TRANSACT TECHNOLOGIES INCTACT
TRANSACT TECHNOLOGIES INC Stock Compensation Disclosure
10. Stock incentive plans
Stock incentive plans. We currently have two
stock incentive plans: the 2005 Equity Incentive Plan and the 2014 Equity Incentive Plan, which provide for awards to executives, key employees, directors and consultants. 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 (which may include performance-based vesting), (v) stock appreciation rights or (vi) limited stock appreciation rights. Awards granted under these plans
have exercise prices equal to 100% of the fair market value of the common stock at the date of grant. Awards granted have a ten-year term and generally vest over a two-year
to four-year period, unless automatically accelerated for certain defined events. As of May 2014, no new awards may be made under the
2005 Equity Incentive Plan. Under our 2014 Equity Incentive Plan, as amended in May 2023, we are authorized to grant awards of up to 2.9
million shares of TransAct common stock. At December 31, 2024, 655,672 shares of common stock remained available for issuance under the 2014 Equity Incentive Plan.
Under the assumptions indicated below, the weighted-average per share fair value of stock option grants for 2024 and 2023 was $3.98 and $4.16, respectively. We also
issued restricted stock units for certain executives and directors that vest over a specified period of time, and in some instances require achieving certain performance metrics. The weighted-average per share fair value of these restricted stock
units was $5.81 and $7.21 in
2024 and 2023,
respectively. The per share fair value of restricted stock units is the trading value of the stock on the date of the grant.
The table below indicates the key assumptions (on a weighted-average basis) used in the option valuation calculations for options granted in 2024 and 2023 and a discussion of our
methodology for developing each of the assumptions used in the valuation model:
|
Years ended December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Expected option term (in years)
|
6.1
|
7.0
|
||||||
|
Expected volatility
|
57.7
|
%
|
55.6
|
%
|
||||
|
Risk-free interest rate
|
4.3
|
%
|
4.2
|
%
|
||||
|
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
||||
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 –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.
We recorded $1.2 and $0.9 million of share-based compensation expense for 2024
and 2023, respectively, included primarily in general and administrative expense in our Consolidated Statements of Operations. We also
recorded income tax benefits of $0.3 million in 2024 and $0.2 million in 2023, related to such share-based compensation. At December 31,
2024, these benefits are recorded as a deferred tax asset in the Consolidated Balance Sheets.
Equity award activity in the 2005 Equity Incentive Plan and the 2014 Equity Incentive Plan, as amended, is summarized below:
|
Stock Options
|
Restricted Stock Units
|
|||||||||||||||
|
Number of Shares
|
Average Price*
|
Number of Units
|
Average Price**
|
|||||||||||||
|
Outstanding at December 31, 2023
|
1,314,475
|
$
|
8.82
|
184,536
|
$
|
7.76
|
||||||||||
|
Granted
|
179,700
|
6.80
|
267,024
|
5.81
|
||||||||||||
|
Exercised
|
–
|
–
|
(74,995
|
)
|
7.41
|
|||||||||||
|
Forfeited
|
(7,750
|
)
|
7.11
|
–
|
–
|
|||||||||||
|
Expired
|
(109,312
|
)
|
10.71
|
–
|
–
|
|||||||||||
|
Outstanding at December 31, 2024
|
1,377,113
|
$
|
8.41
|
376,565
|
$
|
6.44
|
||||||||||
| * |
weighted average exercise price per share
|
| ** |
weighted average grant stock price per share
|
The following summarizes information about equity awards outstanding that are vested and expect to vest and equity awards that are exercisable at December 31, 2024:
|
Equity Awards Vested and Expected to Vest
|
Equity Awards That Are Exercisable
|
|||||||||||||||||||||||||||||||
|
Awards
|
Average Price*
|
Aggregate
Intrinsic
Value
|
Remaining Term**
|
Awards
|
Average Price*
|
Aggregate
Intrinsic
Value
|
Remaining Term**
|
|||||||||||||||||||||||||
|
Stock Options
|
1,377,113
|
$
|
8.41
|
$
|
–
|
4.1
|
973,963
|
$
|
8.96
|
$
|
–
|
2.2
|
||||||||||||||||||||
|
Restricted stock units
|
376,565
|
–
|
1,540
|
2.1
|
–
|
–
|
–
|
–
|
||||||||||||||||||||||||
| * |
weighted average exercise price per share
|
| ** |
weighted-average contractual remaining term in
years
|
Shares that are issued upon exercise of employee stock awards are newly issued shares and not issued from treasury stock. As of December 31, 2024, unrecognized compensation cost related to non-vested equity awards granted under our stock incentive plans is approximately $2.7 million, which is expected to be recognized over a weighted average period of 2.7 years.
The total fair value of awards vested was $0.9
million and $1.3 million during the years ended December 31, 2024 and 2023, respectively. The total intrinsic value (which
is the amount by which the stock price exceeded the exercise price on the date of exercise) of stock options exercised during the years ended December 31, 2024
and 2023 was zero and $3 thousand, respectively, and cash received from option exercises was zero in both 2024 and 2023. Zero and 1,875 stock options were exercised during the year ended December 31, 2024
and 2023, respectively. We recorded zero
realized tax provision in 2024 and 2023
from equity-based awards, related to options exercised.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.