Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
Our management, with the participation of our management team, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2022.
Based on this evaluation, our CEO and CFO concluded that, our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2022 based on the material weaknesses in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) described below.
Management’s Annual Report on Internal Control Over Financial Reporting
This Annual Report on Form 10-K includes a report of management’s assessment regarding internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm because, as a “Emerging Growth Company”, our independent registered public accounting firm is not required to issue such an attestation report.
The following report is provided by management in respect of our internal control over financial reporting:
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management used the Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control - Integrated Framework (2013), or the COSO framework, to evaluate the effectiveness of internal control over financial reporting. Management believes that the COSO framework is a suitable framework for its evaluation of financial reporting because it is free from bias, permits reasonably consistent qualitative and quantitative measurements of our internal control over financial reporting, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of our internal control over financial reporting are not omitted and is relevant to an evaluation of internal control over financial reporting. Management has assessed the effectiveness of our internal control over financial reporting as of September 30, 2022 and has concluded that such internal control over financial reporting was not effective, based on the material weaknesses described below.
Material weakness in internal control over financial reporting.
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 annual or interim financial statements will not be prevented or detected on a timely basis. Based on our assessments and those criteria, management determined that our review and oversight control activities did not operate at a sufficient level of precision to detect errors related to (1) the application of the accounting for net operating loss carryforwards governed by the Tax Cuts and Jobs Act (TCJA) and (2) the accounting for the impairment of the assets. Internal controls in place were not operating effectively to prevent and detect a material misstatement. We have established plans to remediate these material weaknesses outlined below.
Management’s steps taken to remediate the material weakness.
To remediate these two material weaknesses, we have taken the following actions:
1)
We plan to hire additional qualified personnel, to assist management with its financial statement close process and provide oversight of our financial reporting, including items of a non-routine or technical nature.
2)
We plan to implement more timely operation of the review controls and improve communications amongst the various stakeholders in the company.
Our management has concluded that the financial statements included elsewhere in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and is in conformity with GAAP.
99
Changes in internal control over financial reporting.
Except with respect to the remediation actions described above, there have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent limitation on the effectiveness of internal control.
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, 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 the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
100
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required to be disclosed by this item is incorporated herein by reference to our 2023 Proxy Statement, which we expect to file with the SEC within 120 days after the end of our fiscal year ended September 30, 2022.
We have a code of conduct and ethics that applies to all employees, including our principal executive officer and principal financial officer, as well as to the members of our Board of Directors. The code is available at investor.mesa-air.com/corporate-governance/governance-overview . We intend to disclose any changes in, or waivers from, this code by posting such information on the same website or by filing a Current Report on Form 8-K, in each case to the extent such disclosure is required by rules of the SEC or The Nasdaq Global Select Market.
ITEM 11.
EXECUTIVE COMPENSATION
The information required to be disclosed by this item is incorporated herein by reference to our 2023 Proxy Statement which we expect to file with the SEC within 120 days after the end of our fiscal year ended September 30, 2022.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required to be disclosed by this item is incorporated herein by reference to our 2023 Proxy Statement which we expect to file with the SEC within 120 days after the end of our fiscal year ended September 30, 2022.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required to be disclosed by this item is incorporated herein by reference to our 2023 Proxy Statement which we expect to file with the SEC within 120 days after the end of our fiscal year ended September 30, 2022.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required to be disclosed by this item is incorporated herein by reference to our 2023 Proxy Statement which we expect to file with the SEC within 120 days after the end of our fiscal year ended September 30, 2022.
101
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1.
Consolidated Financial Statements
The following financial statements are filed as part of this report:
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
Consolidated Balance Sheets as of September 30, 2022 and 2021
Consolidated Statements of Operations and Comprehensive (loss) income for the years ended September 30, 2022, 2021, and 2020
Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2022, 2021, and 2020
Consolidated Statements of Cash Flows for the years ended September 30, 2022, 2021, and 2020
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules
All schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or notes to the consolidated financial statements under Part II, Item 8 of this Annual Report on Form 10-K.
3.
Exhibits
The exhibits listed below are filed as part of this Annual Report. References under the caption " Incorporated by Reference " to exhibits or other filings indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. Management contracts and compensatory plans or arrangements filed as exhibits to this Annual Report are identified by the “#” sign.
102
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Date
Number
Filed
Herewith
3.1
Second Amended and Restated Articles of Incorporation of the Registrant
8-K
August 14, 2018
3.1
3.2
Second Amended and Restated Bylaws of the Registrant
8-K
December 10, 2020
3.1
4.1
Form of Common Stock Certificate
S-1/A
August 6, 2018
4.1
4.2
Description of Capital Stock
X
4.3
Warrant Agreement, dated October 30, 2020, between Mesa Air Group, Inc. and the United States Department of the Treasury
10-K
December 14, 2020
4.3
4.4
Form of Warrant (incorporated by reference to Annex B to Exhibit 4.3)
10-K
December 14, 2020
4.4
10.1#
Mesa Air Group, Inc. 2018 Equity Incentive Plan and related forms of agreement
S-8
August 16, 2019
99.1
10.2#
Form of Indemnification Agreement between the Registrant and each of its directors and executive officers
S-1
July 13, 2018
10.5
10.3#
Amended and Restated Employment Agreement between the Registrant and Jonathan G. Ornstein, dated July 26, 2018
S-1/A
July 30, 2018
10.7
10.4#
Amended and Restated Employment Agreement between the Registrant and Michael J. Lotz, dated July 26, 2018
S-1/A
July 30, 2018
10.8
10.5#
Amended and Restated Employment Agreement between the Registrant and Brian S. Gillman, dated July 26, 2018
S-1/A
July 30, 2018
10.9
10.6#
Employment Agreement between the Registrant and Torque Zubeck, dated February 23, 2021
10-K
December 10, 2021
10.10
10.7.1††
Second Amended and Restated United Capacity Purchase Agreement between United Airlines, Inc. and Mesa Airlines, Inc. dated November 4, 2020
10-K
December 14, 2020
10.10.15
10.7.2††
First Amendment to the Second Amended and Restated United Capacity Purchase Agreement between United Airlines, Inc. and Mesa Airlines, Inc. dated September 22, 2021
10-K
December 10, 2021
10.11.4
10.7.3††
Second Amendment to the Second Amended and Restated United Capacity Purchase Agreement between United Airlines, Inc. and Mesa Airlines, Inc. dated February 4, 2022
10-Q
May 9, 2022
10.1
10.7.4††
Third Amendment to the Second Amended and Restated United Capacity Purchase Agreement between United Airlines, Inc. and Mesa Airlines, Inc. dated July 11, 2022
10-Q
August 8, 2022
10.3
10.7.5††
Fourth Amendment to the Second Amended and Restated United Capacity Purchase Agreement between United Airlines, Inc. and Mesa Airlines, Inc. dated August 8, 2022
X
103
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Date
Number
Filed
Herewith
10. 8 ††
Aircraft Purchase Agreement between Mesa Airlines, Inc. and United Airlines, Inc. dated September 27, 2022
X
10.9.1††
Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated November 19, 2020, effective as of January 1, 2021
10-Q
February 9, 2021
10.1.1
10.9.2††
First Amendment to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated November 19, 2020, effective January 1, 2021
10-Q
February 9, 2021
10.1.2
10.9.3††
Amendment No. 2 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated April 9, 2021
10-Q
August 9, 2021
10.2.1
10.9.4††
Amendment No. 3 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated April 19, 2021
10-Q
August 9, 2021
10.2.2
10.9.5††
Amendment No. 4 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated June 9, 2021
10-Q
August 9, 2021
10.2.3
10.9.6††
Amendment No. 5 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated August 9, 2021
10-K
December 10, 2021
10.12.6
10.9.7††
Amendment No.7 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated March 31, 2022
10-Q
May 9, 2022
10.12.8
10.9.8††
Amendment No.8 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated June 10, 2022
10-Q
August 8, 2022
10.12.9
10.9.9††
Amendment No.9 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated June 20, 2022
10-Q
August 8, 2022
10.12.10
10.9.10††
Amendment No.10 to the Amended and Restated Capacity Purchase Agreement among the Registrant, Mesa Airlines, Inc. and American Airlines, Inc. dated July 28, 2022
X
10.10.1
Credit and Guaranty Agreement among the Registrant, Mesa Airlines, Inc., Mesa Air Group Airline Inventory Management, L.L.C., the other guarantors party thereto from time to time, CIT Bank, N.A. and the other lenders party thereto, dated August 12, 2016
S-1/A
July 30, 2018
10.12.1
10.10.2
Amendment No. 1 to Credit Agreement among the Registrant, Mesa Airlines, Inc., Mesa Air Group Airline Inventory Management, L.L.C. and CIT Bank, N.A., dated June 5, 2017
S-1/A
July 30, 2018
10.12.2
104
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Date
Number
Filed
Herewith
10.1 0 .3
Amendment No. 2 to Credit Agreement among the Registrant, Mesa Airlines, Inc., Mesa Air Group Airline Inventory Management, L.L.C. and CIT Bank, N.A., dated June 27, 2017
S-1/A
July 30, 2018
10.12.3
10.10.4
Amendment No. 3 to Credit Agreement among the Registrant, Mesa Airlines, Inc., Mesa Air Group Airline Inventory Management, L.L.C. and CIT Bank, N.A., dated September 19, 2017
S-1/A
July 30, 2018
10.12.4
10.10.5
Amendment No. 4 to Credit Agreement among the Registrant, Mesa Airlines, Inc., Mesa Air Group Airline Inventory Management, L.L.C. and CIT Bank, N.A., dated April 27, 2018.
S-1/A
July 30, 2018
10.12.5
10.11.1
Mortgage and Security Agreement among Mesa Airlines, Inc., Mesa Air Group Airline Inventory Management, L.L.C., the other grantors referred to therein and CIT Bank, N.A., dated August 12, 2016
S-1/A
July 30, 2018
10.13.1
10.13
Credit Agreement between Mesa Airlines, Inc. and Export Development Canada, dated August 12, 2015
S-1/A
July 30, 2018
10.16
10.14.1
Credit Agreement between Mesa Airlines, Inc. and Export Development Canada, dated January 18, 2016
S-1/A
July 30, 2018
10.17.1
10.14.2
Amendment No. 1 to Credit Agreement between Mesa Airlines, Inc. and Export Development Canada, dated March 30, 2017
S-1/A
July 30, 2018
10.17.2
10.14.3
Omnibus Amendment Agreement among the Registrant, Mesa Airlines, Inc. and Export Development Canada, dated April 30, 2018
S-1/A
July 30, 2018
10.17.3
10.15
Credit Agreement between Mesa Airlines, Inc. and Export Development Canada, dated June 27, 2016
S-1/A
July 30, 2018
10.18
10.16.1
Office Lease Agreement between the Registrant and DMB Property Ventures Limited Partnership, dated October 16, 1998
DRS
May 7, 2018
10.20.1
10.16.2
First Amendment to Lease between the Registrant and DMB Property Ventures Limited Partnership, dated March 9, 1999
DRS
May 7, 2018
10.20.2
10.16.3
Second Amendment to Lease between the Registrant and DMB Property Ventures Limited Partnership, dated November 8, 1999
DRS
May 7, 2018
10.20.3
10.16.4
Lease Amendment Three between the Registrant and CMD Realty Investment Fund IV, L.P., dated November 7, 2000
DRS
May 7, 2018
10.20.4
10.16.5
Lease Amendment Four between the Registrant and CMD Realty Investment Fund IV, L.P., dated May 15, 2001
DRS
May 7, 2018
10.20.5
10.16.6
Lease Amendment Five between the Registrant and CMD Realty Investment Fund IV, L.P., dated October 11, 2002
DRS
May 7, 2018
10.20.6
10.16.7
Lease Amendment Six between the Registrant and CMD Realty Investment Fund IV, L.P., dated April 1, 2003
DRS
May 7, 2018
10.20.7
105
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Date
Number
Filed
Herewith
10. 16 .8
Amended and Restated Lease Amendment Seven between the Registrant and CMD Realty Investment Fund IV, L.P., dated April 15, 2005
DRS
May 7, 2018
10.20.8
10.16.9
Lease Amendment Eight between the Registrant and CMD Realty Investment Fund IV, L.P., dated October 12, 2005
DRS
May 7, 2018
10.20.9
10.16.10
Lease Amendment Nine between the Registrant and Transwestern Phoenix Gateway, L.L.C., dated November 4, 2010
DRS
May 7, 2018
10.20.10
10.16.11
Lease Amendment Eleven between the Registrant and Phoenix Office Grand Avenue Partners, LLC, dated July 31, 2014
DRS
May 7, 2018
10.20.11
10.16.12
Lease Amendment Twelve between the Registrant and Phoenix Office Grand Avenue Partners, LLC, dated November 20, 2014
DRS
May 7, 2018
10.20.12
10.17.1††
Letter Agreement No. 12 between the Registrant and General Electric Company, acting through its GE-Aviation business unit, dated October 22, 2019, and effective as of October 9, 2019
10-K
December 14, 2020
10.20.1
10.17.2††
Letter Agreement No. 13 between the Registrant and General Electric Company, acting through its GE-Aviation business unit, dated December 11, 2019, and effective as of December 13, 2019
10-K
December 14, 2020
10.20.2
10.17.3††
Letter Agreement No. 13-1 between the Registrant and General Electric Company, acting through its GE-Aviation business unit, dated March 26, 2020
8-K
March 31, 2020
10.1
10.17.4††
Letter Agreement No. 12-1 between the Registrant and General Electric Company, acting through its GE-Aviation business unit, dated March 26, 2020
8-K
March 31, 2020
10.2
10.17.5††
Amended and Restated Letter Agreement No. 13-2 between the Registrant and General Electric Company, acting through its GE-Aviation business unit, dated October 8, 2020
10-K
December 14, 2020
10.20.5
10.18.1
Loan and Guarantee Agreement, dated as of October 30, 2020, among Mesa Airlines, Inc., as Borrower, the Guarantors party hereto from time to time, the United States Department of the Treasury, and The Bank of New York Mellon, as Administrative Agent and Collateral Agent.
10-K
December 14, 2020
10.22.1
10.19
Fourteenth Amendment to Lease between the Registrant and BOF AZ Phoenix Gateway Center LLC, dated December 15, 2021
10-Q
February 9, 2022
10.1
21.1
List of subsidiaries of the Registrant
X
23.1
Consent of Ernst & Young LLP
X
31.1
Certification of Principal Executive Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002
X
106
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Date
Number
Filed
Herewith
31.2
Certification of Principal Financial Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002
X
32.1*
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2*
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101.INS
Inline XBRL Instance Document
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*
This certification will not be deemed " filed " for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
**
The exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request.
#
Management contract or compensatory plan.
††
Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.
ITEM 1 6 .
FORM 10-K SUMMARY
None.
107
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.
MESA AIR GROUP, INC.
Date: December 29, 2022
By:
/s/ Torque Zubeck
Torque Zubeck
Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on December 29, 2022 by the following persons on behalf of the registrant and in the capacities indicated.
Signature
Title
Date
/s/Jonathan G. Ornstein
Chairman, Chief Executive Officer and Director
December 29, 2022
Jonathan G. Ornstein
(Principal Executive Officer)
/s/Torque Zubeck
Chief Financial Officer
December 29, 2022
Torque Zubeck
(Principal Financial Officer and Principal Accounting Officer)
/s/Ellen N. Artist
Director
December 29, 2022
Ellen N. Artist
/s/Mitchell Gordon
Director
December 29, 2022
Mitchell Gordon
/s/Dana J. Lockhart
Director
December 29, 2022
Dana J. Lockhart
/s/Daniel McHugh
Director
December 29, 2022
Daniel McHugh
/s/Harvey W. Schiller
Director
December 29, 2022
Harvey W. Schiller
/s/Spyridon Skiados
Director
December 29, 2022
Spyridon Skiados
108