Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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, 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
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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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is 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.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. 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 . 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 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;
• Enhance the design of controls surrounding the preparation and review of the income tax provision, and enhance the automation of the income tax processes and controls to allow for a timelier completion and review of internal controls; and
• 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.
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.
Item 9B. Other Information
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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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. The remaining information required by Item 10 is incorporated herein by reference to the relevant information to be included in our definitive proxy statement related to the 2021 annual shareholders meeting.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the relevant information to be included in our definitive proxy statement related to the 2021 annual shareholders meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholders is incorporated by reference to the relevant information to be included in our definitive proxy statement related to the 2021 annual shareholders meeting.
Equity Compensation Plan Information
The following table provides certain information as of December 31, 2020 concerning the shares of our common stock that may be issued under existing equity compensation plans.
Plan Category Number of Securities
to be Issued Upon
Exercise of
Outstanding Options
Weighted Average
Exercise Price of
Outstanding Options
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(in thousands, except exercise price)
Equity Compensation Plans Approved by Security Holders (1)
5 $ 22.35 1,787
Equity Compensation Plans Not Approved by Security Holders — — —
Total 5 $ 22.35 1,787
________________________________________
(1) Includes the Company’s 2009 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. There are no awards outstanding as of December 31, 2020 under the Company's 2007 Stock Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference to the relevant information to be included in our definitive proxy statement related to the 2021 annual shareholders meeting.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated by reference to the information to be included in our definitive proxy statement related to the 2021 annual shareholders meeting.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) The following financial statements are filed herewith in Item 8 of Part II above:
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Page
Report of independent registered public accounting firm
46
Consolidated Balance sheets as of December 31, 2020 and December 31, 2019
49
Consolidated Statements of income (loss) for the years ended December 31, 2020, 2019 and 2018
50
Consolidated Statements of comprehensive income (loss) for the years ended December 31, 2020, 2019 and 2018
51
Consolidated Statements of equity for the year ended December 31, 2020, 2019 and 2018
52
Consolidated Statements of cash flows for the years ended December 31, 2020, 2019 and 2018
53
Notes to consolidated financial statements
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(2) Financial Statement Schedules
All other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.
(3) Exhibits
Exhibit No. Description
2.1 Membership Interest Purchase Agreement, dated December 15, 2017, among Mistras Group, Inc., WPT Holdings Inc., West Penn Non-Destructive Testing, LLC (formerly known as West Penn Non-Destructive Testing, Inc.), N. David Campbell and James C. DeChellis III (filed as exhibit 2.1 to the Current Report on Form 8-K filed on December 21, 2017 and incorporated herein by reference)
2.2 Share Purchase Agreement, dated as of December 13, 2018, among 2159562 Alberta Ltd., as purchaser, Mistras Group, Inc., as parent of purchaser, the shareholders of Onstream Holdings, Inc. listed in Schedule A thereto, and Onstream Holdings, Inc. (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 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. 4) filed on September 21, 2009 (Registration No. 333-151559) and incorporated herein by reference)
3.2 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation (filed as exhibit 3.1 to the Quarterly Report on Form 10-Q filed on January 11, 2017 and incorporated herein by reference)
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 the 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 (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)
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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)
10.6 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)
10.7 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)
10.8 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)
10.9 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 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
23.1* Consent of KPMG LLP
24.1* Power of Attorney (included as part of the signature page to this report)
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1** Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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32.2** Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document
101.SCH XBRL Schema Document
101.CAL XBRL Calculation Linkbase Document
101.LAB XBRL Labels Linkbase Document
101.PRE XBRL Presentation Linkbase Document
101.DEF XBRL Definition Linkbase Document
_______________________
Exhibits 10.5 to 10.15 are management contracts or compensatory plans, contracts, or arrangements.
* Filed herewith.
** Furnished herewith.
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MISTRAS GROUP, INC.
By: /s/ Dennis Bertolotti
Dennis Bertolotti
President and Chief Executive Officer
Date: March 16, 2021
We, the undersigned directors and officers of Mistras Group, Inc., hereby severally constitute Dennis Bertolotti, Edward J. Prajzner and Michael C. Keefe, and each of them singly, as our true and lawful attorneys with full power to each of them to sign for us, in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K filed with the Securities and Exchange Commission.
This power of attorney may only be revoked by a written document executed by the undersigned that expressly revokes this power by referring to the date and subject hereof.
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.
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Signature Title Date
/s/ Dennis Bertolotti President, Chief Executive Officer and Director (Principal Executive Officer)
March 16, 2021
Dennis Bertolotti
/s/ Edward J. Prajzner Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and
Accounting Officer)
March 16, 2021
Edward J. Prajzner
/s/ Dr. Sotirios J. Vahaviolos Executive Chairman and Director March 16, 2021
Dr. Sotirios J. Vahaviolos
/s/ Nicholas DeBenedictis Director March 16, 2021
Nicholas DeBenedictis
/s/ James J. Forese Director March 16, 2021
James J. Forese
/s/ Richard H. Glanton Director March 16, 2021
Richard H. Glanton
/s/ Michelle J. Lohmeier Director March 16, 2021
Michelle J. Lohmeier
/s/ Charles P. Pizzi Director March 16, 2021
Charles P. Pizzi
/s/ Manuel N. Stamatakis Director March 16, 2021
Manuel N. Stamatakis
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