MESA LABORATORIES INC CO
For the period ended Mar 31, 2025. Filed May 28, 2025.
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FY2025 · Filed May 28, 2025
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Item 9A. Controls and Procedures
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, 2025. Based on that evaluation, our management concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Management's Annual Report on Internal Control Over Financial Reporting
Our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is 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. 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, 2025, 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, 2025.
Our CEO and CFO have certified that, based on their knowledge, our consolidated financial statements and other financial information included in this Annual Report on Form 10-K (“Form 10-K”), fairly present, in all material respects, our financial condition, results of operations and cash flows as of, and for, the periods presented in this Form 10-K.
Prior Year Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As disclosed in Part II Item 9A.Controls and Procedures in our annual report on Form 10-K filed with the Securities and Exchange Commission on June 28, 2024 for the year ended March 31, 2024, we identified three material weaknesses in internal controls:
| ● | Controls over technical accounting for complex and non-routine transactions - We did not have adequate supervision and review controls over complex technical accounting matters. |
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| ● | Controls over determining the useful lives of our recently acquired intangibles - During the GKE acquisition's measurement period, we selected a useful life over which to amortize acquired customer relationships, but there was evidence that a longer useful life may be appropriate. |
| ● | Certain controls related to change management and logical access – Our risk assessment process was insufficient and as a result, we did not design adequate controls related to logical access for our enterprise resource planning tool. In addition, certain controls designed to provide comfort over change management were not operating effectively for a portion of the year ended March 31, 2024. The failure of these information technology general controls extended to automated application controls across portions of financial reporting and business transaction cycles which rely upon the affected information technology application controls. |
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Remediation Status for Prior Year Material Weaknesses in Internal Control Over Financial Reporting
Following identification of the material weaknesses, and as part of our commitment to strengthen our internal control over financial reporting, we implemented remedial actions under the oversight of the Audit Committee of our Board of Directors to address our material weaknesses:
| ● | Technical accounting for complex and non-routine transactions – Management implemented criteria under which to evaluate technical accounting transactions to determine those that require the assistance of a third-party specialist. In the first quarter of fiscal year 2025, we identified two transactions that met our criteria for requiring a specialist: 1) the partial repurchases of the Notes, and 2) the amendment and modification of our Credit Facility. We identified and selected qualified third-party advisors, including validation that that the advisors possessed adequate knowledge to address the complexities of the applicable technical accounting matters, and we ensured analyses were appropriately reviewed, ensuring consensus on accounting conclusions. Following the execution of our remediation plan for these transactions, management concluded that the material weakness was remediated. In subsequent transactions during the year, including the quantitative impairment analysis performed over our five reporting units, Management utilized a qualified third party specialist to assist with technical accounting matters, including reviewing Management’s conclusions. |
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| ● | Assessment of useful lives of recently acquired intangibles - We modified the useful life of our customer relationship intangible and recorded an immaterial cumulative effect true-up to release amortization expense during the three months ended June 30, 2024. Following the execution of our remediation plan related to the useful lives of recently acquired intangible assets, management concluded that the material weakness was remediated. |
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| ● | Information technology general controls ("ITGCs") - In fiscal year 2024, our risk assessment process was insufficient, and as a result, we did not design user access controls covering our ERP that operate at an adequate level of precision to appropriately identify the user groups tested in certain of our other logical access and change management controls. In addition, certain logical access and change management controls were not operating effectively for portions of fiscal year 2024. Management performed the following procedures to remediate the material weakness in internal controls over ITGCs: |
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| ● | Engaged a third-party specialist to assist in remediating our material weakness. The third party: (i) provided templates to assist in robust controls documentation, (ii) provided training to key personnel responsible for performing controls, and (iii) evaluated the design of our ITGC controls and our risk assessment documentation. |
| ● | Implemented new controls over logical access, engaging a third-party expert to extract user access and permission data from our enterprise resource planning tool. Using this data, we made changes to permissions and roles to ensure that adequate segregation of duties and appropriate permissions were present. |
| ● | Evaluated and modified the reports used as source data to test change management and logical access controls in our enterprise resource planning tool, and improved the documentation of our conclusions to more clearly demonstrate the completeness and accuracy of the data, which has allowed us to conclude that the related controls were operating effectively at March 31, 2025. |
Following the execution of our remediation plans, management has concluded that the material weaknesses have been remediated.
Moss Adams LLP, the independent registered public accounting firm that audited our consolidated financial statements as of March 31, 2025 and for the year then ended, is appointed by the Audit Committee of our Board of Directors. Moss Adams LLP has issued an unqualified opinion on our consolidated financial statements and has issued an attestation report on our internal control over financial reporting as of March 31, 2025 within Item 8.Financial Statements and Supplementary Data in this annual report on Form 10-K.
Changes in internal control over financial reporting
Except the remediation of the prior year material weakness related to ITGCs as described above, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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