View:
United States securities and exchange commission logo
September 22, 2022
Timothy Fitzsimmons
Chief Financial and Accounting Officer
CompoSecure, Inc.
309 Pierce Street
Somerset , New Jersey 08873
Re: CompoSecure, Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2021
Filed March 14,
2022
Form 10-Q for the
Quarterly Period Ended June 30, 2022
Filed August 9,
2022
File No. 001-39687
Dear Mr. Fitzsimmons:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2021
Business, page 7
1. At the top of page 8
you provide your net revenues and Adjusted EBITDA for 2021 and
2020. Please represent
to us that in future filings you will balance your disclosure of non-
GAAP Adjusted EBITDA by
providing the most directly comparable GAAP measure
with greater
prominence. See Item 10(e)(1)(i)(A) of Regulation S-K and Question 102.10
of the Compliance and
Disclosure Interpretations (CDIs) for Non-GAAP Financial
Measures, updated April
4, 2018.
2. Please expand on the
operation of your Arculus Ecosystem beginning on page 8 by telling
us how it functions. In
your response, please address the following:
Although you do not
expect to directly buy or swap cryptocurrencies for your
Timothy Fitzsimmons
FirstName LastNameTimothy Fitzsimmons
CompoSecure, Inc.
Comapany 22,
September NameCompoSecure,
2022 Inc.
September
Page 2 22, 2022 Page 2
FirstName LastName
customers, tell us where those assets will be stored. Clarify for
us whether the
crypto-assets will be stored in your Arculus Wallet and, if so,
whether they are stored
in your app or in the Arculus Cold Storage Wallet.
Confirm for us that a customer's private key will only be
stored in the Aruculus Cold
Storage Wallet, or tell us where the private key is stored.
Tell us what happens if the Arculus Cold Storage Wallet in the
form of the Arculus
Keycard is lost by or stolen from the customer. Explain whether
your system
maintains a backup of that information or whether there is any
way to retrieve the
information stored on the keycard.
Tell us your consideration of the custody guidance in SAB 121.
Explain whether you
are obligated under your agreements to safekeep customers'
crypto-assets and/or
whether you must replace any such assets lost or stolen through
breach of or
malfunction of the software underlying your system.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Use of Non-GAAP Financial Measures, page 66
3. In your earnings releases and accompanying presentation materials
furnished as exhibits
to Item 2.02 Forms 8-K for the periods ended December 31, 2021 and
June 30, 2022 filed
March 10, 2022 and August 4, 2022, respectively, you disclose Full
Year 2022 Guidance
for your Adjusted EBITDA without providing a reconciliation to the
most directly related
GAAP measure. Please represent to us that in future materials
furnished on Forms 8-
Kyou will include such a reconciliation or, alternatively, a statement
that the information
could not be presented without unreasonable efforts under Regulation
S-K,
Item 10(e)(1)(i)(B). Refer to Instruction 2 to Item 2.02 of Form 8-K,
Item 10(e)(1)(i)(B)
of Regulation S-K and Question 102.10 of the CDIs for Non-GAAP
Financial Measures,
updated April 4, 2018.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Revenue Recognition, page 83
4. Please tell us your revenue recognition policies for each of the
products and services
under your Arculus Ecosystem and reference for us the authoritative
literature your rely
upon to support your accounting. In your response, please ensure you
address the
following:
Identify for us each product and service you currently provide and
expect to
provide within the next year.
Tell us whether you accept or will accept cryptographical assets
in payment for your
products and/or services, and if so how you account, or will
account, for receivables
denominated in crypto-assets and the crypto assets actually
received.
Tell us the amount of revenues earned for each product and service
in 2021 and each
of the first and second quarters of 2022.
Tell us your consideration for disclosing your revenue recognition
policy for these
Timothy Fitzsimmons
CompoSecure, Inc.
September 22, 2022
Page 3
products and services in your 2021 Form 10-K and/or 2022 Forms
10-Q.
Tell us your consideration for disclosing the amounts of
revenue recognized for these
products and services in your 2021 Form 10-K and 2022 Forms 10-Q
under the
disaggregation requirements in ASC 606-10-50-5.
Segments, page 86
5. You report in the slides attached as Exhibit 99.2 to your Item 2.02
Forms 8-K for the
periods ended December 31, 2021 and June 30, 2022 that your Adjusted
EBITDA
includes approximately $21 million for the year ended December 31,
2021 and
approximately $10 million for the six month period ended June 30, 2022
related to the
launch of your Arculus platform. In the August 4, 2022 earnings call
for the period ended
June 30, 2022, management suggested that the Arculus program would be
a separate
reportable segment as it becomes a greater part of your business. The
amounts you report
as the impact of your Arculus business on Adjusted EBITDA appear to
exceed 10% of
your consolidated Adjusted EBITDA for the respective periods. Please
provide for us
your analysis supporting why your Arculus business is not an operating
and reporting
segment at either December 31, 2021 or June 30, 2022 and reference for
us the
authotitative literature you rely upon to support your position.
8. Equity Structure
Non-Controlling Interest, page 99
6. You disclose that your non-controlling interests are redeemable at
your option subject to
their terms and conditions. Please provide for us your analysis
supporting classification of
the non-controlling interests as temporary equity when ASC
480-10-S99-3A.2 includes
the concept of redemption not being solely within the control of the
issuer. Refer to
specific guidance you rely upon in your response.
Form 10-Q for the Quarterly Period Ended June 30, 2022
Notes to Consolidated Financial Statements - Unaudited
13. Earnings Per Share
Change in Accounting Policy for net income per share, page 26
7. Please tell us why the change you disclose in allocating income and
calculating earnings
per share effective April 1, 2022 is not the correction of an error.
Reference for us the
authoritative literature you rely upon to support your position. In
addition, tell us your
FirstName LastNameTimothy Fitzsimmons
consideration for providing the letter from your independent registered
public accountant
Comapany NameCompoSecure,
as stipulated Inc. of Regulation S-K or tell us where you
provided this
in Item 601(b)(18)
letter.
September 22, 2022 Page 3
FirstName LastName
Timothy Fitzsimmons
FirstName LastNameTimothy Fitzsimmons
CompoSecure, Inc.
Comapany 22,
September NameCompoSecure,
2022 Inc.
September
Page 4 22, 2022 Page 4
FirstName LastName
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Rolf Sundwall at 202-551-3105 or Mark Brunhofer at
202-551-3638
with any questions.
Sincerely,
Division of
Corporation Finance
Office of Finance