16. Stock Based Compensation

CPI Card Group Inc. Omnibus Incentive Plan

During October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity based incentives may be granted to participating employees, advisors and directors. The Company had reserved 1,200,000 shares of common stock for issuance under the Omnibus Plan. As of December 31, 2019, there were 278,199 shares available for grant under the Omnibus Plan.

The Company did not grant any awards of non-qualified stock options for the year ended December 31, 2019. During the year ended December 31, 2018, the Company granted awards of non-qualified stock options for 159,755 shares of common stock. All stock option grants have a 10-year term, and will generally vest ratably over a three-year period beginning on the first anniversary of the grant date.

The following is a summary of the activity in outstanding stock options under the Omnibus Plan:


				Weighted-
		Weighted-		Average
		Average		Remaining
		Exercise		Contractual Term
	Options	Price		(in Years)

Outstanding as of December 31, 2018	910,627	$	14.99
Forfeited	(117,543)		15.48
Outstanding as of December 31, 2019	793,084	$	14.91	7.40
Options vested and exercisable as of December 31, 2019	542,513		19.01	7.15
Options vested and expected to vest as of December 31, 2019	793,084		14.91	7.40

The following is a summary of the activity in non-vested stock options under the Omnibus Plan:



		Weighted-
		Average
		Grant-Date
	Number	Fair Value
Non-vested as of December 31, 2018	605,352	$	3.14
Forfeited	(78,676)		3.39
Vested	(276,105)		4.20
Non-vested as of December 31, 2019	250,571	$	1.90

Unvested options as of December 31, 2019 vest as follows:


2020		200,364
2021		50,207
Total unvested options as of December 31, 2019		250,571

The fair value of stock option awards was determined at the date of grant using a Black-Scholes option-pricing model, with the following weighted-average assumptions:


	December 31, 2018
Expected term in years	6.0
Volatility	48.0	%
Risk-free interest rate	2.7	%
Dividend yield	—	%

Expected term –For option grants valued using a Black-Scholes option-pricing model, the Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.

Volatility – The Company considered the volatility of its own common stock in determining the fair value of stock option awards, in addition to a peer group average historical volatility over the expected option term. This is due to the limited amount of trading history of the Company’s common stock. The peer group was based on financial technology companies that completed an initial public offering of common stock within the last 10 years.

Risk-free interest rate – The risk-free interest rate was determined by using the United States Treasury rate for the period that coincided with the expected option term.

Dividend yield – The estimated dividend yield is based on the Company’s recent historical dividend practice and the market value of its common stock.

The weighted average grant-date fair value of options granted is as follows:


	Year Ended December 31,
	2019		2018
Weighted Average Grant-Date Fair Value of Options Granted	$	n/a	$	1.21

The following table summarizes the changes in the number of outstanding restricted stock units for the year ended December 31, 2019 under the Omnibus Plan:


		Weighted-
		Average
		Grant-Date
	Shares	Fair Value
Outstanding as of December 31, 2018	68,649	$	6.25
Vested	(57,563)		3.15
Forfeited	(3,739)		22.01
Outstanding as of December 31, 2019	7,347	$	22.49

The Company did not grant awards of restricted stock units for the year ended December 31, 2019. During the year ended December 31, 2018, the Company granted awards of restricted stock units for 75,188 shares of common stock. The restricted stock unit awards contain conditions associated with continued employment or service, and generally vest one year from the date of grant. On the vesting dates, shares of common stock are issued to the award recipients. Unvested restricted stock units of 7,347 as of December 31, 2019 will vest entirely in 2020.

The following table summarizes the changes in the number of outstanding cash performance awards for the year ended December 31, 2019:


		Cash Performance Awards
Outstanding as of December 31, 2018		425,012
Vested		(212,505)
Forfeited		(71,435)
Outstanding as of December 31, 2019		141,072

During the year ended December 31, 2017, the Company granted awards of 932,837 cash performance units with a grant-date fair value of $663. These awards will settle in cash in three annual payments on the first, second and third anniversaries of the date of grant. The cash performance units are based on the performance of the Company’s stock, measured based on the Company’s stock price at each of the first, second, and third anniversaries of the grant date compared to the Company’s stock price on the date of grant. The cash performance units originally in 2017 were valued using a Monte Carlo simulation. The Company recognizes compensation expense on a straight-line basis for each annual performance period. The cash performance units are accounted for as a liability and remeasured to fair value at the end of each reporting period. As of December 31, 2019, the Company recognized a liability of $65 in “Accrued expenses” in the Consolidated Balance Sheet for unsettled cash performance units, which are expected to vest in March 2020.

Compensation expense for the Omnibus Plan for the years ended December 31, 2019 and 2018 was $250 and $961, respectively. As of December 31, 2019, the total unrecognized compensation expense related to unvested options, restricted stock units, and cash performance unit awards under the Omnibus Plan was $126, which the Company expects to recognize over an estimated weighted average period of 0.8 years.

CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan

In 2007, the Company’s Board of Directors adopted the CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan (the “Option Plan”). Under the provisions of the Option Plan, stock options may be granted to employees, directors, and consultants at an exercise price greater than or equal to (and not less than) the fair market value of a share on the date the option is granted.

As a result of the Company’s adoption of its Omnibus Plan, as further described above, no further awards will be made under the Option Plan.

During the year ended December 31, 2019, the remaining 6,600 outstanding shares in the Option Plan were exercised. As such, there were no outstanding shares remaining as of December 31, 2019

There was no compensation expense related to options previously granted under the Option Plan, for years ended December 31, 2019 and 2018.