12. 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 February 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. Under this program, which was completed in the second quarter of 2013, the Company purchased approximately 3.0 million common shares under this program for a total cost of approximately $25.0 million, or a weighted average cost, including commissions, of $8.20 per share.

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 in the third quarter of 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 approximately 7.5 million shares under these programs for a total cost of $32.5 million, or a weighted average cost, including commissions, of $4.35 per share.

The Company does not currently have an open stock repurchase program.

c. Stock-based Compensation Plans

The Company has historically utilized stock-based compensation, consisting of restricted stock units (“RSUs”) and stock options, for key employees and non-employee directors as a means of attracting and retaining quality personnel. Service-based grants generally have a vesting period of three to four years and a contractual maturity of ten years. Performance-based grants generally have vesting periods ranging from one to four years and a contractual maturity of ten years.

On February 25, 2013, the Company’s Board of Directors approved the 2013 Stock Incentive Plan (the “2013 Plan) which was subsequently approved by stockholders at the Annual Meeting of Stockholders on May 23, 2013. Under the 2013 Plan, the Company reserved for future grants: (i) 1.6 million shares of common stock, plus (ii) the number of shares of common stock that were authorized but unissued under the Company’s 2009 Stock Incentive Plan (the “2009 Plan”) as of the effective date of the 2013 Plan, and (iii) the number of shares of stock that have been granted under the 2009 Plan that either terminate, expire or lapse for any reason after the effective date of the 2013 Plan. As of December 31, 2013, 2.3 million shares remain available for future grants. Shares issued upon exercise of stock awards from these plans have historically been issued from the Company’s authorized unissued shares.

d. Performance-based stock awards

The Company has issued performance-based stock options and performance-based 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 performance 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.

e. Restricted Stock Units

The following table summarizes RSU activity for the years ended December 31, 2013, 2012 and 2011:


	2013					2012					2011
				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		582,212		$	5.42		1,096		$	4.76		50	$	4.24
Granted		1,054,293			10.72		713,148			5.40		1,046		4.78
Released		(257,693	)		5.44		(97,007	)		5.30		—
Forfeited		(99,689	)		6.86		(35,025	)		5.29		—

Units outstanding, end of year		1,279,123			9.67		582,212			5.42		1,096		4.76

Aggregate intrinsic value at year end	$	20,312,473

Aggregate intrinsic value represents the Company’s closing stock price on the last trading day of the period, which was $15.88 per share, multiplied by the number of restricted stock units. In 2013 and 2012, the Company granted approximately 0.3 million and 0.2 million performance-based RSUs, respectively (included in the table above). As of December 31, 2013, the performance criteria has been met for approximately 0.2 million of the 0.3 million performance-based RSUs outstanding. The Company recognized $1.4 million and $0.7 million of compensation expense related to performance-based RSUs during the twelve months ended December 2013 and 2012, respectively.

Certain RSUs that vested in 2013 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Total shares withheld were approximately 33,000 and had a value of approximately $0.3 million on their respective vesting dates as determined by the Company’s closing stock price. Payments for the employees’ tax obligations are reflected as a financing activity within the statement of cash flows. These net-share settlements had the effect of share repurchases by the Company as they reduced the amount of shares that would have otherwise been issued as a result of the vesting.

f. Stock Option Activity

The following table summarizes stock option activity for the years ended December 31, 2013, 2012 and 2011:


	2013					2012					2011
				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		6,321,076		$	6.05		7,576,493		$	5.75		7,507,236		$	5.71
Granted		—					—					1,018,182			4.65
Exercised		(2,671,058	)		5.75		(784,383	)		2.46		(539,923	)		2.64
Expired / terminated		(284,326	)		7.83		(471,034	)		7.15		(409,002	)		6.38

Options outstanding, end of year		3,365,692			6.15		6,321,076			6.05		7,576,493			5.75

Options exercisable, end of year		3,217,146			6.22		5,278,243			6.31		6,432,667			6.02

Options expected to vest, end of year		103,362			4.54

The weighted average grant-date fair value of options granted for the year ended December 31, 2011 was $2.16. No stock options were granted in 2013 or 2012. Total intrinsic value of options exercised was $15.7 million, $3.2 million and $1.6 million for the years ended December 31, 2013, 2012 and 2011, 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, 2013:


	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)
$3.53 - $5.00		1,886,679	$	4.62		5.9		1,739,833	$	4.63		5.8
$5.01 - $7.00		528,221		5.60		5.2		526,521		5.60		5.1
$7.01 - $10.00		649,381		7.72		3.0		649,381		7.72		3.0
$10.01 - $15.00		194,763		10.31		3.4		194,763		10.31		3.4
$15.01 - $29.83		106,648		18.69		0.4		106,648		18.69		0.4

$3.53 - $29.83		3,365,692		6.15		4.9		3,217,146		6.22		4.8

The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2013, was $33.1 million and $31.4 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 $15.88 on December 31, 2013.

At December 31, 2013, the Company had 0.1 million unvested options outstanding with a weighted average exercise price of $4.58 per share, weighted average fair value of $2.18 per share and weighted average remaining contractual life of 6.8 years. The aggregate intrinsic value of unvested options at December 31, 2013 was $1.7 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, 2013, approximately 0.4 million performance-based stock options are outstanding, of which less than 50,000 are unvested. Of the unvested performance options, 17,000 are expected to vest. The aggregate grant-date fair value of the 0.4 million performance-based stock options vested and expected to vest as of December 31, 2013 is approximately $1.0 million. The Company recognized $0.1 million, $0.1 million and $0.3 million of stock-based compensation expense related to performance-based stock options during 2013, 2012 and 2011, respectively.

g. 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 (in thousands):


	2013		2012		2011
Cost of products sold	$	175	$	172	$	121
Sales, general and administrative expenses		3,158		2,647		2,291
Research and development expenses		1,007		603		626

Total stock-based compensation	$	4,340	$	3,422	$	3,038

Total stock-based compensation expense recognized in the statements of operations for the years ended December 31, 2013, 2012 and 2011 includes $0.1 million, $0.5 million and $1.3 million, respectively, related to ISOs for which no tax benefit is recognized. The Company recorded a tax benefit in 2013, 2012, and 2011 of $6.8 million, $4.7 million, and $10,000, 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 $3.5 million and $3.7 million as of December 31, 2013 and 2012, respectively.

As of December 31, 2013, there was $8.6 million in unrecognized compensation costs related to RSUs and $0.1 million of unrecognized compensation expense related to stock options granted under our stock plans. We expect to recognize the cost related to the RSUs and stock options over weighted average periods of 31 months and 12 months, respectively.