Stock Based Compensation

12 Months Ended

Dec. 31, 2022

16. 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 December 31, 2022, there were 944,123 shares of Common Stock available for grant under the Omnibus Plan. Options have 7-year terms and are issued with exercise prices equal to the fair market value of the Company’s common stock on the grant date.

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



				Weighted-Average
		Weighted-Average		Remaining	Aggregate
		Exercise		Contractual Term	Intrinsic
	Options	Price		(in Years)	Value
Outstanding as of December 31, 2021	778,835	$	18.02	5.59
Granted	44,905		14.95	6.27
Exercised	(28,752)		6.47	—
Expired	(1,320)		21.75	—
Forfeited	(13,045)		26.55	—
Outstanding as of December 31, 2022	780,623	$	18.12	4.65	$	15,902
Options vested and exercisable as of December 31, 2022	680,564	$	17.34	4.45	$	14,636
Options vested and expected to vest as of December 31, 2022	780,623	$	18.12	4.65	$	15,902

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



		Weighted-Average
		Grant-Date
	Number	Fair Value
Unvested as of December 31, 2021	127,357	$	17.42
Granted	44,905		8.99
Vested	(59,158)		17.42
Forfeited	(13,045)		15.68
Unvested as of December 31, 2022	100,059	$	6.02

Unvested stock options of 100,059 as of December 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 weighted average fair value of options granted during the years ended December 31, 2022 and 2021 was $8.99 and $17.42, respectively. The total intrinsic value of

options exercised during the years ended December 31, 2022 and 2021 was $414 and $802, respectively. The total fair value of options vested during the years ended December 31, 2022 and 2021 was $1,031 and $50, respectively.

The fair value of the stock option awards granted for the years ended December 31, 2022 and 2021, were determined using a Black-Scholes option-pricing model with the following weighted-average assumptions:


	December 31,
	2022		2021
Expected term in years ⁽¹⁾	4.25		4.25
Volatility ⁽²⁾	77.6	%	78.6	%
Risk-free interest rate ⁽³⁾	2.86	%	0.71	%
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 for the year ended December 31, 2022 under the Omnibus Plan:



				Weighted-Average
				Remaining
		Weighted-Average		Amortization
		Grant-Date		Period
	Shares	Fair Value		(in Years)
Outstanding as of December 31, 2021	261,982	$	13.19
Granted	35,795		16.87
Vested	(179,311)		7.47
Forfeited	(19,802)		11.64
Outstanding as of December 31, 2022	98,664	$	25.23	1.08

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. The weighted average fair value of restricted stock units granted during the years ended December 31, 2022 and 2021 was $16.87 and $29.61, respectively. The total fair value of shares vested was during the year ended December 31, 2022 was $1,340 and there were no shares vested during the year ended December 31, 2021.

Compensation expense for the Omnibus Plan for the years ended December 31, 2022 and 2021 was $3,479 and $1,250, respectively, and the Company realized total tax benefits during the years ended December 31, 2022 and 2021 from stock-based compensation of $442 and $31, respectively. As of December 31, 2022, the total unrecognized compensation expense related to unvested options and restricted stock units is $1,477, which the Company expects to recognize over an estimated weighted-average period of approximately 1.05 years.