Mesa Air Group Inc (MESA)

[eastunder]

Mesa 8k discussing the reason for reporting delay

the Company identified an approximately $30 million factual balance sheet misstatement associated with the classification of debt on the condensed consolidated balance sheet as of June 30, 2023.

https://www.sec.gov/Archives/edgar/data/810332/000119312524010261/0001193125-24-010261-index.htm

Item 4.02.

Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

On January 18, 2023, the Audit Committee of the Board of Directors of the Company concluded, after discussion with the Company’s management and RSM US LLP (“RSM”), the Company’s independent registered accounting firm for the year ended September 30, 2023, that the Company’s previously issued unaudited condensed consolidated financial statements as of and for the three and nine months ended June 30, 2023, included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “3rd Quarter 10-Q”) filed with the SEC on August 14, 2023, the earnings release relating to the Company’s financial results as of and for the fiscal quarter ended June 30, 2023 and in reports, related earnings releases, investor presentations or similar communications of the specified financial statements, should no longer be relied upon for the reason discussed below.

Subsequent to the filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and in connection with the preparation of its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the “2023 Form 10-K”), the Company identified an approximately $30 million factual balance sheet misstatement associated with the classification of debt on the condensed consolidated balance sheet as of June 30, 2023. This error was due to certain debt covenant requirements that were not met under its Second Amended and Restated Credit and Guaranty Agreement dated as of June 30, 2022 (as amended, the “United Credit Agreement”), with United Airlines, Inc. (“United”). The debt covenants consisted of the 12-month rolling consolidated interest and rental coverage ratio covenants for the fiscal period ended June 30, 2023 and September 30, 2023. As a result, the $30 million should have been classified as current debt on the face of the balance sheet as opposed to long-term debt. In addition, the Company incorrectly stated in the going concern disclosures within the footnotes to its condensed consolidated financial statements included in the 3rd Quarter 10-Q that, as of June 30, 2023, the Company was in compliance with all of its debt covenants.

The Company’s management has concluded that in light of the classification error described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective. The control deficiency and the Company’s remediation plan with respect to such resulting material weakness will be described in more detail in the 2023 Form 10-K

The Company’s management and the Audit Committee have discussed the matters disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with RSM, the Company’s independent registered public accounting firm.

As a result of the foregoing, as soon as practicable, the Company intends to file its Annual Report on Form 10-K for the year ended September 30, 2023. The Company will disclose the nature, timing, and extent of the error as of June 30, 2023 within the 2023 Form 10-K. Accordingly, the Company expects that the balance of approximately $30 million will be classified as long-term debt as of September 30, 2023 when the 2023 Form 10-K is filed.

Except as discussed above, the classification error had no impact on the Company’s cash and cash equivalent balances or total assets for the applicable period, nor any other item on the condensed consolidated balance sheet. It also had no impact on the Company’s condensed consolidated statement of operations, including total operating revenues and operating expenses, net loss, its condensed consolidated statements of cash flows, including total cash flows, or any non-GAAP measure reported.