UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ |
|
For the quarterly period ended June 30, 20212022 OR
☐ |
|
For the transition period from _________ to _____________________
Commission file number 1-9330
INTELLIGENT SYSTEMSCORECARD CORPORATION
(Exact name of registrant as specified in its charter)
| Georgia | 58-1964787 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 30093 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (770) 381-2900
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicated by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No☑No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company | ☑ | |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use to the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $0.01 par value for the class |
| NYSE |
As of June 30, 2021, 8,742,5992022, 8,567,008 shares of Common Stock of the issuer were outstanding.
Intelligent SystemsCoreCard Corporation
Index
Form 10-Q
| Page | |||
| Part I | Financial Information | ||
| Item 1 | Financial Statements | ||
| Consolidated Balance Sheets at June 30, | 3 | ||
| Consolidated Statements of Operations for the three and six months ended June 30, | 4 | ||
| Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, | 4 | ||
Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, | 5 | ||
| Consolidated Statements of Cash Flows for the six months ended June 30, | 6 | ||
| Notes to Consolidated Financial Statements | 7 | ||
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
| Item 4 | Controls and Procedures | ||
| Part II | Other Information | ||
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | ||
| Item 6 | Exhibits | ||
| Signatures | |||
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Intelligent SystemsCoreCard Corporation
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| June 30, 2021 | December 31, 2020 | ||||||||||||||
As of | (unaudited) | (audited) | June 30, 2022 | December 31, 2021 | ||||||||||||
| ASSETS | (unaudited) | (audited) | ||||||||||||||
Current assets: | ||||||||||||||||
Cash | $ | 26,210 | $ | 37,956 | $ | 21,516 | $ | 29,244 | ||||||||
Accounts receivable, net | 7,048 | 3,270 | 16,202 | 5,547 | ||||||||||||
Notes and interest receivable, current portion | 220 | 0 | ||||||||||||||
Other current assets | 1,377 | 1,263 | 2,669 | 2,046 | ||||||||||||
Total current assets | 34,855 | 42,489 | 40,387 | 36,837 | ||||||||||||
Investments | 2,654 | 1,921 | 6,512 | 6,355 | ||||||||||||
Notes and interest receivable, net of current portion | 3,012 | 2,681 | ||||||||||||||
Property and equipment, at cost less accumulated depreciation | 7,790 | 6,914 | 12,771 | 10,371 | ||||||||||||
Other long-term assets | 4,304 | 3,020 | 4,627 | 4,585 | ||||||||||||
Total assets | $ | 52,615 | $ | 57,025 | $ | 64,297 | $ | 58,148 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 1,266 | $ | 714 | $ | 2,281 | $ | 2,763 | ||||||||
Deferred revenue, current portion | 1,040 | 1,322 | 1,262 | 2,263 | ||||||||||||
Accrued payroll | 2,368 | 1,901 | 1,951 | 2,145 | ||||||||||||
Accrued expenses | 354 | 321 | 564 | 404 | ||||||||||||
Income tax payable | 606 | 954 | ||||||||||||||
Other current liabilities | 2,782 | 4,850 | 2,476 | 3,278 | ||||||||||||
Total current liabilities | 8,416 | 10,062 | 8,534 | 10,853 | ||||||||||||
Noncurrent liabilities: | ||||||||||||||||
Deferred revenue, net of current portion | 88 | 0 | 418 | 164 | ||||||||||||
Deferred tax liability | 818 | 818 | 556 | 549 | ||||||||||||
Long-term lease obligation | 2,687 | 1,994 | 2,664 | 2,708 | ||||||||||||
Total noncurrent liabilities | 3,593 | 2,812 | 3,638 | 3,421 | ||||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock, $0.01 par value: Authorized shares - 20,000,000; | ||||||||||||||||
Issued shares - 9,001,311 and 8,929,368 at June 30, 2021 and December 31, 2020, respectively; | ||||||||||||||||
Outstanding shares - 8,742,599 and 8,885,797 at June 30, 2021 and December 31, 2020, respectively | 90 | 89 | ||||||||||||||
| Common stock, 0.01 par value: Authorized shares - 20,000,000; | ||||||||||||||||
| Issued shares – 9,007,815 and 9,001,311 at June 30, 2022 and December 31, 2021, respectively; | ||||||||||||||||
Outstanding shares – 8,567,008 and 8,689,815 at June 30, 2022 and December 31, 2021, respectively | 90 | 90 | ||||||||||||||
Additional paid-in capital | 16,197 | 15,836 | 16,421 | 16,261 | ||||||||||||
Treasury stock, 258,712 and 43,571 shares at June 30, 2021 and December 31, 2020, respectively, at cost | (9,399 | ) | (1,639 | ) | ||||||||||||
Accumulated other comprehensive loss | (132 | ) | (140 | ) | ||||||||||||
Treasury stock, 440,807 and 311,496 shares at June 30, 2022 and December 31, 2021, respectively, at cost | (15,006 | ) | (11,327 | ) | ||||||||||||
Accumulated other comprehensive income (loss) | 50 | (194 | ) | |||||||||||||
Accumulated income | 33,850 | 30,005 | 50,570 | 39,044 | ||||||||||||
Total stockholders’ equity | 40,606 | 44,151 | 52,125 | 43,874 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 52,615 | $ | 57,025 | $ | 64,297 | $ | 58,148 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Intelligent SystemsCoreCard Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||
Services | $ | 11,055 | $ | 8,053 | $ | 19,967 | $ | 15,946 | $ | 13,412 | $ | 11,055 | $ | 25,207 | $ | 19,967 | ||||||||||||||||
Products | 2,300 | 0 | 2,300 | 0 | 1,794 | 2,300 | 14,283 | 2,300 | ||||||||||||||||||||||||
Total net revenue | 13,355 | 8,053 | 22,267 | 15,946 | 15,206 | 13,355 | 39,490 | 22,267 | ||||||||||||||||||||||||
Cost of revenue | ||||||||||||||||||||||||||||||||
Services | 5,558 | 3,694 | 9,986 | 7,201 | 7,937 | 5,558 | 15,393 | 9,986 | ||||||||||||||||||||||||
Products | 0 | 0 | 0 | 0 | − | − | − | − | ||||||||||||||||||||||||
Total cost of revenue | 5,558 | 3,694 | 9,986 | 7,201 | 7,937 | 5,558 | 15,393 | 9,986 | ||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||
Marketing | 46 | 31 | 83 | 63 | 85 | 46 | 151 | 83 | ||||||||||||||||||||||||
General and administrative | 1,241 | 704 | 2,121 | 1,762 | 1,255 | 1,241 | 2,940 | 2,121 | ||||||||||||||||||||||||
Research and development | 2,652 | 921 | 4,754 | 1,838 | 2,463 | 2,652 | 5,787 | 4,754 | ||||||||||||||||||||||||
Income from operations | 3,858 | 2,703 | 5,323 | 5,082 | 3,466 | 3,858 | 15,219 | 5,323 | ||||||||||||||||||||||||
Investment loss | (134 | ) | (95 | ) | (267 | ) | (1,145 | ) | ||||||||||||||||||||||||
Investment income (loss) | 260 | (134 | ) | 157 | (267 | ) | ||||||||||||||||||||||||||
Other income | 81 | 117 | 156 | 253 | 29 | 81 | 66 | 156 | ||||||||||||||||||||||||
Income before income taxes | 3,805 | 2,725 | 5,212 | 4,190 | 3,755 | 3,805 | 15,442 | 5,212 | ||||||||||||||||||||||||
Income taxes | 1,000 | 525 | 1,367 | 943 | 899 | 1,000 | 3,916 | 1,367 | ||||||||||||||||||||||||
Net income | $ | 2,805 | $ | 2,200 | $ | 3,845 | $ | 3,247 | $ | 2,856 | $ | 2,805 | $ | 11,526 | $ | 3,845 | ||||||||||||||||
Earnings per share: | Earnings per share: | |||||||||||||||||||||||||||||||
Basic | $ | 0.32 | $ | 0.25 | $ | 0.43 | $ | 0.36 | $ | 0.33 | $ | 0.32 | $ | 1.34 | $ | 0.43 | ||||||||||||||||
Diluted | $ | 0.32 | $ | 0.24 | $ | 0.43 | $ | 0.36 | $ | 0.33 | $ | 0.32 | $ | 1.33 | $ | 0.43 | ||||||||||||||||
Basic weighted average common shares outstanding | 8,797,691 | 8,924,988 | 8,848,351 | 8,924,988 | 8,595,478 | 8,797,691 | 8,625,504 | 8,848,351 | ||||||||||||||||||||||||
Diluted weighted average common shares outstanding | 8,828,773 | 9,019,025 | 8,880,831 | 9,020,470 | 8,616,354 | 8,828,773 | 8,651,874 | 8,880,831 | ||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited, in thousands) | ||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Net income | $ | 2,805 | $ | 2,200 | $ | 3,845 | $ | 3,247 | $ | 2,856 | $ | 2,805 | $ | 11,526 | $ | 3,845 | ||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 4 | (15 | ) | 8 | (46 | ) | 243 | 4 | 244 | 8 | ||||||||||||||||||||||
Total comprehensive income | $ | 2,809 | $ | 2,185 | $ | 3,853 | $ | 3,201 | $ | 3,099 | $ | 2,809 | $ | 11,770 | $ | 3,853 | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Intelligent SystemsCoreCard Corporation
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except share amounts)
Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Accumulated Earnings | Stockholders’ Equity | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Accumulated Earnings | Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 8,924,988 | $ | 89 | $ | 15,450 | $ | 0 | $ | (94 | ) | $ | 21,844 | $ | 37,289 | ||||||||||||||||||||||||||||||||||||||||||
Net income | 1,047 | 1,047 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | 62 | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | (31 | ) | (31 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | 8,924,988 | $ | 89 | $ | 15,512 | $ | 0 | $ | (125 | ) | $ | 22,891 | $ | 38,367 | ||||||||||||||||||||||||||||||||||||||||||
Net income | 2,200 | 2,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | 61 | 61 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | (15 | ) | (15 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 8,924,988 | $ | 89 | $ | 15,573 | $ | 0 | $ | (140 | ) | $ | 25,091 | $ | 40,613 | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 8,885,797 | $ | 89 | $ | 15,836 | $ | (1,639 | ) | $ | (140 | ) | $ | 30,005 | $ | 44,151 | 8,885,797 | $ | 89 | $ | 15,836 | $ | (1,639 | ) | $ | (140 | ) | $ | 30,005 | $ | 44,151 | ||||||||||||||||||||||||||
Common stock repurchased* | (70,947 | ) | (2,712 | ) | (2,712 | ) | (70,947 | ) | (2,712 | ) | (2,712 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | 67,500 | 1 | 106 | 107 | 67,500 | 1 | 106 | 107 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 1,040 | 1,040 | 1,040 | 1,040 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | 57 | 57 | 57 | 57 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | 4 | 4 | 4 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | 8,882,350 | $ | 90 | $ | 15,999 | $ | (4,351 | ) | $ | (136 | ) | $ | 31,045 | $ | 42,647 | 8,882,350 | $ | 90 | $ | 15,999 | $ | (4,351 | ) | $ | (136 | ) | $ | 31,045 | $ | 42,647 | ||||||||||||||||||||||||||
Common stock repurchased* | (144,194 | ) | (5,048 | ) | (5,048 | ) | (144,194 | ) | (5,048 | ) | (5,048 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net income | 2,805 | 2,805 | 2,805 | 2,805 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | 4,443 | 198 | 198 | 4,443 | 198 | 198 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | 4 | 4 | 4 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 8,742,599 | $ | 90 | $ | 16,197 | $ | (9,399 | ) | $ | (132 | ) | $ | 33,850 | $ | 40,606 | 8,742,599 | $ | 90 | $ | 16,197 | $ | (9,399 | ) | $ | (132 | ) | $ | 33,850 | $ | 40,606 | ||||||||||||||||||||||||||
Balance at December 31, 2021 | 8,689,815 | $ | 90 | $ | 16,261 | $ | (11,327 | ) | $ | (194 | ) | $ | 39,044 | $ | 43,874 | |||||||||||||||||||||||||||||||||||||||||
Common stock repurchased* | (70,864 | ) | (2,332 | ) | (2,332 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 8,670 | 8,670 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | 8,618,951 | $ | 90 | $ | 16,271 | $ | (13,659 | ) | $ | (193 | ) | $ | 47,714 | $ | 50,223 | |||||||||||||||||||||||||||||||||||||||||
Common stock repurchased* | (58,447 | ) | (1,347 | ) | (1,347 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 2,856 | 2,856 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | 6,504 | 150 | 150 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | 243 | 243 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 8,567,008 | $ | 90 | $ | 16,421 | $ | (15,006 | ) | $ | 50 | $ | 50,570 | $ | 52,125 | ||||||||||||||||||||||||||||||||||||||||||
*At June 30, 2021,2022, approximately $5,601,000$19,994,000 was authorized for future repurchases of our common stock.
The accompanying notes are an integral part of these consolidated financial statements.
Intelligent SystemsCoreCard Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
CASH PROVIDED BY (USED FOR): | 2021 | 2020 | 2022 | 2021 | ||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net income | $ | 3,845 | $ | 3,247 | $ | 11,526 | $ | 3,845 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 1,769 | 691 | 2,333 | 1,769 | ||||||||||||
Stock-based compensation expense | 255 | 123 | 160 | 255 | ||||||||||||
Non-cash investment expense | 0 | 1,009 | ||||||||||||||
Deferred income taxes | 72 | − | ||||||||||||||
Non-cash interest income | (55 | ) | (55 | ) | − | (55 | ) | |||||||||
Equity in loss of affiliate company | 267 | 176 | ||||||||||||||
Equity in (gain) loss of affiliate company | (157 | ) | 267 | |||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable, net | (3,778 | ) | 623 | (10,655 | ) | (3,778 | ) | |||||||||
Other current assets | (114 | ) | (153 | ) | (688 | ) | (114 | ) | ||||||||
Other long-term assets | (37 | ) | (9 | ) | (236 | ) | (37 | ) | ||||||||
Accounts payable | 552 | 28 | 611 | 552 | ||||||||||||
Accrued payroll | 467 | (854 | ) | (194 | ) | 467 | ||||||||||
Deferred revenue, current portion | (282 | ) | 4,112 | (1,001 | ) | (282 | ) | |||||||||
Accrued expenses | 33 | 85 | 160 | 33 | ||||||||||||
Other current liabilities | (2,605 | ) | 705 | (827 | ) | (2,605 | ) | |||||||||
Deferred revenue, net of current portion | 88 | (14 | ) | 254 | 88 | |||||||||||
Net cash provided by operating activities | 405 | 9,714 | 1,358 | 405 | ||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Purchases of property and equipment | (2,612 | ) | (2,767 | ) | (5,760 | ) | (2,612 | ) | ||||||||
Advances on notes and interest receivable | (550 | ) | (1,000 | ) | − | (550 | ) | |||||||||
Proceeds from payments on notes receivable | 55 | 0 | 110 | 55 | ||||||||||||
Purchase of intangible assets | (400 | ) | 0 | − | (400 | ) | ||||||||||
Purchase of long-term investment | (1,000 | ) | 0 | − | (1,000 | ) | ||||||||||
Net cash used for investing activities | (4,507 | ) | (3,767 | ) | (5,650 | ) | (4,507 | ) | ||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Sale of capital stock pursuant to exercise of option | 107 | 0 | − | 107 | ||||||||||||
Repurchases of common stock | (7,759 | ) | 0 | (3,679 | ) | (7,759 | ) | |||||||||
Net cash used for financing activities | (7,652 | ) | 0 | (3,679 | ) | (7,652 | ) | |||||||||
Effects of exchange rate changes on cash | 8 | (46 | ) | 243 | 8 | |||||||||||
Net (decrease) increase in cash | (11,746 | ) | 5,901 | |||||||||||||
Net decrease in cash | (7,728 | ) | (11,746 | ) | ||||||||||||
Cash at beginning of period | 37,956 | 26,415 | 29,244 | 37,956 | ||||||||||||
Cash at end of period | $ | 26,210 | $ | 32,316 | $ | 21,516 | $ | 26,210 | ||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||||
Cash paid during the period for income taxes | $ | 1,754 | $ | 0 | $ | 5,330 | $ | 1,754 | ||||||||
Purchases of property and equipment, accrued but not paid | $ | 1,093 | $ | − | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Intelligent SystemsCoreCard Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
Throughout this report, the terms “we”, “us”, “ours”, “ISC”“CoreCard” and “company”“Company” refer to Intelligent SystemsCoreCard Corporation, including its wholly-owned and majority-owned subsidiaries. The unaudited Consolidated Financial Statements presented in this Form 10-Q10-Q have been prepared in accordance with accounting principles generally accepted in the United States applicable to interim financial statements. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of ISCCoreCard management, these Consolidated Financial Statements contain all adjustments (which comprise only normal and recurring accruals) necessary to present fairly the financial position and results of operations as of and for the three and six month periods ended June 30, 2021 2022 and 2020.2021. The interim results for the three and six months ended June 30, 2021 2022 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with our Consolidated Financial Statements and notes thereto for the fiscal year ended December 31, 2020, 2021, as filed in our Annual Report on Form 10-K.10-K.
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K10-K for the year ended December 31, 2020.2021.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No.2016-13, 2016-13, Measurement of Credit Losses on Financial Instruments, to require financial assets carried at amortized cost to be presented at the net amount expected to be collected based on historical experience, current conditions and forecasts. Subsequently, the FASB issued ASU No.2018-19, 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards. Further, the FASB issued ASU No.2019-04, 2019-04, ASU No.2019-05, 2019-05, ASU 2019-102019-10 and ASU 2019-112019-11 to provide additional guidance on the credit losses standard. The ASUs are effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. Adoption of the ASUs is on a modified retrospective basis. We plan to adopt the ASUs on January 1, 2023. The ASUs are currently not expected to have a material impact on our consolidated financial statements.
RecentIn March 2022, the Financial Accounting Pronouncements Adopted
In December 2019, the FASBStandards Board issued ASU 2019Accounting Standards Update (ASU) 2022-02 "Financial Instruments -12, Income Taxes Credit Losses (Topic 740)326): Simplifying the Accounting for Income Taxes. This standard simplifiesTroubled Debt Restructurings and Vintage Disclosures" (ASU 2022-02), which eliminates the accounting guidance for income taxestroubled debt restructurings (TDRs) by eliminatingcreditors that have adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and enhances certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.disclosure requirements. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. This standardASU is effective for fiscal yearsinterim and annual periods beginning after December 15, 2020, 2022, with early adoption permitted. Adoption of the ASUs is on a modified retrospective basis. We adopted this standard inplan to adopt the first quarterASUs on January 1, 2023. The adoption of 2021 and the adoption did ASU 2022-02 is not expected to have a material impact on the Consolidated Financial Statements.
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”), which clarifies certain interactions between the guidance to account for certain equity securities, investments under the equity method of accounting and forward contracts or purchased options to purchase securities under Topic 321, Topic 323 and Topic 815. For public entities, ASU 2020-01 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020. We adopted this standard in the first quarter of 2021 and the adoption did not have a material impact on theour Consolidated Financial Statements.
We have considered all other recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our Consolidated Financial Statements.
2. | REVENUE |
Disaggregation of Revenue
In the following table, revenue is disaggregated by type of revenue for the three and six months ended June 30, 2021 2022 and 2020:2021:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
License | $ | 2,300 | $ | 0 | $ | 2,300 | $ | 0 | $ | 1,794 | $ | 2,300 | $ | 14,283 | $ | 2,300 | ||||||||||||||||
Professional services | 6,100 | 5,156 | 11,847 | 10,435 | 7,605 | 6,100 | 14,167 | 11,847 | ||||||||||||||||||||||||
Processing and maintenance | 4,193 | 2,673 | 6,799 | 4,867 | 4,510 | 4,193 | 8,570 | 6,799 | ||||||||||||||||||||||||
Third party | 762 | 224 | 1,321 | 644 | 1,297 | 762 | 2,470 | 1,321 | ||||||||||||||||||||||||
Total | $ | 13,355 | $ | 8,053 | $ | 22,267 | $ | 15,946 | $ | 15,206 | $ | 13,355 | $ | 39,490 | $ | 22,267 | ||||||||||||||||
Foreign revenues are based on the location of the customer. Revenues from customers by geographic areas for the three and six months ended June 30, 2021 2022 and 20202021 are as follows:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
United States | $ | 12,515 | $ | 7,789 | $ | 21,397 | $ | 15,362 | $ | 14,865 | $ | 12,515 | $ | 38,861 | $ | 21,397 | ||||||||||||||||
Middle East | 316 | 211 | 580 | 211 | ||||||||||||||||||||||||||||
European Union | 629 | 264 | 659 | 584 | 25 | 629 | 49 | 659 | ||||||||||||||||||||||||
Middle East | 211 | 0 | 211 | 0 | ||||||||||||||||||||||||||||
Total | $ | 13,355 | $ | 8,053 | $ | 22,267 | $ | 15,946 | $ | 15,206 | $ | 13,355 | $ | 39,490 | $ | 22,267 | ||||||||||||||||
Concentration of Revenue
The following table indicates the percentage of consolidated revenue represented by each customer that represented more than 10 percent of consolidated revenue in the three and six month periods ended June 30, 2021 2022 and 2020.2021. Most of our customers have multi-year contracts with recurring revenue as well as professional services fees that vary by period depending on their business needs.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Customer A | 71 | % | 65 | % | 71 | % | 65 | % | ||||||||
Customer B | 6 | % | 13 | % | 6 | % | 10 | % | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Customer A | 71 | % | 71 | % | 79 | % | 71 | % | ||||||||
3. | NOTES RECEIVABLE |
During the quarter ended September 30, 2017, we entered into a Loan Agreement with a privately-held identity and professional services company with ties to the FinTech industry. We committed to lend up to $1,500,000 all of which has been advanced. During 2018, we advanced $550,000 on three separate simple Promissory Note(s). As discussed in Note 4, we converted the Loan Agreement and all outstanding Promissory Notes to an equity ownership of 40 percent of the company. At the same time, we entered into and advanced a $1,000,000 Loan Agreement that bears interest at the rate of 6.0 percent annually with a maturity date of June 2021. In October 2019 and January 2020, we entered into Loan Agreements and advanced an additional $500,000 and $1,000,000, respectively, that bears interest at the rate of 6.0 percent annually with maturity dates of October 2021 and January 2022, respectively. In January 2021, we deferred payment of these Loans to December 2023 and have therefore classified the Loans as long-term.
In the quarter ended March 31, 2018, we entered into a Convertible Loan Agreement with a private limited India based company in the FinTech industry. We committed to lend up to $435,000 with an initial advance of $235,000. The loan bears interest at the rate of 5.0 percent annually with the maturity date on the third anniversary of funding of such Promissory Note. We are entitled to convert the principal on the initial note for up to ten percent ownership of shares of the company. For the quarter ended March 31, 2020, we determined that the principal and interest is likely not collectible and therefore recorded a valuation allowance of $259,000, included in investment loss on the Consolidated Statement of Operations.
In February 2021, we entered into and advanced a $550,000 Promissory Note with a privately held technology company and program manager in the FinTech industry, discussed further below in Note 4.industry. The note bears interest at the rate of 4.6 percent annually with the maturity date of October 2023.
4. | INVESTMENTS |
BeginningWe hold a 40 percent ownership interest in2017, and in subsequent periods we entered into a Loan Agreement and various Promissory Notes with a privately held identity and professional services company with ties to the FinTech industry. The carrying value of our investment was $1,486,000 at June 30, 2022, included in investments on the Consolidated Balance Sheets. In 2021, the company transferred its advisory business to a new entity. We contributed our note receivable of $2,806,000 and $800,000 of cash for a 28% ownership interest in the new entity. The carrying value of our investment in the new entity was $4,026,000 at June 2019, we converted30, 2022, included in investments on the Loan Agreement and all Promissory Notes into equity resulting in ownership ofConsolidated Balance Sheets. We continue to hold a 40 percent ofownership interest in the company.original company which will continue with its events and media operations. We account for our investmentinvestments using the equity method of accounting which resulted in lossesincome of $134,000$260,000 and $267,000$157,000 for the three and six months ended June 30, 2021, 2022, respectively, included in investment lossincome (loss) on the Consolidated Statement of Operations. The carrying value of $1,654,000 is included in investments. A portion of the company’s business has been negatively impacted by the pandemic while other portions of its business have improved. We evaluate on a continuing basis whether any impairment indicators are present that would require additional analysis or write-downs of the investment. While we have not recorded an impairment related to this investment or determined that an impairment trigger existed at these investments as of June 30, 2021, significant2022, variations from current expectations could impact future assessments resultingresult in future impairment charges.
On December 30, 2016 we signed an agreement to invest $1,000,000 in a privately held technology company and program manager in the FinTech industry, with $500,000 of the investment held in escrow to pay future fees to CoreCard pursuant to a Processing Agreement entered into by the parties. The investment was funded on January 4, 2017. In the quarter ended June 30, 2018, we recorded an impairment charge of $250,000 to reduce the carrying value due to the investee’s limited funding to support its operation and sales and marketing efforts. In the quarter ended March 31, 2020, due to the uncertainty from the economic downturn resulting from the recent pandemic, we determined that the fair value of our investment was $0 and therefore we recorded an impairment charge of $750,000, included in investment loss on the Consolidated Statement of Operations for the quarter ended March 31, 2020. CoreCard remains in an ongoing business relationship with the company pursuant to a Processing Agreement and a Program Management Services Agreement. CoreCard is positioned to assume the program management aspects of the investee company if the need should arise to ensure their program(s) ongoing viability and the completion of the Processing Agreement with CoreCard. As program manager for this company, we receive cash periodically to fund the customer’s various programs. We held $919,000 and $3,335,000 at June 30, 2021 and December 31, 2020, respectively, in cash on behalf of this customer which is included in other current liabilities on the Consolidated Balance Sheet.
In the second quarter of 2021, we invested $1,000,000 in a privately held company that provides supply chain and receivables financing. The carrying amount of $1,000,000 is accounted for at cost and is included in investments on the Consolidated Balance Sheet.
5. | RELATED PARTY TRANSACTION |
The lease on our headquarters and primary facility in Norcross, Georgia is held by ISC Properties, LLC, an entity controlled by our Chairman and Chief Executive Officer, J. Leland Strange. Mr. Strange holds a 100% ownership interest in ISC Properties, LLC. In We have determined that ISC Properties, LLC is not a variable interest entity. On March 1, 2022, we canceled our lease agreement dated April 1, 2021 we signedand entered into a new lease forto move our corporate headquarters facility forand to procure additional office space. The new lease has a 5 yearfive-year term beginning March 1, 2022 as disclosed on our Form 8-K8-K dated AprilMarch 1, 2021.2022.
6. | STOCK-BASED COMPENSATION |
At June 30, 2021, 2022, we have 3four stock-based compensation plans in effect. In August 2020, shareholders approved the 2020 Non-Employee Directors’ Stock Incentive Plan (the “2020“2020 Plan”), which authorizes the issuance of 200,000 shares of common stock to non-employee directors. In May 2022, shareholders approved the 2022 Employee Stock Incentive Plan (the “2022 Plan”), which authorizes the issuance of 750,000 shares of common stock to employees. We record compensation cost related to unvested stock awards by recognizing the unamortized grant date fair value on a straight-line basis over the vesting periods of each award. We have estimated forfeiture rates based on our historical experience. Stock option compensation expense for the three and six month periods ended June 30, 2021 2022 and 20202021 has been recognized as a component of general and administrative expenses in the accompanying Consolidated Financial Statements. We recorded $198,000$150,000 and $61,000$198,000 of stock-based compensation expense for the three months ended June 30, 2021 2022 and 2020,2021, respectively, and $255,000$160,000 and $123,000$255,000 for the six months ended June 30, 2021 2022 and 2020,2021, respectively.
As of June 30, 2021, 2022, there is $74,000 ofno unrecognized compensation cost related to stock options. There were 0 and 67,500 options exercised during the three and six months ended June 30, 2021, respectively.2022. During the quarter ended June 30, 2021, 2022, an aggregate of 4,4436,504 shares totaling $150,000 were granted to the three independent members of our board of directors pursuant to the 2020 Plan. Pursuant to the terms of the 2020 Plan, the shares were granted at fair market value on the date of the Annual Meeting of Shareholders and vested upon issuance. NoNaN options expired unexercised during the quarter. The following table summarizes options as of June 30, 2021:2022:
# of Shares | Wgt Avg Exercise Price | Wgt Avg Remaining Contractual Life in Years | Aggregate Value | |||||||||||||
Outstanding at June 30, 2021 | 59,000 | $ | 17.35 | 7.1 | $ | 893,620 | ||||||||||
Vested and exercisable at June 30, 2021 | 49,000 | $ | 16.81 | 7.0 | $ | 778,920 | ||||||||||
Options Outstanding and Exercisable: | ||||||||||||||||||||
Range of | Number | Wgt. Avg. Contractual | Wgt. Avg. | Aggregate | ||||||||||||||||
| $3.50 | - | $3.86 | 13,000 | 4.7 | $ | 3.75 | $ | 298,720 | ||||||||||||
| $7.80 | 8,000 | 5.9 | $ | 7.80 | $ | 102,750 | ||||||||||||||
| $19.99 | 30,000 | 6.6 | $ | 19.99 | $ | 132,600 | ||||||||||||||
| $39.11 | 8,000 | 6.9 | $ | 39.11 | $ | -- | ||||||||||||||
| $3.50 | - | $39.11 | 59,000 | 6.1 | $ | 17.35 | $ | 534,070 | ||||||||||||
The estimated fair value of options granted is calculated using the Black-Scholes option pricing model with assumptions as previously disclosed in our 20202021 Form 10-K.10-K.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the company’s closing stock price on the last trading day of the second quarter of 20212022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2021. 2022. The amount of aggregate intrinsic value will change based on the market value of the company’s stock.
7. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
The carrying value of cash, marketable securities, accounts receivable, notes receivable, accounts payable and certain other financial instruments (such as accrued expenses, and other current liabilities) included in the accompanying consolidated balance sheets approximates their fair value principally due to the short-term maturity of these instruments.
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash, marketable securities, trade accounts and notes receivable. Our available cash is held in accounts managed by third-partythird-party financial institutions. Cash may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While we monitor cash balances on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, we have experienced no loss or lack of access to our cash; however, we can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets.
8. | FAIR VALUE MEASUREMENTS |
In determining fair value, the company uses quoted market prices in active markets. GAAP establishes a fair value measurement framework, provides a single definition of fair value, and requires expanded disclosure summarizing fair value measurements. GAAP emphasizes that fair value is a market-based measurement, not an entity specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability.
GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable input be used when available. Observable inputs are based on data obtained from sources independent of the company that market participants would use in pricing the asset or liability. Unobservable inputs are inputs that reflect the company’s assumptions about the estimates market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The hierarchy is measured in three levels based on the reliability of inputs:
• Level 1 |
|
Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.
• Level 2 |
|
Valuations based on quoted prices in less active, dealer or broker markets. Fair values are primarily obtained from third party pricing services for identical or comparable assets or liabilities.
• Level 3 |
|
Valuations derived from other valuation methodologies, including pricing models, discounted cash flow models and similar techniques, and not based on market, exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections that are not observable in the market and significant professional judgment is needed in determining the fair value assigned to such assets or liabilities.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
The fair value of equity method investments has not been determined as it was impracticable to do so due to the fact that the investee companies are relatively small, early stage private companies for which there is no comparable valuation data available without unreasonable time and expense. The fair value of our cost method investments was determined using Level 3 inputs.
9. | COMMITMENTS AND CONTINGENCIES |
Leases
We have noncancelable operating leases for offices and data centers expiring at various dates through March 2026. 2027. These operating leases are included in other long-term assets on the Company's June 30, 2021 2022 and December 31, 2020 2021 Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are included in other current liabilities and long-term lease obligation on the Company's June 30, 2021 2022 and December 31, 2020 2021 Consolidated Balance Sheets. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.
Supplemental Information–Leases
Supplemental information related to our right-of-use assets and related lease liabilities is as follows:
June 30, 2021 | December 31, 2020 | June 30, 2022 | December 31, 2021 | |||||||||||||
Right-of-use asset, net and lease liabilities (in thousands) | $ | 3,781 | $ | 2,889 | $ | 3,953 | $ | 3,955 | ||||||||
Weighted average remaining lease term (years) | 3.7 | 3.5 | 3.8 | 3.5 | ||||||||||||
Weighted average discount rate | 4.2 | % | 3.8 | % | 3.4 | % | 4.1 | % | ||||||||
For the six months ended June 30, 2021 2022 and 2020,2021, cash paid for operating leases included in operating cash flows was $348,000 and $575,000, and $449,000, respectively.
Maturities of our operating lease liabilities as of June 30, 2021 2022 is as follows:
Operating Leases | Operating Leases | |||||||
| (in thousands) | (in thousands) | |||||||
2021 | $ | 622 | ||||||
2022 | 1,107 | $ | 695 | |||||
2023 | 1,031 | 1,334 | ||||||
2024 | 808 | 1,007 | ||||||
2025 | 406 | 617 | ||||||
2026 | 503 | |||||||
Thereafter | 73 | 68 | ||||||
Total lease liabilities | $ | 4,047 | $ | 4,224 | ||||
Lease expense for the three and six months ended June 30, 2021 2022 and 20202021 consisted of the following:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Cost of Revenue | $ | 224 | $ | 212 | $ | 442 | $ | 290 | $ | 194 | $ | 224 | $ | 412 | $ | 442 | ||||||||||||||||
General and Administrative | 56 | 52 | 112 | 105 | 107 | 56 | 158 | 112 | ||||||||||||||||||||||||
Research and Development | 10 | 27 | 21 | 54 | 47 | 10 | 93 | 21 | ||||||||||||||||||||||||
Total | $ | 290 | $ | 291 | $ | 575 | $ | 449 | $ | 348 | $ | 290 | $ | 663 | $ | 575 | ||||||||||||||||
Legal Matters
On or about July 9, 2019, a securities class action complaint was filed in the United States District Court for the Eastern District of New York (Case No.1:19-cv-03949) by Michael Skrzeczkoski, individually and on behalf of all others similarly situated, against the company, and certain current and former directors and officers. The complaint alleges, among other things, that certain of our press releases and SEC filings were misleading as a result of the failure to disclose alleged related party transactions affecting revenue recognition and the absence of disclosure regarding certain allegations against former director Parker H. Petit in connection with his former position with MiMedx, Inc. The complaint seeks to recover attorney’s fees and costs and unspecified damages on behalf of purchasers who acquired our stock during the period from January 23, 2019, through May 29, 2019, and purportedly suffered financial harm as a result of the alleged misleading statements. On September 26, 2019, the Court appointed Edgardo Canez as lead plaintiff (“Lead Plaintiff”) on behalf of the putative class. On November 18, 2019, Lead Plaintiff, individually and on behalf of a putative class of persons or entities who purchased or otherwise acquired publicly traded company securities from May 23, 2014 through May 29, 2019, filed an amended class action complaint against the company, and certain current and former directors and officers (the “Amended Complaint”). The Amended Complaint alleges similar allegations in violation of Sections 10(b) and 20(a) of the Securities Exchange Act as the previously filed complaint. The Amended Complaint seeks to recover attorney’s fees and costs and unspecified damages. On January 2, 2020, Defendants submitted a motion to dismiss, and on March 3, 2020, briefing on the motion to dismiss was completed. On April 6, 2021, the Court entered an order granting the motion to dismiss.
On or about February 14, 2020, two purported shareholders, derivatively and on behalf of the Company, filed substantially similar shareholder derivative actions in the Eastern District of New York against certain current and former directors and officers (the “Individual Defendants”), and the Company as a nominal defendant (together with the Individual Defendants, the “Defendants”). The complaints assert a claim against Messrs. Strange, Moise, Petit, Fuzzell and Chandler for a violation of Section 14(a) of the Securities Exchange Act by issuing purportedly misleading statements in the Company’s 2017 and 2018 Proxies. The complaints also assert claims against the Individual Defendants for breaches of fiduciary duty, waste of corporate assets, and unjust enrichment arising out of, among other things, purportedly undisclosed related party transactions, other relationships, and certain allegations against former director Parker H. Petit in connection with his former position with MiMedx, Inc. and other companies. The relief sought in the complaints includes changes to the Company’s corporate governance procedures, unspecified damages, equitable relief, restitution, and attorney’s fees and costs. On April 20, 2020, the two derivative actions were consolidated and captioned, In re Intelligent Systems Corporation Stockholder Derivative Litigation, Lead Case No.1:20-cv-00832, in the Eastern District of New York (the “Derivative Matter”). On June 19, 2020, Defendants filed their motion to dismiss, and briefing was subsequently completed. After a conference held on August 24, 2020, the parties agreed that Defendants’ motion to dismiss would be temporarily withdrawn without prejudice to refile after the conclusion of any discovery permitted by further Court order. On September 8, 2020, Plaintiffs moved for leave to conduct limited discovery (“Plaintiffs’ Motion for Discovery”). On December 23, 2020, the Court entered a stipulation among the parties whereby Plaintiffs’ Motion for Discovery shall be withdrawn, the Company will engage in limited discovery, and the parties agree that the Derivative Matter shall be stayed pending resolution of the motion to dismiss in the related above-mentioned securities litigation matter, among other things. The matter is currently stayed.
There are no other pending or threatened legal proceedings. However, in the ordinary course of business, from time to time we may be involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. We accrue for unpaid legal fees for services performed to date.
10. | INCOME TAXES |
We recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized, net of a valuation allowance, for the estimated future tax effects of deductible temporary differences and tax credit carry-forwards. A valuation allowance against deferred tax assets is recorded when, and if, based upon available evidence, it is more likely than not that some or all deferred tax assets will not be realized.
There were 0no unrecognized tax benefits at June 30, 2021 2022 and December 31, 2020. 2021. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There were 0no accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the periods presented. We have determined we have 0no uncertain tax positions.
We file a consolidated U.S. federal income tax return for all subsidiaries in which our ownership equals or exceeds 80%, as well as individual subsidiary returns in various states and foreign jurisdictions. With few exceptions we are no longer subject to U.S. federal, state and local or foreign income tax examinations by taxing authorities for returns filed more than three years ago.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In addition to historical information, this Form 10-Q may contain forward-looking statements relating to ISC.CoreCard. All statements, trend analyses and other information relative to markets for our products and trends in revenue, gross margins and anticipated expense levels, as well as other statements including words such as “anticipate”, “believe”, “plan”, “estimate”, “expect”, and “intend”, and other similar expressions, constitute forward-looking statements. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties including those factors described below under “Factors That May Affect Future Operations”, and that actual results may differ materially from those contemplated by such forward-looking statements. ISCCoreCard undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.
For purposes of this discussion and analysis, we are assuming and relying upon the reader’s familiarity with the information contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Form 10- K for the year ended December 31, 2020 2021as filed with the Securities and Exchange Commission.
Overview
Our consolidated operations consist of our CoreCard Software subsidiaryCorporation, a Georgia corporation, and its predecessor companies have operated since 1973 and its securities have been publicly traded since 1980. In this report, sometimes we use the terms “Company”, “us”, “ours”, “we”, “Registrant” and similar words to refer to CoreCard Corporation and subsidiaries. Our executive offices are located in Norcross, Georgia and our website is www.corecard.com.
On December 15, 2021, we changed our name to CoreCard Corporation from Intelligent Systems Corporation. Our corporate structure did not change nor did our financial reporting. See our 8-K dated December 15, 2021, for more information. We are primarily engaged in the business of providing technology solutions and processing services to the financial technology and services market, commonly referred to as the FinTech industry. Our operations are conducted through our affiliate companies located in Romania, India, and the United Arab Emirates and Colombia, as well as the corporate office in Norcross, Georgia which provides significant administrative, human resources and executive management support to CoreCard.
We provide technology solutionssupport. Corecard’s foreign subsidiaries are CoreCard SRL in Romania, CoreCard Software India Pvt. Ltd. in India, CoreCard Colombia SAS in Colombia and Corecard Software DMCC in United Arab Emirates, that perform software development and testing as well as processing services to the financial services market, commonly referred to as the FinTech industry. We derive our product revenue from licensing our comprehensive suite of financial transaction management software to accounts receivable businesses, financial institutions, retailers and processors to manage their credit and debit cards, prepaid cards, private label cards, fleet cards, buy now pay later programs, loyalty programs, and accounts receivable and loan transactions. Our service revenue consists of fees for software maintenance and support for licensed software products, fees for processing services that we provide to companies that outsource their financial transaction processing functions to us, and professional services primarily for software customizations provided to both license and processing customers.operations support.
Our results vary in part depending on the size and number of software licenses recognized as well as the value and number of professional services contracts recognized in a particular period. As we continue to grow our Processing Services business, we continue to gain economies of scale on the investment we have made in the infrastructure, resources, processes and software features developed over the past number of years to support this growing side of our business. We are adding new processing customers at a faster pace than we are adding new license customers, resulting in steady growth in the processing revenue stream. However, we also receive license revenue and are experiencing growth in our professional services revenue due to the addition of Goldman Sachs Group, Inc. as a customer in 2018, referred to as “Customer A” in the Notes to Consolidated Financial Statements. In total, this customer represented 71%79% and 65%71% of our consolidated revenues in the first six months of 20212022 and 2020,2021, respectively. We expect future professional services, maintenance, and license revenue from this customer in 2021for the remainder of 2022 and future years; however, the amount and timing will be dependent on various factors not in our control such as the number of accounts on file and the level of customization needed by the customer. License revenue from this customer, similar to other license arrangements, is tiered based on the number of active accounts on the system. Once the customer achieves each tier level, they receive a perpetual license up to that number of accounts; inactive accounts do not count toward the license tier. The customer receives an unlimited perpetual license at a maximum tier level that allows them to utilize the software for any number of active accounts. They currently usepreviously used the software for a single institution andinstitution. In the first quarter of 2022 they added an additional customer, resulting in additional one-time license fees apply if multiple institutions are added, which we expect to occur in the second half of 2021.fees. Support and maintenance fees are charged based on the tier level achieved and increase at new tier levels.
In 2020, we experienced the loss of a large customer due to insolvency. In October 2020, we opened offices in Dubai and Chennai and hired some of the insolvent customer’s employees. In April 2021, we completed an agreement to purchase computer hardware and customer intangible assets and collected previously unrecognized accounts receivable resulting in revenue of $0.6 million for the quarter ended June 30, 2021. We have collected and settled all outstanding receivables from this customer, and we do not anticipate receiving additional revenue from them in the future. In the second quarter of 2021, we converted one of their customers to our processing platform. We expect revenue for the remainder of 2021 and future years from servicing this new customer and adding other new customers in the region.
We typically receive revenue based on the number of active accounts on file rather than transaction volume and therefore the COVID-19 pandemic and related economic slowdown has had a muted impact on our results. Most of our employees in India have been working remotely throughout the pandemic which has primarily impacted our ability to hire and train new employees. We have been able to maintain key functions and business continuity while delivering growth in our professional services revenue; however, the hiring and training constraints could impact future growth in our professional services revenue. Additionally, with the recent increase in severity of the pandemic in India, we could experience operational disruptions or service delays which could impact the amount and timing of revenues for the remainder of the year.
The infrastructure of our multi customer environment is scalable for the future. A significant portion of our expense is related to personnel, including approximately 610922 employees located in India, Romania, United Arab Emirates and Dubai.Colombia. In October 2020, we addedopened a new locationsoffice in Dubai, United Arab Emirates to support CoreCard’s expansion of processing services into new markets in the Asia Pacific, Middle East, Africa and Chennai, IndiaEuropean regions. In October 2021, we opened a new location in Bogotá, Colombia where we are hiring technical personnel to expand our international capabilities.support existing customers and continued growth. Our ability to hire and train employees on our processes and software impacts our ability to onboard new customers and deliver professional services for software customizations. In addition, we have certain corporate office expenses associated with being a public company that impact our operating results.
Our revenue fluctuates from period to period and our results are not necessarily indicative of the results to be expected in future periods. It is difficult to predict the level of consolidated revenue on a quarterly or annual basis for a number of reasons, including the following:
● | Software license revenue in a given period may consist of a relatively small number of contracts and contract values can vary considerably depending on the software product and scope of the license sold. Consequently, even minor delays in delivery under a software contract (which may be out of our control) could have a significant and unpredictable impact on the consolidated revenue that we recognize in a given quarterly or annual period. |
● | Customers may decide to postpone or cancel a planned implementation of our software for any number of reasons, which may be unrelated to our software or contract performance, but which may affect the amount, timing and characterization of our deferred and/or recognized revenue. |
● | Customers typically require our professional services to modify or enhance their CoreCard software implementation based on their specific business strategy and operational requirements, which vary from customer to customer and period to period. |
● | The timing of new processing customer implementations is often dependent on third party approvals or processes which are typically not under our direct control. |
We continue to maintain a strong cash position. We intend to use cash balances to support the domestic and international operations associated with our CoreCard business and to expand our operations in the FinTech industry through financing the growth of CoreCard and, if appropriate opportunities become available, through acquisitions of businesses in this industry. In November 2018, our Board of Directors authorized a share repurchase program of $5 million, all of which has been utilized. In April 2021, the Board authorized an additional $10 million for our share repurchase program, all of which $4.4 million has been utilized. We made share repurchases of $7.8$1.3 million for the six months ended 2021,2022, and no$7.8 million in share repurchases in the six month period ended June 30, 2020.2021. In May 2022, the Board authorized an additional $20 million for our share repurchase program. We have $5.6approximately $20 million of authorized share repurchases remaining at June 30, 2021.2022.
Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements presented in this quarterly report.
Revenue – Total revenue in the three and six month periods ended June 30, 20212022 was $13,355,000$15,206,000 and $22,267,000,$39,490,000, respectively, which represents increases of 6614 percent and 4077 percent compared to the respective periods in 2020.2021.
● | Revenue from services was |
● | Revenue from products, which is primarily software license fees, was |
Cost of Revenue – Total cost of revenue was 4252 percent and 4539 percent of total revenue in the three and six month periods ended June 30, 2021,2022, respectively, compared to 4642 percent and 45 percent in the corresponding periods of 2020.2021. For the three month period ended June 30, 2022, the increase in cost of revenue as a percentage of revenue is primarily driven by lower license revenue and investments made in our processing infrastructure in 2021 and 2022 including hardware and software purchases and additional space in our data centers. For the six month period ended June 30, 2022, the decrease as a percentage of revenue is primarily driven by an increase in license revenue, partially offset by investments in our infrastructure. Cost of revenue includes costs to provide annual maintenance and support services to our installed base of licensed customers, costs to provide professional services, and costs to provide our financial transaction processing services. The cost and gross margins on such revenues can vary considerably from period to period depending on the customer mix, customer requirements and project complexity as well as the mix of our U.S. and offshore employees working on the various aspects of services provided. In addition, we continue to devote the resources necessary to support our growing processing business, including direct costs for regulatory compliance, infrastructure, network certifications, and customer support. Investments in our infrastructure in 20202021 and 20212022 are in anticipation of adding customers in future periods. As such, we will not experience economies of scale unless we add additional customers, as anticipated. This may be subject to change in the future if new regulations or processing standards are implemented causing us to incur additional costs to comply.
Operating Expenses – In the three and six month periods ended June 30, 2021,2022, total operating expenses from consolidated operations were higher than indecreased 3 percent and increased 28 percent compared to the corresponding periodperiods in 2020 primarily due to higher research and development costs and higher general and administrative expenses.2021, respectively. Research and development expenses were 1887 percent lower and 15922 percent higher in three and six month periods in 2021,2022, respectively, as compared to the same periods in 2020.2021. In the three and six month periodsperiod ended June 30, 2021,2022, research and development expenses were lower mainly due to lower bonus accruals partially offset by an increase in headcount. In the six month period ended June 30, 2022, research and development expenses were higher mainly due to payroll forhiring of additional offshore technical personnel and hardshiphigher bonus payments related to the pandemic’s impact on our offshore employees.accruals. Additionally, we hired onshore and offshore technical personnel to work on the development of an updated platform. General and administrative expenses were 761 percent and 2039 percent higher in the three and six month periods ended June 30, 2021, respectively, due2022. The increase for the six month period primarily relates to higher bonus accruals in the current period as well as a stock grant to the board in the second quarter of 2021 that was similarly granted in the third quarter in 2020.2022. Marketing expenses increased 4885 percent and 3282 percent for the three and six month periods in 2021,2022, respectively, as compared to the same periods in 2020.2021. Our client base continues to increase with minimal marketing efforts as we continue to have prospects contact us via online searches; however, we will continue to re-evaluate our marketing expenditures as needed to competitively position the Processing Services business.
Investment Income (Loss) – In the three and six months ended June 30, 2021,2022, we recorded $134,000$260,000 and $267,000$157,000 of investment losses,income, respectively, compared to investment losses of $95,000$134,000 and $1,145,000$267,000 for the three and six months ended June 30, 2020, respectively. The 2020 investment losses primarily relate2021, respectively, related to first quarter 2020 impairment charges on investments resulting from the economic downturn caused by the recent pandemic and losses onour equity method investments. We did not record any impairmentsinvestments discussed further in 2021.Note 4.
Other Income (Loss) – In the three and six months ended June 30, 2021,2022, we recorded income of $29,000 and $66,000, respectively, compared to income of $81,000 and $156,000 respectively, compared to income of $117,000 and $253,000 for the comparable 20202021 periods. The decrease results from lower interest rates and lower cash balances in the 20212022 period.
Income Taxes – Our effective tax rates for the three and six months ended June 30, 20212022 were 26.323.9 percent and 26.225.4 percent compared to effective tax rates of 19.326.3 percent and 22.526.2 percent for the respective periods in 2020.2021.
Liquidity and Capital Resources
Our cash balance at June 30, 2021,2022, was $26,210,000$21,516,000 compared to $37,956,000$29,244,000 at December 31, 2020.2021. During the six months ended June 30, 2021,2022, cash provided by operations was $405,000$1,358,000 compared to cash provided by operations of $9,714,000$405,000 for the six months ended June 30, 2020.2021. The decreaseincrease is primarily due to lower deferred revenue balances, higher accounts receivable balances and anet income, decrease in cash held for program management funding, higher depreciation, and higher accounts payable, partially offset by higher net incomeaccounts receivable and higher depreciation. In addition, duringdeferred revenue balances. The increase in accounts receivable relates to timing of invoices and payments primarily from our largest customer. There are no material disputes related to the second quarteroutstanding balances, some of 2021, we invested $1,000,000 in a privately held supply chain financing company which is described in more detail in Note 4 topast due at June 30, 2022, however we have concluded the Consolidated Financial Statements. Weentire balance is collectible.
During the six months ended June 30, 2022, we used $2,612,000$5,760,000 of cash to acquire computer equipment primarily for the technical resources added in our India office and continued investments in our existing processing environment in the U.S and technical resources added in our India office.U.S.
We expect to have sufficient liquidity from cash on hand as well as projected customer payments to support our operations and capital equipment purchases in the foreseeable future. Currently we expect to use cash in excess of what is required for our current operations for share repurchases and opportunities we believe will expand our FinTech business, as exemplified in transactions described in Notes 3 and 4, although there can be no assurance that appropriate opportunities will arise. In November 2018, our Board of Directors authorized a share repurchase program of $5 million, all of which has been utilized. In April 2021, the Board authorized an additional $10 million for our share repurchase program, all of which $4.4 million has been utilized. In May 2022, the Board authorized an additional $20 million for share repurchases. We made share repurchases of $7.8$3.7 million for the six months ended 2021,2022, and no$7.8 million of share repurchases in the six month period ended June 30, 2020.2021. We have $5.6approximately $20 million of authorized share repurchases remaining at June 30, 2021.2022.
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, liquidity or results of operations.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. We consider certain accounting policies related to revenue recognition and valuation of investments to be critical policies due to the estimation processes involved in each. Management discusses its estimates and judgments with the Audit Committee of the Board of Directors. For a detailed description on the application of these and other accounting policies, see Note 1 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021. Reference is also made to the discussion of the application of these critical accounting policies and estimates contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for 2020.2021. During the six month period ended June 30, 2021,2022, there were no significant or material changes in the application of critical accounting policies.
Factors That May Affect Future Operations
Future operations are subject to risks and uncertainties that may negatively impact our future results of operations or projected cash requirements. It is difficult to predict future quarterly and annual results with certainty.
Among the numerous factors that may affect our consolidated results of operations or financial condition are the following:
● | Our largest customer represented 79% of our consolidated revenues for the six months ended June 30, 2022. In the event of material failures to meet contract obligations related to the services provided, there is risk of breach of contract and loss of the customer and related future revenues. Additionally, loss of the customer and related future revenues or a reduction in revenues could result if they or their customers choose an alternative service provider, build an in-house solution, or decide to exit the business or service line that falls under the services that we provide for them. |
● | Weakness or instability in the global financial markets could have a negative impact due to potential customers (most of whom perform some type of financial services) delaying decisions to purchase software or initiate processing services. |
● | Increased federal and state regulations and reluctance by financial institutions to act as sponsor banks for prospective customers could result in losses and additional cash requirements. |
|
|
● | Delays in software development projects could cause our customers to postpone implementations or delay payments, which would increase our costs and reduce our revenue and cash. |
● | We could fail to deliver software products which meet the business and technology requirements of our target markets within a reasonable time frame and at a price point that supports a profitable, sustainable business model. |
● | Our processing business is impacted, directly or indirectly, by more regulations than our licensed software business. If we fail to provide services that comply with (or allow our customers to comply with) applicable regulations or processing standards, we could be subject to financial or other penalties that could negatively impact our business. |
● | A security breach in our platform could expose confidential information of our |
● | Software errors or poor quality control may delay product releases, increase our costs, result in non-acceptance of our software by customers or delay revenue recognition. |
● | We could fail to expand our base of customers as quickly as anticipated, resulting in lower revenue and profits and increased cash needs. |
● | We could fail to retain key software developers and managers who have accumulated years of know-how in our target markets and company products or fail to attract and train a sufficient number of new software developers and testers to support our product development plans and customer requirements at projected cost levels. |
● | Increasing and changing government regulations in the United States and foreign countries related to such issues as data privacy, financial and credit transactions could require changes to our products and services which could increase our costs and could affect our existing customer relationships or prevent us from getting new customers. |
● | Delays in anticipated customer payments for any reason would increase our cash requirements and could adversely impact our profits. |
● | Competitive pressures (including pricing, changes in customer requirements and preferences, and competitor product offerings) may cause prospective customers to choose an alternative product solution, resulting in lower revenue and profits (or losses). |
● | Our future capital needs are uncertain and depend on a number of factors; additional capital may not be available on acceptable terms, if at all. |
● | Volatility in the markets, including as a result of political instability, civil unrest, war or terrorism, or pandemics or other natural disasters, such as the recent outbreak of coronavirus, could adversely affect future results of operations and could negatively impact the valuation of our investments. |
● | Other general economic and political conditions could cause customers to delay or cancel purchases. |
Item 4. Controls and Procedures
Evaluation of Disclosure Control Over Financial Reporting
As of the end of the period covered by this report, the companyCompany carried out an evaluation, under the supervision and with the participation of the company’sCompany’s management, including the company’sCompany’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the company’sCompany’s disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company’sCompany’s disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There were no significant changes in the company’s internal control over financial reporting or in other factors identified in connection with this evaluation that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On or about July 9, 2019, a securities class action complaint was filed in the United States District Court for the Eastern District of New York (Case No. 1:19-cv-03949) by Michael Skrzeczkoski, individually and on behalf of all others similarly situated, against the company, and certain current and former directors and officers. The complaint alleges, among other things, that certain of our press releases and SEC filings were misleading as a result of the failure to disclose alleged related party transactions affecting revenue recognition and the absence of disclosure regarding certain allegations against former director Parker H. Petit in connection with his former position with MiMedx, Inc. The complaint seeks to recover attorney’s fees and costs and unspecified damages on behalf of purchasers who acquired our stock during the period from January 23, 2019, through May 29, 2019, and purportedly suffered financial harm as a result of the alleged misleading statements. On September 26, 2019, the Court appointed Edgardo Canez as lead plaintiff (“Lead Plaintiff”) on behalf of the putative class. On November 18, 2019, Lead Plaintiff, individually and on behalf of a putative class of persons or entities who purchased or otherwise acquired publicly traded company securities from May 23, 2014 through May 29, 2019, filed an amended class action complaint against the company, and certain current and former directors and officers (the “Amended Complaint”). The Amended Complaint alleges similar allegations in violation of Sections 10(b) and 20(a) of the Securities Exchange Act as the previously filed complaint. The Amended Complaint seeks to recover attorney’s fees and costs and unspecified damages. On January 2, 2020, Defendants submitted a motion to dismiss, and on March 3, 2020, briefing on the motion to dismiss was completed. On April 6, 2021, the Court entered an order granting the motion to dismiss.
On or about February 14, 2020, two purported shareholders, derivatively and on behalf of the Company, filed substantially similar shareholder derivative actions in the Eastern District of New York against certain current and former directors and officers (the “Individual Defendants”), and the Company as a nominal defendant (together with the Individual Defendants, the “Defendants”). The complaints assert a claim against Messrs. Strange, Moise, Petit, Fuzzell and Chandler for a violation of Section 14(a) of the Securities Exchange Act by issuing purportedly misleading statements in the Company’s 2017 and 2018 Proxies. The complaints also assert claims against the Individual Defendants for breaches of fiduciary duty, waste of corporate assets, and unjust enrichment arising out of, among other things, purportedly undisclosed related party transactions, other relationships, and certain allegations against former director Parker H. Petit in connection with his former position with MiMedx, Inc. and other companies. The relief sought in the complaints includes changes to the Company’s corporate governance procedures, unspecified damages, equitable relief, restitution, and attorney’s fees and costs. On April 20, 2020, the two derivative actions were consolidated and captioned, In re Intelligent Systems Corporation Stockholder Derivative Litigation, Lead Case No. 1:20-cv-00832, in the Eastern District of New York (the “Derivative Matter”). On June 19, 2020, Defendants filed their motion to dismiss, and briefing was subsequently completed. After a conference held on August 24, 2020, the parties agreed that Defendants’ motion to dismiss would be temporarily withdrawn without prejudice to refile after the conclusion of any discovery permitted by further Court order. On September 8, 2020, Plaintiffs moved for leave to conduct limited discovery (“Plaintiffs’ Motion for Discovery”). On December 23, 2020, the Court entered a stipulation among the parties whereby Plaintiffs’ Motion for Discovery shall be withdrawn, the Company will engage in limited discovery, and the parties agree that the Derivative Matter shall be stayed pending resolution of the motion to dismiss in the related above-mentioned securities litigation matter, among other things. The matter is currently stayed.
For information regarding our accounting for legal contingencies, see Note 9 of the Notes to Consolidated Financial Statements in this Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of Securities
The following table sets forth information regarding our purchases of shares of our common stock during the three months ended June 30, 2021:
Total Number of Shares Purchased | Average Price Paid per Share1 | Total Number of Shares Purchased as Part of Publicly Announced Program 2 | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program 2 | |||||||||||||
April 1, 2021 to April 30, 2021 | - | - | - | $ | 10,649,000 | |||||||||||
May 1, 2021 to May 31, 2021 | 93,098 | $ | 35.95 | 93,098 | $ | 7,302,000 | ||||||||||
June 1, 2021 to June 30, 2021 | 51,096 | $ | 33.28 | 51,096 | $ | 5,601,000 | ||||||||||
Total | 144,194 | $ | 35.01 | 144,194 | $ | 5,601,000 | ||||||||||
1This price includes per share commissions paid.
2In November 2018, our Board of Directors authorized a share repurchase program of $5 million, all of which has been utilized. In April 2021, the Board authorized an additional $10 million for our share repurchase program, of which $4.4 millionall has been utilized. In May 2022, the Board authorized an additional $20 million for our share repurchase program. Under this publicly announced program, we are authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The repurchase program does not have an expiration date and may be suspended or discontinued at any time. We have approximately $20 million of authorized share repurchases remaining at June 30, 2022.
The following table sets forth information regarding our purchases of shares of our common stock during the three months ended June 30, 2022:
Total Number of Shares Purchased | Average Price Paid per Share1 | Total Number of Shares Purchased as Part of Publicly Announced Program | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | |||||||||||||
April 1, 2022 to April 30, 2022 | - | $ | - | - | $ | 1,341,000 | ||||||||||
May 1, 2022 to May 31, 2022 | 24,979 | $ | 23.12 | 24,979 | $ | 20,764,000 | ||||||||||
June 1, 2022 to June 30, 2022 | 33,468 | $ | 23.01 | 33,468 | $ | 19,994,000 | ||||||||||
Total | 58,447 | $ | 23.05 | 58,447 | $ | 19,994,000 | ||||||||||
1This price includes per share commissions paid.
Item 6. Exhibits
The following exhibits are filed or furnished with this report:
| 3.1 |
|
| 3.2 |
|
| 31.1 |
| Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 |
| Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 |
|
| 101.INS** | Inline XBRL Instance |
| 101.SCH** |
| Inline XBRL Taxonomy Extension Schema |
| 101.CAL** |
| Inline XBRL Taxonomy Extension Calculation |
| 101.DEF** |
| Inline XBRL Taxonomy Extension Definitions |
| 101.LAB** |
| Inline XBRL Taxonomy Extension Labels |
| 101.PRE** |
| Inline XBRL Taxonomy Extension Presentation |
| 104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
** | XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
CORECARD CORPORATION | |||
| Registrant | |||
|
|
| |
|
|
|
|
Date: August | By: | /s/ J. Leland Strange | |
J. Leland Strange |
| ||
|
|
| |
Chief Executive Officer, President |
| ||
Date: August | By: | /s/ Matthew A. White |
|
|
| Matthew A. White |
|
|
| Chief Financial Officer |
|
EXHIBIT INDEX
Exhibit | Descriptions | ||
3.1 |
| ||
3.2 | Amended and Restated Bylaws of the Registrant dated March 2, 2021. (Incorporated by reference to Exhibit 3.2 of the Registrant’s Form 10-K for the period ended December 31, 2020.) | ||
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification of Chief Executive Officer and Chief Financial Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS** | Inline XBRL Instance | ||
101.SCH** | Inline XBRL Taxonomy Extension Schema | ||
101.CAL** | Inline XBRL Taxonomy Extension | ||
101.DEF** | Inline XBRL Taxonomy Extension Definitions | ||
101.LAB** | Inline XBRL Taxonomy Extension Labels | ||
101.PRE** | Inline XBRL Taxonomy Extension Presentation | ||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
** | XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |