12. Stock incentive plans

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

12. Stock incentive plans

Stock incentive plans.  We currently have two primary stock incentive plans: the 2005 Equity Incentive Plan and 2014 Equity Incentive Plan, which provides for awards to executives, key employees, directors and consultants.  We previously maintained two other stock incentive plans, the 1996 Director’s Stock Plan and the 2001 Employee Stock Plan, both of which expired during 2014.  The plans generally provide for awards in the form of: (i) incentive stock options, (ii) non-qualified stock options, (iii) restricted stock, (iv) restricted stock units, (v) stock appreciation rights or (vi) limited stock appreciation rights.  Options granted under these plans have exercise prices equal to 100% of the fair market value of the common stock at the date of grant.  Options granted have a ten-year term and generally vest over a three- to five-year period, unless automatically accelerated for certain defined events.  As of May 2014, no new awards will be made under the 2005 Equity Incentive Plan.  Under our 2014 Equity Incentive Plan, we may authorize up to 600,000  shares of TransAct common stock.  At December 31, 2014, 566,000 shares of common stock remained available for issuance under the 2014 Equity Incentive Plan.

Under the assumptions indicated below, the weighted-average fair value of stock option grants for  2014, 2013 and 2012 was $11.11, $7.94 and $6.91, respectively.  The table below indicates the key assumptions used in the option valuation calculations for options granted in  2014, 2013 and 2012 and a discussion of our methodology for developing each of the assumptions used in the valuation model:

	Year ended December 31,
	2014		2013		2012
Expected option term	6.6 years		6.8 years		6.7 years
Expected volatility		53.8%		56.5%		57.8%
Risk-free interest rate		1.6%		0.8%		0.8%
Dividend yield		2.6%		3.1%		-%

Expected Option Term - This is the weighted average period of time over which the options granted are expected to remain outstanding giving consideration to our historical exercise patterns.  Options granted have a maximum term of ten years and an increase in the expected term will increase compensation expense.

Expected Volatility – The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period approximately equal to the expected option term of the grant.  An increase in the expected volatility factor will increase compensation expense.

Risk-Free Interest Rate - This is the U.S. Treasury rate in effect at the time of grant having a term approximately equal to the expected term of the option.  An increase in the risk-free interest rate will increase compensation expense.

Dividend Yield – We began paying a quarterly dividend to common shareholders in December 2012,. The dividend yield is calculated by dividing the annual dividend declared per common share by the weighted average market value of our common stock on the date of grant. An increase in the dividend yield will decrease compensation expense.

For 2014, 2013 and 2012, we recorded $506,000, $521,000, and $520,000 of share-based compensation expense, respectively, included primarily in general and administrative expense in our Consolidated Statements of Operations.  We also recorded income tax benefits of approximately $377,000, $127,000, and $183,000 in 2014, 2013, and 2012 respectively, related to such share-based compensation.  At December 31, 2014, these benefits are recorded as a deferred tax asset in the Consolidated Balance Sheets.

Option activity in the 1996 Directors’ Stock Plan, 2001 Employee Stock Plan, 2005 Equity Incentive Plan and 2014 Equity Incentive Plan is summarized below:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2013		718,475	$	8.49
Granted		169,500		11.11
Exercised		(6,000)		2.18
Forfeited		(62,500)		8.51
Expired		(23,500)		31.58
Outstanding at December 31, 2014		795,975	$	8.41	5.7 years	$	87,000
Options exercisable at December 31, 2014		490,725	$	7.72	4.1 years	$	87,000
Options vested or expected to vest		784,108	$	8.39	6.0 years	$	87,000

Shares that are issued upon exercise of employee stock options are newly issued shares and not issued from treasury stock.  As of December 31, 2014, unrecognized compensation cost related to stock options is approximately $955,000, which is expected to be recognized over a weighted average period of 2.5 years.

The total intrinsic value of stock options exercised was $20,000, $910,000 and $222,000 and the total fair value of stock options vested was $943,000, $815,000, and $641,000 during 2014, 2013 and 2012, respectively.  Cash received from option exercises was $13,000, $1,045,000 and $172,000 for 2014, 2013 and 2012, respectively.  We recorded a realized tax benefit in 2014, 2013 and 2012 from equity-based awards of $7,000, $132,000 and $57,000, respectively, related to options exercised which has been included as a component of cash flows from financing activities in the Consolidated Statements of Cash Flows.

Restricted stock:  We paid a portion of the 2013, 2012 and 2011 incentive bonus for the chief executive officer and chief financial officer in the form of 8,663, 17,613 and 20,055 deferred stock units, respectively, with a corresponding credit recorded to Additional Paid in Capital (net of share relinquishments) in the amounts of $56,000, $111,000 and $134,000 in 2014, 2013 and 2012, respectively.  Such deferred stock units were granted in March 2014, 2013 and 2012, respectively, and were fully vested at the time of grant.  These units will be converted three years from the grant date to shares of the Company’s common stock on a one-for-one basis.  The weighted average exercise price of the deferred stock units was $8.07.