| EARNINGS PER SHARE |
EARNINGS PER SHARE The following table sets forth the computation of net income used to compute basic and diluted net earnings per share of Class A common stock for the three months and nine months ended September 30, 2022. No earnings per share are presented for the periods ended September 30, 2021 as only the Class B common shares would have been outstanding in historical periods pursuant to the reverse recapitalization and the Class B common shares do not participate in the Company's income or loss and are therefore not participating securities.
| | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | Basic and diluted: | | | | | | | | | | | | | | | Net income | | $ | 21,894 | | | $ | 109,459 | | | | | | | | | | | | Less: Net income attributable to non-controlling interest | | (19,077) | | | (93,973) | | | | | | | | | | | | Net income attributable to Class A Common Stockholders | | $ | 2,817 | | | $ | 15,486 | | | | | | | | | | | | Plus: adjustment due to net effect of stock options and exchangeable notes to net income | | 733 | | | 15,446 | | | | | | | | | | | | Net income attributable to Class A Common Stockholders after adjustment | | $ | 3,550 | | | $ | 30,932 | | | | | | | | | | | Weighted average common shares outstanding used in computing net income per share -
basic | | 15,433,438 | | | 15,141,169 | | | | | | | | | | | | Plus: net effect of dilutive stock options and exchangeable notes | | 4,228,622 | | | 17,673,514 | | | | | | | | | | | | Weighted average common shares outstanding used in computing net income per share—diluted | | 19,662,060 | | | 32,814,683 | | | | | | | | | | | | Net income per share—basic | | $ | 0.18 | | | $ | 1.02 | | | | | | | | | | | | Net income per share—diluted | | $ | 0.18 | | | $ | 0.94 | | | | | | | | | | |
Securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an antidilutive effect on per share amounts. The Company applied the if-converted method for the Exchangeable Notes to calculate diluted earnings per share in accordance with ASU 2020-06.
The following amounts were not included in the calculation of net earnings per diluted share because their effects were anti-dilutive: | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | | | | | | Potentially dilutive securities: | | | | | | | | | | Warrants | | 22,415,400 | | | 22,415,400 | | | | | | | Class B common shares | | 60,586,800 | | | 60,586,800 | | | | | | | Exchangeable notes | | 12,999,978 | | | — | | | | | | | Earnout consideration shares | | 7,500,000 | | | 7,500,000 | | | | | | | Stock options and restricted common shares | | 3,753,590 | | | 3,453,590 | | | | | | | | | | | | | | |
Change in Accounting Policy for net income per share:
Effective April 1, 2022, the Company had changed its methodology to apply its accounting policy to calculate the basic and diluted earnings per share as well as determined that it would push down the changes in fair value of the mark-to-market liabilities that related to the Company's warrants and earnout consideration liability to its operating subsidiary, Holdings, resulting in a change to the net income attributable to the controlling and non-controlling interest.
The Company observed diversity in practice due to lack of specific guidance in ASC 810 related to earnings per share due to the Company's Up-C structure. The method adopted effective April 1, 2022 was voluntary and more appropriately represented the economics of the net income allocation upon the conversion of the potential dilutive instruments due to the fact that the issuance of Class A Common Stock would result with a corresponding issuance of a Class A Common Unit in Holdings. Further, for similar reasons, pushing down the changes in fair value of the mark-to-market liabilities to Holdings, and therefore allocating the changes between the controlling and non-controlling interest would provide more appropriate information to the users of the financial statements. The Company determined that, accordingly, this change would more appropriately reflect the allocation of the consolidated Company’s net assets between the controlling and non-controlling interest, and the respective basic and dilutive earnings per share presented in the Company’s consolidated financial statements. Below is a summary of the impact of the change in accounting policy for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | Three-month period ended September 30, 2022 | | | | Three-month period ended September 30, 2022 | | Income Statement Items: | | Under No-allocation method | | Adjustment | | As reported | | Net income per share attributable to Class A common stockholders - basic | | $ | 0.23 | | | $ | (0.05) | | | $ | 0.18 | | | Net income per share attributable to Class A common stockholders - diluted | | $ | 0.12 | | | $ | 0.06 | | | $ | 0.18 | | | Net income attributable to CompoSecure, Inc. | | 3,577 | | | (760) | | | 2,817 | | | Net income attributable to redeemable non-controlling interests | | $ | 18,314 | | | $ | 763 | | | $ | 19,077 | |
| | | | | | | | | | | | | | | | | | | | | | | Nine-month period ended September 30, 2022 | | | | Nine-month period ended September 30, 2022 | | Income Statement Items: | | Under No-allocation method | | Adjustment | | As reported | | Net income per share attributable to Class A common stockholders - basic | | $ | 3.17 | | | $ | (2.15) | | | $ | 1.02 | | | Net income per share attributable to Class A common stockholders - diluted | | $ | 1.21 | | | $ | (0.27) | | | $ | 0.94 | | | Net income attributable to CompoSecure, Inc. | | 48,072 | | | (32,586) | | | 15,486 | | | Net income attributable to redeemable non-controlling interests | | $ | 63,785 | | | $ | 30,188 | | | $ | 93,973 | |
| | | | | | | | | | | | | | | | | | | | | | | Six-month period ended June 30, 2022 | | | | Six-month period ended June 30, 2022 | | Income Statement Items: | | Under No-allocation method | | Adjustment | | As reported | Provision for income taxes | | $ | 948 | | | $ | 2,397 | | | $ | 3,345 | | | Net income | | 89,963 | | | (2,397) | | | 87,566 | | | Net income attributable to CompoSecure, Inc. | | 44,050 | | | (32,112) | | | 11,938 | | | Net income attributable to redeemable non-controlling interests | | 45,913 | | | 29,715 | | | 75,628 | | | Net income per share attributable to Class A common stockholders - basic | | $ | 2.94 | | | $ | (2.14) | | | $ | 0.80 | | | Net income per share attributable to Class A common stockholders - diluted | | $ | 0.97 | | | $ | (0.22) | | | $ | 0.75 | | | | | | | | | | | Three-month period ended June 30, 2022 | | | | Three-month period ended June 30, 2022 | | Income Statement Items: | | Under No-allocation method | | Adjustment | | As reported | | Income tax expense | | $ | 405 | | | $ | 2,397 | | | $ | 2,802 | | | Net income | | 63,055 | | | (2,397) | | | 60,658 | | | Net income attributable to CompoSecure, Inc. | | 38,437 | | | (29,963) | | | 8,474 | | | Net income attributable to redeemable non-controlling interests | | 24,619 | | | 27,565 | | | 52,184 | | | Net income per share attributable to Class A common stockholders - basic | | $ | 2.55 | | | $ | (1.99) | | | $ | 0.56 | | | Net income per share attributable to Class A common stockholders - diluted | | $ | 0.68 | | | $ | (0.16) | | | $ | 0.52 | | | | | | | | | | | June 30,
2022 | | | | June 30,
2022 | | Balance Sheet Items: | | Under No-allocation method | | Adjustment | | As reported | | Deferred tax asset | | $ | 25,098 | | | $ | (321) | | | $ | 24,777 | | | Retained earnings | | (962,502) | | | (2,397) | | | (964,899) | |
Deferred tax asset was adjusted cumulatively in the period ended June 30, 2022 due to the change in accounting policy. The Company determined that the effect on deferred tax assets and provision for income taxes for the periods ended March 31, 2022 and December 31, 2021 were immaterial and therefore were not adjusted retrospectively. | | | | | | | | | | | | | | | | | | | | | | | Three-month period ended March 31, 2022 | | | | Three-month period ended March 31, 2022 | | Income Statement Items: | | As reported | | Adjustment | | Under re-allocation method | | Net income per share attributable to Class A common stockholders - basic | | $ | 0.32 | | | $ | (0.09) | | | $ | 0.23 | | | Net income per share attributable to Class A common stockholders - diluted | | $ | 0.16 | | | $ | 0.07 | | | $ | 0.23 | | | Net income attributable to CompoSecure, Inc. | | 4,741 | | | (1,347) | | | 3,394 | | | Net income attributable to redeemable non-controlling interests | | 22,167 | | | 1,347 | | | 23,514 | |
| | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2021 | | | | Year ended December 31, 2021 | | Income Statement Items: | | As reported | | Adjustment | | Under re-allocation method | | Net income per share attributable to Class A common stockholders - basic (1) | | $ | 0.91 | | | $ | (0.70) | | | $ | 0.21 | | | Net income per share attributable to Class A common stockholders - diluted (1) | | $ | 0.14 | | | $ | (0.02) | | | $ | 0.12 | | | Net income attributable to CompoSecure, Inc. (2) | | 13,512 | | | (10,358) | | | 3,154 | | | Net income attributable to redeemable non-controlling interests | | 69,902 | | | 10,358 | | | 80,260 | |
(1) The amounts for the year ended December 31, 2021 represent basic and diluted net income per share of Class A common stock for the prorated period from December 27, 2021 through December 31, 2021, the period following the Business Combination described in Note 1.
(2) Net income attributable to CompoSecure, Inc. for the year ended December 31, 2021 was equal to net income for the period subsequent to the Business Combination for the prorated period from December 27, 2021 through December 31, 2021. Net income attributable to non-controlling for the year ended December 31, 2021 is equal to net income for the period from January 1, 2021 through December 31, 2021.
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