Stockholders' Equity

3 Months Ended

Mar. 31, 2013

Stockholders' Equity [Abstract]

Stockholders' equity

7. Stockholders’ equity

Stock Option Activity

At March 31, 2013, the Company had four stock-based compensation plans, which are described more fully in the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. There are approximately 0.8 million shares available for grant under the Plans as of March 31, 2013.

Performance-based stock awards

The Company has issued performance-based stock options and performance-based restricted stock units (“RSUs”), the vesting of which is contingent upon the achievement of certain performance criteria related to the operating performance of the Company as well as successful and timely development and market acceptance of future product introductions. In addition, certain of the RSUs have additional service requirements subsequent to the achievement of the performance criteria. Compensation expense is recognized over the implicit service period (the longer of the period the performance condition is expected to be achieved or the required service period) based on management’s estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date.

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2013:

	Number of Units			Weighted Average  Grant- Date Fair Value		Aggregate Intrinsic Value
Units outstanding, beginning of period		582,212		$	5.42
Granted		576,376			8.92
Released		(123,501	)		5.28
Forfeited		(14,126	)		5.30
Units outstanding, end of period		1,020,961			7.41	$	8,116,640

Aggregate intrinsic value represents the Company’s closing stock price on the last trading day of the period, which was $7.95 per share, multiplied by the number of RSUs. As of March 31, 2013, there was $5.7 million in unrecognized compensation costs related to RSUs granted under our stock plans. We expect to recognize these costs over a weighted average period of 29 months.

In 2013, the Company granted approximately 139,000 performance-based RSUs (included in the table above). Of the approximately 225,000 performance-based RSUs outstanding as of March 31, 2013, the performance criteria have been met for approximately 86,000 units which will vest upon the completion of service requirements.

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2013:

	Number of options			Weighted Average Exercise Price		Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Options outstanding, beginning of period		6,321,076		$	6.05
Granted		—			—
Exercised		(242,678	)		1.25
Expired / forfeited		(24,027	)		4.81
Options outstanding, end of period		6,054,371			6.25		4.88	$	12,835,996
Exercisable at March 31, 2013		5,218,671			6.49		4.53		10,133,307
Expected to vest after March 31, 2013		642,255			4.58		6.70		2,162,786

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 $7.95 on March 31, 2013. The aggregate intrinsic value of options exercised for the three months ended March 31, 2013 and 2012, was approximately $1.6 million and $26,000, respectively. As of March 31, 2013, total unrecognized stock-based compensation expense related to unvested stock options was approximately $0.8 million, which is expected to be recognized over a remaining weighted average period of approximately 12 months. Options expected to vest are presented net of expected forfeitures.

Included in the table above is approximately 0.6 million of performance-based options, including 0.2 million for which performance conditions have been met. At March 31, 2013, there are approximately 0.4 million performance-based options outstanding for which the performance criteria have yet to be met. There is approximately $0.1 million of remaining expense to be recognized relative to these performance based options as of March 31, 2013.

Share-Based Compensation Expense

The fair value of RSUs is estimated as the closing price of our common stock on the date of grant. The Company calculates the fair value of stock options using the Black-Scholes-Merton option pricing valuation model, which incorporates various assumptions including volatility, expected life and risk-free interest rates. No options were awarded during the three month periods ended March 31, 2013 or March 31, 2012. The estimated fair value of stock-based compensation awards is amortized to expense on a straight-line basis over the service periods. As stock-based compensation expense recognized is based 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.

Share-based compensation was classified as follows:

	Three Months Ended March 31,
	2013		2012
Cost of products sold	$	34,432	$	67,144
Sales, general and administrative expenses		730,504		547,133
Research and development expenses		158,405		143,777
Total share-based compensation	$	923,341	$	758,054

Total share-based compensation expense recognized in the statement of operations for the three months ended March 31, 2013 and 2012, included approximately $39,000 and $89,000, respectively, related to incentive stock options for which no tax benefit is recognized.

Issuer Purchases of Equity Securities

On February 26, 2013, the Company announced that TASER’s Board of Directors authorized a stock repurchase program to acquire up to $25.0 million of the Company’s outstanding common stock subject to stock market conditions and corporate considerations. During the three months ended March 31, 2013, the Company purchased 702,866 common shares under this program for a total cost of approximately $5.4 million, or a weighted average cost of $7.61 per share. The weighted average cost includes the average price paid per share of $7.58, plus any applicable administrative costs for the transaction. As of April 25, 2013, the Company has repurchased approximately 1.9 million shares of common stock at a total cost of approximately $14.8 million.