Stockholders' Equity

12 Months Ended

Dec. 31, 2012

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

On April 25, 2012, TASER’s Board of Directors authorized a stock repurchase program to acquire up to $20.0 million of the Company’s outstanding common stock subject to stock market conditions and corporate considerations. The Company purchased approximately 3.8 million common shares under this program for a total cost of $20.0 million, or a weighted average cost, including commissions, of $5.22 per share. The buyback was completed as of August 13, 2012.

In March 2011 and July 2011, TASER’s Board of Directors authorized two stock repurchase programs to acquire up to $12.5 million and $20.0 million, respectively, 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-based Compensation Plans

The Company has historically granted stock-based compensation for various equity owners and key employees as a means of attracting and retaining quality personnel. The Company has utilized restrictive stock units and stock options. 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 ratably 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.

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 Plan was approved at the Annual Meeting of Stockholders on May 28, 2009. Awards 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, 2012, 1.4 million options remain available for future grants. Shares issued upon exercise of stock options from these plans have historically been issued form 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, 0.9 million 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 0.5 million 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 0.2 million 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 $10,000 is being recognized over the three-year vesting period of the newly granted options.

e. Performance-based stock awards

The Company has issued performance-based stock options and performance-based restricted stock units, 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 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.

f. Restricted Stock Units

The following table summarizes restricted stock unit activity for the years ended December 31:

	2012					2011				2010
				Weighted				Weighted				Weighted
	Number			Average		Number		Average		Number		Average
	of			Grant-Date		of		Grant-Date		of		Grant-Date
	Units			Fair Value		Units		Fair Value		Units		Fair Value
Units outstanding, beginning of year		1,096		$	4.76		50	$	4.24		50	$	4.24
Granted		713,148			5.40		1,046		4.78		—
Released		(97,007	)		5.30		—				—
Forfeited		(35,025	)		5.29		—				—
Units outstanding, end of year		582,212			5.42		1,096		4.76		50		4.24
Aggregate Intrinsic Value at Year End	$	5,204,975

Aggregate intrinsic value represents the Company’s closing stock price on the last trading day of the period, which was $8.94 per share, multiplied by the number of restricted stock units. In 2012, the Company granted approximately 186,000 performance-based restricted stock units (included in the table above). As of December 31, 2012, the performance criteria have been met for approximately 173,000 units and approximately 181,000 remain outstanding. The Company recognized $0.7 million of compensation expense related to performance-based restricted stock units during 2012.

g. Stock Option Activity

A summary of the Company’s stock options at December 31, 2012, 2011 and 2010, and for the years then ended is presented in the table below:

	2012					2011					2010
				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		7,576,493		$	5.75		7,507,236		$	5.71		8,780,017		$	5.94
Granted under option exchange program		—					—			—		221,723			4.84
Granted		—					1,018,182			4.65		988,941			5.08
Exercised		(784,383	)		2.46		(539,923	)		2.64		(502,205	)		1.99
Expired / terminated		(471,034	)		7.15		(409,002	)		6.38		(1,517,934	)		7.28
Cancelled under option exchange program		—			—		—			—		(463,306	)		11.66
Options outstanding, end of year		6,321,076			6.05		7,576,493			5.75		7,507,236			5.71
Options exercisable, end of year		5,278,243			6.31		6,432,667			6.02		5,967,590			5.99
Options expected to vest, end of year		841,249			4.62

The weighted average fair value of options granted for the years ended December 31, 2011 and 2010 was $2.16 and $2.59, respectively. No stock options were granted in 2012. Total intrinsic value of options exercised was $3.2 million, $1.6 million and $2.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. The intrinsic value for options exercised was calculated as the difference between the exercise price of the underlying stock option awards and the market price of the Company’s common stock on the date of exercise.

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2012:

	Options Outstanding						Options Exercisable
					Weighted						Weighted
			Weighted		Average				Weighted		Average
	Number of		Average		Remaining		Number of		Average		Remaining
Range of	Options		Exercise		Contractual		Options		Exercise		Contractual
Exercise Price	Outstanding		Price		Life (Years)		Exercisable		Price		Life (Years)
$0.28—$0.99		209,602	$	0.41		0.3		209,602	$	0.41		0.3
$1.03—$2.41		106,444		2.37		0.7		106,444		2.37		0.7
$3.53—$9.93		5,555,961		5.81		5.4		4,513,128		6.06		5.0
$10.07—$19.76		425,569		11.99		3.4		425,569		11.99		3.4
$20.12—$29.98		23,500		23.02		1.4		23,500		23.02		1.4
$0.28—$29.98		6,321,076		6.05		5.0		5,278,243		6.31		4.5

The total fair value of options exercisable was $18.3 million, $13.9 million and $18.7 million at December 31, 2012, 2011 and 2010, respectively. The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2012 was $19.9 million and $15.5 million, respectively. Aggregate intrinsic value represents the difference between the exercise price of the underlying stock option awards and the closing market price of the Company’s common stock of $8.94 on December 31, 2012.

At December 31, 2012, the Company had 1.0 million unvested options outstanding with a weighted average exercise price of $4.72 per share, weighted average fair value of $2.23 per share and weighted average remaining contractual life of 7.2 years. The aggregate intrinsic value of unvested options at December 31, 2012 was $4.4 million.

The Company granted approximately 1.0 million performance-based stock options (included in the table above) from 2008 through 2011. As of December 31, 2012, 0.6 million performance-based stock options are outstanding, 0.1 million are exercisable, and 0.5 million are unvested. Of the unvested shares, 0.3 million are expected to vest. The fair value of the 0.4 million performance-based stock options vested and expected to vest as of December 31, 2012 is approximately $1.1 million. The Company recognized $0.1 million, $0.3 million and $0.1 million of stock-based compensation expense related to performance-based stock options during 2012, 2011 and 2010, respectively.

h. Stock-based Compensation Expense

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

	2012		2011		2010
Indirect manufacturing expense	$	172,360	$	121,177	$	300,787
Sales, general and administrative expenses		2,645,827		2,291,339		2,728,360
Research and development expenses		603,319		625,784		653,528
Total stock-based compensation	$	3,421,506	$	3,038,300	$	3,682,675

Total stock-based compensation expense recognized in the statement of operations for the years ended December 31, 2012, 2011 and 2010 includes $0.5 million, $1.3 million and $1.9 million, respectively, related to ISOs for which no tax benefit is recognized. The Company recorded a tax benefit in 2012, 2011, and 2010 of $4.7 million, $9,800 and $0, respectively, to offset taxes payable related to the non-qualified disposition of ISOs exercised and sold. The total future tax benefits related to non-qualified and restricted stock units was $3.7 million and $2.8 million as of December 31, 2012 and 2011, respectively.

As of December 31, 2012, there was $2.0 million in unrecognized compensation costs related to restricted stock units and $1.0 million of unrecognized compensation expense related to stock options granted under our stock plans. We expect to recognize the cost related to the restricted stock units and stock options over weighted average periods of 25 months and 14 months, respectively.