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Item 9A. Controls and Procedures

2021-06-01 compared with 2020-06-01 · 54 added, 64 removed, 54 unchanged (69% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to reasonably ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March 31, 2020 .

Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of that date due to a material weakness in internal control over financial reporting, described below.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to reasonably ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March 31, 2021. Based on that evaluation, our management concluded that our disclosure controls and procedures were effective as March 31, 2021. 

Management's Annual Report on Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.

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

Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management evaluated the effectiveness of our internal control over financial reporting as of March 31, 2020, using the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.

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 our annual or interim financial statements will not be prevented or detected on a timely basis.

We identified a material weakness in internal control related to ineffective information technology general controls ("ITGCs") in the areas of user access and program change management over certain information technology (IT) systems that support our financial reporting processes.

Our business process controls (both automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.

We believe that these control deficiencies were a result of:

insufficient training of personnel on the importance of ITGCs;

inadequate processes to identify and assess changes to the IT environment which lead to ineffective design of our ITGC control environment;

inadequate staffing during the year in key positions responsible for compliance and oversight;

and IT control processes lacking sufficient documentation to ensure continuity of processes such that the successful operation of ITGCs was overly dependent on knowledge of certain individuals with experience in our IT organization, which led to failure resulting from changes in IT personnel.

Management and Internal Audit performed risk mitigation procedures and determined that the material weakness did not result in any identified misstatements to our financial statements, and there were no changes to previously released financial results.

Based on the material weakness described, we have concluded that as of March 31, 2020, our internal control over financial reporting was not effective.

Our independent auditors, Plante & Moran, PLLC, a registered public accounting firm, is appointed by the Audit Committee of our Board of Directors, subject to ratification by our shareholders.

Plante & Moran, PLLC has issued an adverse opinion on the effectiveness of our internal controls over financial reporting as of March 31, 2020, which appears in Item 8.

Financial Statements and Supplementary Data of this form 10-K.

As a result of the material weakness identified, Management has implemented and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively.

The remediation actions include:

(i) we intend to provide training programs addressing ITGCs and policies around internal controls over financial reporting, which will include educating control owners concerning the requirements of each control that they are responsible for;

(ii) we have created roles that are responsible for IT compliance and oversight;

(iii) we are developing and maintaining documentation underlying ITGCs to promote knowledge transfer upon personnel and function changes;

(iv) implementing an IT management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting processes;

and (v) enhanced quarterly reporting on the remediation measures to the Audit Committee of the Board of Directors.

We believe that these actions will remediate the material weakness.

The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We expect that the remediation of this material weakness will be completed prior to the end of our year ending March 31, 2021.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management evaluated the effectiveness of our internal control over financial reporting as of March 31, 2021, using the framework in “Internal Control –

Integrated Framework”

issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of  March 31, 2021. 

Our independent auditor, Plante & Moran, PLLC, a registered public accounting firm, is appointed by the Audit Committee of our Board of Directors, subject to ratification by our shareholders.

Plante & Moran, PLLC has issued an unqualified opinion on the effectiveness of our internal controls over financial reporting as of March 31, 2021, which appears in Item 8. 

Financial Statements and Supplementary Data 

of this form 10-K. 

Changes in internal control over financial reporting

In addition to the material weakness identified during the quarter, the GPT Acquisition was completed on October 31, 2019.

The financial results of GPT are included in our Consolidated Financial Statements as of March 31, 2020 and for the year then ended.

The GPT business represented $13,830 of revenues and ($7,433) of net loss, respectively, for the year ended March 31, 2020.

As this acquisition occurred in the third quarter of fiscal year 2020, the scope of our assessment of our internal control over financial reporting does not include GPT.

This exclusion is in accordance with the Securities and Exchange Commission’s general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition.

The GPT Acquisition was completed on October 31, 2019, and the financial results of GPT are included in our Consolidated Financial Statements as of March 31, 2020 and for the period then ended, and as of March 31, 2021 and for the year then ended. During the time since acquisition, we have assessed the control environment of GPT;

made certain changes to GPT's internal controls over financial reporting, including design changes that were required as we brought GPT onto our enterprise resource planning tool; and performed testing over the operating effectiveness of many of GPT's internal controls.

We now consider GPT to be included in the scope of our assessment of internal controls over financial reporting.

Other Information

Item 10. 

Directors, executive officers and Corporate Governance

Incorporated by reference from the definitive Proxy Statement for our 2020 Annual Me eting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2020 .

Incorporated by reference from the definitive Proxy Statement for our 

2021 Annual Me eting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2021.

Executive Officers and Compensation

Incorporated by reference from the definitive Proxy Statement for our 2020 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2020 .

Incorporated by reference from the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2021.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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The weighted average exercise price in column (b) includes the weighted average exercise price of options only.

Includes 499,548 shares remaining available under the 2014 Equity Plan.

Includes 44,039 shares remaining available under the 2014 Equity Plan.

Each share underlying a full value awards such as restricted stock, or performance shares count as five shares used against the total number of securities authorized under the plan.

Additional information for this item is incorporated by reference from the definitive Proxy Statement for our 2020 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2020 .

Additional information for this item is incorporated by reference from the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2021.

Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference from the definitive Proxy Statement for our 2020 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2020 .

Incorporated by reference from the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2021.

Principal Accountant Fees and Services

Incorporated by reference from the definitive Proxy Statement for our 2020 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2020 .

Incorporated by reference from the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2021.

Exhibits and Consolidated Financial Statement Schedules

1 unchanged sentence

The Consolidated Financial Statements of the Registrant listed on the accompanying index (please see Item 8.

Financial Statements and Supplementary Data) are filed as part of this Annual Report.

Financial Statements and Supplementary Data)  are filed as part of this Annual Report.

All financial statement schedules have been omitted either because they are not applicable or required, or the information that would be required to be included is disclosed in the notes to the Consolidated Financial Statements.

Articles of Incorporation and Amendments to Articles of Incorporation (incorporated by reference from exhibit 3.1 to Mesa Laboratories, Inc.’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Amended and Restated Bylaws of Mesa Laboratories, Inc.

(incorporated by reference from exhibit 3.1 to the Current Report on Form 8-K filed on May 10, 2019 (Commission File Number:

Base Indenture, dated August 12, 2019, by and between the Company and Wells Fargo Bank, National Association, as Trustee (incorporated by reference from exhibit 4.1 to Mesa Laboratories Inc.'s report on Form 8-K filed on August 12, 2019 (Commission File Number:

First Supplemental Indenture, dated August 12, 2019, by and between the Company and Wells Fargo Bank, National Association, as Trustee (incorporated by reference from exhibit 4.2 to Mesa Laboratories Inc.'s report on Form 8-K filed on August 12, 2019 (Commission File Number:

Base Indenture, dated August 12, 2019, by and between the Company and Wells Fargo Bank, National Association, as Trustee (incorporated by reference from exhibit 4.1 to Mesa Laboratories Inc.'s report on Form 8-K 

filed on August 12, 2019 (Commission File Number:

First Supplemental Indenture, dated August 12, 2019, by and between the Company and Wells Fargo Bank, National Association, as Trustee (incorporated by reference from exhibit 4.2 to Mesa Laboratories Inc.'s report on Form 8-K 

filed on August 12, 2019 (Commission File Number:

Description of securities registered under section 12 .

Credit Agreement dated as of March 5, 2021 among Mesa Laboratories, Inc., the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent .

Mesa Laboratories, Inc.

2006 Stock Compensation Plan (incorporated by reference from Exhibit 10.2.1 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Mesa Laboratories, Inc.

2014 Equity Plan (incorporated by reference from Exhibit 10.2.2 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of 2014 Equity Plan Option Award Agreement (incorporated by reference from Exhibit 10.3.1 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of 2014 Equity Plan Option Award Agreement as amended (incorporated by reference from Exhibit 10.3.2 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of 2014 Equity Plan Restricted Stock Award Agreement (incorporated by reference from Exhibit 10.1 to Mesa Laboratories, Inc.’s report on Form 8-K filed on June 11, 2018 (Commission File Number:

Form of 2019 Performance Share Unit Agreement, issued under the 2014 Equity Plan (incorporated by reference from Exhibit 10.3.4 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of 2020 Performance Share Unit Agreement, issued under the 2014 Equity Plan (incorporated by reference from exhibit 10.1 to Mesa Laboratories Inc.'s report on Form 10-Q filed on July 30, 2019 (Commission File Number:

Form of Confidentiality, Non-Compete and Non-Solicitation Agreement (incorporated by reference from Exhibit 10.4 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of Executive Employment Agreement (incorporated by reference from Exhibit 10.1 to Mesa Laboratories, Inc.’s report on Form 8-K filed on April 11, 2017 (Commission File Number 000-11740))

Subsidiaries of Mesa Laboratories, Inc.

Consent of Plante & Moran PLLC, independent registered public accounting firm, to the incorporation by reference in the Registration Statements on Form S-8 (file numbers 333-206551, 333-186893 and 333-152210) and Form S-3 (file number 333-225451) of their report dated June 1, 2020, included in the Registrant's Annual Report on Form 10-K for the year ended March 31, 2020.

Consent of EKS&H LLLP, independent registered public accounting firm, to the incorporation by reference in the Registration Statements on Form S-8 (file numbers 333-206551, 333-186893 and 333-152210), and Form S-3 (file number 333-225451) of their report dated June 1, 2020, included in the Registrant's Annual Report on Form 10-K for the year ended March 31, 2018.

2014 Equity Plan (incorporated by reference from Exhibit 10.2.2 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of 2014 Equity Plan Option Award Agreement (incorporated by reference from Exhibit 10.3.1 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of 2014 Equity Plan Restricted Stock Award Agreement (incorporated by reference from Exhibit 10.1 to Mesa Laboratories, Inc.’s report on Form 8-K filed on June 11, 2018 (Commission File Number:

000-11740)) .

Form of 2019 Performance Share Unit Agreement, issued under the 2014 Equity Plan (incorporated by reference from Exhibit 10.3.4 to Mesa Laboratories, Inc’s report on Form 10-Q filed on July 31, 2018 (Commission File Number:

Form of 2020 Performance Share Unit Agreement, issued under the 2014 Equity Plan (incorporated by reference from exhibit 10.1 to Mesa Laboratories Inc.'s report on Form 10-Q 

filed on July 30, 2019 (Commission File Number:

Form of 2021 Restricted Stock Unit Agreement, issued under the 2014 Equity Plan .

10.5 * α

Form of Executive Employment Agreement (incorporated by reference from Exhibit 10.1 to Mesa Laboratories, Inc.’s report on Form 8-K filed on April 11, 2017 (Commission File Number 000-11740) ).

Subsidiaries of Mesa Laboratories, Inc. 

Consent of Plante & Moran, PLLC, independent registered public accounting firm, to the incorporation by reference in the Registration Statements on Form S-8 (file numbers 333-206551, 333-186893 and 333-152210) and Form S-3 (file number 333-225451) of their report dated June 1, 2021, included in the Registrant's Annual Report on Form 10-K for the year ended March 31, 2021.

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).

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Section 1350.

Consolidated Financial statements for the Annual Report on Form 10-K of Mesa Laboratories, Inc.

for the annual period ended March 31, 2020 , formatted in XBRL:

(i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive (Loss) Income, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.

Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

* Indicates a management contract or compensatory plan, contract or arrangement.

α Mesa Laboratories, Inc.

α Mesa Laboratories, Inc.

has entered into an Executive Employment Agreement with each of Gary M.

Owens and John V.

+ Filed electronically herewith.

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.

MESA LABORATORIES, INC.

June 1 , 2020

Chief Executive Officer

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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and Treasurer

/s/David Perez

John B Schmieder

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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 9A. Controls and Procedures