Stockholders equity

6 Months Ended

Jun. 30, 2011

Stockholders' equity [Abstract]

Stockholders' equity

7. Stockholders’ equity

Stock Repurchase

In March 2011, TASER’s Board of Directors authorized a stock repurchase program to acquire up to $12.5 million of the Company’s outstanding common stock subject to stock market conditions and corporate considerations. Through June 30, 2011, the Company repurchased approximately 2.9 million shares at a weighted average cost, including commissions, of $4.28 per share and a total cost of $12.5 million. During July 2011, TASER’s Board of Directors authorized an additional repurchase program to acquire up to $20 million of the Company’s outstanding common stock, subject to stock market conditions and corporate considerations. Through August 4, 2011, the Company has repurchased a total of approximately 207,000 shares at an average cost of $4.22 per share and a total cost of $0.9 million.

Stock Option Activity

At June 30, 2011, the Company had four stock-based compensation plans, three of which are described more fully in Note 10 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K.

The following table summarizes the stock options available and outstanding as of June 30, 2011, as well as activity during the six months then ended:

				Outstanding Options
	Options Available						Weighted Average
	for Grant			Number of options			Exercise Price
Balance at December 31, 2010		2,478,768			7,507,286		$	5.71
Granted		(933,728	)		933,728		$	4.65
Exercised		—			(4,668	)	$	0.84
Expired/terminated		46,354			(46,354	)	$	5.46
Balance at June 30, 2011		1,591,394			8,389,992		$	5.59

The options outstanding as of June 30, 2011, have been segregated into five ranges for additional disclosure as follows:

	Options Outstanding						Options Exercisable
			Weighted						Weighted
			Average		Weighted Average				Average
			Exercise		Remaining		Number		Exercise
Range of Exercise Price	Number Outstanding		Price		Contractual Life		Exercisable		Price
$0.28 - $0.99		473,168	$	0.37		1.7		473,168	$	0.37
$1.03 - $2.41		650,379	$	1.62		1.3		650,379	$	1.62
$3.53 - $9.93		6,708,332	$	5.78		6.8		5,099,926	$	6.28
$10.07 - $19.76		533,413	$	11.94		4.4		533,413	$	11.94
$20.12 - $29.98		24,700	$	22.91		2.9		24,700	$	22.91
		8,389,992	$	5.59		6.0		6,781,586	$	5.87

The total fair value of options exercisable at June 30, 2011 and 2010 was $20.9 million and $19.7 million, respectively. The aggregate intrinsic value of options outstanding and options exercisable at June 30, 2011, was $4.2 million and $4.1 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $4.55 per share, and the exercise price multiplied by the number of options outstanding. Total intrinsic value of options exercised for the three and six month periods ended June 30, 2011, was $0 and approximately $13,000, respectively. Total intrinsic value of options exercised for the three and six month periods ended June 30, 2010 was approximately $39,000 and $2,128,000, respectively.

At June 30, 2011, the Company had approximately 1.6 million unvested options outstanding with a weighted average exercise price of $4.76 per share, weighted average grant date fair value of $2.19 per share and a weighted average remaining contractual life of 8.7 years. Of these unvested options outstanding, management estimates that approximately 1.5 million options will ultimately vest based on its historical experience.

As of June 30, 2011, total unrecognized stock-based compensation expense related to unvested stock options was approximately $4.2 million, which is expected to be recognized over a remaining weighted average period of approximately 15 months.

Stock-Based Compensation Expense

The Company calculates the fair value of stock-based awards using the Black-Scholes-Merton option valuation model, which incorporates various assumptions including volatility, expected life, and interest rates. The assumptions used for the three and six month periods ended June 30, 2011 and 2010, and the resulting estimates of weighted-average fair value per share of options granted during those periods, are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Expected life of options	4.5 years			4.5 years			4.5 years			4.5 years
Weighted average volatility		52.8	%		62.2	%		55.7	%		61.5	%
Weighted average risk-free interest rate		1.5	%		2.0	%		1.7	%		2.1	%
Dividend rate		0.0	%		0.0	%		0.0	%		0.0	%
Weighted average fair value of options granted	$	2.01		$	2.25		$	2.17		$	2.71

The expected life of options represents the estimated period of time until exercise and is based on the Company’s historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of employee behavior. Expected stock price volatility is based on a combination of historical volatility of the Company’s stock and the one-year implied volatility of its publicly traded options for the related vesting periods. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The Company has not paid dividends in the past and does not plan to pay any dividends in the near future. The estimated fair value of stock-based compensation awards and other options is amortized to expense on a straight line basis over the relevant vesting period. As share-based compensation expense is recognized on awards ultimately expected to vest, it is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company’s forfeiture rate was calculated based on its historical experience of awards which ultimately vested.

Reported share-based compensation was classified as follows for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30				Six Months Ended June 30
	2011		2010		2011		2010
Cost of Products Sold	$	51,976	$	80,476	$	104,980	$	151,985
Sales, general and administrative expenses		649,566		724,464		1,372,745		1,522,591
Research and development expenses		175,465		111,686		362,199		251,644
	$	877,007	$	916,626	$	1,839,924	$	1,926,220

Total share-based compensation expense recognized in the income statement for the three and six months ended June 30, 2011, includes approximately $430,000 and $1.4 million, respectively, related to Incentive Stock Options (“ISOs”) for which no tax benefit is recognized. Total share-based compensation expense recognized in the income statement for the three and six months ended June 30, 2010, includes approximately $503,000 and $1.3 million, respectively, related to ISOs for which no tax benefit is recognized. The Company did not tax effect the share-based compensation expense for tax purposes related to the non-qualified disposition of ISOs exercised and sold as the benefit will be recorded when the Company is in a position to realize the benefit with an offset to taxes payable in future periods. The total unrecognized tax benefit related to the non-qualified disposition of stock options in the three and six months ended June 30, 2011, was approximately $430,000 and $1.4 million, respectively. The total unrecognized tax benefit related to the non-qualified disposition of stock options in the three and six months ended June 30, 2010, was approximately $39,000 and $2.1 million, respectively.

The Company has granted a cumulative total of 950,800 performance-based stock options from 2008 through June 30, 2011, the vesting of which is contingent upon the achievement of certain performance criteria related to the successful and timely development and market acceptance of future product introductions, as well as the future sales and operating performance of the Company. Compensation expense is recognized over the implicit service period (the date the performance condition is expected to be achieved) based on management’s estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date. At June 30, 2011, 259,452 unvested performance options with a fair value of approximately $603,000 remain outstanding. No options were forfeited during the three or six months ended June 30, 2011. During the three and six months ended June 30, 2010, 25,000 and 225,000 of these options, respectively, were forfeited, resulting in the reversal of approximately $52,000 and $346,000, respectively, of previously recognized compensation expense.