Note 9—Shareholders’ Equity

The number of shares issued of common stock is summarized below:


	2014		2013
Balance at beginning of year		9,031,756		8,956,488
Exercise of employee stock options		210,790		66,313
Restricted stock vesting		42,325		—
Shares issued to employee stock purchase plan		3,989		5,976
Share-based compensation		2,365		2,979

Balance at end of year		9,291,225		9,031,756

Common Stock: During fiscal 2014 the Company did not repurchase any shares of its common stock under the Company’s repurchase program. The Company purchased 110,000 shares of its common stock for $770,000 in fiscal 2013. As of January 31, 2014, the Company’s Board of Directors has authorized the purchase of up to an additional 390,000 shares Company’s common stock on the open market or in privately negotiated transactions.

During fiscal 2014 and 2013, certain of the Company’s employees delivered a total of 66,828 and 20,938 shares respectively, of the Company’s common stock to satisfy the exercise price for stock options exercised and related taxes. The shares delivered were valued at a total of $797,000 and $176,000, respectively and are included with the treasury stock in the accompanying consolidated balance sheet at January 31, 2014 and 2013. These transactions did not impact the number of shares authorized for repurchase under the Company’s current repurchase program.

Astro-Med maintains the following benefit plans involving its common stock:

Stock Plans: Astro-Med has one equity incentive plan (the “Plan”) under which incentive stock options, non-qualified stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”) and other equity based awards may be granted to officers and certain employees. An aggregate of 1,000,000 shares were authorized for awards under the Plan. At January 31, 2014, 359,475 shares were available for grant under the Plan. Options granted to employees vest over four years. The exercise price of each stock option will be established at the discretion of the Compensation Committee; however, any incentive stock options granted must be at an exercise price of not less than fair market value at the date of grant. In fiscal year 2013, a portion of the Company’s executive’s long-term incentive compensation was awarded in the form of RSUs. The 2013 RSUs are earned if the Company achieves specific thresholds of net sales and annual operating income as established under the fiscal 2013 Domestic Management Bonus Plan and vest fifty percent on the first anniversary of the grant date and fifty percent on the second anniversary of the grant date provided that the grantee is employed on each vesting date by Astro-Med or an affiliate company. All such RSUs were earned in fiscal 2013 and fifty percent vested in March 2013; the balance will vest in March 2014, subject to the grantee’s continued employment. In April 2013, the Company granted options and RSUs to officers (“2014 RSUs”). Each 2014 RSU will be earned and vest as follows: twenty-five percent of the 2014 RSU vests on the third anniversary of the grant date, fifty percent of the 2014 RSU vests upon the Company achieving its cumulative budgeted net sales target for fiscal years 2014 through 2016 (the “Measurement Period”), and twenty-five percent of the total 2014 RSU vests upon the Company’s achieving a target average annual ORONA (operating income return on net assets as calculated under the Domestic Management Bonus Plan) for the Measurement Period. The grantee may not sell, transfer or otherwise dispose of more than fifty percent of the common stock issued upon vesting of the RSU until the first anniversary of the vesting date.

The Plan provides for an automatic annual grant of ten-year options to purchase 5,000 shares of stock to each non-employee director upon the adjournment of each shareholders’ meeting. Each such option is exercisable at the fair market value as of the grant date and vests immediately prior to the next succeeding shareholders’ meeting. During fiscal 2014 and 2013, 20,000 options, were awarded each year to non-employee directors pursuant to the Plan. In addition to the automatic option grant under Plan, the Company has a Non-Employee Director Annual Compensation Program (the “Program”) which provides that each non-employee director is entitled to an annual cash retainer of $7,000 (the “Cash Retainer”), plus $500 for each Board and committee meeting attended. The non-employee director may elect for any fiscal year to receive all or a portion of the Cash Retainer in the form of common stock of the Company, which will be issued under the Plan. If a non-employee director elects to receive all or a portion of the Cash Retainer in the form of common stock, such shares shall be issued in four quarterly installments on the first day of each fiscal quarter, and the number of shares of common stock to be issued shall be based on the fair market value of such common stock on the date such installment is payable. The common stock received in lieu of such Cash Retainer will be fully vested. However, a non-employee director who receives common stock in lieu of all or a portion of the Cash Retainer may not sell, transfer, assign, pledge or otherwise encumber the common stock prior to the first anniversary of the date on which such shares were issuable. In the event of the death or disability of a nonemployee director, or a change in control of the Company, any shares of common stock issued in lieu of such Cash Retainer, shall no longer be subject to such restrictions on transfer.

In addition, under the Program, each non-employee director receives RSAs with a value equal to $20,000 (the “Equity Retainer”) upon adjournment of each annual shareholders meeting. If a non-employee director is first appointed or elected to the Board of Directors effective on a date other than at the annual shareholders meeting, on the date of such appointment or election, the director shall receive a pro rata award of restricted common stock having a value based on the number of days remaining until the next annual meeting. The Equity Retainer will vest on the earlier of 12 months after the grant date or the date immediately prior to the next annual meeting of the shareholders following the meeting at which such RSAs were granted. However, a non-employee director may not sell, transfer, assign, pledge or otherwise encumber the vested common stock prior to the second anniversary of the vesting date. In the event of the death or disability of a non-employee director, or a change in control of the Company, the RSAs shall immediately vest and shall no longer be subject to such restrictions on transfer.

Stock Options:

Aggregated information regarding stock options granted under the Plan is summarized below:


	Number of Shares			Option Price Per Share		Weighted Average Option Price Per Share
Options Outstanding, January 31, 2013		916,612		$	2.40-11.90	$	8.46
Options Granted		56,800		$	10.50-10.60	$	10.54
Options Exercised		(210,790	)	$	2.40-11.90	$	8.33
Options Expired		(25,975	)	$	2.40-11.90	$	9.42

Options Outstanding, January 31, 2014		736,647		$	5.78-11.90	$	8.63

Options Exercisable, January 31, 2014		570,324		$	5.78-11.90	$	8.57

Set forth below is a summary of options outstanding at January 31, 2014:


Outstanding							Exercisable
Range of Exercise prices	Options		Weighted Average Exercise Price		Remaining Contractual Life		Options		Weighted Average Exercise Price
$5.78-8.73		500,422	$	7.66		4.7		390,299	$	7.57
$8.74-11.90		236,225	$	10.68		4.7		180,025	$	10.73

		736,647						570,324

The fair value of each stock option granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:


	Years Ended January 31,
	2014	2013
Risk-free interest rate	0.81%-0.84%	0.62%-1.20%
Expected life (years)	5	5
Expected volatility	38.07%-38.46%	38.74%-39.46%
Expected dividend yield	2.63%	3.41-3.46%

The weighted average fair value of options granted during fiscal 2014 and 2013 was $2.79 and $2.02, respectively. As of January 31, 2014, there was $250,000 of unrecognized compensation expense related to the unvested stock options granted under the plans. The expense is to be recognized over a weighted average of two years.

As of January 31, 2014, the aggregate intrinsic value (the aggregate difference between the closing stock price of the Company’s common stock on January 31, 2014, and the exercise price of the outstanding options) that would have been received by the option holders if all options had been exercised was $2,905,000 for all exercisable options and $3,707,000 for all options outstanding. The weighted average remaining contractual terms for these options are 3.6 years for options that are exercisable and 4.7 years for all options outstanding. The total aggregate intrinsic value of options exercised during fiscal 2014 and 2013 was $706,000 and $241,000, respectively.

Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs)

Aggregated information regarding RSUs and RSAs granted under the Plan is summarized below:


	RSAs & RSUs			Weighted Average Grant Date Fair Value
Outstanding at January 31, 2013		96,900		$	8.10
Granted		57,544			10.14
Vested		(46,798	)		8.27
Expired or canceled		(1,150	)		8.35

Outstanding at January 31, 2014		106,496		$	9.12

As of January 31, 2014, there was $375,000 of unrecognized compensation expense related to unvested RSUs and RSAs.

Share-based compensation expense has been recognized as follows:


	Years Ended January 31,
	2014		2013
(In thousands)
Stock Options	$	192	$	163
Restricted Stock Awards and Restricted Stock Units		370		317

Total	$	562	$	480

Employee Stock Purchase Plan (ESPP): Astro-Med’s ESPP allows eligible employees to purchase shares of common stock at a 15% discount from fair market value on the date of purchase. A total of 247,500 shares were initially reserved for issuance under this plan. Summarized plan activity is as follows:


	Years Ended January 31,
	2014			2013
Shares reserved, beginning		64,231			70,207
Shares purchased		(3,989	)		(5,976	)

Shares reserved, ending		60,242			64,231

Employee Stock Ownership Plan: Astro-Med has an Employee Stock Ownership Plan (ESOP) providing retirement benefits to all eligible employees. Annual contributions in amounts determined by the Company’s Board of Directors are invested by the ESOP’s Trustees in shares of common stock of Astro-Med. Contributions may be in cash or stock. Astro-Med’s contributions (paid or accrued) amounted to $100,000 in both fiscal 2014 and 2013 and were recorded as compensation expense. All shares owned by the ESOP have been allocated to participants.