Stockholders equity

9 Months Ended

Sep. 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. In 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 September 30, 2011, the Company repurchased approximately 5.9 million shares at an average cost, including commissions, of $4.23 per share and a total cost of approximately $24.9 million.

Stock Option Activity

At September 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 September 30, 2011, as well as activity during the nine 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		(997,728	)		997,728		$	4.64
Exercised		—			(24,569	)	$	1.77
Expired/terminated		91,147			(91,147	)	$	5.22
Balance at September 30, 2011		1,572,187			8,389,298		$	5.60

The options outstanding as of September 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		469,255	$	0.37		1.4		469,255	$	0.37
$1.03 - $2.41		634,391	$	1.60		1.0		634,391	$	1.60
$3.53 - $9.93		6,727,539	$	5.77		6.5		5,358,240	$	6.05
$10.07 - $19.76		533,413	$	11.94		4.1		533,413	$	11.94
$20.12 - $29.98		24,700	$	22.91		2.7		24,700	$	22.91
		8,389,298	$	5.60		5.6		7,019,999	$	5.84

The total fair value of options exercisable at September 30, 2011 and 2010 was $21.3 million and $20.3 million, respectively. The aggregate intrinsic value of options outstanding and options exercisable at September 30, 2011, was $3.8 million and $3.7 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 $4.31 per share, and the exercise price multiplied by the number of options outstanding. Total intrinsic value of options exercised for the three and nine month periods ended September 30, 2011, was approximately $49,000 and approximately $63,000, respectively. Total intrinsic value of options exercised for the three and nine month periods ended September 30, 2010 was approximately $89,000 and $2.2 million respectively.

At September 30, 2011, the Company had approximately 1.4 million unvested options outstanding with a weighted average exercise price of $4.71 per share, weighted average grant date fair value of $2.15 per share and a weighted average remaining contractual life of 8.6 years. Of these unvested options outstanding, management estimates that approximately 1.3 million options will ultimately vest based on its historical experience.

As of September 30, 2011, total unrecognized stock-based compensation expense related to unvested stock options was approximately $3.6 million, which is expected to be recognized over a remaining weighted average period of approximately 14 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 nine month periods ended September 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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Expected life of options	4.5 years			4.5 years			4.5 years			4.5 years
Weighted average volatility		54.4	%		58.9	%		55.6	%		61.2	%
Weighted average risk-free interest rate		0.9	%		1.3	%		1.7	%		2.0	%
Dividend rate		0.0	%		0.0	%		0.0	%		0.0	%
Weighted average fair value of options granted	$	1.97		$	1.87		$	2.16		$	2.62

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 requisite service 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 nine months ended September 30, 2011 and 2010:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Cost of Products Sold	$	30,238	$	107,947	$	135,217	$	259,932
Sales, general and administrative expenses		518,513		692,420		1,891,258		2,215,010
Research and development expenses		144,769		112,411		506,969		364,056
	$	693,520	$	912,778	$	2,533,444	$	2,838,998

Total share-based compensation expense recognized in the income statement for the three and nine months ended September 30, 2011, includes approximately $251,000 and $1.2 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 nine months ended September 30, 2010, includes approximately $414,000 and $1.7 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 nine months ended September 30, 2011, was approximately $49,000 and $63,000, respectively. The total unrecognized tax benefit related to the non-qualified disposition of stock options in the three and nine months ended September 30, 2010, was approximately $89,000 and $2.2 million, respectively.

The Company has granted a cumulative total of 950,800 performance-based stock options from 2008 through September 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 September 30, 2011, 219,067 unvested performance options with a fair value of approximately $541,000 remain outstanding. No performace-based options were forfeited during the three or nine months ended September 30, 2011. During the nine months ended September 30, 2010, 225,000 of these options were forfeited, resulting in the reversal of approximately $346,000, of previously recognized compensation expense. No performance-based options were forfeited during the three months ended September 30, 2010.