What changed in this filing

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Item 1. Business

2022-03-14 compared with 2021-03-16 · 181 added, 144 removed, 402 unchanged (45% of the section changed)

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This Annual Report on Form 10-K contains forward-looking statements regarding Mistras Group, Inc.

("Mistras," the Company," "us," "we" and similar expressions) and our business, financial condition, results of operations and prospects within the meaning of Section 27A of the Securities Act of 1933 (Securities Act), and Section 21E of the Securities Exchange Act of 1934 (Exchange Act).

("Mistras,""MISTRAS," "the Company," "us," "we" and similar expressions) and our business, financial condition, results of operations and prospects within the meaning of Section 27A of the Securities Act of 1933 (Securities Act), and Section 21E of the Securities Exchange Act of 1934 (Exchange Act).

Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact.

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In some cases, you can identify forward-looking statements by terminology, such as “goals,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “could,” “should,” “would,” “predicts,” “appears,” “projects,” or the negative of such terms or other similar expressions.

Factors that could cause or contribute to differences in results and outcomes from those in our forward-looking statements include, without limitation, those discussed elsewhere in this Report in Part I, Item 1A.

“Risk Factors,” Part 2, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in this Item 1, as well as those discussed in our other Securities and Exchange Commission (SEC) filings.

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However, you should consult any further disclosures we may make on these or related topics in our reports on Form 8-K or Form 10-Q filed with the SEC.

The following discussions should be read in conjunction with the sections of this Report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.”

The following discussions should be read in conjunction with the sections of this Annual Report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.”

Asset Protection Industry Overview

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is a leading "one source" multinational provider of integrated technology-enabled asset protection solutions, helping to maximize the safety and operational uptime for civilization’s most critical industrial and civil assets.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and a decades-long legacy of industry leadership, MISTRAS leads clients in the oil and gas, aerospace and defense, power generation, civil infrastructure, and manufacturing industries towards achieving and maintaining operational excellence.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and a decades-long legacy of industry leadership, MISTRAS leads clients in the oil and gas, petrochemical, aerospace and defense, renewable and non-renewable energy, civil infrastructure, and manufacturing industries towards achieving and maintaining operational excellence.

By supporting these organizations that help fuel our vehicles and power our society;

inspecting components that are trusted for commercial, defense, and space craft;

and building real-time monitoring equipment to enable safe travel across bridges, MISTRAS helps the world at large.

The company’s core capabilities also include non-destructive testing (“NDT”) field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.

MISTRAS enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial IoT-connected digital software and monitoring solutions.

We offer our customers “OneSource™ for Asset Protection Solutions ® ” and are a leading global provider of technology-enabled asset protection solutions used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure.

Our asset protections are intended to help maximize safety and uptime of our customers' assets and facilities.

and building real-time monitoring equipment to enable safe travel across bridges, MISTRAS helps the world move, innovate and create a safe and sustainable future for generations to come.

The company’s core capabilities include Non-Destructive Testing (“NDT”) field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.

MISTRAS enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IIoT") -connected digital software and monitoring solutions.

We offer our customers “One Source for Asset Protection Solutions ® ” and are a leading global provider of technology-enabled asset protection solutions used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure.

Our asset protection solutions are intended to help maximize safety and uptime of our customers' assets and facilities.

These mission critical solutions enhance our customers’ ability to comply with governmental safety and environmental regulations, extend the useful life of their assets, increase productivity, minimize repair costs, manage risk and avoid catastrophic disasters.

We deliver value through a comprehensive “OneSource™” portfolio of customized solutions, utilizing a proven systematic method that creates a closed-loop lifecycle for addressing continuous asset protection and improvement.

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Our specialized asset protection solutions include:

• Field Inspections

• Laboratory Quality Assurance/Control (QA/QC)

• Laboratory Testing

• Maintenance

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• Data Management and Services

Our OneSource™ model emphasizes the integration of these solutions and the asset integrity data associated with them to service our customers throughout their assets’ lifetimes.

Our OneSource model emphasizes the integration of these solutions and the asset integrity data associated with them to service our customers throughout their assets’ lifetimes and are delivered to our customers in three primary ways:

data services, field operations, and shop work.

Under this business model, many customers outsource their inspection, integrity data management and other asset protection needs to us on a “run-and-maintain” basis to ensure the continued safety and structural and operational integrity of their assets.

Revenue streams include data services revenue derived from the selling of licenses and analyzing and synthesizing customer data through our OneSuite™ platform;

field operations revenue derived from work performed in the field at customer locations;

and shop work revenue derived from operations designing, building, and customizing products in our laboratories for our customers.

We have established long-term relationships as a critical solutions provider to many of the leading companies with asset-intensive infrastructure in our target markets.

These markets primarily consist of:

• Oil & Gas (Downstream, Midstream, Upstream and Petrochemical)

• Oil and Gas (Downstream, Midstream and Upstream)

• Aerospace & Defense

• Power Generation and Transmission

• Power Generation & Transmission

• Public Infrastructure, Research and Engineering

• Process Industries

• Petrochemical

A majority of our revenues are generated by deploying technicians at our customers' locations.

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We generated revenues of $677.1 million, $592.6 million and $748.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

We generated a net loss of $(99.5) million, net income of $6.1 million and net income of $6.8 million for the years ended December 31, 2020, 2019, and 2018 respectively.

We generated net income of $3.9 million, a net loss of $(99.5) million and net income of $6.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

For the years ended December 31, 2021, 2020 and 2019, we generated approximately 82%, 80% and 80%, respectively, of our revenues from our Services segment.

Our revenues are diversified, with our top ten customers accounting for approximately 32%, 34% and 34% of our revenues during the years ended December 31, 2020, 2019 and 2018, respectively.

Our revenues are diversified, with our top ten customers accounting for approximately 33%, 32% and 34% of our revenues during the years ended December 31, 2021, 2020 and 2019, respectively, with no customer accounting for greater than 10% of our revenues in any such year.

OUR SPECIALIZED SOLUTIONS

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The ability to inspect infrastructure assets and not interfere with their operating performance makes NDT a highly-attractive alternative to many traditional techniques, which may require shutting down an asset or entire facility.

Typical issues for which MISTRAS technicians inspect include corrosion, cracking, leaking, faults and flaws in piping, storage tanks, pressure vessels as well as a wide range of other industrial assets and public infrastructure.

Typical issues for which Mistras technicians inspect include corrosion, cracking, leaking, faults and flaws in piping, storage tanks and pressure vessels, as well as a wide range of other industrial assets and public infrastructure.

Our automated data acquisition solutions utilize smart sensing and monitoring, robotic inspection systems, and digitized spot inspections to provide asset integrity data with greater insight into current and future asset conditions.

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After an initial field inspection is performed, MISTRAS is able to provide multiple supplemental solutions that further serve to solidify our relationships with our customers and drive additional revenue.

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Laboratory Quality Assurance/Control (QA/QC)

Our network of in-house laboratories located across North America and Europe offers quality assurance and quality control (QA/QC) solutions for new and existing metal and alloy components, materials, and composites.

Our in-house labs work with our customers throughout their components’ lifetimes, from preparation and production to post-processing and in-service component monitoring.

MISTRAS’ laboratory QA/QC solutions help to meet customer needs throughout their manufacturing cycles, with a focus on optimizing production logistics.

Our in-house lab solutions include:

• Non-destructive evaluation/inspection (NDE/NDI)

• Destructive testing (DT)

• Metallurgical testing

• Chemical analysis testing

• Mechanical services

• Pre-machining

• Finishing services

We often inspect and test components prior to assembly to screen for defects and discontinuities introduced in the manufacturing process.

We also inspect existing components to ensure they remain fit-for-purpose.

Our labs hold a wide variety of certifications, such as:

Nadcap (formerly NADCAP, the National Aerospace and Defense Contractors Accreditation Program), AS9100/ISO-9001, Federal Aviation Administration (FAA) Repair Station, and the International Traffic in Arms Regulations/Export Administration Regulations (ITAR/EAR) , that allow us to perform inspections to meet or exceed stringent regulatory and manufacturers' requirements.

With these certifications comes a comprehensive range of approvals from prime contractors of major projects, militaries, and internationally-renowned original equipment manufacturers (OEMs) from many of our key markets, including the oil and gas, aerospace and defense, power generation, and industrial markets.

We perform maintenance and light mechanical services to prepare assets for inspection and to return them to working condition post inspection.

These services include corrosion removal, mitigation and prevention;

insulation installation and removal;

electrical services;

heat tracing, industrial cleaning;

Our light mechanical services are often offered as complementary, value-added solutions to inspections, such as removing insulation in order to inspect piping, then re-installing insulation.

Our multi-disciplined technicians offer maintenance and light mechanical services in hard-to-access areas, in combination with rope access or diving strategies.

Mechanical services are still a small part of our business, and we carefully try to avoid providing any such services that conflict with our inspection services.

Engineering Consulting

We provide a broad range of engineering consulting services, primarily for process equipment, technologies and facilities.

Our engineering consultations include plant operations and management support, turnaround/shutdown planning, profit improvement, facilities planning studies, engineering design, process safety reviews, energy optimization evaluations, benchmarking/key performance indicator (KPI) development and technical training.

Our Asset Integrity Management/Mechanical Integrity (AIMS/MI) services help improve asset reliability and regulatory compliance through a systematic, engineering-based approach to ensure the ongoing integrity and safety of equipment and industrial facilities.

AIMS/MI services can include conducting an inventory of infrastructure assets;

developing, implementing and training personnel in executing inspection and maintenance procedures;

and managing MI programs.

We help to identify gaps between existing and desired practices and establish quality assurance standards for fabrication, engineering and installation of infrastructure assets.

Much of our work is conducted in hard-to-access locations, including those in at-height, subsea and confined locations.

We utilize scaffolding and rope access to access at-height and confined assets;

certified divers for subsea inspection and maintenance;

and unmanned (drone) aerial, land-based and subsea systems to deliver a wide range of inspection applications, with an emphasis on minimizing at-height access and confined space entry (CSE).

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Data Management and Services

The asset protection solutions that MISTRAS provides throughout our customers’ asset lifecycles generate asset integrity data that needs to be effectively archived, managed, and analyzed.

MISTRAS provides value to our customers through our ability to integrate these functions to a single provider, as customers often struggle to unify data that was collected by various contractors in different locations at different times.

A common difficulty that MISTRAS' customers face is the ability to easily access and analyze data from multiple data collection and input contractors.

We recognize that this data is most valuable to our customers when it is accessible and integrated (regardless of vendor, tool, or facility), and have taken significant steps to digitalizing asset protection processes through the release of the first-ever asset protection software ecosystem MISTRAS OneSuite.

The OneSuite software platform offers functions of MISTRAS' popular software and services brands as integrated apps on a cloud environment.

OneSuite serves as a single access portal for customers' data activities and provides access to 50 plus applications being offered on one centralized platform.

Plant Condition Management Software (PCMS®).

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It also develops asset integrity management plans based on RBI calculations that specify an optimal schedule for the testing, maintenance and retirement of assets.

In many instances, customers of our field inspections and consulting services also have licensed PCMS for storage and analysis of collected inspection and MI data.

A common difficulty that MISTRAS’ customers face is the ability to easily access data from multiple data collection inputs and contractors.

MISTRAS is actively advancing initiatives focused on creating digital pathways between multiple data applications, including PCMS, to provide streamlined access to asset integrity data and offer subject matter expert (SME) data analysis support.

In many instances, customers of our field inspections and consulting services also have licensed PCMS for storage and analysis of collected inspection and Mechanical Integrity ("MI") data.

We believe PCMS is one of the most widely used plant condition management software systems in North American refineries.

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Pipeline Data.

Following our acquisitions of companies that support the midstream sector of the Oil & Gas industry, we believe MISTRAS provides among the most comprehensive, data-driven pipeline protection solution available to the industry.

Following our acquisitions of companies that support the midstream sector of the oil and gas industry, we believe MISTRAS provides among the most comprehensive, data-driven pipeline protection solutions available to the industry.

These proprietary pipeline data analysis solutions enable deep integration of inline inspection ("ILI") big data with real-time risk analytics and business intelligence ("BI") to provide capabilities for supporting pipeline integrity, which we believe provides us with an important competitive advantage.

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MISTRAS has also invested resources in digitalizing and optimizing the collection, transfer, and visibility of field inspection data.

MISTRAS Digital ® is an electronic platform that digitally delivers field inspection assignments and related data, captures inspection results, and delivers electronic reporting and productivity tracking via relevant KPIs to multiple members of a customer organization, including those not directly associated with the Inspection function.

MISTRAS Digital is an electronic platform that digitally delivers field inspection assignments and related data, captures inspection results, and delivers electronic reporting and productivity tracking via relevant key performance indicators (KPI(s)) to multiple members of a customer organization, including those not directly associated with the inspection function.

Customers have made clear that the timely and accurate delivery of field data to their inspection data management systems ("IDMS") is an important feature for them.

MISTRAS Digital ® integrates with MISTRAS’ PCMS and other inspection data management systems to provide additional productivity improvements.

MISTRAS Digital integrates with PCMS and other inspection data management systems to provide additional productivity improvements.

Online Monitoring.

Our online condition-monitoring solutions provide real-time reports and analysis of infrastructure to alert facility personnel to damages before critical failures occur, while our flexible, Industrial Internet of Things (IIoT)-compatible, cloud-based online monitoring portal centralizes and analyzes all collected monitoring data.

Our online condition-monitoring solutions provide real-time reports and analysis of infrastructure to alert facility personnel to damages before critical failures occur, while our flexible, IIoT-compatible, cloud-based online monitoring portal centralizes and analyzes all collected monitoring data.

These monitoring solutions are often installed in hazardous or hard-to-reach locations, helping to enhance safety by reducing the need to send technicians into unsafe locations.

We offer monitoring solutions for a wide range of assets and applications, including:

• Wind Turbine Blades

• Tube Leaking

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• Fluid Corrosivity

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• Through-Valve Leaking

We have continued to develop new technologies to provide monitoring of wind blade integrity through our Sensoria™ blade monitoring technology, which received a U.S.

patent during the fourth quarter of 2021.

Sensoria helps provide real-time monitoring and damage detection of wind turbine blades and allows our customers to maximize uptime, performance and safety of wind turbine blades.

This tool provides additional growth and expansion of our capabilities to serve both new and existing wind turbines and greatly enhances our product offerings within the renewable energy industry.

With expertise in monitoring hardware and services, MISTRAS designs and installs monitoring systems, and provides commissioning, training, reporting, technical support, and annual maintenance services.

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Much of our monitoring is based on acoustical emissions technology.

Laboratory Testing

Our network of in-house laboratories located across North America and Europe offers quality assurance and quality control ("QA/QC") solutions for new and existing metal and alloy components, materials, and composites.

Our in-house labs work with our customers to test and measure utilized components throughout their lifetimes, from preparation and production to post-processing and in-service component monitoring.

MISTRAS’ laboratory QA/QC solutions help to meet customer needs throughout their manufacturing cycles, with a focus on optimizing production logistics.

Our in-house lab solutions include:

• Non-destructive evaluation/inspection ("NDE"/"NDI")

• Destructive testing ("DT")

• Metallurgical testing

• Chemical analysis testing

• Mechanical services

• Pre-machining

• Finishing services

We often inspect and test components prior to assembly to screen for defects and discontinuities introduced in the manufacturing process.

We also inspect existing components to ensure they remain fit-for-purpose.

Our labs hold a wide variety of certifications, such as:

Nadcap (formerly NADCAP, the National Aerospace and Defense Contractors Accreditation Program), AS9100/ISO-9001, Federal Aviation Administration (FAA) Repair Station, and the International Traffic in Arms Regulations/Export Administration Regulations (ITAR/EAR) , that allow us to perform inspections which meet or exceed stringent regulatory and manufacturers' requirements.

With these certifications come a comprehensive range of approvals from prime contractors of major projects, militaries, and internationally-renowned original equipment manufacturers (OEMs) from many of our key markets, including the oil and gas, aerospace and defense, power generation, and industrial markets.

We perform maintenance and light mechanical services to prepare assets for inspection and to return them to working condition post inspection.

These services include corrosion removal, mitigation and prevention;

insulation installation and removal;

electrical services;

heat tracing, industrial cleaning;

Our light mechanical services are often offered as complementary, value-added solutions to inspections, such as removing insulation in order to inspect piping, then re-installing insulation.

Our multi-disciplined technicians offer maintenance and light mechanical services in hard-to-access areas, in combination with rope access or diving strategies.

Mechanical services are still a small part of our business, and we carefully try to avoid providing any such services that conflict with our inspection services.

Engineering Consulting

We provide a broad range of engineering consulting services, primarily for process equipment, technologies and facilities.

Our Asset Integrity Management ("AIMS") and Mechanical Integrity services help improve asset reliability and regulatory compliance through a systematic, engineering-based approach to ensure the ongoing integrity and safety of equipment and industrial facilities.

AIMS/MI services can include conducting an inventory of infrastructure assets;

developing, implementing and training personnel in executing inspection and maintenance procedures;

and managing MI programs.

We help to identify gaps between existing and desired practices and establish quality assurance standards for fabrication, engineering and installation of infrastructure assets.

Much of our work is conducted in hard-to-access locations, including those in at-height, subsea and confined locations.

We utilize scaffolding and rope access to access at-height and confined assets;

certified divers for subsea inspection and maintenance;

and unmanned (drone) aerial, land-based and subsea systems to deliver a wide range of inspection applications, with an emphasis on minimizing at-height access and confined space entry ("CSE").

We design and manufacture portable, handheld, wireless and turnkey NDT equipment, along with corresponding data acquisition sensors and software, for spot inspections and long-term, unattended monitoring applications.

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• Automated Ultrasonics

• Data Solutions

• Fossil Power

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• Mechanical Services

• MISTRAS Digital®

• Nuclear Power

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ASSET PROTECTION INDUSTRY OVERVIEW

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Asset protection plays a crucial role in assuring the integrity and reliability of critical infrastructure.

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NDT has historically been a prominent solution in the asset protection industry due to its capacity to detect defects without compromising the integrity of the tested materials or equipment.

The supply of NDT inspection services has traditionally come from many small vendors, who provide services to a small geographic region.

A trend has emerged, however, for customers to engage a select few vendors capable of providing a wider spectrum of asset protection solutions for global infrastructure, in addition to an increased demand for advanced non-destructive testing (ANDT) solutions and data acquisition software, both of which require a highly-trained workforce.

Due to these trends, those vendors offering integrated solutions, scalable operations, skilled personnel and a global footprint will have a distinct competitive advantage.

Traditionally, the supply of NDT inspection services has been provided by many relatively small vendors, who provide services in a more localized geographic region.

A trend has emerged, however, for customers to increasingly engage a select few vendors capable of providing a wider spectrum of asset protection solutions for global infrastructure, in addition to an increased demand for advanced non-destructive testing ("ANDT") solutions and data acquisition software, both of which require a highly-trained workforce.

Due to these trends, those vendors offering integrated solutions, scalable operations, skilled personnel and a global footprint are expected to have a distinct competitive advantage.

Moreover, we believe that vendors that are able to effectively deliver both advanced solutions and data analytics, by virtue of their access to customers’ data, create a significant barrier to entry for competitors, leading to the opportunity to further create significant recurring revenues.

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Digital Transformation of Asset Protection.

Plants in the oil & gas and process industries are recognizing the need to evolve their traditional, paper-based mechanical integrity programs in favor of digitalized solutions.

Plants in the oil and gas and process industries are recognizing the need to evolve their traditional, paper-based mechanical integrity programs in favor of digitalized solutions.

The rise of big data intelligence and the need to gain actionable insights from raw asset integrity data are growing trends that provide opportunities for contractors with a wide range of asset protection expertise and integrated data platforms to help customers maximize uptime while controlling costs.

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These materials often cannot be tested using traditional NDT techniques.

We believe that demand for more advanced testing and assessment solutions will increase along with the increased utilization of these advanced materials during the design, manufacturing, operating and quality control phases.

We believe that demand for more advanced testing and assessment solutions will increase as the utilization of these advanced materials increases during the design, manufacturing, operating and quality control phases.

Meeting Safety Regulations .

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Our customers benefit from MISTRAS’ extensive engineering consulting base that supports them in devising mechanical integrity programs that both meet regulatory compliance standards and enable enhanced safety and uptime at the customer's facilities.

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Expanding Addressable End-Markets .

The continued emergence of and advances in asset protection technologies and software-based systems are increasing the demand for asset protection solutions in applications where existing techniques were previously ineffective.

This has been true for the wind energy market, which has been receptive to updating traditional blade inspection processes in favor of unattended, remote monitoring solutions such as Sensoria.

Expanding Aerospace and Defense Industry .

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The collapse of world oil prices in 2015 and 2016 undermined industry expansion.

While energy prices recovered in 2017 and 2018, they have once more declined, with the current year collapse, fueled by the coronavirus pandemic.

With lower prices, we continue to see reductions in NDT and maintenance spending, although not to the extent as experienced in during 2015 and 2016, due in part to price stabilization.

While energy prices recovered in 2017 and 2018, they have once more declined, and subsequently rebounded in the second half of 2021.

Current political activities in Ukraine and its surrounding areas are likely to have increased oil prices and are expected to continue to significantly impact oil prices for the foreseeable future.

Expanding Pipeline Integrity Regulations:

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OneSource Provider for Asset Protection Solutions .

We believe we have one of the most comprehensive portfolios of integrated asset protection solutions worldwide, which positions us to be a leading single-source provider for our customers’ asset protection requirements.

We believe we have one of the most comprehensive portfolios of integrated asset protection solutions worldwide, which positions us to be a leading single-source provider for our customers’ asset

protection requirements.

This is particularly a competitive strength in regards to turnarounds and shutdowns - during which facilities temporarily cease portions of their operations in order to perform plant-wide inspections, maintenance and repairs - as the services being requested and performed during these work stoppages make up significant portions of refinery, process and power plant maintenance budgets.

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MISTRAS’ expertise and proprietary research and development in data solutions throughout the asset protection cycle provides a competitive advantage.

With solutions for integrated data acquisition, storage, visualization and analytics, our integrated data management solutions are ahead of the industry’s trend towards centralizing asset protection to fewer, highly-skilled and multi-disciplined vendors.

With solutions for integrated data acquisition, storage, visualization and analytics, our integrated data solutions well-position us for the industries' increasing movement towards digitalizing and centralizing asset protection to fewer, highly-skilled and multi-disciplined vendors.

Many of our data solutions are platform-agnostic, allowing us to integrate into customer's existing operations, and thereby expanding the potential customer pool for our solutions.

Our presence in our customers’ operations throughout their asset lifecycles also ideally positions us to be their primary vendor to centralize their asset integrity data collection, management, and analysis, creating opportunities to scale our relationships.

Long-Standing Trusted Provider to a Diversified and Growing Customer Base .

We have become a trusted partner to a large and growing customer base across numerous global markets through our proven, decades-long track record of successful operations.

Our customers include some of the largest and most well-recognized firms in the oil and gas, chemicals, power generation and aerospace and defense industries, as well as public authorities.

Our customers include some of the largest and most well-recognized firms in the oil and gas, chemicals, power generation and transmission and aerospace and defense industries, as well as public authorities.

Repository of Customer-Specific Inspection Data .

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Our deep knowledge base in asset protection services and equipment enables us to offer technology packages, in which our field technicians utilize our proprietary and specialized testing procedures and hardware, advanced pattern recognition, neural network software and databases to compare test results against our prior testing data or national and international structural integrity standards.

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Deep Domain Knowledge and Extensive Industry Experience .

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We believe that we remain ahead of the technological curve by backing our extensive industry expertise with the investment of resources in research and development (R&D).

Some of the advanced inspection technologies developed by our internal R&D teams include an automated radiographic testing (aRT) crawler for corrosion under insulation (CUI) inspections in aboveground pipelines;

Some of the advanced inspection technologies developed by our internal R&D teams include our Sensoria wind blade monitoring technology;

an automated radiographic testing ("aRT") crawler for corrosion under insulation ("CUI") inspections in aboveground pipelines and piping;

our Large Structure Inspection ("LSI") scanner;

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We are also actively seeking to optimize our customers’ asset protection workflows and processes, by creating digital paths between data applications to increase data visibility and reduce manual data entry and human error.

We have continued providing our customers with innovative asset protection software ecosystem through our MISTRAS OneSuite platform.

The software platform offers functions of MISTRAS' popular software and services brands as integrated apps on a cloud environment.

OneSuite serves as a single access portal for customers' data activities and provides access to 50 plus applications being offered on one centralized platform.

Expand Our Focus in the Aerospace and Defense Industries .

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The recent interest in the use of additive manufacturing techniques to create components also necessitates advanced inspection and testing solutions.

The Company consummated two acquisitions of aerospace inspection companies in 2017.

These recent actions are driven by our increased focus to provide solutions to our customers in the aerospace and defense industries throughout their manufacturing value chains in this growing area.

The Company consummated two acquisitions of aerospace inspection companies in 2017, enhancing our capabilities and focus on providing solutions to our customers in the aerospace and defense industries throughout their manufacturing value chains in this growing area.

Expand Our Focus in the Pipeline Integrity Industry.

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In 2019, we acquired a company that provides pipeline integrity management software and services to energy transportation companies.

We acquired an inline inspection provider based in Canada in 2018 with operations in the U.S.

and have implemented our PCMS software for several pipeline operators to support their integrity data management.

We acquired an inline inspection provider in 2018 and have implemented our PCMS software for several pipeline operators to support their integrity data management.

Expanding our Mechanical Services Portfolio.

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We intend to maintain and enhance our technological leadership by continuing to invest in developing new technology, applications and data services.

We intend to continue deepening synergies between our solutions to provide our customers with uniquely-integrated offerings, which we believe makes us a more attractive vendor for customers seeking to centralize their asset protection.

We also intend to continue to develop technologies that enhance the flow of data throughout multiple operational phases and facilities, through solutions such as MISTRAS Digital, our integrated pipeline integrity data portfolio, and our cloud-based monitoring data portal.

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The release of our OneSuite ecosystem underscores our dedication to continue deepening synergies between our solutions to provide our customers with uniquely-integrated offerings, which we believe makes us a more attractive vendor for customers seeking to centralize their asset protection.

We have actively continued to develop technologies that enhance the flow of data throughout multiple operational phases and facilities, through solutions such as MISTRAS Digital, our integrated pipeline integrity data portfolio, and our cloud-based monitoring data portal, and Sensoria, our wind blade monitoring technology.

Expand our Solution Offerings to Existing Customers .

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We believe we have significant opportunities to expand our customer base in relatively new end markets, including wind and other alternative energy, natural gas transportation industries pipeline integrity and additive manufacturing.

We believe that the development of our Sensoria tool, which allows our customers to maximize uptime, performance and safety of wind turbine blades, provides additional growth and expansion of our capabilities to serve both new and existing wind turbines and greatly enhances our product offerings within the renewable energy industry.

The expansion of our addressable markets is being driven by the increased recognition and adoption of advanced asset protection technologies that are supplanting traditional methods.

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The Company has three operating segments:

Services provides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components.

Services provides asset protection solutions in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components.

This segment includes data services revenue derived from the selling of licenses and analyzing and synthesizing customer data through our OneSuite platform, field operations revenue derived from work performed in the field at customer locations, and shop revenue derived from operations designing, building, and customizing products in our laboratories for our customers.

PCMS software and pipeline related software and data analysis solutions are included in this segment.

International offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment.

Products and Systems designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.

For a discussion of segment revenues, operating results and other financial information, including geographic areas in which we generated revenues, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, as well as Note 2-Revenue in the notes to consolidated financial statements in Item 8 of this Annual Report.

For a discussion of segment revenues, operating results and other financial information, including geographic areas in which we generated revenues, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, as well as Note 2-Revenue and Note 19-Segment Disclosure in the notes to consolidated financial statements in Item 8 of this Annual Report.

Our Target Markets

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domestic markets.

These factors are excerpted below from various Energy Information Administration (EIA) outlook reports:

It is unclear what effects the recently engaged conflict between Russia and Ukraine is likely to have on the world economy and certain of our target markets, including particularly the oil and gas market and the information below is subject to change based on these factors.

Excerpted below are forecasts from various Energy Information Administration (EIA) outlook reports, which are subject to change based on these factors:

The electricity generation mix is projected to continue to experience a rapid rate of change, with renewables the projected fastest-growing source of electricity generation through 2050 because of continuing declines in the capital costs for solar and wind that are supported by federal tax credits and higher state-level renewables targets.

With slow load growth and increasing electricity production from renewables, U.S.

coal-fired and nuclear electricity generation is projected to decline, with most of the decline occurring by the mid-2020s.

The EIA forecasts U.S.

crude oil production will average 11.0 million barrels per day (bpd) in 2021, down 0.3 million bpd from 2020, and then rise to 11.5 million bpd in 2022.

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coal-fired electricity generation is projected to decline, with most of the decline occurring by the mid-2020s.

The EIA noted U.S.

crude oil production averaged 11.2 million barrels per day (bpd) in 2021, down 0.1 million bpd from 2020.

The EIA forecasts production to rise to average 12.0 million bpd in 2022 and continue to rise to 12.6 million bpd in 2023.

There are a number of economic factors which drive the aerospace market, including:

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Revenue by Target Market

The following chart represents the percentage of consolidated revenues we generated from our various markets for the year ended December 31, 2020:

Mistras Revenues by Target Market

(Year ended December 31, 2020)

Oil & Gas Breakdown

(Year ended December 31, 2020)

MISTRAS supplies oil and gas asset protection solutions to downstream (refining), midstream (transportation and storage), upstream (exploration and production) and petrochemical operations.

The following charts represent our revenue by target market for the years ended December 31, 2021, 2020 and 2019 as the petrochemical market was consolidated within the oil and gas target market.

We have separately broken out this information in the current period as we have continued to provide increased services and products to this market, and continue to expect increases in future periods.

For comparability purposes, Petrochemical comprised 3% and 4% of total revenues for the years ended December 31, 2020 and 2019, respectively, which were included within the oil and gas target market.

MISTRAS supplies oil and gas asset protection solutions to downstream (refining), midstream (transportation and storage) and upstream (exploration and production) operations.

We use our vast solutions portfolio to help identify current and future asset performance, and actively prevent, mitigate or otherwise address potential issues, including corrosion, cracking, leaking and other damages that may lead to safety, productivity or environmental concerns.

Our solutions help identify conditions that if not remedied, could lead to potential catastrophic failures in tanks, vessels, valves, buried and above ground pipelines, pumps, motors, compressors and other critical assets found throughout the oil & gas production and delivery supply chain.

We actively seek to evolve our solutions through technological enhancements and R&D to discover new applications.

Online monitoring and permanently-mounted sensors, as well as the use of drones and other alternative delivery devices, are all being considered as oil and gas infrastructure owners look to “smart” technologies that reduce human intervention while delivering highly-accurate inspection & integrity data.

highly-accurate inspection & integrity data.

We also have actively sought to further enhance our integrated approach to asset protection, through the development of our complementary mechanical service portfolio.

In general, the energy market is poised to leverage digital solutions to facilitate process improvements as well as increase plant reliability and improve process and personnel safety.

This provides an opportunity for us to synergistically leverage our asset protection solutions into our new MISTRAS Digital platform.

In general, the oil and gas market is poised to leverage digital solutions to facilitate process improvements as well as increase plant reliability and improve process and personnel safety.

This provides an opportunity for us to synergistically leverage our digital asset protection solutions, including MISTRAS Digital and OneSuite.

Digital transmission of data in various industry sectors, with built-in analytic functions, will allow our customers to better leverage inspection data that is being generated in the field.

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While we expect off-stream inspection of critical assets to remain a routine practice, we anticipate an increase in the demand for non-invasive, or on-stream inspections.

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Aerospace and Defense

The aerospace industry is undergoing unprecedented growth with many original equipment manufacturers (OEMs) reporting record-high backlogs of up to ten years.

The aerospace industry continued to rebound from COVID-19 throughout 2021 with backlog and production levels approaching and exceeding pre-pandemic levels for certain original equipment manufacturers (OEM).

We serve this rapidly-growing target market by providing a full range of inspection, testing, machining, mechanical, finishing, additive manufacturing and equipment solutions, for which we are Nadcap certified.

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We believe that in recent years, acceptance of asset protection solutions has grown in this industry due to the aging of critical power generation and transmission infrastructure.

We received a U.S.

patent for the technology behind Sensoria, our innovative 24/7/365 rotor blade monitoring system and sensors that enable blade integrity management for wind turbine owners and operators.

Sensoria is a remote rotor blade monitor that detects and reports damages in real-time, including cracks, lightning strikes, skin ruptures and perforations, delaminations, and more.

By sending immediate damage alerts to operators, Sensoria enables them to maximize blade uptime and generating capacity while preventing damages from worsening.

This tool provides additional growth and expansion of our capabilities to serve both new and existing wind turbines and greatly enhances our product offerings within the renewable energy industry.

The growing availability of cheap natural gas, along with environmental concerns with coal, has stimulated the construction of new natural gas-fired power plants across North America, creating opportunities for MISTRAS to provide specialized solutions in multiple phases.

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These include NDT services — often performed through rope and/or drone access — to identify corrosion, cracking, and other defects that can affect the safety and operational effectiveness of wind turbines, along with remedial solutions to repair minor damages identified during inspections.

MISTRAS views the wind/renewables market as a market with growth potential, and we are actively engaging in technology R&D to further support wind turbine owner/operators.

We anticipate demand will continue to grow for wind/renewable energy solutions in the future.

Process Industries

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Public authorities tasked with new construction and maintenance of existing public infrastructure increasingly use asset protection solutions to inspect these assets, including the use of embedded sensors to enable online monitoring throughout the life of the asset.

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We have provided testing and structural health monitoring ("SHM") and data solutions on bridges and structures worldwide, including some of the largest and most well-known bridges in the United States and United Kingdom.

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Our monitoring teams also provide regular reports that include early warnings of suspect areas before an alarm is generated.

Petrochemical

We provide asset protection NDT services for customers within the petrochemical industry, as they transform byproducts into goods which are utilized in many end products such as plastics, soaps, fertilizers, synthetic fibers and rubber.

We actively seek to evolve our solutions through technological enhancements and R&D to discover new applications.

Online monitoring and permanently-mounted sensors provide real-time data to petrochemical owners and operators and provide an opportunity for us to synergistically leverage our asset protection solutions into our new MISTRAS Digital platform, OneSuite.

Digital transmission of data in various industry sectors, with built-in analytic functions, will allow our customers to better leverage inspection data that is being generated in the field.

We also have actively sought to further enhance our integrated approach to asset protection, through the development of our complementary mechanical service portfolio.

We provide our asset protection solutions to a global customer base of diverse companies primarily in our target markets.

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We have operations in 10 countries and occasionally conduct business in a few other countries.

Most of our revenues are derived from our U.S., Canadian and European operations.

Most of our revenues are derived from our U.S., Canadian and European operations and we do not have material operations in Russia, Ukraine or other areas which are impacted by the Russian invasion of Ukraine.

See Note 2-Revenue and Note 19-Segment Disclosure to the consolidated financial statements in this Annual Report for further disclosure of our revenues, long-lived assets and other financial information regarding our international operations.

Sales and Marketing

We sell our asset protection solutions through our direct sales and marketing teams within all of our offices worldwide.

We sell our asset protection solutions through our direct sales and marketing activities worldwide.

In addition, our project and laboratory managers, as well as our management, are trained on our solutions and often are the source of sales leads and customer contacts.

Our direct sales and marketing teams work closely with our customers’ research and design personnel, reliability engineers and facilities maintenance engineers to demonstrate the benefits and capabilities of our asset protection solutions, refine our asset protection solutions based on changing market and customer needs and identify potential sales opportunities.

We divide our sales and marketing efforts into services sales, products and systems sales and marketing and utilize customer relationship management (CRM) systems to collect, manage and collaborate customer information with our teams globally.

Our direct sales and marketing teams work closely with our customers’ to demonstrate the benefits and capabilities of our asset protection solutions, refine our asset protection solutions based on changing market and customer needs and identify potential opportunities.

We divide our sales and marketing efforts into services sales, products and systems sales and marketing and utilize marketing automation and customer relationship management (CRM) systems to collect, manage and collaborate customer information with our teams globally.

Our CRM's also provide critical data to provide accurate forecasting and reporting.

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Most of our hardware products are manufactured in our Princeton Junction, New Jersey facility.

Our Princeton Junction facility includes the capabilities and personnel to fully produce all of our AE products and NDT Automation Ultrasonic equipment.

This facility includes the capabilities and personnel to fully produce all of our AE products and NDT Automation Ultrasonic equipment.

We also design and manufacture automated ultrasonic systems and scanners in France.

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Less than 0.01% of our employees in the United States are unionized.

Caring Connects

We consider the Company and its employees as a team connected by a common thread of caring – about one another, our customers, the environment, and the work we do.

We see our responsibility as looking out for our employees and to encourage our employees to look out for one another, by fostering a culture of togetherness, safety, respect, and contribution which enables each individual member to feel that they are a part of something bigger.

A community of caring professionals with a genuine passion for helping people and making a difference, together – that’s the heart of the program we call Caring Connects.

We believe that our employees are key to achieving our goals and strategy.

We have committed resources throughout our organization to ensure that the Company is attracting, developing, and retaining talented employees needed to support all aspects of our activities.

Our core values and business ethics guide and direct all activities undertaken by the Company.

We believe that the health and safety of our employees is paramount.

We have also developed key initiatives and strategies regarding our talent and people initiatives.

Below, we describe some of the key initiatives and values around health and safety.

Management regularly updates the Board with regards to our safety and people strategy and how we are performing in these areas.

In 2020, our Board of Directors established the Environmental, Social and Safety Committee.

This Committee, which consists of independent directors, monitors and oversees the strategic direction of our initiatives in support of our core values and our environmental, social and governance (ESG) initiatives.

Talent, Leadership and Employee Development

We believe that employee development and engagement begins with our senior management team, which has considerable industry experience and expertise.

Leveraging this experience and expertise, the senior management team is able to continuously review the Company’s organizational structure and provide opportunities for the growth and development for our employees.

This process helps us develop leaders at all levels within the organization, and to engage employees with rewarding opportunities, competitive salary and benefits, to advance their careers and contribute to our success.

As part of our continued commitment to our employees, we have established various programs to promote lifelong learning and development opportunities for our employees.

These include a mix of voluntary and mandatory training programs, which are provided in-person, virtually or on the job.

We also provide employees the ability to continue to gain additional professional certifications to contribute to their career advancement.

We utilize a web-based training center which is available to field technicians for career advancement and includes over 500 web-based classes.

In addition, we are committed to ensuring all employees are compensated at a living wage.

All local minimum wage requirements are met and where no wage laws are in place, employees are compensated competitively, in accordance with industry standards.

We also provide leadership development using third-party leadership organizations to members of our executive management team, and we provide coaching and leadership development to all levels of management, including the General Managers who work in the field.

Our human rights policy places a high priority on diversity and equal opportunity and provides the Company’s employees with management’s expectations related to human rights and labor practices.

Another program we instituted focuses on our connection by a common thread of caring – about one another, our customers, the environment, and the work we do.

We seek to foster a culture of togetherness, safety, respect, and contribution which enables each individual member to feel that he or she is a part of something bigger.

A community of caring professionals with a genuine passion for helping people and making a difference together – that is the heart of the program we call “Caring Connects.”

MISTRAS’ Safety-Conscious Culture

We consider safety as the backbone of our operations.

Our asset protection solutions aim to ensure that industrial assets and facilities remain in safe, reliable working order, which in turn enhances safety for our clients, the public, and the environment.

Our lab and field personnel are trained to operate according to strict safety and quality standards so that our processes and procedures in regard to hazardous materials, worker safety, and accident prevention are sound and effective.

MISTRAS works to help ensure that our clients are in full compliance with all federal, state, and local regulations.

We consider safety the backbone of our operations.

Our asset protection solutions aim to ensure that industrial assets and facilities remain in safe, reliable working condition, which in turn enhances safety for our clients, the public, and the environment.

Our lab and field personnel are trained to operate according to strict safety and quality standards so that our processes and procedures regarding hazardous materials, worker safety, and accident prevention are sound and effective.

Further to this, we are constantly evaluating these processes and procedures to ensure that they remain of high quality and are effective, and consider changes in the manner in which work is performed or lessons that have been learned from any sources, such as industry data.

MISTRAS works to help ensure that our clients are in full compliance with all federal, state, and local

Our practices, policies and procedures are designed to help ensure we perform our duties through the use of safe, industry-best practices, seeking to minimize risk wherever possible.

We emphasize a “MISTRAS’ safety-conscious” culture with the intent that it becomes embedded in the day-to-day work of all our employees.

We use various training tools and other practices to instill attitudes,

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beliefs, perceptions, and values that all employees share in the mandate to create and maintain a safe work environment for all.

We stay abreast of our safety performance through analysis of our company-wide safety statistics, which help us to determine behavioral trends while also instilling a culture of proactivity .

In 2020, our Board of Directors established the Social Responsibility, Environmental and Safety Committee, consisting of independent directors to help monitor and emphasize the importance of these core values at Mistras.

We use various training tools and other practices to instill attitudes, beliefs, perceptions, and values that all employees share in the mandate to create and maintain a safe work environment for all.

We continuously monitor our safety performance through analysis of our company-wide safety statistics, which help us to determine behavioral trends while also instilling a culture of proactivity.

For the year ended December 31, 2021, our Total Recordable Incident Rate (“TRIR”) was 0.15, when excluding COVID-19 related cases.

This was a reduction of (0.19) and (0.18) from the years ended December 31, 2020 and December 31, 2019 TRIR, respectively, when similarly excluding COVID-19 related cases.

Our business is seasonal.

This seasonality relates primarily to our oil and gas business, and to a lesser extent from the fossil and nuclear power industries.

This seasonality relates primarily to our oil and gas target market, and to a lesser extent within our other target markets.

refineries’ non-peak periods are generally in the fall, when they are retooling to produce more heating oil for winter, and in the spring, when they are retooling to produce more gasoline for summer.

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• Development of permanently embedded inspection systems to provide continuous, online, in-service monitoring of critical structural components

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Research and development expenses are reflected on our consolidated statements of income as research and engineering expenses.

Research and development expenses are reflected on our consolidated statements of income (loss) as research and engineering expenses.

Our company-sponsored research and engineering expenses were approximately $2.5 million, $2.9 million and $3.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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We utilize a combination of intellectual property safeguards, including patents, copyrights, trademarks and trade secrets, as well as employee and third-party confidentiality agreements, to protect our intellectual property.

As of December 31, 2020, we held two U.S.

patents (by direct ownership or exclusive licensing), which will expire in 2021 and 2026, respectively, and seven patents pending in the U.S.

for applications filed in 2018, 2019 and 2020, and had licenses to certain other patents.

However, we do not principally rely on these patents or licenses to provide most of our proprietary asset protection solutions.

As of December 31, 2021, we held six U.S.

patents by direct ownership and one by exclusive licensing, all of which will expire in 2026, and seven patent applications pending in the U.S.

All the owned patents and patent applications pending have been filed since 2018.

While we do not rely on these patents or licenses to provide a majority of our proprietary asset protection solutions, certain of these patents do provide us with a competitive advantage and we believe they will be an asset to our growth strategy.

Our trademarks and service marks provide us and our solutions with a certain amount of brand recognition in our markets.

We do not consider any single patent, trademark or service mark material to our financial condition or results of operations.

As of December 31, 2020, the primary trademarks and service marks that we held in the United States included MISTRAS ® and our stylized globe design.

As of December 31, 2021, the primary trademarks and service marks that we held in the United States included MISTRAS ® , our stylized globe design and our tag line "One Source for Asset Protection Solutions".

Other key trademarks or service marks that we utilize in localized markets or product advertising include:

• Onstream® (word and logo)

• PCMS® (word and logo)

• Mistras Digital ®

• OneSource™ for Asset Protection Solutions ®

• Physical Acoustics and the PAC logo

• CALIPERAY™ (word and logo)

• Physical Acoustics PAC logo

• Streamview™

• Ropeworks ®

• Sensor Highway™

• Transformer Clinic™

• Valve Squeak

Many elements of our asset protection solutions involve proprietary know-how, technology or data that are not covered by patents or patent applications because they are not patentable or would be difficult to enforce, including technical processes, equipment designs, algorithms and procedures.

We believe that this proprietary know-how, technology and data is the most important component of our intellectual property used in our asset protection solutions and is a primary differentiator of our solutions from those of our competitors.

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All of our employees are subject to confidentiality requirements through our employee handbook.

In addition, many of our employees have entered into confidentiality and proprietary information agreements with us.

In addition, many of our employees have entered into confidentiality and proprietary information agreements with

Our employee handbook and these agreements require our employees not to use or disclose our confidential information and to assign to us all the inventions, designs and technologies they develop during the course of employment with us, as well as addressing other intellectual property protection issues.

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We are not currently involved in any material intellectual property claims.

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Environmental Matters

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from Seton Hall University School of Law.

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Lange joined Mistras when we acquired Quality Services Laboratories in November 2000, and was elected a Director in 2003.

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All of the materials we file with or furnish to the SEC are available free of charge on our website at http://investors.mistrasgroup.com/sec.cfm, as soon as reasonably practicable after having been electronically submitted to the SEC.

Information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report or any other filing with the SEC.

Information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this Annual Report or any other filing with the SEC.

All of our SEC filings are also available at the SEC’s website at www.sec.gov .

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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 1. Business