CPI Card Group Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures about Market Ris k ​ Not required due to smaller reporting company status. ​ 34 Table of Contents Item 4. Controls and Procedure s ​ Evaluation of Disclosure Controls and Procedures ​ Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. As of the date of this report, the material weaknesses did not result in any identified material misstatements to the financial statements and there were no changes to previously reported financial results. ​ Remediation Plan for Material Weaknesses ​ To remediate the material weaknesses referenced above, the Company has been pursuing the remediation steps identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. ​ We have conducted trainings, hired additional qualified resources and have engaged a nationally recognized accounting firm to assist with the design and implementation of control procedures to address the identified risks of material misstatements in key process areas. We have implemented system controls and manual monitoring activities to ensure appropriate segregation of duties over journal entries processed in batches. We have enhanced user access controls over the revenue system at certain locations. We have enhanced our change management controls relating to the development and changes to custom reports in certain information technology systems and have been performing additional analysis over source documentation to implement controls over information, primarily in the purchasing and revenue processes. ​ Management is continuing to design and implement internal controls to require appropriate reviews and retention of documentation of those reviews with regard to our revenue process, as well as controls over the accuracy of the sales price within the revenue system at certain locations. We are enhancing our controls requiring appropriate reviews and approvals and retention of documentation with regard to the purchasing process. We are also in the early stages of the process of implementing new systems and automating certain processes to enhance our internal controls. ​ The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and are tested for operating effectiveness. ​ Changes in Internal Control over Financial Reporting ​ Except for the changes in internal control over financial reporting related to the material weaknesses described above, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during our second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ​ ​ 35 Table of Contents PART II – Other Information