CPI Card Group(PMTS) - 2025 Q1 - Quarterly Results

Merger Agreement - The merger agreement involves CPI CG Inc. as Parent, Apollo Merger Subsidiary, Inc. as Merger Sub, and Arroweye Solutions, Inc. as the Company, with the merger expected to close on May 6, 2025[12]. - The merger will constitute a Deemed Liquidation Event, with the merger consideration paid according to the provisions of the Company's Restated Charter[15]. - The Company aims to obtain written consent from its Stockholders for the merger in accordance with Delaware General Corporation Law[15]. - The respective boards of directors of Parent and Merger Sub have unanimously approved the merger agreement, deeming it in the best interests of their stockholders[16]. - The Company will merge with Merger Sub, ceasing the separate existence of Merger Sub and continuing as the Surviving Corporation under Delaware General Corporation Law (DGCL)[103]. - The Merger will be effective upon the filing of the Certificate of Merger with the Secretary of State of Delaware[104]. - The initial directors and officers of the Surviving Corporation will be those of Merger Sub immediately prior to the Effective Time[108]. - The only required stockholder approval for the merger is the affirmative vote of at least 75% of the Company's Series C and Series B Preferred Stock holders, and a majority of the Common Stock holders[148]. Financial Metrics - The total Adjustment Escrow Amount is set at $1,500,000, which will be subject to reductions and increases as per the Escrow Agreement[19]. - The Closing Cash Purchase Price will be calculated as the Estimated Purchase Price minus the Escrow Amount and the Holder Representative Funds[23]. - The purchase price for the merger is set at $45,550,000, adjusted by net working capital, funded indebtedness, cash equivalents, and seller transaction expenses[113]. - The estimated purchase price will be provided at least three business days before the closing date, detailing the reference amount, net working capital adjustment, and other financial metrics[114]. - The final purchase price will be determined within 120 days after the closing date, based on a detailed calculation by Parent[118]. - If the final purchase price exceeds the estimated purchase price, Parent and the Company will pay the difference to the designated account[125]. - If the estimated purchase price exceeds the final purchase price, the excess will be paid from the adjustment escrow funds[126]. - Payments made under this section will be treated as adjustments to the closing cash purchase price for tax purposes[128]. Company Operations - The Company is engaged in unique card production, personalization, and fulfillment with on-demand digital printing capabilities[22]. - The merger is expected to enhance the operational capabilities of the combined entity, particularly in the digital printing sector[22]. - The merger will facilitate market expansion and potentially lead to new product offerings in the card production industry[22]. - The company reported a revenue of $275 million for the quarter, representing a 15% increase year-over-year[49]. - The user base grew to 1.5 million active users, a 20% increase compared to the previous quarter[49]. - The company expects revenue guidance for the next quarter to be between $290 million and $300 million, indicating a growth rate of 5-9%[49]. - New product launches are anticipated to contribute an additional $50 million in revenue over the next fiscal year[49]. - The company is investing $10 million in research and development for new technologies aimed at enhancing user experience[49]. - Market expansion efforts are focused on entering three new countries by the end of the fiscal year, targeting a potential market of 500,000 new users[49]. - The company has completed a strategic acquisition of a smaller competitor for $50 million, expected to enhance market share by 10%[49]. - The company plans to implement a new marketing strategy with a budget increase of 25% to boost brand awareness[49]. Financial Health - The company reported a decrease in funded indebtedness to $113.875 million, down from $150 million last year[49]. - The Company has no material liabilities except those reflected in the Recent Balance Sheet and those incurred in the ordinary course of business since the Balance Sheet Date[160]. - The Company has good title to all tangible assets used in its business, which are in good working order and sufficient for current operations[161]. - The Company is in compliance with all applicable laws and has not received any notices of noncompliance since January 1, 2022[162]. - The Company owns no real property but has valid leasehold interests in all leased properties, with all leases in full force and effect[165]. - There are no pending or threatened material actions against the Company or its properties since January 1, 2022[172]. Compliance and Legal - The term "Material Adverse Effect" refers to any event that could significantly impact the company's overall financial condition, excluding certain specified circumstances[58]. - "Net Working Capital" is defined as the total current assets minus current liabilities, excluding specific tax-related items and cash equivalents[60]. - The "Net Working Capital Adjustment" is calculated as the difference between Closing Net Working Capital and a Reference Amount, which is the average month-end Net Working Capital for a specified period[61][73]. - The "State Sales Tax Escrow Amount" is set at $1,250,000, which will be adjusted over time according to the Escrow Agreement[76]. - "Seller Transaction Expenses" include various fees and costs incurred by the company related to the transactions, excluding certain amounts related to Parent or its Affiliates[75]. - The "Recent Balance Sheet" refers to the unaudited balance sheet of the company as of a specific date, which is part of the Financial Information provided[72]. - "Permitted Liens" include various types of liens that are incurred in the ordinary course of business and are not yet due[66]. - "Privacy Laws" encompass a range of regulations concerning the processing and security of personal information, including federal and state statutes[71]. - The "Specified States" are identified in a specific schedule, which outlines the states relevant to certain tax obligations[79]. - "Organizational Documents" include all foundational documents related to the formation and governance of the company[63]. - The Company must deliver a FIRPTA Certificate as part of the closing conditions, which is essential for tax compliance[142]. - The Company is not in material breach of its Organizational Documents, ensuring compliance with corporate governance[147]. Intellectual Property - The Company exclusively owns all right, title, and interest in its Owned Intellectual Property, which is sufficient for its business operations[174]. - No material breach or default under any licensing agreements has occurred and is continuing[177]. - The Company has made available complete copies of all material licenses related to its Licensed Intellectual Property[177]. - The Company has valid and enforceable rights to use all Company IT Systems, which are in good working condition and sufficient for current business needs[185]. - There have been no unauthorized access or security breaches that materially disrupted the operation of the Business[187]. - The Company is in compliance with all applicable Privacy Laws and has not received any notices of alleged breaches since January 1, 2019[188]. - The Company has not engaged in any voluntary or mandatory self-disclosure regarding non-compliance with Privacy Laws[189]. - The Company has taken commercially reasonable steps to maintain the confidentiality of its Trade Secrets and confidential information[182]. - The Company has not received any claims alleging infringement of Intellectual Property rights[179]. Contracts and Agreements - All Company Contracts are in full force and effect, with no material breaches or defaults reported[200]. - Contracts with customers generating over $1,000,000 in revenue for the 12-month period ending December 31, 2024, have been identified[196]. - The Company has made available complete copies of all Company Contracts, including amendments and supplements[200]. - The Company has not used any funding or personnel from educational institutions or Governmental Authorities to develop Owned Intellectual Property[184].