form S-1 (Amendment No.

4) filed on September 21, 2009 (Registration No.

333-151559) and incorporated herein by reference)

10.9 Form of Restricted Stock Unit Certificate for awards under 2009 Long-Term Incentive Plan (filed as exhibit 10.1 to Quarterly Report on Form 10-Q filed on January 13, 2011 and incorporated herein by reference)

10.8 Mistras Group, Inc.

2016 Long-Term Incentive Plan (filed as exhibit B to the Definitive Proxy Statement dated September 7, 2016 and incorporated herein by reference)

10.11 Form of Restricted Stock Unit Certificate for awards under the 2016 Long-Term Incentive Plan (filed as Exhibit 10.16 to Transition Report on Form 10-K filed on March 20, 2017 and incorporated herein by reference)

10.12 Mistras Group Severance P lan (filed as Exhibit 10.11 to Annual Report on Form 10-K filed on March 18, 2019 and incorporated herein by reference)

10.9 Amendment No.

1, dated May 19, 2020, to the 2016 Long-Term Incentive Plan (filed as exhibit 10.2 to the Quarterly Report Form 10-Q filed on August 7, 2020 and incorporated herein by reference)

10.10* Amendment No.

2, dated December 1, 2020, to the 2016 Long-Term Incentive Plan.

10.11 Form of Restricted Stock Unit Certificate for awards under the 2016 Long-Term Incentive Plan (filed as Exhibit 10.16 to the Transition Report on Form 10-K filed on March 20, 2017 and incorporated herein by reference)

10.12 Form of Restricted Stock Unit Certificate for awards to senior officers under the 2016 Long-Term Incentive Plan (filed as Exhibit 10.2 to the Quarterly Report Form 10-Q filed on May 19, 2020 and incorporated herein by reference)

10.13 Mistras Group Severance Plan (filed as Exhibit 10.11 to the Annual Report on Form 10-K filed on March 18, 2019 and incorporated herein by reference)

10.14 Employment Agreement between the Company and Sotirios J.

Vahaviolos, dated February 28, 2018 (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q filed May 8, 2018 and incorporated by reference herein)

10.14 Employment Agreement between the Company and Dennis Bertolotti, dated March 13, 2018 (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q filed May 8, 2018 and incorporated by reference herein)

10.15 Description of Compensation for Non-Employee Directors (filed as Exhibit 10.19 to Annual Report on Form 10-K filed March 14, 2018 and incorporated herein by reference)

Vahaviolos, dated February 28, 2018 (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed May 8, 2018 and incorporated by reference herein)

10.15 Employment Agreement between the Company and Dennis Bertolotti, dated March 13, 2018 (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed May 8, 2018 and incorporated by reference herein)

21.1* Subsidiaries of the Registrant

4 unchanged sentences

32.1** Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Table o f Contents

32.2** Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

10 unchanged sentences

FORM 10-K SUMMARY

Table o f Contents

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

9 unchanged sentences

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

Table o f Contents

Signature Title Date

Vahaviolos Executive Chairman and Director March 27, 2020

/s/ Dennis Bertolotti President, Chief Executive Officer and Director (Principal Executive Officer)

5 unchanged sentences

March 16, 2021

Vahaviolos Executive Chairman and Director March 16, 2021

/s/ Nicholas DeBenedictis Director March 16, 2021

5 unchanged sentences

Lohmeier Director March 16, 2021

/s/ Charles P.

Pizzi Director March 16, 2021

/s/ Manuel N.

Stamatakis Director March 16, 2021

Curtis Weldon Director March 27, 2020

Curtis Weldon

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures