What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-12 · 136 added, 111 removed, 471 unchanged (34% of the section changed)

4 unchanged sentences

(Amounts in Thousands, Except Share and Per Share Amounts)

September 30,

Current assets:

20 unchanged sentences

$ 0.001 par value— 100,000 shares authorized;

0 shares issued and outstanding at June 30, 2021 and December 31, 2020

0 shares issued and outstanding at September 30, 2021 and December 31, 2020

Stockholders’ deficit:

1 unchanged sentence

$ 0.001 par value— 100,000,000 shares authorized;

11,237,056 and 11,230,482 shares issued and outstanding at June 30, 2021 and December 31, 2020

11,238,994 and 11,230,482 shares issued and outstanding at September 30, 2021 and December 31, 2020

Capital deficiency

7 unchanged sentences

(Amounts in Thousands, Except Share and Per Share Amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total net sales

14 unchanged sentences

Total other expense, net

Income (loss) from continuing operations before income taxes

Income from continuing operations before income taxes

Income tax (expense) benefit

16 unchanged sentences

earnings (loss)

March 31, 2021

June 30, 2021

Stock-based compensation

1 unchanged sentence

Components of comprehensive income:

June 30, 2021

September 30, 2021

earnings (loss)

December 31, 2020

Shares issued under stock-based compensation plans

Stock-based compensation

1 unchanged sentence

Components of comprehensive income:

June 30, 2021

September 30, 2021

earnings (loss)

March 31, 2020

June 30, 2020

Shares issued under stock-based compensation plans

Stock-based compensation

Components of comprehensive income:

June 30, 2020

September 30, 2020

earnings (loss)

3 unchanged sentences

Components of comprehensive income:

June 30, 2020

September 30, 2020

See accompanying notes to condensed consolidated financial statements

3 unchanged sentences

(Amounts in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

9 unchanged sentences

Prepaid expenses and other assets

Income taxes receivable, net

Income taxes, net

Accounts payable

15 unchanged sentences

Proceeds from exercises of stock options

Taxes withheld and paid on stock compensation

Debt issuance costs

34 unchanged sentences

The Company believes the global impacts from COVID-19 have contributed to certain adverse effects on its supply chain, including increased lead times for, and higher costs for, certain raw materials and components, as well as a global chip shortage, which are expected to continue in the future.

CPI closely monitors its supply chain and has purchased and may continue to purchase additional inventory to help mitigate potential supply chain constraints.

The current economic environment has also affected the available labor pool in the areas in which the Company operates, which has resulted in increased labor cost and turnover in our facilities, challenges hiring production employees and shipping delays.

The Company believes the related cost impacts of all of the foregoing will increase through the second half of 2021 and beyond.

The Company may not be able to pass some or all of these costs through to its customers.

CPI closely monitors its supply chain and has purchased and may continue to purchase additional inventory to help mitigate supply chain constraints.

The current environment has also affected the available labor pool in the areas in which the Company operates, which has resulted in increased labor cost and turnover in our facilities, challenges hiring production employees and shipping delays.

On November 4, 2021, the Occupational Safety and Health Administration (“OSHA”) filed an Emergency Temporary Standard (“ETS”) with the Office of the Federal Register that will require employers with 100 or more employees to require their employees to be fully vaccinated with a COVID-19 vaccine or to produce a negative COVID-19 test result on at least a weekly basis, along with certain other requirements.

Based on the pre-publication version of the ETS, the Company believes the proposed rule would apply to the Company.

Compliance with the ETS could result in increased costs as well as labor disruptions, employee attrition and/or difficulty recruiting new employees which could compound the labor shortage already impacting the Company.

The Company expects the labor and supply chain challenges described above, and the associated costs, to continue to increase through the fourth quarter of 2021 and beyond.

The Company may not be able to pass all of these costs through to its customers.

The Company has also experienced increased demand for its products and services.

The Company is experiencing increased production lead times, which is likely to continue through the second half of 2021 and beyond, depending on the duration of the staffing and supply chain challenges and the level of demand from its customers.

The Company is experiencing increased production lead times, which it believes is likely to continue in the fourth quarter of 2021 and beyond, depending on the duration of the staffing and supply chain challenges and the level of demand from its customers.

The Company will continue to monitor and respond as the situation evolves.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, changes in net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitation and technical corrections to tax depreciation methods for qualified improvement property.

refunds, modifications to the net interest deduction limitation and technical corrections to tax depreciation methods for qualified improvement property.

Refer to Note 11, Income Taxes for a discussion of the CARES Act income tax impacts on the Company.

In addition, CPI deferred employer social security payments in 2020 in accordance with the CARES Act, which are required to be paid in 2021 and 2022.

In addition, CPI deferred employer social security payments in 2020 in accordance with the CARES Act, which are allowed to be paid in two installments in 2021 and 2022.

While the Company is participating in certain programs under the CARES Act, the CARES Act and its guidance are subject to change.

10 unchanged sentences

The Company did not retain significant continuing involvement with the discontinued operations subsequent to the disposal.

The impact of the discontinued operations was insignificant to the Company’s condensed consolidated statement of operations for the three and six months ended June 30, 2021 and 2020.

The impact of the discontinued operations was insignificant to the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2021 and 2020.

Use of Estimates

11 unchanged sentences

Adjustment of Prior Period Financial Statements for Immaterial Items

In accordance with Securities and Exchange Commission Staff Accounting Bulletin 99, Materiality, codified in Accounting Standards Codification (“ASC”) 250, Presentation of Financial Statements , during the year ended December 31, 2020, the Company corrected two immaterial items relating to estimated sales tax expense and depreciation expense for prior periods presented by revising the condensed consolidated financial statements and other financial information included herein.

For the quarter ended June 30, 2020, the total impact of the prior period adjustment was a decrease to “Selling, General and Administrative expenses” (“SG&A”) of $ 2,528 for estimated sales tax expense as this balance related to periods prior to 2020, and an increase to “Cost of sales” of $ 62 for depreciation expense.

For the six months ended June 30, 2020, the total impact of the prior period adjustment was a decrease to SG&A of $ 2,406 for estimated sales tax expense as this balance related to periods prior to 2020, and an increase to “Cost of sales” of $ 124 for

depreciation expense.

The condensed consolidated financial statements and other financial information for the

prior year period reflect the corrected balances which included sales tax expense in Selling, General and Administrative expenses (“SG&A”) of $ 293 and depreciation expense of $ 124 for the nine months ended September 30, 2020.

Refer to Note 14, Commitments and Contingencies for additional discussion of the estimated sales tax liability recorded in “Accrued expenses” on the condensed consolidated balance sheet.

The Company disaggregates its net sales by major source as follows:

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Debit and Credit

1 unchanged sentence

Intersegment eliminations

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Debit and Credit

1 unchanged sentence

Intersegment eliminations

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Debit and Credit

1 unchanged sentence

Intersegment eliminations

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Debit and Credit

13 unchanged sentences

Net sales are recognized for “Services” as the services are performed.

Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, including CPI On-Demand ® personalization, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers and

software-as-a-service personalization of instant issuance debit and credit cards.

The Company also generates “Services” net sales from usage-fees generated from the Company’s patented card design software, known as MYCA TM , which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images.

7 unchanged sentences

Accounts receivable consisted of the following:

June 30, 2021

September 30, 2021

December 31, 2020

3 unchanged sentences

Inventories consisted of the following:

June 30, 2021

September 30, 2021

December 31, 2020

4 unchanged sentences

Plant, equipment, leasehold improvements and operating lease right-of-use assets consisted of the following:

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

Operating lease right-of-use assets, net of accumulated amortization

Depreciation expense of plant, equipment and leasehold improvements, including depreciation of assets under financing leases, was $ 2,668 and $ 3,067 for the three months ended June 30, 2021 and 2020, respectively, and $ 5,741 and $ 6,158 for the six months ended June 30, 2021 and 2020, respectively.

Depreciation expense of plant, equipment and leasehold improvements, including depreciation of assets under financing leases, was $ 2,482 and $ 2,831 for the three months ended September 30, 2021 and 2020, respectively, and $ 8,223 and $ 8,989 for the nine months ended September 30, 2021 and 2020, respectively.

Operating lease right-of-use assets, net of accumulated amortization, are further described in Note 9, Financing and Operating Leases.

Goodwill and Other Intangible Assets

The Company reports all of its goodwill in the Debit and Credit segment at June 30, 2021 and December 31, 2020.

The Company reports all of its goodwill in the Debit and Credit segment at September 30, 2021 and December 31, 2020.

Goodwill is tested for impairment at least annually on October 1 or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable.

The Company did not identify a triggering event requiring a quantitative test for impairment as of June 30 , 2021.

The Company did not identify a triggering event requiring a quantitative test for impairment as of September 30 , 2021.

Intangible assets consist of customer relationships, technology and software, and trademarks.

Intangible amortization expense was $ 1,149 and $ 1,149 for the three months ended June 30, 2021 and 2020, respectively, and $ 2,298 and $ 2,298 for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021 and December 31, 2020, intangible assets, excluding goodwill, were comprised of the following:

June 30, 2021

Intangible amortization expense was $ 1,088 and $ 1,149 for the three months ended September 30, 2021 and 2020, respectively, and $ 3,386 and $ 3,447 for the nine months ended September 30, 2021 and 2020, respectively.

At September 30, 2021 and December 31, 2020, intangible assets, excluding goodwill, were comprised of the following:

September 30, 2021

December 31, 2020

3 unchanged sentences

Intangible assets subject to amortization

The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of June 30, 2021 was as follows:

2021 (excluding the six months ended June 30, 2021)

The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of September 30, 2021 was as follows:

2021 (excluding the nine months ended September 30, 2021)

Fair Value of Financial Instruments

7 unchanged sentences

Fair Value as of

Fair Value Measurement at June 30, 2021

Fair Value Measurement at September 30, 2021

September 30,

(Using Fair Value Hierarchy)

8 unchanged sentences

Accrued expenses consisted of the following:

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

Operating and financing lease liability (current portion)

Income taxes payable

Total accrued expenses

8 unchanged sentences

Three Months Ended

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

Operating lease costs

6 unchanged sentences

Total financing lease costs

Six Months Ended

June 30, 2021

June 30, 2020

Nine Months Ended

September 30, 2021

September 30, 2020

Operating lease costs

7 unchanged sentences

The following table reflects balances for operating and financing leases:

June 30, 2021

September 30, 2021

December 31, 2020

12 unchanged sentences

Finance and operating lease ROU assets are recorded in “Plant, equipment, leasehold improvements, and operating lease right-of-use assets, net.” Financing and operating lease liabilities are recorded in “Accrued expenses” and “Other long-term liabilities.”

Future cash payment with respect to lease obligations as of June 30, 2021 were as follows:

2021 (excluding the six months ended June 30, 2021)

Future cash payment with respect to lease obligations as of September 30, 2021 were as follows:

2021 (excluding the nine months ended September 30, 2021)

Total lease payments

1 unchanged sentence

Long-Term Debt

At June 30, 2021 and December 31, 2020, long-term debt consisted of the following:

At September 30, 2021 and December 31, 2020, long-term debt consisted of the following:

September 30,

First Lien Term Loan

16 unchanged sentences

As of March 15, 2021, the Company had outstanding borrowings of $ 30,000 , plus accrued and unpa id interest, under the Senior Credit Facility, and $ 304,746 , plus accrued and unpaid interest, under the First Lien Term Loan.

interest expense on the condensed consolidated statement of comprehensive income for the six months ended June 30, 2021.

During the second quarter of 2021, the Company used $ 15,000 of cash on hand to pay down the ABL Revolver to zero and had no borrowings outstanding thereunder as of June 30, 2021.

In addition, early termination of the Senior Credit Facility required payment of a “make-whole” premium of $ 2,635 as an early termination penalty, which was paid on March 15, 2021, and recorded as interest expense on the condensed consolidated statement of comprehensive income for the nine months ended September 30, 2021.

During the second quarter of 2021, the Company used $ 15,000 of cash on hand to pay down the ABL Revolver to zero and had no borrowings outstanding thereunder as of September 30, 2021.

The Senior Notes bear interest at a rate of 8.625 % per annum and mature on March 15, 2026.

2 unchanged sentences

Borrowings under the ABL Revolver bear interest at a rate per annum that ranges from the LIBOR Rate plus 1.25 % to the LIBOR Rate plus 1.75 % , or the Base Rate plus 0.25 % to the Base Rate plus 0.75 % , based on the average daily borrowing capacity under the ABL Revolver over the most recently completed month.

The Base Rate as defined in the ABL Revolver is the greater of the Federal Funds Rate plus 0.5 % , the LIBOR Rate for a one month interest period plus 1.0 % , or the Wells Fargo Bank, National Association “prime rate”.

The Company may elect to apply either the LIBOR Rate or Base Rate interest to borrowings at its discretion.

18 unchanged sentences

These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method.

The debt issuance costs recorded on the Senior Notes were $ 7,558 and are reported as a reduction to the long-term debt balance as of June 30, 2021.

The net discount and debt issuance costs on the ABL Revolver were $ 2,144 and are recorded as other assets (current and long term) on the condensed consolidated balance sheet as of June 30, 2021.

During the six months ended June 30, 2021, the Company recorded a $ 5,048 loss on debt extinguishment relating to the unamortized deferred financing costs and debt discount in connection with the termination of the Senior Credit Facility and First Lien Term Loan.

During the three months ended June 30, 2021, the Company recognized an income tax expense of $ 2,522 on a pre-tax income of $ 8,754 , compared to an income tax benefit of $ 3,115 on a pre-tax loss from continuing operations of $ 1,832 for the prior year period.

During the six months ended June 30, 2021, the Company recognized an income tax expense of $ 3,882 on pre-tax income of $ 12,524 , representing an effective income tax rate of 31.0 %.

For the six months ended June 30, 2020, the Company recognized an income tax benefit of $ 3,580 on a pre-tax loss from continuing operations of $ 515 , representing an effective income tax rate of 695.1 %.

For the six months ended June 30, 2021 and 2020, the effective tax rate differs from the U.S.

The debt issuance costs recorded on the Senior Notes were $ 7,558 and are reported as a reduction to the long-term debt balance as of September 30, 2021.

The net discount and debt issuance costs on the ABL Revolver were $ 2,144 and are recorded as other assets (current and long term) on the condensed consolidated balance sheet as of September 30, 2021.

During the nine months ended September 30, 2021, the Company recorded a $ 5,048 loss on debt extinguishment relating to the unamortized deferred financing costs and debt discount in connection with the termination of the Senior Credit Facility and First Lien Term Loan.

During the three months ended September 30, 2021, the Company recognized an income tax expense of $ 2,887 on pre-tax income of $ 9,513 , compared to income tax expense of $ 1,402 on pre-tax income of $ 7,211 for the prior year period.

During the nine months ended September 30, 2021, the Company recognized income tax expense of $ 6,769 on pre-tax income of $ 22,037 , representing an effective income tax rate of 30.7 %.

For the nine months ended September 30, 2020, the Company recognized an income tax benefit of $ 2,178 on pre-tax income from continuing operations of $ 6,696 , representing an effective income tax rate of ( 32.5 %).

For the nine months ended September 30, 2021 and 2020, the effective tax rate differs from the U.S.

federal statutory income tax rate as follows:

September 30,

Tax at federal statutory rate

4 unchanged sentences

Effective income tax rate

During the six months ended June 30, 2021, the Company received cash income tax refunds of $ 6,003 related primarily to U.S.

During the nine months ended September 30, 2021, the Company received cash income tax refunds of $ 9,846 related primarily to U.S.

federal income taxes for prior tax years, including net operating loss (“NOL”) carrybacks relating to the CARES Act.

As of June 30, 2021, the Company has an income tax receivable on the condensed consolidated balance sheet relating to certain remaining U.S.

federal income tax receivables including CARES Act income tax refunds, net of current income tax provisional amounts due.

The Company believes that it is reasonably possible that $ 317 of its unrecognized tax benefits may be recognized in the next one year period as a result of settlement with the taxing authorities.

As such, this balance is reflected in “Accrued expenses” in the Company’s condensed consolidated balance sheet as of June 30, 2021.

In March 2020, the CARES Act was signed into law.

The CARES Act allowed companies with NOLs originating in 2018, 2019, or 2020 to carry back those losses for five years and temporarily eliminated the tax law provision that limits the use of NOLs to 80% of taxable income.

The CARES Act increased the Internal Revenue Code Section 163(j) interest deduction limit for 2019 and 2020, and allowed for the acceleration of refunds of alternative minimum tax credits.

For the six months ended June 30, 2020, the Company recorded an estimated tax benefit for certain provisions in the CARES Act including the carryback of losses and the increase to the interest deduction limitation, resulting in a tax rate benefit of 643.0 % .

The CARES Act increased the Internal Revenue Code Section 163(j) interest deduction limit for 2019 and 2020, and allowed for the acceleration of refunds of alternative

minimum tax credits.

For the nine months ended September 30, 2020, the Company recorded an estimated tax benefit for certain provisions in the CARES Act including the carryback of losses and the increase to the interest deduction limitation, resulting in a tax rate benefit of 54.7 % .

The Company believes that it is reasonably possible that approximately $ 208 of its unrecognized tax benefits may be recognized within a year as a result of settlement with the taxing authorities.

As such, this balance is reflected in “Accrued Expenses” in the Company’s consolidated balance sheet as of September 30, 2021.

Stockholders’ Deficit

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income from continuing operations

11 unchanged sentences

Refer to Note 9, Financing and Operating Leases for details on the Company’s future cash payments with respect to financing and operating leases.

During the normal course of business, the Company enters into non-cancellable agreements to purchase goods and services, including production equipment and information technology systems.

During the normal course of business, the Company enters into non-

cancellable agreements to purchase goods and services, including production equipment and information technology systems.

The Company leases real property for its facilities under non-cancellable operating lease agreements.

12 unchanged sentences

The patents all relate to antenna technology.

SPS alleges that the Company

incorporates the patented technology into its products that use contactless communication.

SPS alleges that the Company incorporates the patented technology into its products that use contactless communication.

The Company does not manufacture antennas;

it purchases certain antenna-related components from SPS and a number of other suppliers.

The Company has not been formally served with the complaint and thus has not yet filed an answer.

The Company was served with the complaint and is in the process of preparing an answer.

The Company intends to investigate and pursue its rights relating to the claims and to defend the suit vigorously.

However, no assurance can be given that this matter will be resolved favorably.

Accordingly, it is not yet possible to reliably determine any potential liability that could result from this matter in the event of an adverse determination, and no liability has been recorded as of June 30, 2021.

Due to the stage of this matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter, and no liability has been recorded as of September 30, 2021.

In addition to the matter described above, the Company may be subject to routine legal proceedings in the ordinary course of business.

3 unchanged sentences

It is probable that the Company will be subject to sales tax liabilities plus interest and penalties relating to historical activity in certain states.

The estimated liability for sales tax as of June 30, 2021 and December 31, 2020 was $ 1,549 and $ 1,696 , respectively, and is recorded in a ccrued expenses in the condensed consolidated balance sheets.

The liability decreased from the estimate recorded in the prior period due to ongoing activity.

As the Company remits cash to the applicable state tax authorities for historical sales tax and interest, the liability balance decreases.

Due to the estimates involved in the analysis, the Company expects that the estimated liability will change in the future, and may exceed the current estimate.

The Company also may be subject to examination by the relevant state tax authorities.

The estimated liability for sales tax as of September 30, 2021 and December 31, 2020 was $ 1,228 and $ 1,696 , respectively, and is recorded in a ccrued expenses in the condensed consolidated balance sheets.

The liability decreased from the estimate recorded in the prior period primarily due to the Company remitting cash to the applicable state tax authorities for historical sales tax and interest.

The Company may be subject to examination by the relevant state tax authorities.

Due to the estimates involved in the analysis, the liability may change in the future.

The Company is unable to predict a range of additional loss that is reasonably possible.

Sales tax recovered from customers reduces the estimated expense when it is received or probable of collection .

Future changes to the liability that impact the condensed consolidated statements of operations will be recorded within SG&A.

During the six months ended June 30, 2021, the Company recorded a sales tax benefit of $ 465 within SG&A for current activity relating to sales tax recovered from customers and net changes to the estimated liability.

During the nine months ended September 30, 2021, the Company recorded a sales tax benefit of $ 465 within SG&A for current activity relating to sales tax recovered from customers and net changes to the estimated liability.

Stock-Based Compensation

3 unchanged sentences

Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity-based incentives may be granted to participating employees, advisors and directors.

On May 27, 2021, the Company’s stockholders approved an amendment and restatement of the Omnibus Plan to, among other things, increase the total number of shares of the Company’s Common Stock reserved and available for issuance thereunder by 1,000,000 shares resulting in a total of 2,200,000 shares of Common Stock issuable under the Omnibus Plan.

As of June 30, 2021, there were 1,185,113 shares of Common Stock available for grant under the Omnibus Plan.

During the six months ended June 30, 2021, and during the fiscal year ended December 31, 2020, the Company did no t grant any awards of non-qualified stock options.

thereunder by 1,000,000 shares resulting in a total of 2,200,000 shares of Common Stock issuable under the Omnibus Plan.

As of September 30, 2021, there were 970,832 shares of Common Stock available for grant under the Omnibus Plan.

During the nine months ended September 30, 2021, the Company granted 115,659 awards of non-qualified stock options, and during the fiscal year ended December 31, 2020, the Company did no t grant any awards of non-qualified stock options.

The following is a summary of the activity in outstanding stock options under the Omnibus Plan:

1 unchanged sentence

Outstanding as of December 31, 2020

Outstanding as of June 30, 2021

Options vested and exercisable as of June 30, 2021

Options vested and expected to vest as of June 30, 2021

Outstanding as of September 30, 2021

Options vested and exercisable as of September 30, 2021

Options vested and expected to vest as of September 30, 2021

The following is a summary of the activity in unvested stock options under the Omnibus Plan:

2 unchanged sentences

Unvested as of December 31, 2020

Unvested as of June 30, 2021

Unvested stock options of 33,300 as of June 30, 2021 are expected to vest entirely in the second half of 2021.

Unvested as of September 30, 2021

Unvested stock options of 115,659 as of September 30, 2021 have a seven year term and are expected to vest ratably over a two-year period on each anniversary of the grant date.

The fair value of the stock option awards granted during the nine months ended September 30, 2021, was

determined using a Black-Scholes option-pricing model with the following weighted-average assumptions:

Expected term in years (1)

Volatility (2)

Risk-free interest rate (3)

Dividend yield (4)

(1) The Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.

(2) Volatility was based on a weighting of the Company’s historical volatility and its peer group, which is comprised of companies with similar industry, size, and financial leverage.

(3) The risk-free interest rate was determined by using the United States Treasury rate for the period consistent with the expected option term described above.

(4) The Company’s expected annual dividend yield was zero based on current practice.

The following table summarizes the changes in the number of outstanding restricted stock units:

Outstanding as of December 31, 2020

Outstanding as of June 30, 2021

The Company granted 180,001 restricted stock units to employees on October 2, 2020.

The restricted stock unit awards contain conditions associated with continued employment or service and vest two years from the date of grant.

Outstanding as of September 30, 2021

The Company granted 98,622 restricted stock units to employees and directors on September 21, 2021, and granted 180,001 restricted stock units to employees on October 2, 2020.

The restricted stock unit awards contain conditions associated with continued employment or service.

The restricted stock units granted in 2021 are expected to either vest ratably over a two-year period on each anniversary of the grant date or vest entirely on the year-and-a-half anniversary of the grant date .

The restricted stock units granted in 2020 are expected to vest on the two-year anniversary of the date of grant.

On the vesting date, shares of Common Stock will be issued to the award recipients.

Unvested restricted stock units of 175,502 as of June 30, 2021 are expected to vest entirely in October 2022.

Compensation expense for the Omnibus Plan for the three months ended June 30, 2021 and 2020 was $ 47 and $ 18 , respectively.

Compensation expense for the Omnibus Plan for the six months ended June 30, 2021 and 2020 was $ 98 and $ 59 , respectively.

As of June 30, 2021, the total unrecognized compensation expense related to unvested options and restricted stock units is $ 238 , which the Company expects to recognize over an estimated weighted-average period of approximately 1.3 years.

Compensation expense for the Omnibus Plan for the three months ended September 30, 2021 and 2020 was $ 116 and $ 25 , respectively.

Compensation expense for the Omnibus Plan for the nine months ended September 30, 2021 and 2020 was $ 214 and $ 84 , respectively.

As of September 30, 2021, the total unrecognized compensation expense related to unvested options and restricted stock units is $ 5,015 , which the Company expects to recognize over an estimated weighted-average period of approximately 1.9 years.

Segment Reporting

The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its net sales, EBITDA (as defined below) or total assets, or when the Company believes information about the segment would be useful to the readers of the financial statements.

The Company has identified reportable segments that represent 10% or more of its net sales, EBITDA (as defined below) or total assets, or when the Company believes information about the segment would be useful to the readers of the financial statements.

The Company’s chief operating decision maker is its Chief Executive Officer, who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures, such as net sales and EBITDA.

3 unchanged sentences

The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and to identify strategies to improve the allocation of resources amongst segments.

As of June 30, 2021, the Company’s reportable segments were as follows:

As of September 30, 2021, the Company’s reportable segments were as follows:

● Debit and Credit;

4 unchanged sentences

The Company also sells Card@Once instant card issuance solutions, and private label credit cards that are not issued on the networks of the Payment Cards Brands.

The Company provides CPI On-Demand services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on-demand basis for customers.

The Company provides CPI On-Demand

services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on-demand basis for customers.

The Debit and Credit segment facilities are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands.

5 unchanged sentences

Performance Measures of Reportable Segments

Net Sales and EBITDA of the Company’s reportable segments for the three and six months ended June 30, 2021 and 2020, were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Net Sales and EBITDA of the Company’s reportable segments for the three and nine months ended September 30, 2021 and 2020, were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Debit and Credit

1 unchanged sentence

Intersegment eliminations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Debit and Credit

Prepaid Debit

The following table provides a reconciliation of total segment EBITDA to net income for the three and six months ended June 30, 2021 and 2020:

The following table provides a reconciliation of total segment EBITDA to net income for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total segment EBITDA

4 unchanged sentences

Balance Sheet Data of Reportable Segments

Total assets of the Company’s reportable segments at June 30, 2021 and December 31, 2020, were as follows:

June 30, 2021

Total assets of the Company’s reportable segments at September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021

December 31, 2020

4 unchanged sentences

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-Q

Item 1. Financial Statements