Stockholders Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

11. Stockholders’ Equity

a. Common Stock and Preferred Stock

The Company has authorized the issuance of two classes of stock designated as “common stock” and “preferred stock,” each having a par value of $0.00001 per share. The Company is authorized to issue 200 million shares of common stock and 25 million shares of preferred stock.

b. 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. During 2011, the Company repurchased 7,464,583 shares at an average cost, including commissions, of $4.35 per share, or a total cost of $32.5 million.

c. Stock Option Plans

The Company has historically issued stock options to various equity owners and key employees as a means of attracting and retaining quality personnel. The option holders have the right to purchase a stated number of shares at the market price on the grant date. The options issued under the Company’s 1999 Stock Option Plan (the “1999 Plan”), 2001 Stock Option Plan (the “2001 Plan”) and 2004 Stock Option Plan (the “2004 Plan”) generally vest over a three-year period and have a contractual maturity of ten years; however, the majority of options issued under the 2004 Plan within fiscal 2005 had vesting terms of one year. The shares issuable under each of the plans were registered on Form S-8 with the United States Securities and Exchange Commission.

On March 31, 2009, the Company’s Board of Directors approved the 2009 Stock Incentive Plan (“the 2009 Plan”), under which the Company reserved 1,000,000 shares of common stock available for future grants. The 2009 Stock Incentive Plan was approved at the Annual Meeting of Stockholders on May 28, 2009. Options issued under the 2009 Plan generally vest over a three to four-year period and have a contractual maturity of ten years.

The total number of shares registered under these plans was as follows: 9,952,500 under the 1999 Plan, 6,600,000 under the 2001 Plan, 6,800,000 under the 2004 Plan and 1,000,000 under the 2009 Plan. These plans provide for officers, key employees, directors and consultants to receive nontransferable stock options to purchase an aggregate of 24,352,500 shares of the Company’s common stock. As of December 31, 2011, 1,666,543 options remain available for future grants. Shares issued upon exercise of stock options from these plans have historically been issued from the Company’s authorized unissued shares.

d. 2010 Stock Option Exchange Program

On December 27, 2010, the Company completed a stock option exchange program, which provided employees holding certain options the opportunity to exchange outstanding options granted pursuant to the Company’s 1999 Plan, 2001 Plan, and 2004 Plan, for a lesser amount of new options to be granted with lower exercise prices. The exchange offer commenced on November 24, 2010, and expired on December 27, 2010. Stock options eligible for exchange were those that had an exercise price per share greater than $8.00, and that had not expired before December 27, 2010. As of November 24, 2010, 867,540 options were eligible for exchange. Neither our executive officers nor members of our Board of Directors were eligible to participate in the exchange offer.

A total of 463,306 options were tendered by employees, representing 53% of the total stock options eligible for exchange. On December 28, 2010, the Company granted an aggregate of 221,723 new options under the 2009 Stock Incentive Plan in exchange for the eligible options surrendered. The exercise price of the new options is $4.84 per share, which was the closing price of the Company’s Common Stock on December 27, 2010, as reported by the NASDAQ Global Select Market. An incremental stock option expense of a $10,000 is being recognized over the three-year vesting period of the newly granted options.

e. Stock Option Activity

A summary of the Company’s stock options at December 31, 2011, 2010 and 2009, and for the years then ended is presented in the table below:

		September 30,			September 30,		September 30,			September 30,		September 30,			September 30,
	2011					2010					2009
				Weighted					Weighted					Weighted
	Number			Average		Number			Average		Number			Average
	of			Exercise		of			Exercise		of			Exercise
	Options			Price		Options			Price		Options			Price
Options outstanding, beginning of year		7,507,286		$	5.71		8,780,067		$	5.94		9,108,930		$	5.87
Granted under option exchange program		—			—		221,723			4.84		—			—
Granted		1,019,228			4.65		988,941			5.08		551,270			4.56
Exercised		(539,923	)		2.64		(502,205	)		1.99		(323,351	)		0.48
Expired / terminated		(409,002	)		6.38		(1,517,934	)		7.28		(556,782	)		6.36
Cancelled under option exchange program		—			—		(463,306	)		11.66		—			—
Options outstanding, end of year		7,577,589			5.75		7,507,286			5.71		8,780,067			5.94
Options exercisable, end of year		6,432,667			6.02		5,967,590			5.99		5,988,159			6.23
Options available for grant at end of year		1,666,543					2,478,768					1,708,192
Weighted average fair value value of options granted during the year				$	2.16				$	2.59				$	2.56

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2011:

		September 30,		September 30,		September 30,		September 30,		September 30,
	Options Outstanding						Options Exercisable
Range of Exercise Price	Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number of Options Exercisable		Weighted Average Exercise Price
$0.28 - $0.99		462,655	$	0.37		1.2		462,655	$	0.37
$1.03 - $2.41		364,957		1.76		1.0		364,957		1.76
$3.53 - $9.93		6,218,117		5.81		6.4		5,073,195		6.19
$10.07 - $19.76		507,560		11.93		3.8		507,560		11.93
$20.12 - $29.98		24,300		22.94		2.4		24,300		22.94
$0.28 - $29.98		7,577,589		5.75		5.6		6,432,667		6.02

The total fair value of options exercisable was $13.9 million, $18.7 million and $19.3 million at December 31, 2011, 2010 and 2009, respectively. The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2011 was $4.9 million and $4.1 million, respectively. The aggregate intrinsic value of unvested options at December 31, 2011 was $0.8 million. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $5.12 as of December 30, 2011, and the exercise price of the option multiplied by the number of options outstanding. Total intrinsic value of options exercised was $1.6 million, $2.2 million and $1.3 million for the years ended December 31, 2011, 2010 and 2009, respectively.

At December 31, 2011, the Company had 1.1 million unvested options outstanding with a weighted average exercise price of $4.75 per share, weighted average fair value of $2.24 per share and weighted average remaining contractual life of 8.4 years. Of the unvested options outstanding at December 31, 2011, the Company expects that 1.1 million options will ultimately vest based on its historical experience.

f. Stock-based Compensation Expense

The Company accounts for share-based compensation using the fair-value method. Reported share-based compensation was classified as follows for the years ended December 31:

		September 30,		September 30,		September 30,
	2011		2010		2009
Indirect manufacturing expense	$	121,177	$	300,787	$	349,243
Sales, general and administrative expenses		2,291,339		2,728,360		3,218,735
Research and development expenses.		625,784		653,528		1,420,859
Total stock-based compensation	$	3,038,300	$	3,682,675	$	4,988,837

As of December 31, 2011, total unrecognized stock-based compensation expense related to non-vested stock options was $3.5 million, which is expected to be recognized over a total weighted average period of 17 months. $1.7 million of this expense is expected to be recognized in 2012.

Total share-based compensation expense recognized in the statement of operations for the years ended December 31, 2011, 2010 and 2009 includes $1.3 million, $1.9 million and $2.6 million, respectively, related to ISOs for which no tax benefit is recognized. The total future tax benefits related to non-qualified stock options were $2.5 million, $1.9 million and $1.5 million for the years ended December 31, 2011, 2010 and 2009, respectively. The Company recorded a tax benefit in 2011, 2010, and 2009 of $9,800, $0, and $32,000, respectively, to offset taxes payable related to the non-qualified disposition of ISOs exercised and sold. The total expected future tax benefit related to the non-qualified disposition of stock options in 2011, 2010 and 2009 was $1.5 million, $2.2 million and $1.3 million, respectively.

The Company granted 950,800 performance-based stock options from 2008 through 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 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. There were no forfeitures during the year ended December 31, 2011. Management determined that 225,000 and 106,700 of these options were forfeited during 2010 and 2009, respectively. Of the remaining 619,100 outstanding options, 405,195 options are exercisable, and 213,905 are unvested. The fair value of the remaining 201,156 performance-based stock options outstanding and still expected to vest was estimated to be $0.5 million. The Company recognized $0.3 million, $0.1 million and $0.8 million of related stock-based compensation expense related to performance-based stock options during 2011, 2010 and 2009, respectively.