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Stock Based Compensation

9 Months Ended

Sep. 30, 2021

15. Stock-Based Compensation

CPI Card Group Inc. Omnibus Incentive Plan

In 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. On May 27, 2021, the Company’s stockholders approved an amendment and restatement of the Omnibus Plan to, among other things, increase the total number of shares of the Company’s Common Stock reserved and available for issuance

thereunder by 1,000,000 shares resulting in a total of 2,200,000 shares of Common Stock issuable under the Omnibus Plan. As of September 30, 2021, there were 970,832 shares of Common Stock available for grant under the Omnibus Plan.

During the nine months ended September 30, 2021, the Company granted 115,659 awards of non-qualified stock options, and during the fiscal year ended December 31, 2020, the Company did not grant any awards of non-qualified stock options. 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, 2020	706,372	$	15.20	6.44
Granted	115,659		29.62	6.98
Exercised	(10,513)		5.25
Forfeited	(19,381)		23.03
Outstanding as of September 30, 2021	792,137	$	17.35	5.65
Options vested and exercisable as of September 30, 2021	676,478	$	15.25	5.42
Options vested and expected to vest as of September 30, 2021	792,137	$	17.35	5.65

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


		Weighted-Average
	Options	Grant-Date Fair Value

Unvested as of December 31, 2020	45,319	$	1.10
Granted	115,659		17.43
Vested	(45,319)		1.10
Unvested as of September 30, 2021	115,659	$	17.43

Unvested stock options of 115,659 as of September 30, 2021 have a seven year term and are expected to vest ratably over a two-year period on each anniversary of the grant date.

The fair value of the stock option awards granted during the nine months ended September 30, 2021, was

determined using a Black-Scholes option-pricing model with the following weighted-average assumptions:


	Nine Months
	Ended
	September 30
	2021
Expected term in years ⁽¹⁾	4.3
Volatility ⁽²⁾	78.6	%
Risk-free interest rate ⁽³⁾	0.7	%
Dividend yield ⁽⁴⁾	—	%

(1)

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.

(2)

Volatility was based on a weighting of the Company’s historical volatility and its peer group, which is comprised of companies with similar industry, size, and financial leverage.

(3)

The risk-free interest rate was determined by using the United States Treasury rate for the period consistent with the expected option term described above.

(4)

The Company’s expected annual dividend yield was zero based on current practice.

The following table summarizes the changes in the number of outstanding restricted stock units:


				Weighted-
				Average
		Weighted-		Remaining
		Average		Amortization
		Grant-Date		Period
	Shares	Fair Value		(in Years)
Outstanding as of December 31, 2020	180,001	$	2.12
Granted	98,622		29.62
Forfeited	(22,485)		2.12
Outstanding as of September 30, 2021	256,138	$	12.71	1.77

The Company granted 98,622 restricted stock units to employees and directors on September 21, 2021, and granted 180,001 restricted stock units to employees on October 2, 2020. The restricted stock unit awards contain conditions associated with continued employment or service. The restricted stock units granted in 2021 are expected to either vest ratably over a two-year period on each anniversary of the grant date or vest entirely on the year-and-a-half anniversary of the grant date. The restricted stock units granted in 2020 are expected to vest on the two-year anniversary of the date of grant. On the vesting date, shares of Common Stock will be issued to the award recipients.

Compensation expense for the Omnibus Plan for the three months ended September 30, 2021 and 2020 was $116 and $25, respectively. Compensation expense for the Omnibus Plan for the nine months ended September 30, 2021 and 2020 was $214 and $84, respectively. As of September 30, 2021, the total unrecognized compensation expense related to unvested options and restricted stock units is $5,015, which the Company expects to recognize over an estimated weighted-average period of approximately 1.9 years.