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Stock Based Compensation

3 Months Ended

Mar. 31, 2022

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 March 31, 2022, there were 940,221 shares of Common Stock available for grant under the Omnibus Plan.

During the three months ended March 31, 2022, the Company granted 10,888 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, 2021	778,835	$	18.02	5.59
Granted	10,888		14.32	6.91
Exercised	—		—	—
Forfeited	(3,870)		29.62	—
Outstanding as of March 31, 2022	785,853	$	17.91	5.36
Options vested and exercisable as of March 31, 2022	651,478	$	15.76	5.12
Options vested and expected to vest as of March 31, 2022	785,853	$	17.91	5.36

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, 2021	127,357	$	17.42
Granted	10,888		8.49
Forfeited	(3,870)		17.43
Unvested as of March 31, 2022	134,375	$	16.70

Unvested stock options of 134,375 as of March 31, 2022 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 three months ended March 31, 2022, was

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


	Three Months Ended
	March 31, 2022
Expected term in years ⁽¹⁾	4.25
Volatility ⁽²⁾	77.44	%
Risk-free interest rate ⁽³⁾	1.91	%
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, 2021	261,982	$	13.19
Granted	6,459		14.32
Forfeited	(8,725)		9.32
Outstanding as of March 31, 2022	259,716	$	13.35	1.32

The restricted stock unit awards contain conditions associated with continued employment or service. Restricted stock units granted in 2022 are expected to vest ratably over a two-year period on each anniversary of the grant date. 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 March 31, 2022 and 2021 was $961 and $51, respectively. As of March 31, 2022, the total unrecognized compensation expense related to unvested options and restricted stock units is $3,459, which the Company expects to recognize over an estimated weighted-average period of approximately 1.4 years.