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Amy Young @ Bowne
602-817-4787
NASD
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bowne.edgar@bowne.com

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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-KSB
ã

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2001
or

o

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from

to

Commission File Number 001-16391

TASER INTERNATIONAL, INC.
(Name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)

86-0741227
(I.R.S. Employer
Identification Number)

7860 E. McClain Drive, Suite 2,
Scottsdale, Arizona
(Address of principal executive offices)

85260
(Zip Code)

(480) 991-0797
(Issuer’s telephone number)

Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.00001 par value per share
Warrant, right to purchase one share of Common Stock
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
No

ã

o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in
this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB.

ã

The issuer’s revenues for the fiscal year ended December 31, 2001 were $6,853,272.
The aggregate market value of the Common Stock held by non-affiliates of the issuer, based on the average of
the high and low sales prices of the issuer’s Common Stock on March 14, 2002 as reported by Nasdaq, was
$25,703,906. 1,240,572 shares of Common Stock held by each current executive officer, director, and nonexecutive manager of the issuer have been excluded from this computation in that such persons may be deemed to
be affiliates of the issuer.
The number of shares of Common Stock outstanding as of March 14, 2002 was 2,821,378.
Transitional Small Business Disclosure Format:

Yes

o

No

ã

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DOCUMENTS INCORPORATED BY REFERENCE
Parts of registrant’s proxy statement dated on or about March 25, 2002 prepared in connection with the annual
meeting of stockholders to be held May 1, 2002 are incorporated by reference into Part III of this report.

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TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promotors and Control Persons; Compliance with Section 16
(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
FINANCIAL STATEMENTS:
SIGNATURES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Balance Sheets
Statements of Operations
TASER INTERNATIONAL, INC. Statements of Stockholders’ Equity (Deficit) For the Years
Ended December 31, 2001 and 2000
TASER INTERNATIONAL, INC. Statements of Cash Flows For the Years Ended December 31,
2001 and 2000
Notes to Financial Statements
EX-10.13
EX-10.15
EX-10.17
EX-23.1
EX-99.1

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TASER INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
Page
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.

PART III
ITEM 9.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.

Description of Business
Description of Property
Legal Proceedings
Submission of Matters to a Vote of Security Holders

2
10
10
10

Market for Common Equity and Related Stockholder Matters
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Financial Statements
Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

11

Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Transactions
Exhibits and Reports on Form 8-K

1

13
17
17

17
17
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We own the following registered trademarks: TASER® and AIR TASER®. We also have the following
unregistered trademarks: TASER-WaveTM, T-WAVE TM, AUTO TASER TM, ADVANCED TASER TM and
AFIDTM. Each other trademark, trade name or service mark appearing in this report belongs to its respective
holder.
PART I
The statements contained in this report that are not historical are “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), including without limitation, statements
regarding our expectations, beliefs, intentions or strategies regarding the future. We intend that such forwardlooking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements relate to, among other things: (1) expected revenue and earnings growth;
(2) estimates regarding the size of target markets; (3) our ability to successfully penetrate the law enforcement
market; (4) growth expectations for existing accounts; (5) our ability to expand product sales to the private security,
military, commercial airlines, and consumer self-defense markets; and (6) our target business model. These
statements are qualified by important factors that could cause our actual results to differ materially from those
reflected by the forward-looking statements. Such factors include but are not limited to: (1) market acceptance of
our products; (2) our ability to establish and expand direct and indirect distribution channels; (3) our ability to
attract and retain the endorsement of key opinion-leaders in the law enforcement community; (4) the level of
product technology and price competition for our ADVANCED TASER products; (5) the degree and rate of growth
of the markets in which we compete and the accompanying demand for our products; and (6) other factors detailed
in our filings with the Securities and Exchange Commission, including, without limitation, those factors detailed in
Exhibit 99.1 to this report.
Item 1. Description of Business
Overview
TASER International, Inc. began operations in Arizona in 1993 for the purpose of developing and
manufacturing less-lethal self-defense devices. From inception until the introduction in 1994 of our first product the
AIR TASER, we were in the developmental stage and focused our efforts on product development, raising capital,
hiring key employees and developing marketing materials to promote our product line.
In 1995 and 1996, we concentrated our efforts on promoting retail sales and establishing distribution channels
for the AIR TASER product line. However, our marketing efforts were limited by a non-compete agreement that
prohibited the marketing or selling of our products to the U.S. law enforcement and military markets. Accordingly,
initial sales of the AIR TASER were limited to the consumer market. While early sales in this market were
promising, by the end of 1996, we were unable to establish consistent sales channels in the consumer marketplace
and sales declined. In late 1996, we relocated our production facilities to Mexico to reduce production costs while
we evaluated complementary product lines.
In 1997, we introduced our second product line, the AUTO TASER. The initial market response to the AUTO
TASER suggested the demand for this product would more than compensate for the declining AIR TASER sales
and provide working capital resources to develop the next generation of AIR TASER products for the law
enforcement community. Because of strong pressure from pre-production orders, we accelerated the development of
the AUTO TASER. As a result of this acceleration, production costs of the AUTO TASER far exceeded initial
projections, and we experienced a substantial amount of AUTO TASER returns due to product defects.
In 1998, the non-compete agreement that had precluded sales of our products to the law enforcement and
military markets expired. In anticipation of its expiration, we focused our research and development efforts on the
ADVANCED TASER product line. Our change in focus from the consumer market to the law enforcement market
resulted from a market analysis that suggested the most effective method of penetrating
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the consumer and private security markets was through the de facto endorsement of our products by the law
enforcement community. In order to enter the law enforcement market we would have to make material changes to
our existing technology and channel all of our resources toward success in this market.
In August 1999, we discontinued the AUTO TASER product line and closed our production facility in Mexico.
Following closure of our facility in Mexico, we out-sourced the production of the AIR TASER and certain nonproprietary assemblies to a third-party assembler. Our primary objective was to complete development of the
ADVANCED TASER. In December 1999, we introduced the ADVANCED TASER for sale in the law enforcement
market.
The first full year of ADVANCED TASER product line sales was 2000. Although we had limited financial
resources, we spent the year building the distribution channel for marketing the product line and developing a
nationwide training campaign to introduce the product line to law enforcement agencies, primarily in North
America. We also began evaluating the prospect of returning manufacturing to the United States.
In 2001, we made significant changes to support the growing demand for the ADVANCED TASER product
line. We discontinued outsourcing of the final assembly of our products and moved these operations back into our
Scottsdale facility. In addition we developed a manufacturing infrastructure inclusive of direct assembly and
material management to support product demand. We also completed in 2001, an initial public offering of 800,000
units, at $13.00 per unit, each consisting of one and one half shares of common stock and one and one half warrants,
each whole warrant to purchase one share of common stock, with net proceeds to us of approximately $8.4 million.
Proceeds from the offering were used to retire debt, increase inventory and working capital and fund future sales
and marketing programs.
We relocated our corporate headquarters to a larger, more modern facility in January of 2001. Our new
Scottsdale facility provided sufficient space for our manufacturing, warehousing, and office needs. We also
established a new support infrastructure in connection with bringing our manufacturing operations back to
Scottsdale. We hired a full-time production manager and a warehouse manager to control the flow of materials and
our use of labor, and we hired and trained 21 additional employees.
Also in 2001, we hired a new Executive Vice President of Sales and Marketing primarily to further our
penetration of the law enforcement market. We contracted with 51 independent sales representatives to expand our
sales and marketing efforts, and we sold or provided ADVANCED TASERs to more than 1,000 police agencies
across the U.S. and Europe. 2001 also marked the introduction of our products to the airline industry. Immediately
following the tragic events of September 11, 2001, leading commercial airlines contacted us with regard to using
the ADVANCED TASER on board commercial aircraft. In December 2001, United Airlines became the first U.S.
airline to purchase our products. United’s initial order was for 1,300 ADVANCED TASERs units, plus cartridges
and holstering accessories. These units are being warehoused for United pending final approval by the Federal
Aviation Administration for their deployment on commercial aircraft.
PRODUCTS
Our weapons use compressed nitrogen to shoot two small, electrified probes up to a maximum distance of 21
feet. The probes and compressed nitrogen are stored in a replaceable cartridge attached to the base of the weapon.
Our proprietary replacement cartridges are sold separately.
After firing, the probes discharged from our cartridges remain connected to the weapon by high-voltage
insulated wires that transmit electrical pulses into the target. These electrical pulses, which we call TASER-Waves
or T-Waves, are transmitted through the body’s nerves in a manner similar to the transmission of signals used by the
brain to communicate with the body. The T-Waves temporarily overwhelm the normal electrical signals within the
body’s nerve fibers, impairing subjects’ ability to control their bodies or perform coordinated actions. T-Waves can
penetrate up to two inches of clothing and up to a class 3 bullet resistant vest, the second most protective of seven
classes of bullet resistant vests. The initial effect lasts up to five seconds and the charge can be repeated for up to
approximately ten minutes by repeatedly firing the weapon.
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Since all our weapons use the same cartridges, we can support multiple platforms and still achieve economies of
scale in cartridge production. Our cartridges contain numerous colored, confetti-like tags bearing the cartridge’s
serial number. These tags, referred to as Anti-Felon Identification tags, or AFIDs, are scattered when one of our
weapons is fired. We require sellers of our products to participate in the AFID program by registering buyers of our
cartridges. In many cases, we can use AFIDs to identify the registered owner of cartridges fired.
We introduced our initial product, the AIR TASER, in 1994. We designed the AIR TASER to look like a
cellular telephone rather than a weapon to target the consumer electronics market. Currently, the AIR TASER
product line consists of the AIR TASER, a cartridge that shoots two small, electrified probes up to 15 feet, an
optional laser sight, and a number of holstering accessories. We continue to target the AIR TASER line to the
consumer market.
We developed the ADVANCED TASER product line, launched in December 1999, primarily for the law
enforcement and corrections market. The ADVANCED TASER is our primary product. We sell the M26 version of
this weapon exclusively to law enforcement and corrections agencies and as of 2001, the commercial airline
industry. Currently, the ADVANCED TASER M26 product line consists of the ADVANCED TASER, a cartridge
that shoots two small, electrified probes up to 21 feet, TASER-labeled rechargeable batteries, NiMH battery
charger, and a number of holstering accessories.
In addition to the law enforcement line of ADVANCED TASER products, we also developed a less powerful
consumer version of the ADVANCED TASER M26 for the consumer market. This line includes the ADVANCED
TASER M18L, with integrated laser sight, the ADVANCED TASER M18 without an integrated laser sight, a
cartridge that shoots two small, electrified probes up to 15 feet, and a number of holstering accessories.
Our most inexpensive consumer product is the entry-level consumer AIR TASER, with a retail price of $120.
Our high-end consumer model, the ADVANCED TASER M18L with integrated laser sight, retails for $600. The
ADVANCED TASER M26 is currently our best selling item. Law enforcement distributors sell the M26 to police
and corrections agencies for $400. Retail cartridge prices range from $16 to $30 per unit. We will make M26 sales
to the commercial airline industry directly at law enforcement prices.
We offer a lifetime warranty on the AIR TASER. Under this warranty, we will replace any AIR TASER that
fails to operate properly for a $25 fee. The AIR TASER is designed to disable an attacker for up to 30 seconds, and
we encourage consumers to leave the unit and flee after firing it. As a result, we also provide free replacement units
to consumers who follow this suggested procedure. To qualify for the replacement unit, users must file a police
report that describes the incident and confirms the use of the AIR TASER. Warranty costs under the AIR TASER
replacement policy have been minimal to date. Historically, approximately 2% of the AIR TASERs sold by us were
returned by end users in connection with a warranty claim.
We offer a one year no-questions-asked replacement policy on the ADVANCED TASER. If after the warranty
expires, the weapon fails to operate properly for any reason, we will replace it for a fee of $75. This fee is intended
to help defray the handling and repair costs associated with product returns. This policy is attractive to our law
enforcement and corrections agency customers. In particular, it avoids disputes regarding the source or cause of any
defect. Based upon our 2000 and 2001 warranty return information, we have created a reserve for ADVANCED
TASER product returns equivalent to 7% of the sales volume shipped in 2001, multiplied by a factor representing
the scrap cost associated with each returned unit. Warranty costs under the ADVANCED TASER replacement
policy totaled $11,500 in 2001, and $50,000 in 2000. The figure for 2000 included $41,000 recorded in connection
with a series of ADVANCED TASERS that we recalled in the fourth quarter of 2000 due to a defective electronic
component.
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MARKETS
Law enforcement and corrections
Federal, state and local law enforcement agencies in the United States currently represent the primary target
market for the ADVANCED TASER. Acceptance of the ADVANCED TASER by United States police departments
has been fairly rapid since its introduction in December 1999.
In the law enforcement market, over 1,000 law enforcement agencies have made initial purchases of the
ADVANCED TASER for testing or deployment. These agencies include the Unites States Secret Service, Los
Angeles Police Department, Los Angeles County Sheriff’s Department, New York Police Department, the Royal
Canadian Mounted Police, Miami Police Department, Denver Police Department, Fort Worth (TX) Police
Department, Orange County (FL) Sheriff’s Department, Ohio State Troopers, Phoenix (AZ) Police Department,
Chandler (AZ) Police Department, Philadelphia Police Department, Seattle Police Department, and Minneapolis
Police Department. In addition, 25 police departments, including San Diego, Reno, Sacramento, Albuquerque,
Citrus County (FL) Sheriff’s Office and Clay County (FL) Sheriff’s Office have purchased enough of our weapons
to issue one to each of their patrol officers.
We believe the ADVANCED TASER could prove equally suitable for use in correctional facilities and have
begun to see ADVANCED TASER deployments in correctional facilities such as those operated by Los Angeles
Custody Division and the State of Wisconsin.
Commercial airlines
The commercial airlines became a new market for us in 2001. Following the events of September 11, 2001, the
commercial airline industry began implementing added security measures to protect both its passengers and crew.
These measures included reinforcement of cockpit doors, increased airport security, and the testing of effective
weapons for storage and use on board planes. The ADVANCED TASER is one alternative now under review by the
Federal Aviation Administration (FAA), the U.S. Department of Justice, the U.S. Congress, many leading
commercial carriers, and one significant aircraft manufacturer. United Airlines became the first major carrier to
commit to our ADVANCED TASER product for on board security. United purchased 1,300 of our weapons in
December 2001, and intends to install the weapons on board their entire fleet pending FAA approval. We believe
the FAA will approve the ADVANCED TASER for use on board commercial aircraft. However, as approval is
uncertain, we have not included revenue from this market in our 2002 financial guidance.
Private security firms and guard services
We are still in the early stage of pursuing additional opportunities for sales of the ADVANCED TASER in
private security markets, and have made only limited sales to date. However, a report of the Security Industry
Association for 1999-2000, estimated that there were over 1.7 million privately employed security guards or
personnel in the United States. They represent a broad range of individuals, including bodyguards, commercial and
government building security guards, commercial money carrier employees and many others, and represent a large
potential market.
Consumer/personal protection
Prior to the introduction of the ADVANCED TASER in 1999, the majority of our annual revenue was derived
from consumer sales. However, since the introduction of the ADVANCED TASER in 2000, our annual revenue
from consumer sales has dropped to an average range of $1.0 to $1.5 million per year. We expect consumer sales to
remain in this range in 2002, with growth appearing in 2003 as a result of acceptance of the ADVANCED TASER
by the law enforcement community. We believe consumer sales could contribute a substantial portion of our
revenues beyond 2003, particularly if the ADVANCED TASER becomes more established in the law enforcement
and airline industries.
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Military
Military police forces may use the ADVANCED TASER for purposes similar to those of civilian police units
and to reduce the possibility of civilian casualties resulting from combat operations in populated environments. We
have not formally pursued sales opportunities in the military market, but are consulting with military experts
regarding use of our products. During 2001, we did sell 50 ADVANCED TASERS to the U.S. Air Force, and the
U.S. Marine Corps completed its evaluation of the weapon and recommended an undisclosed quantity for
deployment. We have not included revenues from military agencies in our 2002 financial guidance.
SALES AND MARKETING
Law enforcement and corrections agencies represent our primary target market. In this market, the decision to
purchase the ADVANCED TASER is normally made by a group of people including the agency head, his training
staff, and weapons experts. The decision sometimes involves political decision-makers such as city council
members. The decision-making process can take as little as a few weeks or as long as several years.
United States distribution
With the exception of several accounts to which we sell directly, the vast majority of our law enforcement
agency sales in the Unites States occur through our network of more than 25 law enforcement distributors. To
service these distributors and assist us in expanding sales to new agencies, we have retained the services of six
independent manufacturer’s representative firms, which collectively employ more than 50 sales representatives.
These representatives call on potential distributors and utilize their expansive contacts within the law enforcement
community to open new sales opportunities for us. We compensate our representatives solely on a commission
basis, calculated as a percentage of the sales they complete. The commissions paid to our representatives are
accrued at the end of each quarter, and paid to the representative firms on the 15th day of the month following
payment by our customers.
Sales in the consumer market are made through the same group of representatives, as well as many of the same
independent distributors. However, as of December 31, 2001, we had also established relationships with eleven new
commercial distributors in the United States. Due to the confidential nature of the relationships established with the
major U.S. airlines, we currently intend to make all future sales of our products directly to the commercial airline
industry. These direct sales will enable us to assist the airlines in the development of training and tactical
applications, and to provide on-site equipment maintenance services as they are required.
International distribution
We concentrated our marketing resources on penetrating the United States law enforcement and corrections
market in 2000 and 2001. Accordingly, our international sales efforts in these years were limited to select
presentations and training seminars conducted by TASER personnel. These presentations included the introduction
of the ADVANCED TASER in Europe and parts of the Middle East, South America and Asia. During the fourth
quarter of 2001 and early 2002, we retained the services of three international manufacturer’s representatives to
continue our pursuit of these key markets. Also during this period, we began screening qualified importers to
represent us in more than 30 countries around the world. Our sales outside the U.S. and Canada accounted for 9%
and 18% of total revenues in 2001 and 2000 respectively. We do not anticipate that the total sales generated outside
the U.S. and Canada will exceed 10% of our total sales in 2002.
We have worked in the past with more than 20 foreign distributors. These foreign distributors purchase products
from us and resell them to sub-distributors, retail dealers or end users. We continue to provide most foreign
distributors with short-term exclusive contracts to sell our products in a designated region. Although many of these
relationships are inactive, we continue to ship products as ordered.
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Training programs
Most law enforcement and corrections agencies will not purchase new weapons until a training program is in
place to certify all officers in their proper use. We offer an eight-hour class that certifies law enforcement and
corrections agency trainers as instructors in the use of the ADVANCED TASER. We have certified approximately
3,900 law enforcement training officers as ADVANCED TASER instructors. Our certification program is designed
to make it easier for departments to comply with these training requirements.
151 of our certified instructors have undergone further training and become certified as master instructors. We
authorize these individuals to train other law enforcement and corrections agency trainers, not just end-users within
these organizations. 40 of our master instructors have agreed to conduct ADVANCED TASER training classes on a
regular basis. These instructors independently organize and promote their own training sessions, and we provide
them with logistical support. They are independent professional trainers, serve as local TASER experts, and assist
our distributors in conducting TASER demonstrations at other police departments within regions. Through 2000 we
did not charge for attendance at these classes. However, effective January 1, 2001, our charge for training is $195
per attendee. We pay master instructors a per-session training fee for each session they conduct. These training
sessions have led directly to the sale of ADVANCED TASERs to a number of police departments.
MANUFACTURING
On March 1, 2001, we relocated all final assembly operations to our corporate headquarters in Scottsdale,
Arizona. Our headquarters has approximately 6,000 square feet of product assembly and warehouse space. We own
all of the equipment required to manufacture and assemble our finished products, as well as all molds, schematics,
and prototypes utilized by our vendors in the production of required raw materials and sub-assemblies.
With our current work force, on a single shift, we are able to produce approximately 30,000 cartridges per
month, and more than 3,000 TASERs. We can expand our production capabilities by adding additional personnel
and a second shift with negligible new investment in tooling and equipment.
We purchase finished circuit boards and injection-molded plastic components from vendors located in the
Phoenix area. Although we currently obtain these components from single source suppliers, we own the injection
molded component tooling used in their production. As a result, we believe we could obtain alternative suppliers
without incurring significant production delays. We also purchase small, machined parts from a vendor in Taiwan,
China, and custom cartridge assemblies from a proprietary vendor in Arizona. We believe that these or readily
available alternative suppliers can consistently meet our needs for these components. We acquire most of our
components on a purchase order basis and do not have long-term contracts with suppliers. We believe that our
relationships with our suppliers are good.
COMPETITION
Law enforcement and corrections market
In the law enforcement and corrections market, the ADVANCED TASER competes directly with the conducted
energy weapon sold by Electronic Medical Research Laboratories, Inc., doing business as Tasertron. Tasertron is
the sole remaining manufacturer of the original TASER weapon introduced in the 1970’s. As of December 31,
2001, over 1,000 police departments had purchased, in the aggregate, approximately 15,000 ADVANCED
TASERs. We believe that approximately 350 police departments currently deploy the Tasertron weapon, with less
than 7,500 units deployed primarily at the tactical supervisors level. We believe the ADVANCED TASER also
competes indirectly with a variety of other less-lethal alternatives. In the consumer market, the AIR TASER
competes directly with a conducted energy weapon introduced by Bestex, Inc. in 1996, called the Dual Defense, and
indirectly with other less-lethal alternatives.
Tasertron had an exclusive license to sell TASER products in the North American law enforcement and
corrections market until February 1998. Since its introduction, the ADVANCED TASER has competed
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successfully against the Tasertron unit, even in agencies that had previously purchased weapons from Tasertron.
Other less-lethal weapons, sold by companies such as Armor Holdings Inc. and Jaycor, Inc., compete with our
ADVANCED TASER indirectly. We believe the ADVANCED TASER’s versatility, effectiveness, and low injury
rate enable it to compete effectively against other less-lethal alternatives.
Consumer market
Conducted energy weapons have gained limited acceptance in the consumer market for less-lethal weapons.
These weapons compete with other less-lethal weapons such as stun guns, batons and clubs, and chemical sprays.
The primary competitive factors in the consumer market include a weapon’s cost, effectiveness, and ease of use.
The widespread adoption of the ADVANCED TASER by prominent law enforcement agencies may help us
overcome a perceived historic lack of consumer confidence in conducted energy weapons.
REGULATION
United States regulation
The AIR TASER and ADVANCED TASER, as well as the cartridges used by both weapons, are subject to
identical regulations. Neither weapon is considered to be a “firearm” by the Bureau of Alcohol, Tobacco, and
Firearms. Therefore, no firearms-related regulations apply to the sale and distribution of our weapons within the
United States. In the 1980s however, many states introduced regulations restricting the sale and use of stun guns,
inexpensive hand-held shock devices. We believe existing stun gun regulations also apply to our weapon systems.
In many cases, the law enforcement and corrections market is subject to different regulations than the consumer
market. Where different regulations exist, we assume the regulations affecting the consumer market also apply to
the private security markets except as the applicable regulations otherwise specifically provide. Based on a review
of current regulations, we have determined the following states regulate the sale and use of our weapon systems:
STATE
Connecticut
Florida
Hawaii
Illinois
Indiana
Massachusetts
Michigan
New Jersey
New York
North Carolina
North Dakota
Rhode Island
Washington
Wisconsin

LAW ENFORCEMENT USE
Legal
Legal
Legal
Legal
Legal
Legal
Prohibited (except for evaluation)
Prohibited
Legal
Legal
Legal
Prohibited
Legal
Legal

CONSUMER USE
Legal, subject to restrictions
Legal, subject to restrictions
Prohibited
Legal, subject to restrictions
Legal, subject to restrictions
Prohibited
Prohibited
Prohibited
Prohibited
Legal, subject to restrictions
Legal, subject to restrictions
Prohibited
Legal, subject to restrictions
Prohibited

The following cities and counties also regulate our weapon systems:
CITY OF COUNTY
Annapolis
Baltimore
Chicago
Howard County, MD
Lynn County, OH
New York City
Philadelphia
Washington, D.C.

LAW ENFORCEMENT USE
Legal
Legal
Legal
Legal
Legal
Legal
Legal
Legal

8

CONSUMER USE
Prohibited
Prohibited
Prohibited
Prohibited
Legal, subject to restrictions
Prohibited
Prohibited
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United States export regulation
Our weapon systems are considered a crime control product by the United States Department of Commerce.
Accordingly, the export of our weapon systems is regulated under export administration regulations. As a result, we
must obtain export licenses from the Department of Commerce for all shipments to foreign countries other than
Canada. Most of our requests for export licenses have been granted, and the need to obtain these licenses has not
caused a material delay in our shipments. The need to obtain licenses, however, has limited or impeded our ability
to ship to certain foreign markets. Export regulations also prohibit the further shipment of our products from foreign
markets in which we hold a valid export license for the products to foreign markets in which we do not hold a valid
export license.
In addition, in the fall of 2000, the Department of Commerce introduced new regulations restricting the export
of technology used in our weapon systems. These regulations apply to both the technology incorporated in our
weapon systems and in the processes used to produce them. The technology export regulations do not apply to
production that takes place within the United States, but are applicable to all sub-assemblies and controlled items
manufactured outside the United States.
Foreign regulation
Foreign regulations which may affect our weapon systems are numerous and often unclear. We prefer to work
with a distributor who is familiar with the applicable import regulations in each of our foreign markets. Experience
with foreign distributors in the past indicates that restrictions may prohibit certain sales of our products in a number
of countries. The countries in which we are aware of restrictions include: Belgium, Denmark, Hong Kong, Italy,
Japan, New Zealand, Norway, Sweden, Switzerland and the United Kingdom. Additionally, Australia, Canada and
India permit our products to be sold only to law enforcement and corrections agencies.
INTELLECTUAL PROPERTY
We protect our intellectual property with a variety of patents and trademarks. In addition, we use confidentiality
agreements with employees, consultants and key suppliers to ensure the confidentiality of our trade secrets.
We hold a United States patent on the construction of the gas cylinder used to store the compressed nitrogen in
our cartridges. This patent expires in 2015. We and two other companies are the only licensees for use in electronic
weapons of the technology described in a Unites States patent held by John H. Cover, Jr. The licenses held by the
other licensees may not be transferred and their rights under the licenses may not be expanded or modified without
our approval. Mr. Cover’s patent covers the process by which compressed gases launch the probes in our cartridges
and expires in 2009. Using this compressed gas technology instead of gunpowder prevents our products from being
classified as firearms by the Bureau of Alcohol, Tobacco and Firearms. We also have a broad-based patent
application pending that covers the energy wave form we developed for the ADVANCED TASER.
We own the AIR TASER and TASER registered trademarks as well as several unregistered trademarks. In
addition, in 2001, we purchased the internet domain name “TASER.com”.
RESEARCH AND DEVELOPMENT
Our research and development initiates are led by our internal personnel and make use of specialized consultants
when necessary. These initiatives include bio-medical research and electrical and mechanical engineering design.
We expect that future development projects will focus on reducing the size, extending the range, and improving the
functionality of our weapons. Our total contracted research and development expenditures were $43,400 in 2001
and $7,100 in 2000.
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EMPLOYEES
As of December 31, 2001, we had 49 full-time employees. Eight of these employees were involved in sales,
marketing and training. One was employed in research, development and engineering. Seven were employed in
administrative functions inclusive of executive management, information systems, finance, accounting, and investor
relations. Two were employed in manufacturing support functions. The remaining 31 employees were all direct
manufacturing and assembly operators. Our employees are not covered by any collective bargaining agreement, and
we have never experienced a work stoppage. We believe that our relations with our employees are good.
CORPORATE INFORMATION
We were incorporated in Arizona in September 1993 as ICER Corporation. We changed our name to AIR
TASER, Inc. in December 1993, and to TASER International, Incorporated in April 1998. In February 2001, we
reincorporated in Delaware as TASER International, Inc.
Item 2.

Description of Property

We conduct our operations from a modern 11,800 square-foot facility in Scottsdale, Arizona. The monthly rent
for this facility is approximately $11,500. Our lease expires on December 31, 2005. We believe this facility will
meet our needs for the next three years and that additional space will be available on reasonable terms upon the
expiration of our current lease or if we sooner require additional space.
Item 3.

Legal Proceedings

In February 2000, Thomas N. Hennigan, a distributor of our products from late 1997 through early 2000, sued
us in the United States District Court, Southern District of New York. Mr. Hennigan claims the exclusive right to
sell our products to many of the largest law enforcement, corrections, and military agencies in the United States. He
seeks monetary damages in the aggregate amount of $400 million against us and certain of our officers allegedly
arising in connection with his service to us as a distributor on theories of our failure to pay commissions, breach of
contract, interference with contract, and on related theories. We signed no contract with Mr. Hennigan. We also
believe that he has no reasonable basis for claims to informal or implied contractual rights. As a result, we believe
his claims are without merit, and the litigation will have no material adverse affect on our business, operating results
or financial condition. Mr. Hennigan’s suit was dismissed in February 2001 for lack of jurisdiction of the New York
court. The case is now pending in the United States District Court for the District of Arizona. Mr. Hennigan died in
April 2001. The case is now being prosecuted by his estate.
In early April 2001, James F. McNulty Jr. sued us in the United States District Court, Central District of
California. The lawsuit alleges that certain technology used in the firing mechanism for our weapons infringes upon
a patent for which Mr. McNulty holds a license, and seeks injunctive relief and unspecified monetary damages. We
believe we do not infringe this patent, that Mr. McNulty’s claims are without merit and that the litigation will not
have a material adverse effect on our business, operating results or financial condition. In February 2002, we won a
motion for summary judgement that limits Mr. McNulty’s right to sue for damages only to damages incurred after
February 2001.
In May 2001, the Company filed a complaint against Electronic Medical Research Laboratories, Inc., doing
business as Tasertron, in the United States District Court for the District of Arizona. The complaint alleges
trademark infringement, unfair competition and interference with contractual relations, and seeks monetary
damages and injunctive relief.
Item 4.

Submission of Matters to a Vote of Security Holders

None.
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PART II
Item 5.

Market for Common Equity and Related Stockholder Matters

Market Information
Our Common Stock is quoted under the symbol “TASR” on The Nasdaq SmallCap Stock Market.
Our Warrants to purchase one share of Common Stock are quoted under the symbol “TASRW” on The Nasdaq
SmallCap Stock Market.
The following tables set forth the high and low closing sales prices per share, and per warrant, for our Common
Stock and Warrants as reported by Nasdaq for each quarter since our initial listing of these securities on The Nasdaq
Stock Market in May of 2001:
Common Stock “TASR”
2001 Fiscal Quarters
June 30, 2001(1)
September 30, 2001
December 31, 2001

High

Low

$ 7.30
$ 9.31
$15.14

$5.35
$5.60
$8.25

(1) From May 8, through June 7, 2001, our Common Stock traded on The Nasdaq SmallCap Stock Market only as
a component of a unit consisting of one and one-half shares of Common Stock and one and one half Warrants
each whole Warrant to purchase one share of Common Stock. This unit traded under the symbol “TASRU”. As
of June 7, 2001, our Common Stock and Warrants began trading separately. These prices reflect the sales
prices of our Common Stock beginning June 7, 2001.
Public Warrants “TASRW”
2001 Fiscal Quarters
June 30, 2001(1)
September 30, 2001
December 31, 2001

High

Low

$2.45
$3.20
$6.75

$1.40
$1.25
$2.55

(1) From May 8, through June 7, 2001 our Warrants traded on The Nasdaq SmallCap Stock Market only as a
component of a unit consisting of one and one half shares of Common Stock and one and one half Warrants,
each whole Warrant to purchase one share of Common Stock. This unit traded under the symbol “TASRU”. As
of June 7, 2001, our Common Stock and Warrants began trading separately. These prices reflect sales prices for
our Warrants beginning June 7, 2001.
Holders
As of March 14, 2002 there were approximately 30 holders of record of our Common Stock, and approximately
5 holders of record of our public warrants.
Dividends
We have never declared or paid dividends on our Common Stock.
Recent sales of unregistered securities
In January 2001, pursuant to an exemption under Section 4 (2) of the Securities Act, we issued 5,000 warrants
to an unrelated private lender, as a loan guarantee. These warrants are exercisable at $10.00 per share and expire
January 1, 2006. In 2001, we recorded the fair value of these
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warrants, at the time of issuance, approximately $10,060, as additional paid-in capital. The corresponding interest
expense was recorded ratably over the life of the loan. The private lender is an accredited and sophisticated investor
with knowledge and experience in financial and business matters, and with access to information about us necessary
to make an informed business decision in connection with such grant of warrants to him.
In connection with our initial public offering, pursuant to an exemption under Section 4 (2) of the Securities
Act, we agreed to issue to the underwriter warrants to purchase 80,000 units, each unit consisting of one and one
half shares of Common Stock, and one and one half warrants, each whole warrant to purchase one share of
Common Stock. The exercise price of the underwriter’s warrant is $15.60. The underwriter’s warrants will be
exercisable for units at any time until May 8, 2006. We will cause the registration statement to remain in effect until
the earlier of the time that all of the underwriter’s warrants have been exercised or May 8, 2006. The common stock
and warrants issued to the underwriter upon exercise of these warrants will be freely trade-able.
Also in connection with our public offering, pursuant to an exemption under Section 4 (2) of the Securities Act,
we issued warrants to purchase 5,769 shares of common stock at a price of $7.80 per share to our principal outside
law firm as consideration for legal services rendered during the offering. In 2001 we recorded the fair value of these
warrants, at the time of issuance, approximately $12,627, in our financial statements. The law firm is a sophisticated
investor with knowledge and experience in financial and business matters, and with access to information about us
necessary to make an informed business decision in connection with such grant of warrants to it. The firm exercised
these warrants in January 2002.
Equity compensation plan information
The following table provides details of our equity compensation plans:

Name of Plan
1999 Stock Option Plan
2001 Stock Option Plan
Individual Arrangements
Total

Number of
securities
authorized for
issuance under
the plan

Number of securities
awarded plus
number of securities
to be issued upon
exercise of options,
warrants or rights
granted during last
fiscal year

Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
or rights

Number of
securities
remaining available
for future issuance

833,333
550,000
0
1,383,333

143,322
401,724
0
545,046

143,322
401,724
0
545,046

690,011
148,276
0
838,287

Use of proceeds from registered securities
On May 7, 2001, the SEC declared effective Amendment No. 4 to our Registration Statement on Form SB-2.
We completed our related initial public offering of 800,000 units on May 11, 2001. The initial public offering price
was $13.00 per unit. The gross proceeds of the offering were $10,400,000. Our net proceeds from the offering, after
deducting the underwriters discount, fees and expenses, aggregated approximately $8,400,000.
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Through December 31, 2001, we had used approximately $3.6 million of the net proceeds from the offering as
follows:
Repayment of note payable to stockholder
Accrued interest on notes payable to stockholders
Repayment of notes due to unrelated private lender, including accrued
interest
Repayment of note to third party lender
Purchases of inventory
Research and development expenditures
Production tooling and equipment
Other working capital/general corporate purposes
Total

$ 100,000
268,000
612,800
190,000
572,000
43,000
203,000
1,611,200
$3,600,000

Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of the results of operations and analysis of financial condition for the two years ended
December 31, 2001 and 2000 may be understood more fully by reference to the financial statements and notes to the
financial statements included elsewhere within this report.
PLAN OF OPERATION
We develop, assemble and market less-lethal, conducted energy weapons primarily for use in the law
enforcement and corrections market. Over 1,000 police departments in the United States have made initial
purchases of our products and 25 police departments, including San Diego, Reno, Sacramento, and Albuquerque,
have purchased our products for every patrol officer.
We intend to continue to focus our resources and sales efforts in 2002 and 2003 on further penetration of the
law enforcement market with our ADVANCED TASER product line. We also intend to introduce our consumer
version to the consumer market in early 2002 with the goal of establishing supply relationships with 500 retail
stores by the end of 2002. We believe that our projected operating income in 2002 when added to our cash balance
of $5.6 million as of December 31, 2001 will be adequate to fund our operations in 2002.
However, should the FAA approve the ADVANCED TASERs for use on board commercial aircraft, we may
need additional resources to meet demand for our weapons in the law enforcement, commercial airline and
consumer markets as early as the fourth quarter of 2002. We believe funding will be available at terms favorable to
us, both through our existing credit lines, and possible additional equity financing.
During 2002, we will also continue our research and development efforts. We have begun working on several
future product enhancements, and intend to complete at least one new project by the end of 2002. We expect our
research and development expenditures will total $100,000 in 2002.
MANAGEMENTS DISCUSSION OF THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Overview
Fiscal 2000 was the first full year of ADVANCED TASER product line sales. Although we had limited
financial resources, we spent the year building the distribution channel for marketing the product line and
developing a nationwide training campaign to introduce the ADVANCED TASER to law enforcement agencies,
primarily in North America. We also began evaluating the prospect of returning the manufacturing of our products
to the United States.
In 2001, we made several significant changes to support the growing demand for the ADVANCED TASER
product line. We discontinued outsourcing of the final assembly of our products, moved these
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operations to our Scottsdale headquarters, and developed a manufacturing infrastructure inclusive of direct assembly
and material management to support product demand.
We completed an initial public offering of securities in May of 2001. In this offering, we sold 800,000 units for
$13.00 each, with net proceeds to us of $8.4 million. Each unit included one and one half shares of common stock
and one and one half warrants, each whole warrant to purchase one share of Common Stock. The warrants are
exercisable within five years, to purchase common stock for $9.53 per share.
Summary financial statements
The selected statement of operations data and balance sheet data presented below set forth a summary of data
relating to our results of operations as of, and for the years ended, December 31, 2001 and 2000. This data has been
derived from our audited financial statements and should be read in conjunction with the financial statements and
notes included elsewhere in this report.
December 31, 2001

December 31, 2000

Statements of Operations Data:
Net Sales
Gross Margin
Sales, general and administrative expenses
Income from Operations
Interest Income
Interest Expense
Net Income (Loss) before Taxes
Income Tax Provision
Net Income (Loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share

$6,853,272
3,938,842
3,123,224
772,256
90,285
246,776
620,025
104,996
$ 515,029
$
0.22
$
0.17

$ 3,412,620
1,574,231
1,617,605
(50,511)
103
426,362
(473,247)
0
$ (473,247)
$
(0.19)
$
(0.19)

Balance Sheet Data:
Working Capital (Deficit)
Property and equipment, net
Other Assets, net
Deferred Tax Assets
Total Assets
Total Long Term Debt
Deferred Tax Liability
Total Stockholders Equity (Deficit)

$4,966,184
560,423
72,416
60,840
8,054,679
50,979
19,311
$5,528,733

$(1,069,344)
274,273
0
0
1,039,066
2,822,144
0
$(3,617,215)

Results of operations
Net Sales. Net Sales increased by $3.44 million, or 100.8%, to $6.85 million in the 2001 compared to
$3.41 million in 2000. This increase was almost entirely due to the increased sales of the ADVANCED TASER.
Specifically, ADVANCED TASER sales increased $3.36 million, and the AIR TASER line increased $63,000. It is
our policy to recognize revenue when product is shipped, and title passes, and when the training or other service has
been completed.
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For the years ended December 31, 2001 and 2000, sales by product line were as follows (amounts in thousands):
Product Line

2001

%

2000

%

ADVANCED TASER (including cartridges and accessories)
AIR TASER (including cartridges and accessories)
AUTO TASER (discontinued product line)
Miscellaneous sales (training, freight, services & equipment)

$5,460
1,304
0
89

79.7% $2,099
19.0% 1,241
0.0%
24
1.3%
49

61.5%
36.4%
.7%
1.4%

Net Sales

$6,853

100.0% $3,413

100.0%

Cost of products sold. Cost of products sold increased by $1.1 million, or 58.5% to $2.9 million in 2001
compared to $1.8 million in 2000. However, as a percentage of net sales, costs of products sold decreased 11.4% to
42.5% of sales, down from 53.9% in 2000. This decrease was a result of three key factors: higher sales volume, a
significant shift in the mix of products sold, and reduction in manufacturing costs associated with bringing
manufacturing and assembly operations in house during the first quarter of 2001. Specifically, the direct costs of
product sold decreased 6.0% of sales, a savings derived through decreased material and scrap costs, as well as
improved labor efficiency. Indirect cost of products sold also were reduced by 5.4% of sales, as a result of the
increased sales volume and margins earned relative to the fixed portion of our manufacturing overhead.
Gross Margin: Gross margins improved by $2.3 million, or 150%, to $3.9 million for the year ended
December 31, 2001 compared to $1.6 million for the year ended December 31, 2000. This increase is largely
attributable to the higher level of ADVANCED TASER product sales, and the decreased percentage of sales
expended for manufacturing expenses. As a percentage of sales, gross margins improved to 57.5% in 2001, up from
46.1% in 2000.
Sales, general and administrative expenses. Net sales, general and administrative expenses increased
$1.5 million, or 93.1% to $3.1 million in 2001 from $1.6 million in 2000. However, as a percentage of sales, sales,
general and administrative expenses decreased by 1.8%, to 45.6%, from 47.4% in 2000.
The largest increases in administrative costs incurred were in the areas of legal costs, investor relations and
salaries expense. Legal costs increased by $157,000, or 132% to $276,000 in 2001 from $119,000 in 2000. Of the
$276,000 in fees expensed in 2001, $187,000 was associated with the lawsuits involving the Company. In two of
the cases, TASER is defending against claims pertaining to patent infringement and breach of contract. In the third
case we have alleged that Electronic Medical Research Laboratories, Inc., doing business as Tasertron, has infringed
our trademark rights. Also included in our increased legal expenditures was $89,000 of fees associated with
establishing corporate record keeping systems to comply with both SEC and Nasdaq requirements.
Investor Relations was a new category of expenditures for us in 2001. Prior to our initial public offering in May
of 2001, we created a new investor relations executive position to manage the increased volume of investor-related
correspondence and communications. This new position along with the costs required to support the new investor
base and corporate reporting charges increased administrative expenses by $192,000 in 2001. Additional increases
in administrative expenditures in 2001 resulted from franchise taxes and Directors and Officers liability insurance.
The most significant increase in sales expenses in 2001, as compared to 2000, was commissions. In total,
$459,000 was expensed for our internal and external sales forces as compared to the approximately $80,000
expensed in fiscal 2000. The bulk of this expense, $378,000, was recorded in the fourth quarter of 2001 as a result
of the United Airlines and Los Angeles Police Department orders. The other large increases in sales expenditures
came in the areas of trade shows, training expenditures and marketing collateral materials. The increases to these
expenses in 2001, as compared to 2000 were $47,000, $31,000, and $103,000 respectively.
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Interest Income. Interest income increased to $90,000 in 2001. This additional income resulted from earnings on
the investment of proceeds received from our IPO which were not immediately required for operations. As of
December 31, 2001, we had $4.9 million of cash in interest bearing accounts.
Interest Expense. Interest expense decreased by $179,600, or 42.1%, to $247,000 in 2001 as compared to
$426,000 in 2000. This decrease was a result of the reduction of both long and short-term debt made possible by the
proceeds of our initial public offering completed in May, 2001.
Income Taxes. As of December 31, 2001, we recorded $105,000 as a provision for income taxes payable to both
the Internal Revenue Service, and the Arizona Department of Revenue. Prior to 2001, we were an S-Corporation,
which allowed all the tax attributes to flow through to the stockholders. In early 2001, our tax reporting status was
changed to that of a C-Corporation. When we changed our reporting status, our accumulated shareholder deficit was
converted to additional paid-in capital. As a result of the conversion from an S-Corporation to a C-Corporation,
there are no net operating loss carry forwards available to us. The cumulative effect of the change in the method of
accounting for income taxes was approximately $140,000. This benefit was the result of differences in basis
between financial reporting and tax reporting that were recognized in our fourth quarter following our final tax
review and year-end audit, and, after it was evident that we would have adequate pre-tax earnings to offset the
pending adjustment to unused tax deductions attributable to prior years.
Net Income. Net income increased by $988,000, to $515,000 in 2001 as compared to a net loss of $473,000 in
2000. The increase in net income resulted primarily from the increased sales volume and the improved gross
margins attributed to sales of our ADVANCED TASER line. The increase in net income resulted in an
improvement of $0.41 basic earnings per share for the same periods, improving to income per basic share of $0.22
for 2001, compared to a loss per basic share of $0.19 in 2000. Basic earnings per share calculations were based
upon weighted average shares of 2,303,386 in 2001 and 2,482,976 in 2000. Additionally, diluted earnings per share
increased to earning per share of $0.17 in 2001 as compared with a loss of $0.19 per share for 2000. Diluted
earnings per share calculations were based upon weighted average shares of 3,029,330 in 2001 and 2,482,976 shares
in 2000.
Liquidity and Capital Resources
We have previously sustained significant operating losses. From our inception through December 31, 2000, we
financed our operations through advances from and investments by major stockholders, and bank financing
guaranteed by major stockholders. In 2001, we generated both net income and cash flow from operations.
Management believe that the funds generated in 2001, coupled with anticipated cash flow in 2002, and the net
proceeds remaining from our initial public offering, will be adequate to fund currently projected future operations
and growth.
Liquidity. As of December 31, 2001 we had working capital of $5.0 million compared to a working capital
deficiency of $1.1 million at December 31, 2000. The improvement in working capital from 2000 to 2001 was due
to our initial public offering completed in May of 2001 and our net income of $515,000 in 2001.
During 2001, we used $555,000 of cash in operations compared to $116,290 generated by operations in 2000.
The increase in cash used in operations was due primarily to our increased investment in raw materials inventory,
the reduction of accrued interest expense, and an increase in accounts receivable resulting from $1.6 million of net
sales in the month of December 2001. Reduction of customer deposits, as we shipped previously paid orders, also
resulted in a use of cash. We also used $453,000 of cash in investing activities during 2001, compared to $100,000
of cash used in investing activities in 2000. The funds invested in 2001 were used to purchase production equipment
required to increase production capacity, to purchase office equipment to furnish our new corporate offices, and to
purchase the TASER Trademark and TASER.com web-site. The net cash flows provided by financing activities
were $6.4 million in 2001, as compared to $135,000 for 2000. This increase in cash flows from financing activities
was a direct result of the net proceeds from our initial public offering less debt repayment.
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Capital Resources. Historically, we have funded operating losses and expansion of its business through loans
from two shareholders and an unrelated private investor. Notes payable to related parties were $455,691 as of
December 31, 2001. This amount was repaid in February, 2002. We had cash of $5.6 million at December 31, 2001
as a result of our net income of $515,000 in 2001 and net proceeds from the initial public offering. After payment
of debt and accounts payable outstanding as of December 31, 2001, we believe our monthly cash flow from
operations will be adequate to cover monthly obligations.
We have obtained a revolving line of credit from a domestic bank with a total availability of $1.5 million. The
line is secured by substantially all of our assets, other than intellectual property, and bears interest at prime plus 1%,
4.75% at December 31, 2001. The line of credit matures on April 30, 2002 and requires monthly payments of
interest only. The outstanding balance under the line of credit at December 31, 2001 was $761,000. We are
currently evaluating our options with regard to the renewal of the line of credit or acquisition of an alternative line
and believe that a renewed or replacement line of credit will be available on terms favorable to us.
We anticipate that cash generated from operations, available borrowings under its line of credit and the proceeds
from its initial public offering will be sufficient to provide for working capital needs and to fund future growth.
Item 7.

Financial Statements

The information required by this Item is incorporated by reference to the Financial Statements beginning on
page F-1 herein.
Item 8.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.
PART III
Item 9.

Directors, Executive Officers, Promotors and Control Persons; Compliance with Section 16(a) of the
Exchange Act

The information concerning the identification and business experience of directors is incorporated by reference
to the information set forth in our definitive proxy statement for our 2002 Annual Meeting of Stockholders under
the heading “Election of Directors,” which proxy statement we expect to file with the Securities and Exchange
Commission within 120 days after the end of our fiscal year dated December 31, 2001.
The information concerning the identification and business experience of our executive officers is incorporated
by reference to the information set forth in our definitive proxy statement for our 2002 Annual Meeting of
Stockholders under the heading “Executive Officers”, which proxy statement we expect to file with the Securities
and Exchange Commission within 120 days after the end of our fiscal year dated December 31, 2001.
The information concerning compliance with Section 16(a) of the Exchange Act is incorporated by reference to
the information set forth in our definitive proxy statement for our 2002 Annual Meeting of Stockholders under the
heading “Security Ownership of Certain Beneficial Owners and Management — Section 16(a) Beneficial
Ownership Reporting Compliance,” which proxy statement we expect to file with the Securities and Exchange
Commission within 120 days after the end of our fiscal year dated December 31, 2001.
The information concerning significant employees and family relationships is incorporated by reference to the
information set forth in our definitive proxy statement for our 2002 Annual Meeting of Stockholders under the
heading “Significant Employees and Family Relationships”, which proxy statement we expect to file with the
Securities and Exchange Commission within 120 days after the end of our fiscal year dated December 31, 2001.
Item 10.

Executive Compensation

The information concerning executive compensation is incorporated by reference to the information set forth in
our definitive proxy statement for our 2002 Annual Meeting of Stockholders under the heading
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“Executive Compensation”, which proxy statement we expect to file with the Securities and Exchange Commission
within 120 days after the end of our fiscal year dated December 31, 2001.
Item 11.

Security Ownership of Certain Beneficial Owners and Management

The information concerning security ownership of certain beneficial owners and management is incorporated by
reference to the information set forth in our definitive proxy statement for the 2002 Annual Meeting of
Stockholders under the heading “Security Ownership of Certain Beneficial Owners and Management,” which proxy
statement we expect to file with the Securities and Exchange Commission within 120 days after the end of our fiscal
year dated December 31, 2001.
Item 12.

Certain Relationships and Related Transactions

The information concerning certain relationships and related transactions is incorporated by reference to the
information set forth in our definitive proxy statement for our 2002 Annual Meeting of Stockholders under the
heading “Certain Transactions,” which proxy statement we expect to file with the Securities and Exchange
Commission within 120 days after the end of our fiscal year dated December 31, 2001.
Item 13.

Exhibits and Reports on Form 8-K

(a) Exhibits to Form 10-KSB
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
10.3
10.4
10.5

Company’s Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to Registration Statement
on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Company’s Bylaws, as amended (incorporated by reference to Exhibit 3.2 to Registration Statement on Form SB-2 filed
February 14, 2001 (Registration No. 333-55658), as amended),
Reference is made to pages 1 – 4 of Exhibit 3.1 and pages 1 – 5 and 12 – 14 of Exhibit 3.2
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Public Warrant (incorporated by reference to Exhibit 4.3 to Registration Statement on Form SB-2 filed
February 14, 2001 (Registration No. 333-55658), as amended)
Form of Unit Certificate (incorporated by reference to Exhibit 4.4 to Registration Statement on Form SB-2 file
February 14, 2001 (Registration No. 333-55658), as amended)
Form of Warrant and Unit Agreement (incorporated by reference to Exhibit 4.5 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Underwriters’ Warrant (incorporated by reference to Exhibit 4.6 to Registration Statement on Form SB-2 filed
February 14, 2001 (Registration No. 333-55658), as amended)
Employment Agreement with Patrick W. Smith, dated July 1, 1998 (incorporated by reference to Exhibit 10.1 to
Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)(1)
Employment Agreement with Thomas P. Smith, dated November 15, 2000 (incorporated by reference to Exhibit 10.2 to
Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)(1)
Employment Agreement with Kathleen C. Hanrahan, dated November 15, 2000 (incorporated by reference to
Exhibit 10.3 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as
amended)(1)
Form of Indemnification Agreement between the Company and its directors (incorporated by reference to Exhibit 10.4
to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Indemnification Agreement between the Company and its officers (incorporated by reference to Exhibit 10.5 to
Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)

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10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
23.1
99.1

1999 Employee Stock Option Plan (incorporated by reference to Exhibit 10.6 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)(1)
2001 Stock Option Plan (incorporated by reference to Exhibit 10.7 to Registration Statement on Form SB-2 filed
February 14, 2001 (Registration No. 333-55658), as amended)(1)
Form of Warrant issued to Bruce Culver and Phil Smith (incorporated by reference to Exhibit 10.8 to Registration
Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Licensing Agreement with respect to intellectual property dated October 14, 1993, as amended, by and between the
Company and John H. Cover Jr., and related documents (incorporated by reference to Exhibit 10.9 to Registration
Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Promissory Note, dated October 24, 2000, payable to Bank of America in the amount of $60,000 and related guarantee
and security documents (incorporated by reference to Exhibit 10.12 to Registration Statement on Form SB-2 filed
February 14, 2001 (Registration No. 333-55658), as amended)
Form of Promissory Note issued to stockholders (incorporated by reference to Exhibit 10.13 to Registration Statement
on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Lease between the Company and Norton P. Remes and Joan A. Remes Revocable Trust, dated November 17, 2000
(incorporated by reference to Exhibit 10.14 to Registration Statement on Form SB-2 filed February 14, 2001
(Registration No. 333-55658), as amended),
Equipment Lease between the Company and Thomas P. Smith, dated August 21, 1998.
Letter of Agreement with respect to services, dated May 26, 2000, by and between the Company and Malcolm W.
Sherman (incorporated by reference to Exhibit 10.16 to Registration Statement on Form SB-2 filed February 14, 2001
(Registration No. 333-55658), as amended),
Form of Sales Representative Agreement with respect to services by and between the Company and Sales
Representatives
Loan and Security Agreement, dated April 26, 2001, between the Company and Silicon Valley Bank (incorporated by
reference to Exhibit 10.19 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 33355658), as amended)
Lease Agreement, dated April 17, 2001, between the Company and GE Capital Corporation in the amount of $37,945.
Consent of Arthur Andersen LLP, independent public accounts
Certain Factors to Consider in Connection with Forward-Looking Statements

(1) Management Contract or Compensatory Plan or Arrangement
(b) Reports on Form 8-K
None
FINANCIAL STATEMENTS:
The Financial Statements and Schedules listed below are located after the signature page and begin on page F-1.
Report of Independent Public Accountants
Balance Sheets as of December 31, 2001 and 2000
Statements of Operations for the Years Ended December 31, 2001 and 2000
Statements of Stockholders’ (Deficit) Equity for the Years Ended
December 31, 2001 and 2000
Statements of Cash Flows for the Years Ended December 31, 2001 and
2000
Notes to Financial Statements

19

F-2
F-3
F-4
F-5
F-6
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
TASER INTERNATIONAL, INC.
(Registrant)
Date: March 15, 2002
/s/ PATRICK W. SMITH
_________________________________________
Patrick W. Smith,
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 15, 2002

/s/ PATRICK W. SMITH
-----------------------------------------------Patrick W. Smith,
Chief Executive Officer and Director

Date: March 15, 2002

/s/ THOMAS P. SMITH
-----------------------------------------------Thomas P. Smith,
President and Director

Date: March 15, 2002

/s/ KATHLEEN C. HANRAHAN
-----------------------------------------------Kathleen C. Hanrahan,
Chief Financial Officer
(Principal Financial and Accounting Officer)

Date: March 15, 2002

/s/ PHILLIPS W. SMITH
-----------------------------------------------Phillips W. Smith,
Director and Chairman of the Board

Date: March 15, 2002

/s/ KARL F. WALTER
-----------------------------------------------Karl F. Walter,
Director

Date: March 15, 2002

/s/ BRUCE R. CULVER
-----------------------------------------------Bruce R. Culver,
Director

Date: March 15, 2002

/s/ MATTHEW R. MCBRADY
-----------------------------------------------Matthew R. McBrady
Director

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TASER INTERNATIONAL, INC.
Financial Statements
As of December 31, 2001 and 2000
Together with Report of
Independent Public Accountants
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
TASER International, Inc.:
We have audited the accompanying balance sheets of TASER INTERNATIONAL, INC. (a Delaware
corporation) as of December 31, 2001 and 2000, and the related statements of operations, stockholders’ equity
(deficit) and cash flows for each of the two years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of TASER International, Inc. as of December 31, 2001 and 2000, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
As explained in Note 6 to the financial statements, effective January 1, 2001, concurrent with its change in tax
status from an S corporation to a C corporation, the Company changed its method of accounting for income taxes
and adopted the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Phoenix, Arizona
February 4, 2002
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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
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TASER INTERNATIONAL, INC.
Balance Sheets
December 31, 2001 and 2000
2001
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowance of $29,000 in 2001
and $55,000 in 2000
Inventory
Prepaids and other
Income tax receivable
Deferred income tax asset
Total current assets
Property and Equipment, net
Other Assets, net
Total assets

2000

$5,636,100

$

206,408

765,328
801,926
103,829
53,817
60,840

312,681
221,169
24,535
—
—

7,421,840
560,423
72,416

764,793
274,273
—

$8,054,679

$ 1,039,066

Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Current portion of note payable
Current portion of notes payable to related parties
Current portion of capital lease obligations
Revolving line of credit
Accounts payable and accrued liabilities
Customer deposits
Inventory financing payable
Accrued interest, primarily to related parties
Total current liabilities
Notes Payable to Related Parties, net of current portion
Capital Lease Obligations, net of current portion
Deferred Income Tax Liability
Total liabilities
Commitments and Contingencies
Stockholders’ Equity (Deficit):
Preferred stock, 0.00001 par value per share; 25 million
shares authorized; 0 shares issued and outstanding at
December 31, 2001 and 2000
Common stock, 0.00001 par value per share; 50 million
shares authorized; 2,734,473 and 3,177,421 issued and
outstanding at December 31, 2001 and 2000
Additional paid-in capital
Deferred compensation
Common stock held in treasury, at cost, 0 and 1,666,667
shares at December 31, 2001 and 2000
Retained earnings (accumulated deficit)
Total stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit)

$

—
455,691
51,834
760,838
1,154,280
32,123
—
890

$

100,000
124,574
22,171
—
589,949
539,329
189,980
268,134

2,455,656
—
50,979
19,311

1,834,137
2,778,219
43,925
—

2,525,946

4,656,281

—

—

27
5,073,617
(59,940)

32
4,256,558
(79,920)

—
515,029

(1,000,000)
(6,793,885)

5,528,733

(3,617,215)

$8,054,679

$ 1,039,066

The accompanying notes are an integral part of these balance sheets.
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TASER INTERNATIONAL, INC.
Statements of Operations
For the Years Ended December 31, 2001 and 2000

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense

2001

2000

$6,853,272

$3,412,620

2,304,669
609,761

1,350,175
488,214

3,938,842
3,123,224
43,362

1,574,231
1,617,605
7,137

Gross margin
Sales, general and administrative expenses
Research and development expenses
Income (loss) from operations
Interest Income
Interest Expense
Other Income, net

772,256
90,285
246,776
4,260

(50,511)
103
426,362
3,523

Net income (loss) before income taxes
Provision for income taxes

620,025
104,996

(473,247)
—

$ 515,029

$ (473,247)

$

$

Net income (loss)
Net income (loss) per share:
Basic
Diluted
Weighted average number of common and common
equivalent shares outstanding:
Basic
Diluted

0.22
0.17

2,303,386
3,029,330

(0.19)
(0.19)

2,482,976
2,482,976

The accompanying notes are an integral part of these financial statements.
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TASER INTERNATIONAL, INC.
Statements of Stockholders’ Equity (Deficit)
For the Years Ended December 31, 2001 and 2000
Common Stock

Balance, December 31,
1999
Repurchase of shares from
stockholder for note
payable
Stock options granted for
payment of Board fee
Stock options granted for
payment of consulting
fee
Stock options and warrants
granted for loan
guarantees
Net loss

Shares

Amount

Additional
Paid-in
Capital

3,177,421

$ 32

$ 4,068,814

—

—

—

—

—

79,920

—

—

—

—

13,917

—

—

—

—
—

—
—

93,907
—

—
—

—
—

—
—

32

4,256,558

12

8,370,152

Balance, December 31,
2000
3,177,421
Issuance of shares
pursuant to IPO, net of
issuance costs
1,200,000
Cancellation of treasury
shares
(1,666,667)
Discount on retirement of
related party note
—
Elimination of
accumulated deficit upon
conversion from
S to C corporation
—
Conversion of stock
options
23,722
Stock options and warrants
granted for payment of
consulting fees
—
Stock options and warrants
granted for loan
guarantees
—
Cancellation of partial
shares
(3)
Income tax effect of stock
options exercised
—
Amortization of deferred
compensation
—
Net income
—
Balance, December 31,
2001

2,734,473

(17)

(999,983)

—

61,690

—

(6,793,885)

Treasury Stock
Shares
—

(1,666,667)

Amount
$

—

(1,000,000)

(1,666,667)

(1,000,000)

Deferred
Compensation
$

—

Retained
Earnings
(Deficit)
$(6,320,638)

—

—

(79,920)

—

—

—
(473,247)

(79,920)

(6,793,885)

—

—

—

—

1,666,667

1,000,000

—

—

—

—

—

—

—

—

—

6,793,885

—

27,336

—

—

—

—

—

53,844

—

—

—

—

—

10,060

—

—

—

—

—

—

—

—

—

—

—

87,845

—

—

—

—

—
—

—
—

—
—

—
—

19,980
—

—
515,029

$ 27

$ 5,073,617

—

—

$(59,940)

$

$

515,029

[Additional columns below]
[Continued from above table, first column(s) repeated]

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 28147
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 26

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Total
Stockholders’
Equity
(Deficit)
Balance, December 31, 1999
Repurchase of shares from
stockholder for note
payable
Stock options granted for
payment of Board fee
Stock options granted for
payment of consulting fee
Stock options and warrants
granted for loan
guarantees
Net loss

$(2,251,792)

Balance, December 31, 2000
Issuance of shares pursuant
to IPO, net of issuance
costs
Cancellation of treasury
shares
Discount on retirement of
related party note
Elimination of accumulated
deficit upon conversion
from
S to C corporation
Conversion of stock options
Stock options and warrants
granted for payment of
consulting fees
Stock options and warrants
granted for loan
guarantees
Cancellation of partial
shares
Income tax effect of stock
options exercised
Amortization of deferred
compensation
Net income

(3,617,215)

Balance, December 31, 2001

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 027.00.00.00-1 SN: 5
Ed#: 4
*P66294/027/4*
EDGAR 2

(1,000,000)
—
13,917

93,907
(473,247)

8,370,164
—
61,690

—
27,336

53,844

10,060
—
87,845
19,980
515,029
$ 5,528,733

The accompanying notes are an integral part of these financial statements.
F-5

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 13357
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 27

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

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Ed#: 4
*P66294/028/4*
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Table of Contents

TASER INTERNATIONAL, INC.
Statements of Cash Flows
For the Years Ended December 31, 2001 and 2000
2001
Cash Flows from Operating Activities:
Net income (loss)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities —
Depreciation and amortization
Amortization of deferred compensation
Compensatory stock options and warrants
Stock option tax benefits
Deferred compensation
Change in assets and liabilities:
Accounts receivable
Inventory
Prepaids and other
Deferred income tax asset
Income tax receivable
Accounts payable and accrued liabilities
Customer deposits
Accrued interest
Deferred tax liability

$

2000

515,029

$ (473,247)

176,519
19,980
63,904
87,845
—

124,803
—
187,744
—
(79,920)

(452,647)
(580,757)
(79,294)
(60,840)
(53,817)
564,331
(507,206)
(267,244)
19,311

(190,760)
(63,002)
(10,492)
—
—
14,960
477,012
129,192
—

(554,886)

116,290

(368,140)
(85,000)

(99,759)
—

(453,140)

(99,759)

(45,228)
(4,485,412)
—
2,260,838
(189,980)
500,000
8,370,164
27,336

(16,266)
(12,000)
163,238
—
—
—
—
—

6,437,718

134,972

5,429,692
206,408

151,503
54,905

Cash and Cash Equivalents, end of year

$ 5,636,100

$ 206,408

Supplemental Disclosure:
Cash paid for interest

$

514,020

$ 239,552

$

112,500

$

—

$

81,945

$

43,207

Exchange of shares from related party for note payable

$

—

Discount on prepayment of note payable

$

61,690

$

—

Fair value of stock options issued for payment of consulting and
legal fees

$

53,844

$

13,917

Fair value of stock options and warrants issued for loan guarantees

$

10,060

$

93,907

Fair value of stock options and warrants issued for Board fees

$

—

$

79,920

Net cash (used in) provided by operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment, net
Purchases of other assets
Net cash used in investing activities
Cash Flows from Financing Activities:
Payments under capital leases
Payments on notes payable
Net proceeds from notes payable to related parties
Borrowings under line of credit
Payments under product financing payable
Proceeds from notes payable
Proceeds from Initial Public Offering, net of issuance costs
Proceeds from options exercised
Net cash provided by financing activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, beginning of year

Income taxes paid
Noncash Investing and Financing Activities:
Acquisition of property and equipment under capital leases

$1,000,000

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 13357
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 27

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 028.00.00.00-1 SN: 8
Ed#: 4
*P66294/028/4*
EDGAR 2

The accompanying notes are an integral part of these financial statements.
F-6

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 63970
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 28

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 029.00.00.00 SN: 7
Ed#: 4
*P66294/029/4*
EDGAR 2

Table of Contents

TASER INTERNATIONAL, INC.
Notes to Financial Statements
December 31, 2001 and 2000
1.

The Company
a.

History and Nature of Organization

TASER International, Inc. (TASER or the Company) was incorporated and began operations in Arizona in 1993
for the purpose of developing and manufacturing less-lethal, self-defense devices. From its inception until the
Company commenced production in December 1994, the Company was in the development stage. On May 11,
2001, the Company completed its initial public offering (IPO) of 800,000 units at a price of $13 per unit, consisting
of one and one-half shares of common stock and one and one-half warrants, each whole warrant to purchase one
share of common stock. The net proceeds received, after the underwriting discount and financing costs, totaled
approximately $8.4 million.
b.

Reincorporation and Restatement of Shares

In February 2001, the Company reincorporated in the State of Delaware. In connection with the reincorporation,
the Company completed a 1-for-6 share reverse stock split. The accompanying financial statements and footnotes
have been restated for the lower number of shares of common stock outstanding for all periods presented.
2.

Summary of Significant Accounting Policies
a.

Cash and Cash Equivalents

Cash and cash equivalents include funds on hand and short-term investments with original maturities of three
months or less. At December 31, 2001, cash and cash equivalents included $4.9 million deposited in highly liquid
certificates of deposit and money market funds. These accounts earned interest at an average rate of 1.86% during
2001. Of the $4.9 million, $1.5 million of cash and cash equivalents are required to be maintained as a
compensating balance under the Company’s line of credit agreement (Note 7).
b.

Inventory

Inventories are stated at the lower of cost or market; cost is determined using the most recent acquisition cost
which approximates the first-in, first-out (FIFO) method. Inventories consisted of the following at December 31:
Raw materials and work-in-process
Finished goods

2001

2000

$678,406
123,520

$153,506
67,663

$801,926

$221,169

Inventory costs in 2000 include primarily the cost paid to an outsourced manufacturer, which included charges
for material, labor and overhead. Inventory costs in 2001 included manufacturing costs, including materials, labor
and overhead related to finished goods and components.
c.

Property and Equipment

Property and equipment are stated at cost. Additions and improvements are capitalized while ordinary
maintenance and repair expenditures are charged to expense as incurred. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.
F-7

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 52794
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 29

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

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d.

Long-Lived Assets

The Company periodically evaluates the carrying value of long-lived assets in accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. Under SFAS 121, long-lived assets to be held and used in operations are
reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be
fully recoverable. An impairment loss is recognized if the sum of the expected long-term undiscounted cash flow is
less than the carrying amount of the long-lived assets being evaluated. The Company has not recognized any
impairment losses during the two-year period ended December 31, 2001.
e.

Customer Deposits

The Company requires certain deposits in advance of shipment for foreign customer sales orders. At
December 31, 2000, customer deposits consisted primarily of one foreign customer sales order.
f.

Cost of Products Sold

During 2000 and early 2001, the Company outsourced the assembly of its finished goods, but continued to
manufacture certain small, proprietary components internally. Prior to August 1999, all finished goods were
assembled internally. At December 31, 2000, cost of products sold represents net amounts paid to a vendor to
acquire finished goods sold to customers and the manufacturing costs, including material, labor and overhead
related to the proprietary components the Company manufactures internally. In mid 2001, the Company
discontinued their use of a contract assembler, and consolidated their product manufacturing and assembly
operations at their new facility in Scottsdale, Arizona. At December 31, 2001, costs of products sold included the
manufacturing costs, including materials, labor and overhead related to finished goods and components. Shipping
costs incurred related to product delivery are also included in cost of products sold.
g.

Revenue Recognition

The Company recognizes revenues when products are shipped and title passes, and all sales are final. The
Company charges certain of its customers shipping fees, which are recorded as a component of net sales.
On December 3, 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition in Financial Statements, which provides additional guidance in applying
generally accepted accounting principles for revenue recognition in financial statements. The issuance of SAB
No. 101 did not have a material impact on the revenue recognition method of the Company.
h.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
i.

Advertising Costs

The Company expenses the production cost of advertising as incurred or the first time the advertising takes
place. The Company incurred advertising costs of $19,872 and $35,035 in 2001 and 2000, respectively. Advertising
costs are included in sales, general and administrative expenses in the accompanying statements of operations.
j.

Warranty Costs

The Company warrants its product from manufacturing defects for their lives and will replace any defective
AIR TASER units with a new one for a $25 fee, and defective ADVANCED TASER units for a $75 fee. In 2000,
the Company recalled a series of ADVANCED TASERs due to a defective component in
F-8

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 53988
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 30

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

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Ed#: 4
*P66294/031/4*
EDGAR 2

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connection with which the Company incurred warranty expense of approximately $9,000 and recorded an additional
charge of $41,000 to cover estimated future warranty costs based upon the number of units sold and the estimated
defect rate using its prior actual experience. Accrued warranty expense of $43,000 and $50,000 in 2001 and 2000,
respectively, are included in accounts payable and accrued liabilities in the accompanying balance sheets.
k.

Research and Development Expenses

The Company expenses research and development costs as incurred. The Company incurred product
development expense of $43,362 and $7,137 in 2001 and 2000, respectively.
l.

Income Taxes

The Company, from inception to December 31, 2000, qualified as an S corporation under the Internal Revenue
Code, and accordingly, was not directly subject to income taxes. There is no provision or benefit for income taxes
reflected in the accompanying 2000 financial statements, since items of taxable income and losses are reported in
the individual returns of stockholders.
In 2001, the Company reincorporated in the State of Delaware and elected to be taxed as a C corporation. Net
operating losses (NOLs) prior to the change to a C corporation accrued to the individual stockholders. Accordingly,
such losses were not available to reduce future taxes payable by the Company as a C corporation.
Upon termination of the S status, the Company was required to implement SFAS No. 109, Accounting for
Income Taxes, which requires the calculation of existing temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases.
Based on the criteria described in SFAS No. 109, had the Company been a C corporation in 2000, no federal or
state income tax benefit would have been recorded for the NOLs discussed above. Accordingly, no pro forma
benefit for federal or state income taxes is recorded as if the Company were taxed as a C corporation for any of the
periods presented. Additionally, the accumulated deficit at the time of the S election termination was reclassified to
additional paid-in capital.
m.

Concentration of Credit Risk and Major Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts
receivable, accounts payable and notes payable to related parties. Sales are typically made on credit and the
Company generally does not require collateral. The Company performs ongoing credit evaluations of its customers’
financial condition and maintains an allowance for estimated potential losses. Accounts receivable are presented net
of an allowance for doubtful accounts. No provision for bad debts was recorded for the year ended December 31,
2001 and $72,905 was recorded for the year ended December 31, 2000.
F-9

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 15431
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 31

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 032.00.00.00 SN: 7
Ed#: 4
*P66294/032/4*
EDGAR 2

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For the years ended December 31, 2001 and 2000, sales by product were as follows:
2001

2000

(000s omitted)
Sales by product line:
ADVANCED TASER
AIR TASER
AUTO TASER
Other

$5,460
1,304
—
89

$2,099
1,241
24
49

$6,853

$3,413

91
9

82
18

100%

100%

Geographic:
United States
Other countries

Sales to customers outside of the United States are denominated in U.S. dollars.
The Company had no major customers accounting for more than 10% of sales in 2000. In 2001, three different
customers accounted for 10% or more of sales in that year, as follows:
2001
Customer 1
Customer 2
Customer 3

12.8%
10.9
10.8
34.5%

Receivables from two customers comprise 46.2% of accounts receivable at December 31, 2001. These balances
were fully collected subsequent to year end. Receivables from one customer comprised 44.3% of accounts
receivable at December 31, 2000, representing a concentration of credit risk as defined by SFAS No. 105,
Disclosure of Information About Financial Instruments With Off-Balance-Sheet Risk and Financial Instruments
with Concentrations of Credit Risk.
n.

Financial Instruments

The Company’s financial instruments include cash, accounts receivable and accounts payable. Due to the shortterm nature of these instruments, the fair value of these instruments approximates their recorded value.
The Company has a note payable to a shareholder which, based on the short-term nature of the note and
financing obtained from outside sources, the Company believes is stated at its estimated fair market value. The
revolving line of credit and capital lease obligations approximate fair value as rates on these instruments, in the
aggregate, approximate market rates currently available for instruments with similar terms and remaining
maturities.
o.

Segment Information

The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information.
This statement requires disclosure of certain information about the Company’s operating segments, products,
geographic areas in which it operates and major customers. This statement also allows a company to aggregate
similar segments for reporting purposes. Management has determined that its operations can be aggregated into one
reportable segment. Therefore, no separate segment disclosures have been included in the accompanying notes to
the financial statements.
F-10

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 59639
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 32

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 033.00.00.00 SN: 8
Ed#: 4
*P66294/033/4*
EDGAR 2

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p.

Stock-Based Compensation

The Company measures compensation costs related to stock option plans using the intrinsic value method and
provides pro forma disclosures of net income (loss) and earnings (loss) per common share as if the fair value based
method had been applied in measuring compensation costs. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company’s common stock at the date of measurement over
the amount an employee must pay to acquire the stock and is amortized over the vesting period, generally three to
four years.
q.

Comprehensive Income

The Company has adopted SFAS No. 130, Reporting Comprehensive Income. This statement requires that all
components of comprehensive income be reported in the financial statements in the period in which they are
recognized. During the years ended December 31, 2001 and 2000, the Company did not have any components of
comprehensive income requiring separate reporting in the Company’s financial statements.
r.

Income (Loss) Per Common Share

Income (loss) per common share is computed in accordance with SFAS No. 128, Earnings Per Share. Basic
income (loss) per common share is based upon the weighted average shares outstanding. Diluted income (loss) per
common share is based on the weighted average shares outstanding and dilutive common stock equivalents.
Approximately 725,944 options and warrants were included as common stock equivalents in the computation of
diluted earnings per share for 2001. Approximately 186,049 options and warrants were not included in the
computation of diluted earnings per share for 2000, as their effect would be anti-dilutive.
s.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. Under SFAS 133, all derivatives are required to be recognized in the balance
sheet at fair value. Gains or losses from changes in fair value would be recognized in earnings in the period of
change unless the derivative is designated as a hedging instrument. In June 1999, the Financial Accounting
Standards Board issued SFAS No. 137, which amended SFAS 133, delaying its effective date to fiscal years
beginning after June 15, 2000. The Company does not currently hold any derivative instruments nor does it engage
in hedging activities. The adoption of SFAS No. 133 did not have a material impact on the Company’s financial
position or results of operations.
In March 2000, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 44
(“FIN 44”), Accounting for Certain Transactions Involving Stock Compensation — an Interpretation of APB
Opinion No. 25. FIN 44 is intended to clarify the application of APB No. 25 by providing guidance regarding
among other issues: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for
determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various
modifications to the terms of the previously fixed stock options or awards; and the accounting for an exchange of
stock compensation awards in a business combination. FIN 44 was effective July 1, 2000 but certain provisions
covered specific events occurring after December 15, 1998 or January 12, 2000. The adoption of FIN 44 did not
have a material impact on the Company’s financial position or results of operations.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all business combinations
initiated after June 30, 2001, use the purchase method of accounting and prohibits the use of the pooling-of interest
method. SFAS No. 142 changes the method by which companies may recognize intangible assets in purchase
business combinations and generally requires identifiable intangible assets to be recognized separately from
goodwill. In addition, it eliminates the amortization of all existing and newly acquired goodwill on a prospective
basis and requires companies to assess goodwill for impairment, at least annually, based on the fair value of the
reporting unit. The Company adopted SFAS Nos. 141 and 142 on January 1, 2002.
F-11

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 14650
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 33

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

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Ed#: 4
*P66294/034/4*
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Management has determined that adoption of these standards did not have a material impact on the Company’s
financial statements.
Additionally, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations and SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets during 2001. SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and related
asset retirement costs. SFAS No. 143 is effective for financial statements with fiscal years beginning after June 15,
2002. This statement is not expected to have a material impact on the Company’s financial statements. SFAS
No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The
Company adopted SFAS No. 144 on January 1, 2002. Management has determined that adoption of this standard
did not have a material impact on the Company’s financial statements.
t.

Basis of Presentation

Certain prior year amounts have been reclassified to conform to the current year financial statement
presentation.
3.

Property and Equipment
Property and equipment consist of the following at December 31, 2001 and 2000:
Estimated
Useful Lives
Leasehold improvements

lesser of life
of asset or
lease term
5 years
5 years
3 – 5 years
5 – 7 years

Production equipment
Telephone and office equipment
Computer equipment
Furniture and fixtures

$

63,393
592,472
32,786
467,057
148,894
1,304,602
(744,179)

Less: accumulated depreciation

4.

2001

2000

$

5,000
380,326
31,535
383,492
57,542
857,895
(583,622)

$ 560,423

$ 274,273

2001

2000

$ 25,000
60,000

$—
—

Other Assets
Other assets consist of the following at December 31, 2001 and 2000:
TASER Trademark
TASER.com domain name

85,000
(12,584)

Less: Accumulated amortization

$ 72,416

F-12

—
—
$—

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 12031
P66294.SUB, DocName: 10KSB40, Doc: 1, Page: 34

[B/E]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

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*P66294/035/4*
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These other assets are being amortized over 5 years, their estimated useful lives.
5.

Commitments and Contingencies
a.

Operating Leases

The Company has entered into operating leases for office space and equipment. Rent expense under these leases
for the years ended December 31, 2001 and 2000, was $139,033 and $93,241, respectively. Future minimum lease
payments under operating leases as of December 31, 2001, are as follows:
2002
2003
2004
2005
2006
Thereafter

$142,643
146,363
150,193
154,139
18,673
124,484

Total

b.

$736,495

Litigation

From time to time, the Company is involved in certain legal actions and claims arising in the normal course of
business. Management is of the opinion that it maintains adequate insurance and that such matters will be resolved
without a material effect on the Company’s financial position or results of operations.
In February 2000, the Company was named a defendant in a suit with a former distributor in the state of New
York asserting certain rights of exclusive representation with respect to the Company’s products. The suit was
dismissed in February 2001 for lack of jurisdiction of the New York court. In March 2001, the former distributor
appealed the dismissal. The case is now pending in the state of Arizona. Management believes this matter will be
resolved without a material effect on the Company’s financial condition or results of operations.
In early April 2001, a patent licensee sued the Company in the United States District Court, Central District of
California. The lawsuit alleges that certain technology used in the firing mechanism for the Company’s weapons
infringes upon a patent for which the licensee holds a license, and seeks injunctive relief and unspecified monetary
damages. The Company believes it does not infringe this patent, that the licensee’s claims are without merit and that
the litigation will have no material adverse effect on the Company’s financial condition or results of operations.
c.

Employment Agreements

The Company has employment agreements with its President, Chief Executive Officer (CEO) and Chief
Financial Officer (CFO). The Company may terminate the agreements with or without cause. Should the Company
terminate the agreements without cause, upon a change of control of the Company or death of the employee, the
President, CEO and CFO are entitled to additional compensation. Under these circumstances, these officers may
receive the amounts remaining under their contracts upon termination, which could total $660,000.
6.

Income Taxes

Concurrent with the change in tax status discussed in Note 2, the Company adopted the provisions of SFAS
No. 109. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
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the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date.
The cumulative effect of the change in the method of accounting for income taxes was approximately $140,000.
Pro forma income taxes have not been provided for 2000. As a result of the losses recognized in that period, any
income tax benefit would have been fully offset by the establishment of a valuation allowance for deferred tax
assets had the Company been taxed as a subchapter C corporation.
Significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
2001
Current deferred tax assets:
Nondeductible reserves for bad debts, sales returns and other

$60,840

Total deferred tax asset

$60,840

Long-term deferred tax (assets) liabilities:
Tax over book depreciation of property and equipment
Amortization of other assets

$22,666
(3,355)

Net deferred tax liability

$19,311

Significant components of the federal and state income tax expense are as follows:
Year Ended
December 31,
2001
Current:
Federal provision
State provision

$119,968
26,558

Total current

146,526

Deferred:
Federal benefit
State benefit

(35,300)
(6,230)

Total deferred

(41,530)

Provision for income taxes

$104,996

A reconciliation of the Company’s effective income tax rate to the federal statutory rate follows:
Federal statutory rate
State tax, net of federal benefit
Change in method of accounting for income taxes

34%
6
(23)
17%

7.

Line of Credit

In April 2001, the Company obtained a revolving line of credit with a bank with a total commitment of up to
$1,500,000. The line was fully used to repay a $1,500,000 promissory note to Mr. Bruce R. Culver, a director of the
Company, is secured by assets of Mr. Culver and substantially all of the Company’s assets other than intellectual
property, and has an interest rate of bank prime plus 1% (4.75% at December 31, 2001). The line matures on
April 30, 2002 and requires the Company to make monthly interest payments only until such date. The line of credit
was repaid in full in June 2001 from the proceeds of the Company’s IPO. In July 2001,
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Name: TASER
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the Company drew $760,838 under the line of credit to prepay amounts due Mr. Bruce Culver, a stockholder and
director (Note 9). This amount was outstanding under the line of credit at December 31, 2001.
8.

Inventory Financing Agreement

In 1995, the Company entered into an inventory financing agreement with its warehouser. Under the agreement,
the Company had the right to sell its product to the warehouser at a stated price up to quantities totaling the lesser of
$500,000 or the number of units sold in the last two months. The Company repurchased the product once sold to a
third party at the stated price plus 2% per month (24% annually). In June 1998, the agreement expired and the
Company issued a $189,980 note for the amount due. The note included interest at a rate of 10% and matured
March 31, 2000. As of December 31, 2000, no amounts of principal had been paid on this note and the balance was
recorded as a current payable. In 2001, the note was repaid in full at the close of the IPO in May 2001.
9.

Related Party Transactions and Notes Payable
At December 31, 2001 and 2000 debt obligations were as follows:
Notes payable to stockholders, interest at varying rates of 9% to
27%, principal and interest due through July 1, 2002
Note payable to stockholder, interest at 9.18% payable monthly,
principal matures July 15, 2001
Note payable to unrelated private lender, interest at 11%,
payable monthly, principal matured December 31, 2000
Capital leases, interest at varying rates of 7% to 23%, due in
monthly installments through December 2005, secured by
equipment

2001

2000

$ 455,691

$2,878,010

—

24,783

—

100,000

102,813

66,096

558,504
(507,525)

Less: current portion
Total

$ 50,979

3,068,889
(246,745)
$2,822,144

At December 31, 2001, aggregate annual maturities of long-term debt and capital leases were as follows:
2002
2003
2004
2005

$507,525
37,827
12,608
544
$558,504

During 1998, Mr. Phillips W. Smith, the Company’s chairman, loaned the Company approximately $725,691.
In March 1998, $150,000 was converted into 20,833 shares of common stock at an estimated fair value of $7.20 per
share and $120,000 was repaid. In December 1998, the Company issued a promissory note for $455,691, the
remaining amount due. The note carried interest at 9% (increased to 10% in January 2001) and its maturity was
extended to July 1, 2002.
In addition during 1998, Mr. Bruce R. Culver, a director of the Company, loaned the Company approximately
$622,525. In March 1998, $150,000 was converted into 20,833 shares of common stock at an estimated market
value of $7.20 per share. In December 1998, the Company issued a promissory note for $472,525, the remaining
amount due. The note carried interest at 9% (increased to 10% in January 2001) and its maturity was extended to
July 1, 2002.
In January 1999, Mr. Culver loaned the Company $1,500,000. In return, the Company issued a promissory note
for $500,000 at an effective interest rate of 27.12% to mature October 31, 2000 and issued 1,666,667 shares of
common stock to Mr. Culver at a fair market value of $0.60 per share. The stock issued
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was subject to a repurchase agreement which allowed the Company to repurchase the shares issued at cost if certain
criteria were met. In July 2000, the Company repurchased the 1,666,667 shares under the agreement in exchange for
a promissory note for $1,000,000. This $1,000,000 note and the $500,000 note issued in January 1999 were
consolidated into a new note for $1,500,000 which carried interest at bank prime (9.5% at December 31, 2000) plus
1%. The Company repaid the new note in full with the proceeds of a loan from a commercial bank in April 2001.
In March 1999, the Company issued a promissory note to Mr. Culver for $100,000 at an interest rate of 10%
which matures on July 1, 2002.
In March 1999, the Company issued a promissory note to Mr. Smith for $99,794 at an interest rate of 10%
which matured December 31, 2000 and was repaid in full.
In July 1999, the Company issued a promissory note to Mr. Culver for $50,000 to fund working capital needs at
an interest rate of 10% which matures July 1, 2002.
In May 2000, the Company issued a promissory note to Mr. Culver for $200,000 to fund working capital needs
at an interest rate of 10% which matures on July 1, 2002.
On July 24, 2001, the Company’s Board of Directors approved the prepayment of the total remaining amount
due Mr. Culver, a stockholder and director, of $822,528. The terms of the prepayment included a 7.5% discount, or
$61,690 off the face of the note, which was applied to additional paid-in capital. The funds used to pay this note
were obtained from the Company’s existing line of credit (Note 7).
In July 1999, the Company issued a promissory note to Mr. Malcolm Sherman, a stockholder, for $75,000 to
acquire production equipment. The note carried interest at 9.18%, matured July 1, 2001 and was repaid in full.
In September 1997, the Company issued a promissory note to an unrelated private lender to fund working
capital for $112,000 at an interest rate of 11% which matured June 30, 2002. In June 2001, the note was paid in full.
In January 2001, the Company issued a promissory note to an unrelated private lender to fund working capital
for $500,000 at an interest rate of 18% which was repaid at the close of the IPO in May 2001.
10.

Related Party Transactions

The Company leases an aircraft from its President and is obligated under an operating lease to pay a negotiated
rate of $1,560 per month for rent. This lease expires August 2013. Rent expense for this aircraft for each of the
twelve months ended December 31, 2001 and 2000 was $18,673. In October 2001, the Company entered into an
agreement with the President to pay approximately $29,000 for the replacement of the aircraft’s engine. The
Company has capitalized the cost of the engine in leasehold improvements at December 31, 2001. This amount is
being depreciated over the asset’s useful life of five years.
The Company has a note receivable from a stockholder, the proceeds of which were used by the shareholder to
exercise his options. The note bears interest at 10% and is due December 2002. The amount remaining on the note
totaled $5,501 at December 31, 2001.
Certain officers and a director of the Company have personally guaranteed the Company’s revolving line of
credit and certain capital leases.
11.
a.

Stockholders’ Equity
Common Stock

Concurrent with the re-incorporation in Delaware effective February 2001, the Company adopted a certificate of
incorporation and authorized the issuance of two classes of stock to be designated “common stock” and “preferred
stock”, provided that both common and preferred stock shall have a par value of
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$0.00001 per share and authorized the Company to issue 50 million shares of common stock and 25 million shares
of preferred stock.
Additionally, effective February 2001, the Company declared a 1-for-6 reverse stock split of common stock. All
references to the number of shares, per share amounts, conversion amounts and stock option and warrant data of the
Company’s common stock have been restated to reflect this reverse stock split for all periods presented.
b.

Preferred Stock

The Company is authorized to issue up to 25 million shares of preferred stock, $0.00001 par value. The power
to issue any shares of preferred stock of any class or any series of any class and designations, voting powers,
preferences, and relative participating, optional or other rights, if any, or the qualifications, limitations, or
restrictions thereof, shall be determined by the Board of Directors.
c.

Warrants

At December 31, 2001, the Company had warrants outstanding to purchase 53,496 shares of common stock at
prices ranging from $0.22 to $21.00 per share with an average exercise price of $4.56 per share and a weighted
average remaining life of 2.93 years. A summary of warrants outstanding and exercisable at December 31, 2001 is
presented in the table below:
Outstanding
Weighted
Average
Exercise
Price

Warrants

Expiration
Date

$ 0.22
21.00
3.30
10.00
7.80

16,667
3,333
22,727
5,000
5,769

1/1/03
7/31/05
7/31/05
1/1/06
4/1/06

$ 4.56

53,496

In 2000, the Company issued 22,727 warrants to a stockholder as consideration for his provision of a
$1,500,000 loan to the Company. The warrants are exercisable at $3.30 per share and expire July 31, 2005. These
warrants have been recorded at their estimated fair value of $77,862 and amortized into interest expense in the
accompanying financial statements.
In January 2001, the Company issued 5,000 warrants to an unrelated private lender as a loan guarantee. These
warrants are exercisable at $10 per share and expire January 1, 2006. The fair value of these warrants of
approximately $10,060 was expensed ratably over the life of the debt. In May 2001, the Company issued 5,769
warrants to its legal counsel for consulting services related to the IPO. These warrants are exercisable at $7.80 per
share and expire April 2006. The fair value of these warrants of approximately $12,627 was recorded in the
Company’s financial statements in 2001.
d.

Deferred Compensation

During 2000, two non-employee Board of Director members received their director fees for services relating to
2001 to 2004 through the issuance of, in the aggregate, 13,334 options at an exercise price of $3.30 per share. These
options were recorded at their estimated fair value of $79,920 as deferred compensation in the accompanying
balance sheets and are being amortized into expense over a four-year period.
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e.

Stock Option Plans

The Company has historically issued stock options for 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 amount of shares at
the estimated market value on the grant date. The options issued under the Company’s 1999 Stock Option Plan (the
“1999 Plan”) generally vest over a three-year period. The options issued under the Company’s 2001 Stock Option
Plan (the “2001 Plan”) generally vest over a four-year period.
A summary of the Company’s stock options at December 31, 2001 and 2000 and for the years then ended is
presented in the table below:
2001

2000
Weighted
Average
Exercise
Price

Options

Options

Weighted
Average
Exercise
Price

Options outstanding, beginning of year
Granted
Exercised
Expired/terminated

143,322
401,724
(23,722)
—

$1.14
7.29
1.15
—

124,875
21,863
—
(3,416)

$0.82
2.83
—
0.22

Options outstanding, end of year

521,324

$5.88

143,322

$1.14

Exercisable at end of year

223,670

$4.81

84,979

$1.02

Options available for grant at end of year

148,276

$ —

690,011

$ —

—

$4.08

—

$5.21

Weighted average fair value of options granted in the year

Stock options outstanding and exercisable at December 31, 2001 are as follows:
Outstanding

Exercisable

Exercise
Price

Options

Average
Life(a)

$ 0.22
0.60
0.60
0.66
7.20
3.30
7.21
6.55
6.55
6.55
6.55
6.85
8.82
8.25
10.58
10.80
11.88

3,333
63,500
5,333
29,642
3,958
13,834
120,000
170,000
3,000
1,000
13,224
50,000
500
1,500
5,000
17,500
20,000

3.50
7.00
2.41
2.00
8.74
8.90
4.00
9.00
9.40
4.00
4.42
9.50
9.67
9.75
9.75
9.86
4.88

3,333
61,486
4,176
28,623
3,958
3,598
27,500
38,959
—
1,000
13,224
—
42
63
208
17,500
20,000

$ 5.88

521,324

6.91

223,670

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(a) Average contractual life remaining in years.
The Company measures the compensation cost of its stock option plan, using the intrinsic value based method
of accounting prescribed in Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees.
Accordingly, no compensation cost has been recognized for its stock option plan. The weighted average remaining
contractual life of those options is approximately 7.0 years. For SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123), the Company estimated the fair value of each option grant as of the date of grant using
the Black Scholes option pricing model (beginning in 2001). Prior to the Company’s IPO, the Company followed
rules acceptable for private companies. The following assumptions were used for each year:
2001
Volatility
Risk-free interest rate
Dividend rate
Expected life of options

2000

42.0%
—
5.0%
5.0%
0.0%
0.0%
10 years
10 years

Had the Company’s compensation cost been determined using the fair value of approximately $407,000 in 2001
and $8,300 in 2000, based on the method of accounting prescribed by SFAS No. 123, the Company’s net income
(loss) and net income (loss) per common share would have been adjusted to the following pro forma amounts
(amounts in thousands except per common share amounts):
Year Ended
December 31,
Net income (loss) available to common stockholders:
As reported
Pro forma
Basic net income (loss) per common share:
As reported
Pro forma
Diluted net income (loss) per common share:
As reported
Pro forma

2001

2000

$ 515
108

$ (473)
$ (482)

$0.22
0.05

$(0.19)
$(0.19)

$0.17
0.04

$(0.19)
$(0.19)

In January 2001, the Company adopted the 2001 Plan which provides for officers, key employees and
consultants to receive nontransferable stock options to purchase up to 550,000 shares of the Company’s common
stock. In January 2001, the Company granted 120,000 five-year and 171,000 ten-year, stockholders and one
consultant at exercise prices equal or greater than the value of the common stock portion of the initial per unit
public offering price in the Company’s contemplated IPO. Total compensation costs associated with the option
granted to the consultant is approximately $2,898. In May 2001, the Company granted 11,449 five-year options
under the 2001 Plan, to its outside legal counsel in return for legal services. The options are exercisable at $6.55 per
share and expire May 2006. The options have been recorded at their estimated fair value of $33,177 and amortized
into expense in the accompanying financial statements. Also in May 2001, the Company granted 1,775 five-year
options to consultants for services rendered. The options are exercisable at $6.55 per share and expire May 2006.
These options have been recorded at their estimated fair value of $5,144 and amortized into expense in the
accompanying financial statements.
In November 2001, the Company granted 37,500 ten-year options to employees and stockholders at an exercise
price equal or greater than the value of the common stock on the date of grant. The options vest over a one-month
period.
Also in 2001, the Company granted 60,000 ten-year options to employees at an exercise price equal or greater
than the value of the common stock on the date of grant. The options vest over a four-year period.
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12.

Income (Loss) Per Share

Basic net income (loss) per common share is based upon the weighted average number of common shares
outstanding during the period.
In periods of losses, diluted net loss per share is based upon the weighted average number of common shares
outstanding during the period. As the Company had a net loss for the year ended December 31 2000, the
Company’s common stock options and warrants were anti-dilutive.
Income (loss) per share is calculated as follows for the years ended December 31:
Basic:
Net income (loss)
Weighted average shares outstanding
Net income (loss) per share
Diluted:
Net income (loss)
Weighted average shares used in basic calculation
Stock options and warrants
Weighted average common and common equivalent shares
outstanding
Net income (loss) per share

13.

2001

2000

$ 515,029
2,303,386

$ (473,247)
2,482,976

$

$

0.22

(0.19)

$ 515,029
2,303,386
725,944

$ (473,247)
2,482,976
—

3,029,330

2,482,976

$

0.17

$

(0.19)

Subsequent Event

In February 2002, the Company’s Board of Directors approved the prepayment of the total remaining principal
amount due under a note payable to Mr. Phillips Smith, a stockholder and director of $455,691. The balance was
paid in full in February 2002.
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EXHIBIT INDEX
Exhibit No.
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9

10.10

Description
Company’s Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to
Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Company’s Bylaws, as amended (incorporated by reference to Exhibit 3.2 to Registration Statement on
Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Reference is made to pages 1 – 4 of Exhibit 3.1 and pages 1 – 5 and 12 – 14 of Exhibit 3.2
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to Registration Statement on
Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Public Warrant (incorporated by reference to Exhibit 4.3 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Unit Certificate (incorporated by reference to Exhibit 4.4 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Warrant and Unit Agreement (incorporated by reference to Exhibit 4.5 to Registration Statement on
Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Underwriters’ Warrant (incorporated by reference to Exhibit 4.6 to Registration Statement on
Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Employment Agreement with Patrick W. Smith, dated July 1, 1998 (incorporated by reference to
Exhibit 10.1 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658),
as amended)(1)
Employment Agreement with Thomas P. Smith, dated November 15, 2000 (incorporated by reference to
Exhibit 10.2 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658),
as amended)(1)
Employment Agreement with Kathleen C. Hanrahan, dated November 15, 2000 (incorporated by reference
to Exhibit 10.3 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 33355658), as amended)(1)
Form of Indemnification Agreement between the Company and its directors (incorporated by reference to
Exhibit 10.4 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658),
as amended)
Form of Indemnification Agreement between the Company and its officers (incorporated by reference to
Exhibit 10.5 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658),
as amended)
1999 Employee Stock Option Plan (incorporated by reference to Exhibit 10.6 to Registration Statement on
Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)(1)
2001 Stock Option Plan (incorporated by reference to Exhibit 10.7 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)(1)
Form of Warrant issued to Bruce Culver and Phil Smith (incorporated by reference to Exhibit 10.8 to
Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Licensing Agreement with respect to intellectual property dated October 14, 1993, as amended, by and
between the Company and John H. Cover Jr., and related documents (incorporated by reference to
Exhibit 10.9 to Registration Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658),
as amended)
Promissory Note, dated October 24, 2000, payable to Bank of America in the amount of $60,000 and related
guarantee and security documents (incorporated by reference to Exhibit 10.12 to Registration Statement on
Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)

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Exhibit No.

Description

10.11

Form of Promissory Note issued to stockholders (incorporated by reference to Exhibit 10.13 to Registration
Statement on Form SB-2 filed February 14, 2001 (Registration No. 333-55658), as amended)
Lease between the Company and Norton P. Remes and Joan A. Remes Revocable Trust, dated
November 17, 2000 (incorporated by reference to Exhibit 10.14 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)
Equipment Lease between the Company and Thomas P. Smith, dated August 21, 1998.
Letter of Agreement with respect to services, dated May 26, 2000, by and between the Company and
Malcolm W. Sherman (incorporated by reference to Exhibit 10.16 to Registration Statement on Form SB-2
filed February 14, 2001 (Registration No. 333-55658), as amended)
Form of Sales Representative Agreement with respect to services by and between the Company and Sales
Representatives
Loan and Security Agreement, dated April 26, 2001, between the Company and Silicon Valley Bank
(incorporated by reference to Exhibit 10.19 to Registration Statement on Form SB-2 filed February 14, 2001
(Registration No. 333-55658), as amended)
Lease Agreement, dated April 17, 2001, between the Company and GE Capital Corporation in the amount of
$37,945.
Consent of Arthur Andersen LLP, independent public accounts
Certain Factors to Consider in Connection with Forward-Looking Statements

10.12
10.13
10.14
10.15
10.16
10.17
23.1
99.1

(1) Management Contract or Compensatory Plan or Arrangement

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P66294.SUB, DocName: EX-10.13, Doc: 2

[B/E]

<DOCUMENT>
<TYPE>
<FILENAME>
<DESCRIPTION>
<TEXT>

EX-10.13
p66294ex10-13.txt
EX-10.13

JB: *

Phone: (602) 223-4455

Operator: BPX31027

PN: DOCHDR 2

Date: 15-MAR-2002 21:10:11.51

SN: *

*DOCHDR/2*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 46
CRC: 55230
P66294.SUB, DocName: EX-10.13, Doc: 2, Page: 1
Description: Exhibit 10.13

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.13.01.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 4

*P66294/6101301/4*

1
Exhibit 10.13
EQUIPMENT LEASE

This Equipment Lease (this "Lease") is made effective as of August 21,1998,
between Thomas P. Smith (the "Lessor"), 7500 E. Deer Valley Rd. #15, Scottsdale,
AZ 85255, and Taser International, Inc. (the "Lessee"), 7339 E. Evans Road,
Scottsdale, Arizona 85260, and states the agreement of the parties as follows:
EQUIPMENT SUBJECT TO LEASE. The Lessor shall lease the equipment listed on the
attached Exhibit"A".
PAYMENT TERMS. Payments in the amount of $1,556.05 shall be due on the first
day of each month, with the first payment due on September 25, 1998 and
terminate on August 25, 2013. The lease payments shall be due whether or not the
Lessee has received notice of a payment due.
SERVICE CHARGE. If any Lease installment is not paid within 10 day(s) after the
due date, the Lessee shall pay to the Lessor a service charge of 5% of the late
payment.
NON-SUFFICIENT FUNDS. The Lessee shall be charged $20.00 for each check that is
returned to the Lessor for lack of sufficient funds.
LEASE TERM. This Lease shall begin on the above effective date and shall
terminate on August 25, 2013, unless otherwise terminated in a manner consistent
with the terms of this Lease.
CARE AND OPERATION OF EQUIPMENT. The equipment may only be used and operated
in a careful and proper manner. Its use must comply with all laws, ordinances,
and regulations relating to the possession, use, or maintenance of the
equipment, including registration and/or licensing requirements, if any.
ALTERATIONS. Lessee shall make no alterations to the equipment without the
prior written consent of the Lessor. All alterations shall be the property of
the Lessor and subject to the terms of this Lease.
MAINTENANCE AND REPAIR. The Lessee shall maintain at the Lessee’s cost, the
equipment in good repair and operating condition, allowing for reasonable wear
and tear. Such costs shall include labor, material, parts, and similar items.
LESSOR’S RIGHT OF INSPECTION. The Lessor shall have the right to inspect the
equipment during Lessee’s normal business hours.
RETURN OF EQUIPMENT. At the end of the Lease term, the Lessee shall be
obligated to return the equipment to the Lessor at the Lessee’s expense.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 51
CRC: 52612
P66294.SUB, DocName: EX-10.13, Doc: 2, Page: 2

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.13.02.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 2

*P66294/6101302/2*

<PAGE>
2
OPTION TO RENEW. If the Lessee is not in default upon the expiration of this
lease, the Lessee shall have the option to renew this Lease for a similar term
on such terms as the parties may agree at the time of such renewal.
ACCEPTANCE OF EQUIPMENT. The Lessee shall inspect each item of equipment
delivered pursuant to this Lease. The Lessee shall immediately notify the
Lessor of any discrepancies between such item of equipment and the description
of the equipment in the Equipment Schedule. If the Lessee fails to provide
such notice before accepting delivery of the equipment, the Lessee will be
conclusively presumed to have accepted the equipment as specified in the
Equipment Schedule.
OWNERSHIP AND STATUS OF EQUIPMENT. The equipment will be deemed to be personal
property, regardless of the manner in which it may be attached to any other
property. The Lessor shall be deemed to have retained title to the equipment
at all times, unless the Lessor transfers the title by sale. The Lessee shall
immediately advise the Lessor regarding any notice of any claim, levy, lien, or
legal process issued against the equipment.
RISK OF LOSS OR DAMAGE. the Lessee assumes all risks of loss or damage to the
equipment from any cause, and agrees to return it to the Lessor in the
condition received from the Lessor, with the exception of normal wear and tear,
unless otherwise provided in this Lease.
INDEMNITY OF LESSOR FOR LOSS OR DAMAGES. Unless otherwise provided in this
Lease, if the equipment is damaged or lost, the Lessor shall have the option of
requiring the Lessee to repair the equipment to a state of good working order,
or replace the equipment with like equipment in good repair, which equipment
shall become the property of the Lessor and subject to this Lease.
LIABILITY AND INDEMNITY. Liability for injury, disability, and death of workers
and other persons caused by operating, handling, or transporting the equipment
during the term of this Lease is the obligation of the Lessor. Lessor
shall maintain liability insurance of at least $1,000,000.00. Payment for
Insurance shall be paid be Lessee.
CASUALTY INSURANCE. The Lessor shall insure the equipment in an amount of at
least $196,000.00. Payment for Insurance shall be paid by Lessee.
TAXES AND FEES. During the term of this Lease, the Lessee shall pay all
applicable taxes, assessments, and license and registration fees on the
equipment.
DEFAULT. The occurrence of any of the following shall constitute a default
under this Lease:
A. The failure to make a required payment under this Lease when due.
B. The violation of any other provision or requirement that is not
corrected within

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 50
CRC: 56477
P66294.SUB, DocName: EX-10.13, Doc: 2, Page: 3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.13.03.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 3

*P66294/6101303/3*

3
30 day(s) after written notice of the violation is given.

C. The insolvency or bankruptcy of the Lessee.
D. The subjection of any of Lessee’s property to any levy, seizure,
assignment, application or sale for or by any creditor or government
agency.
RIGHTS ON DEFAULT. In addition to any other rights afforded the Lessor by law,
if the Lessee is in default under this Lease, without notice to or demand on
the Lessee, the Lessor may take possession of the equipment as provided by law,
deduct the costs of recovery (including attorney fees and legal
costs), repair, and related costs, and hold the Lessee responsible for any
deficiency. The rights and remedies of the Lessor provided by law and this
Agreement shall be cumulative in nature. The Lessor shall be obligated to
re-lease the equipment, or otherwise mitigate the damages from the default, only
as required by law.
NOTICE. All notices required or permitted under this Lease shall be deemed
delivered when delivered in person or by mail, postage prepaid, addressed to
the appropriate party at the address shown for that party at the beginning of
this Lease.
ASSIGNMENT. The Lessee shall not assign or sublet any interest in this Lease or
the equipment or permit the equipment to be used by anyone other than the
Lessee or Lessee’s employees, without Lessor’s prior written consent.
ENTIRE AGREEMENT AND MODIFICATION. This Lease constitutes the entire agreement
between the parties. No modification or amendment of this Lease shall be
effective unless in writing and signed by both parties. This Lease replaces
any and all prior agreements between the parties.
GOVERNING LAW. This Lease shall be construed in accordance with the laws of the
State of Arizona.
SEVERABILITY. If any portion of this Lease shall be held to be invalid or
unenforceable for any reason, the remaining provisions shall continue to be
valid and enforceable. If a court finds that any provision of this Lease is
invalid or unenforceable, but that by limiting such provision, it would become
valid and enforceable, then such provision shall be deemed to be written,
construed, and enforced as so limited.
WAIVER. The failure of either party to enforce any provision of this Lease
shall not be construed as a waiver or limitation of that party’s right to
subsequently enforce and compel strict compliance with every provision of this
Lease.
CERTIFICATION. Lessee certifies that the application, statements, trade
references, and financial reports submitted to Lessor are true and correct and
any material misrepresentation will constitute a default under this Lease.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 46
CRC: 53903
P66294.SUB, DocName: EX-10.13, Doc: 2, Page: 4

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.13.04.00

/s/ Thomas P Smith
------------------Thomas P Smith

Lessee:
Taser International,Inc.
By: /s/ Patrick W. Smith
-------------------Patrick W. Smith
President

Ed#: 4

*P66294/6101304/4*

<PAGE>
4
ARBITRATION. Any controversy or claim relating to this Lease, including the
construction or application of this Lease, will be settled by binding
arbitration under the rules of the American Arbitration Association, and any
judgment granted by the arbitrator(s) may be enforced in any court of proper
jurisdiction.
Lessor:
Thomas P Smith

Date: 15-MAR-2002 21:10:11.51

SN: 0

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 7
CRC: 52252
P66294.SUB, DocName: EX-10.13, Doc: 2, Page: 5

[E/O]

<PAGE>

5
EXHIBIT A
EQUIPMENT SCHEDULE

Equipment Description: Cessna 414
</TEXT>
</DOCUMENT>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.13.41.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 1

*P66294/6101341/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P66294.SUB, DocName: EX-10.15, Doc: 3

[B/E]

<DOCUMENT>
<TYPE>
<FILENAME>
<DESCRIPTION>
<TEXT>

EX-10.15
p66294ex10-15.txt
EX-10.15

JB: *

Phone: (602) 223-4455

Operator: BPX31027

PN: DOCHDR 3

Date: 15-MAR-2002 21:10:11.51

SN: *

*DOCHDR/3*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 54
CRC: 11766
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 1

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.01.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 5

*P66294/6101501/5*

1
Exhibit 10.15
[TASER INTERNATIONAL LOGO]
7860 E. McClain Drive, Suite #2, Scottsdale, Arizona 85260, U.S.A.
___________________________________________________________________
Tel.: (480) 991-0797, Fax: (480) 991-0791 *www.TASER.com
__________________________________________________________
INDEPENDENT SALES REPRESENTATIVE AGREEMENT

This agreement, entered into as of __________________, 2001, by and between
TASER(R) International, a corporation organized and existing under the laws of
the State of Delaware (hereinafter referred to as TASER), and _________________,
(hereinafter referred to as Sales Representative).
WHEREAS, TASER is engaged in the manufacture, sale and distribution of
Less-Lethal Defense products and related accessories suitable for law
enforcement and commercial markets; and
WHEREAS, TASER and the Sales Representative desire to enter into a
relationship, whereby Sales Representative will promote the sale of TASER
products in the geographical areas hereinafter described, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable considerations, the receipt and
sufficiency of which is hereby acknowledged, it is mutually agreed upon as
follows:
1. TERRITORY:
The Sales Representative’s territory will consist of the area described below:
_______________________________________________________________________________
It is understood that TASER has the right to select and appoint
Distributors in Sales Representative’s territory. TASER reserves the right to
amend the forgoing territory in its sole discretion, if the Sales
Representative does not meet annual sales objectives, Amendment of the forgoing
can occur anytime during the contract period.
2. DUTIES OF SALES REPRESENTATIVE
The Sales Representative will use its best efforts to solicit orders for the
sale of TASER products by presenting TASER’s products in a clear,
understandable and professional manner. In this regard, Sales Representative
will present TASER products and accessories to federal, state and local law
enforcement personnel, wholesalers, retailers, and consumers within the Sales
Representative’s territory. Sales Representative will at all times emphasize
and adhere to all regulations and practices relating to user safety, shall at
all times maintain a professional

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 58
CRC: 42064
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 2

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.02.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

2
[TASER INTERNATIONAL LOGO]

appearance and shall provide after-sales service to any customer who has
purchased or purchases TASER products and accessories. Sales Representatives
agree to submit updated company resume’s. These resume’s shall include a
complete listing of all other products for which the group has a
representative, location of any offices and numbers of all representatives
employed by the Sales Representatives Group, and the particular territories
assigned to said Group’s representatives. Also, if there are representatives
who are not TASER active within the group, the number and names of those
individuals should also be supplied with the Company resume.
3. SOLICITATION AND / OR PURCHASE ORDERS
All Sales Representatives’ solicitations and/or purchase orders will be
conducted in accordance with such procedures, prices, and terms and
conditions as TASER may specify from time to time. All purchase orders or
sales orders are subject to TASER’s approval. TASER will prepare and deliver
all invoices for billing to customers. Sales Representative must assist TASER
in collecting unpaid invoices upon request by TASER. In addition, Sales
Representative will assist TASER in the resolution of any and all disputes,
adjustments, or other differences between TASER and any customers and / or
distributors.
4. NO AGENCY
Sales Representative is an independent contractor and under no circumstances
will Sales Representative commit TASER to the delivery of TASER products and
accessories purport to legally bind TASER in any matter, or hold himself out
as an employee or agent with legal authority to bind TASER. All accepted
purchase orders, whether or not delivery dates are specified, shall be
subject to delays in manufacture or delivery due to any cause beyond TASER’s
reasonable control. In keeping with the foregoing, no representative may
carry a business card that is TASER exclusive. As a broad parameter, Sales
Representative Groups may include the TASER logo on the bottom of their card,
however a sample must be submitted to TASER, prior to the printing of the
same for TASER’s written approval.
5. RULES OF CONDUCT
In the course of representing TASER, Sales Representative shall adhere to the
following rules of conduct, which include, but are not limited to:
(a) Sales representative shall not disparage, denigrate, "run down" or
make any negative comments regarding another manufacturer or
competitors’ product.
(b) Sales Representative shall not solicit or sell TASER products, or
enter into a type of arrangement, wherein the sale of TASER products
is made

2

Ed#: 6

*P66294/6101502/6*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 56
CRC: 31131
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.03.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

3
[TASER LOGO]
[INTERNATIONAL LOGO]
conditional in any way on a user’s purchase of another company’s
products.
(c) Sales Representative shall at all times maintain a professional
appearance and shall not perform any of his duties set forth in
this agreement, while intoxicated in any manner or under the
influence of any illegal drug.
(d) Under no circumstances shall the representative market, sell,
distribute, solicit, or be involved in any way with another
manufacturer of less-lethal weapons and/or accessories, without the
express written approval of TASER.
(e) Under no circumstances shall the representative market, sell or
demonstrate TASER products and accessories together with any aftermarket product that has not been approved by TASER for use.
Furthermore, no TASER demonstration sample will be equipped or
modified with any after-market accessory or component, including,
but not limited to sights, holsters, or batteries not recommended
for use by TASER.
(f) Sales Representatives understand
enforce the paragraphs contained
not to be considered a waiver of
representative hereby waives any
of laches.

and agree that any failure to
in section 5 of this agreement is
TASER’s rights hereunder and
right they may have to the defense

Any violation of any of the above provisions shall be grounds for immediate
termination by TASER of this Agreement.
6. PERSONNEL
Sales Representative shall maintain a mutually agreed upon number of personnel
to adequately provide the services required under this agreement, including,
but not limited to, after-sales service. Sales Representative shall not use any
person to perform any duties under this Agreement, unless said person has
completed all the following:
(a) Successfully passed the TASER presentation and Product Training
Course, Safety Course, and any other tests or courses TASER deems
necessary to perform the duties as provided herein.
(b) Received TASER written approval to market TASER less-lethal weapons
and accessories.
In the event any person employed by, or affiliated with Sales Representative,
performs any duties related to TASER, which arise out of, or refer in any way
to this agreement or this paragraph, Sales Representative shall waive their
right to receive commissions and TASER shall have the right to immediately
terminate this Agreement. Sales
3

Ed#: 3

*P66294/6101503/3*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 53
CRC: 48542
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 4

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.04.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

4
[TASER INTERNATIONAL LOGO]

Representative agrees and understands that the Sales Management of TASER may,
at any time, request that a member of the representative group take a TASER
Course and successfully pass in order to represent TASER products.
7. USE OF INFORMATION
Only TASER approved information, and terms and conditions will be used in any
advertising, sales promotions, solicitation and other duties set forth in this
Agreement. Sales Representative will not undertake to design or re-engineer
TASER products and accessories, or advise any person on any technical
specification, training practices, use of force recommendations, bulletins, or
accepted practices of applicable TASER safety matters.
IN THE EVENT SALES REPRESENTATIVE ADVISES ANY PERSON CONTRARY TO TASER
POLICIES, SPECIFICATIONS, TERMS AND CONDITIONS OR PROCEDURES CONCERNING TASER’S
PRODUCT LINE, OR THE PROPER USE OF TASER PRODUCTS, OR INDUCES ANY PERSON TO USE
OR APPLY TASER’S PRODUCTS BY MISREPRESENTATION OF THE PRODUCT, ITS
CHARACTERISTICS, USE, COST, AVAILABILITY, SAFETY OR APPLICATIONS, SALES
REPRESENTATIVE SHALL INDEMNIFY, DEFEND, PAY, SAVE AND HOLD TASER HARMLESS FROM
ANY AND ALL CLAIMS, COSTS, JUDGEMENTS, AND DAMAGES, INCLUDING REASONABLE
ATTORNEY’S FEES AND EXPENSES OF COUNCIL, WHICH ARE INCURRED AS A DIRECT OR
INDIRECT CONSEQUENCE THEREOF.
8. REPORTING AND SALES FORECASTS
Sales Representative must quarterly and as soon as available provide TASER with:
(a) Market information available from Customers, including, but not
limited to, competitive pricing on less-lethal weapons and
applicable accessories, new product information introduced by
potential competitors, warranties (and requirement for such
warranties) being issued by competitors; delivery schedules of
competitors; competitors training policies, procedures and
associated costs; feedback from customers with respect to
competitors’ policies, procedures, and problem areas.
Notwithstanding the forgoing, in no event shall the above
information or any other information be obtained from competitors by
Sales Representative. In no event shall the above information or any
documents or information required by TASER pursuant to this
agreement be released, disclosed, or disseminated in any way to
other personnel, firm, or other entity during the term of this
Agreement and for a period of two (2) years after its termination
without TASER’s express written consent.
(b) Forecasts by territory, with respect to the total number of TASER
less-lethal weapons expected to be sold (broken down and separated
by law
4

Ed#: 4

*P66294/6101504/4*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 52
CRC: 42201
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 5

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.05.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

5
[TASER INTERNATIONAL LOGO]
enforcement and commercial sales, by state). These forecasts will
be updated at least every 3 months, and sooner if a moderate market
change occurs, that impacts the sales forecast and production
schedule. Failure to make satisfactory progress toward meeting sales
forecasts and previously agreed upon sales goals shall be grounds
for termination of this Sales Representative Agreement.
(c) The Sales Representative shall submit monthly a sales activity
report within the assigned territory. This report can be given
verbally to the US Sales Manager or in writing.
(d) Copies of all correspondence between Sales Representative and
customers, including, but not limited to, quotations, proposals,
TASER presentation appointments and warranty matters.
(e) All reports, forecasts, or correspondence required by this
paragraph must be submitted to the Sales Representative’s Regional
Sales Manager/Director, or the TASER US Sales Manager for
verification and follow-up, no later than fifteen (15) days after
the close of each quarter or year.
(f) Attached hereto and made a part hereof are copies of forecasts
prepared by TASER based on the historical data for the assigned
territory(s) in regard to the Sales Representative’s performance.
These forecasts will be used in evaluating the Sales
Representative’s performance during the semi-annual reviews. TASER
reserves the right not to renew or to terminate Sales
Representative’s Agreements if the Sales Representative does not
meet the law enforcement sales target of 50% of sales in the
forecasts attached hereto.

9. COMMISSIONS
Subject to the terms and conditions of this Sales Representative Agreement,
Sales Representative will receive a commission on net sales (excluding freight
charges, distributor overages, trade-ins or upgrades, and/or applicable taxes
and discounts taken by the customer) to approved customers in accordance with
the following schedule:
(a) Seven percent (7%) of the total net sales shall be paid to the Sales
Representative within forty-five (45) days of payment by the
customer to TASER, for orders shipped into a Sales Representative’s
territory.
(b) An additional three percent (3%) of net sales, if the Sales
Representative surpasses the law enforcement sales forecast within a
three (3) months period.
5

Ed#: 2

*P66294/6101505/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 54
CRC: 13209
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 6

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.06.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

6
[TASER INTERNATIONAL LOGO]
(c) In the event TASER is not paid within sixty (60) days of specified
invoice terms, Sales Representative shall receive no commission for
late payment of an invoice. This paragraph is not applicable to law
enforcement orders, which will be handled on a case-by-case basis.
(d) Any dispute or claim with respect to the entitlement and/or amount
of commissions shall be made in writing to TASER within forty-five
(45) days from the end of the month for which commissions are
claimed as to entitlement and/or amount. Failure to timely raise in
writing any claims or disputes with respect to entitlement or amount
shall constitute a total waiver by Sales Representative for any such
commissions.
(e) No commissions are payable for Export orders shipped and/or invoiced
into a Sales Representatives territory.

10. HOUSE ACCOUNTS
TASER shall have the unqualified and absolute right at any time to designate any
competitive bidding or procurement for any Governmental entity (Military,
Federal, State, Municipal, and local levels) as a House Account, for which Sales
Representative shall receive no commission, unless otherwise mutually agreed
upon in writing with TASER. Sales Representatives shall receive no commissions
on house accounts. TASER also reserves the right to designate any commercial
accounts as house accounts if, in TASER’s sole discretion, the Sales
Representative is not properly servicing those accounts.
11. SAMPLES
Any samples provided by TASER to Sales Representative shall remain the property
of TASER, cannot be sold or transferred to any other person and must be
returned to TASER upon request. It shall be the responsibility of the Sales
Representative group principal to ensure that each of their Sales
Representative, who is TASER active, has in his or her possession, or has
readily available access to a complete line of TASER products. All samples are
subject to review at any time by TASER and under no circumstances may be sold,
transferred, conveyed, pledged, or hypothecated to any individual or any other
entity, unless approved in advance in writing by TASER. Failure of Sales
Representative to maintain samples in a perfect working order shall be a cause
to immediately terminate this Sales Representative Agreement.
12. TRADE SHOWS AND CONVENTIONS
Sales Representative shall cover all trade shows, conventions and seminars of
interest to law enforcement, and potential purchasers of TASER products in the
assigned territory, and shall send adequate TASER representation to national
trade shows, including, but not limited to; IACP and NOBLE convention. Sales
Representative also agrees to attend any and all other law enforcement trade
shows/conventions/seminars
6

Ed#: 3

*P66294/6101506/3*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 54
CRC: 52535
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 7

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.07.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

7
[TASER INTERNATIONAL LOGO]

within his territory deemed necessary by TASER, at the cost of the Sales
Representative, unless TASER agrees to share certain cost in writing.
13. MEETINGS
Sales Representative shall send its representatives to any TASER sales meeting
and to national trade show meetings, shows, or training programs as requested
by TASER.
14. TECHNICAL SUPPORT AND INSURANCE
TASER shall provide Sales Representatives with leads, technical and training
support, sales samples and literature, sales terms and conditions, pricing
policies, bulletins, and sales promotional materials, as they are available by
TASER.
15. NO SUBCONTRACTING OR ASSIGNMENT
Subcontracting or assignment of this Sales Representative Agreement is
prohibited. Under no circumstances will Sales Representative subcontract,
assign, delegate or otherwise have any person or entity perform any of the
duties and obligations of Sales Representative under this agreement without
TASER’s express written consent.
16. GOVERNING LAW
This Sales Representative Agreement shall be deemed to have been made in Arizona
and shall be governed and construed in accordance with the laws of the State of
Arizona, the sites of TASER’s Business Offices. Should a disagreement arise over
any of the provisions relating to a sales representative agreement, TASER
International and the sales representative shall first meet to settle any
dispute. If this is unsuccessful, both parties (TASER International and named
Sales Representative) hereby agree that any unresolved disputes shall be settled
in binding arbitration under the rules of the American Arbitration Association.
Specifically, this agreement sets forth the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all other representations and understandings both written and oral. This
agreement is drafted under the laws of the state of Arizona, and the venue for
any legal recourse shall take place under laws as written in Arizona, and the
venue for any legal recourse shall take place under these laws and be
adjudicated within its jurisdiction. Further, the parties agree that any
controversy or claim arising out of, or relating to, this agreement, or the
breach thereof, shall be settled by arbitration in accordance with the rules of
the American Arbitration Association in the state of Arizona, USA under their
auspices and the parties agree to have any dispute heard and adjudicated under
these rules in the state of Arizona, USA and both parties agree to be bound by
the decision of the arbitrator and to pay their proportionate fees as required
under the rules of the association and judgment upon the award rendered by the
arbitrator(s) may be entered into any court having jurisdiction thereof.
7

Ed#: 2

*P66294/6101507/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 45
CRC: 32076
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 8

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.08.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

8
[TASER INTERNATIONAL LOGO]

17. TERMS
This Sales Representative Agreement shall continue in force for one year,
renewable for additional one-year term by mutual agreement. It is, however,
expressly understood that TASER has complete and sole discretion to appoint,
terminate, renew, decrease or add to its staff of Sales Representatives, at any
time, for any reason. In such event, the Sales Representative shall be given 60
days written notice if his/her services are no longer required by TASER, after
which time the Agreement with said representatives will be terminated.
18. DISPUTES
Any claim, matter or controversy arising out of or relating to this Sales
Representative Agreement, or the breach thereof, shall be decided by
arbitration in accordance with the Commercial Industry Rules of the American
Arbitration Association governing at that time, unless the parties mutually
agree otherwise in writing. Any arbitration shall be held in Phoenix, AZ. The
prevailing party in any such arbitration shall be entitled to recover
reasonable attorney’s fees, expenses of council, expert witness fees and any
other arbitration expenses. The award of the arbitrators shall be final and
binding, and be enforced in any court of competent jurisdiction.
19. TERMINATION
In the event this agreement is terminated for any reason, Sales Representative
shall be entitled to no compensation or damages of any variety whatsoever, it
being understood that the sales and marketing of TASER products is covered by
any commissions paid or earned by Sales Representative. The Sales
Representative understands that, by signing this Agreement, the following
paragraph specifically eliminates any claim they might have to damages in
quantum meruit. Furthermore, Sales Representative agrees that no commissions
will be due for orders received more than thirty (30) days after Sales
Representative’s termination.
20. ENTIRE AGREEMENT
This Sales Representative Agreement embodies the entire agreement between the
parties hereto, and there are no verbal or collateral agreements between them.
All preliminary negotiations, representation and discussions are deemed merged
herein. This Sales Representative Agreement may be altered or modified only in
writing and signed by all parties hereto.
8

Ed#: 3

*P66294/6101508/3*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 21
CRC: 58510
P66294.SUB, DocName: EX-10.15, Doc: 3, Page: 9

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.15.09.00

[TASER INTERNATIONAL LOGO]
IN WITNESS WHEREOF, the parties have executed this Agreement in
Scottsdale, Arizona, on the date and year above first written.
TASER INTERNATIONAL

SALES REPRESENTATIVE

By: _________________________

By: ___________________________

Title: ______________________

Title: ________________________

_____________________________
WITNESS

_______________________________
WITNESS

</TEXT>
</DOCUMENT>

Ed#: 2

*P66294/6101509/2*

9

9

Date: 15-MAR-2002 21:10:11.51

SN: 0

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P66294.SUB, DocName: EX-10.17, Doc: 4

[B/E]

<DOCUMENT>
<TYPE>
<FILENAME>
<DESCRIPTION>
<TEXT>

EX-10.17
p66294ex10-17.txt
EX-10.17

JB: *

Phone: (602) 223-4455

Operator: BPX31027

PN: DOCHDR 4

Date: 15-MAR-2002 21:10:11.51

SN: *

*DOCHDR/4*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 124
CRC: 12912
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 1

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 610.17.01.00-1 SN: 0

1
Exhibit 10.17

[GE CAPITAL CORPORATION LOGO]
Master Lease Agreement

Account # 4070297

Dated and effective as of April 17, 2001 ("Effective Date"), this MASTER
-------------LEASE AGREEMENT ("Agreement") is entered into by and between GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation with offices at 10
Riverview Drive, Danbury, Connecticut 06810. (together with any successor or
assignee, "Lessor") and the Lessee indicated below (together with any successor
or permitted assignee, "Lessee").
LESSEE:

LEGAL NAME:
TRADE NAME (if any):
ADDRESS:

Taser International, Inc.
7860 E McClain Dr Suite 2
Scottsdale, Arizona 85260

CONTACT and TELEPHONE:
LEGAL ENTITY Type:
State of Organization:
Date of Establishment:

Ed#: 5

*P66294/6101701/5*

Tom Smith 480-905-2000
_____________

LEASE TERMS AND CONDITIONS:
1. LEASING. Subject to the terms of this Agreement, Lessor agrees to
lease to Lessee and Lessee agrees to lease from Lessor the equipment
(collectively, the "Equipment" and individually a "unit of Equipment")
described in any equipment schedule (a "Schedule") signed by Lessee and
approved by Lessor. Each Schedule will incorporate all the terms of this
Agreement and will constitute a separate agreement for lease of the Equipment
(each, a "Lease"). With respect to each Lease, capitalized terms not defined in
this Agreement will have the meanings stated in the applicable Schedule. Unless
it purchases the Equipment under Section 14 ("Options"), Lessee does not have
any right or interest in the Equipment except as a lessee. This Agreement is
effective from the Effective Date, and will continue until all Leases have
terminated or expired.
2. NET LEASE. EACH LEASE IS A NET LEASE. LESSEE IS UNCONDITIONALLY
OBLIGATED TO PAY MONTHLY RENT AND OTHER AMOUNTS DUE UNDER SUCH LEASE REGARDLESS
OF ANY DEFECT OR DAMAGE TO EQUIPMENT, OR LOSS OF POSSESSION, USE OR DESTRUCTION
FROM ANY CAUSE WHATSOEVER. LESSEE’S OBLIGATIONS CONTINUE UNTIL SPECIFICALLY
TERMINATED AS PROVIDED IN SUCH LEASE. LESSEE IS NOT ENTITLED TO ANY ABATEMENT,
REDUCTION, RECOUPMENT, DEFENSE OR SET-OFF AGAINST MONTHLY RENT OR OTHER AMOUNTS
DUE TO LESSOR OR ITS ASSIGNEE, WHETHER ARISING OUT OF SUCH LEASE OR OUT OF
LESSOR’S STRICT LIABILITY OR NEGLIGENCE, FROM ANY THIRD PARTY, OR OTHERWISE.
3. PURCHASE OF EQUIPMENT. Lessor is not obligated to purchase or lease
a unit of Equipment unless before the Last Funding Date: (i) Lessor receives
from Lessee a fully signed and completed Agreement, Schedule, Purchase Order
Assignment in the form of Annex A attached to the applicable Schedule and such
other documents as Lessor may require; (ii) Lessee has irrevocably accepted the
unit of Equipment for lease from Lessor by properly signing and delivering to
Lessor a Certificate of Acceptance in the form of Annex B attached to the
applicable Schedule; (iii) Lessor has received from Supplier clear and
unencumbered title to the Equipment, and (iv) there is no Default (Section 13).
If Lessor has accepted a Purchase Order Assignment but the Lease does not
commence, Lessor may reassign the Purchase Order and the Equipment to Lessee
without recourse or warranty and Lessee will reimburse Lessor for all expenses
incurred, plus interest at the Overdue Rate (Section 15). So long as no Default
has occurred, Lessor appoints Lessee its agent to inspect and accept the
Equipment from Supplier simultaneously with acceptance of the Equipment for
lease. For each Schedule, Lessee irrevocably authorizes Lessor to adjust the
Equipment Price and Total Price to account for equipment change orders or
returns, invoicing errors and similar matters, and agrees to any resulting
adjustments in the TRANSACTION TERMS stated in the applicable Schedule. Lessor
will send Lessee a written notice stating the final Equipment Price, Total
Price and TRANSACTION TERMS, if different from those stated in the applicable
Schedule.
4. TERM AND RENT. (a) The Initial Term begins on the acceptance by the
Lessee of the Equipment (a "Lease Commencement Date"), and continues for the
Initial Term stated in the applicable Schedule. The Monthly Rent accrues from
the Lease Commencement Date. If Monthly Rent is not paid within ten (10) days
of its due date, Lessee agrees to pay a late charge of ten cents ($0.10) per
dollar on, and in addition to, such Monthly Rent, but not exceeding the lawful
maximum, if any. Advance Rent, if any, is applied to the first Monthly Rent due
and then to the final Monthly Rents or at Lessor’s option, to the payment of
any overdue obligation of Lessee. Lessor is not required to: (i) refund any
Advance Rent or Monthly Rent; (ii) pay any interest on Advance Rent; or (iii)
keep Advance Rent in a separate account.
(b) Lessee agrees that the Monthly Rent and Advance Rent have been
calculated on the assumption that the effective corporate income tax rate
(exclusive of any minimum tax rate) for Lessor will be 35%. If Lessor is not
taxed at such tax rate during the Initial Term because of Congressional
enactment of any law, Lessor has the right to increase the Monthly Rent and
Advance Rent and adjust the Casualty Value (Section 8) in such a manner as will
both (i) take into account that such assumption is no longer correct and (ii)
preserve Lessor’s after tax economic yields and cash flows. A change in the
Monthly Rent, Advance Rent, or Casualty Value is effective on the effective
date of such law.
(c) At the end of the term of a Lease, or in the event of a Default,
until Lessee has complied with Section 6(d) ("Use, Operation, Return of
Equipment") or has purchased the Equipment pursuant to Section 14 ("Option"),
Lessee shall pay Lessor Monthly Rent, as liquidated damages for lost rentals

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 124
CRC: 12912
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 1

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 610.17.01.00-2E SN: 0

and not as a penalty, such payment to be computed on a daily basis (with one
day’s rent being 1/30th of the Monthly Rent) until the Equipment is returned or
purchased. Lessee’s obligations and all other provisions of this Lease continue
until such time.
5. TAXES. Lessee agrees to pay promptly as additional rent all license
and registration fees and all taxes (excluding taxes on Lessor’s net income)
together with penalties and interest (collectively, "Taxes") assessed against
Lessor, Lessee, the applicable Lease, the Equipment, the purchase (including
purchase by Lessee), sale, ownership, delivery, leasing, possession, use,
operation or return of the Equipment or its proceeds (such additional rent,
together with Monthly Rent and Advance Rent is hereinafter collectively
referred to as "Rent"). Where permitted by applicable law, except for Type A
Leases, Lessee will report all Taxes. Notwithstanding anything to the contrary
in the Agreement, if and to the extent that any Taxes are reported or paid by
Lessor, Lessee will reimburse Lessor on demand for any such Taxes, or at
Lessor’s option, Lessee shall pay a portion of estimated Taxes along with each
payment of Monthly Rent.
Lessee’s Initials: /s/ TS
-------

Perkin Elmer NEW Master.doc

Ed#: 5

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 147
CRC: 35843
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 2

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 610.17.02.00-1 SN: 0

Ed#: 3

*P66294/6101702/3*

<PAGE>

2
6. USE, OPERATION, RETURN OF EQUIPMENT. (a) Lessee agrees at its own
expense to: (i) maintain the Equipment under a manufacturer’s service and
maintenance contract for the term of the applicable Lease and in any event in
good operating condition; (ii) use the Equipment solely for business purposes,
in the manner for which it was intended and in compliance with all applicable
laws and manufacturer requirements or recommendations; (iii) pay all expenses,
fines, and penalties related to the use, operation, condition or maintenance of
the Equipment; and (iv) comply with all license and copyright requirements of
any software ("Software") used in connection with the Equipment.
(b) Lessee agrees not to attach to the Equipment any accessory,
equipment or device not leased from Lessor unless it is easily removable
without damaging the Equipment. Lessee agrees to pay all costs for parts,
alterations, and additions to the Equipment (including those required by law),
all of which will become the property of Lessor. Lessee agrees not to install
any Equipment or Software, if any, inside any other personal property, Lessor
and Lessee intend that the Equipment is to remain personal property of Lessor.
(c) Provided that there is no Default (Section 13), Lessee is
authorized on behalf of Lessor to enforce in its own name (and at its own
expense) any warranty, indemnity or right to damages related to the Equipment
which Lessor has against the Supplier.
(d) At the end of the term of a Lease, or in the event of a Default,
Lessee agrees, at its own expense and risk, (i) to pay for any repairs required
to place the Equipment in the same condition as when received by Lessee,
reasonable wear and tear excepted; (ii) without unreasonable delay, to cause
the Equipment to be disassembled, deinstalled, inspected, tested and crated in
accordance with manufacturer recommendations, and any and all local, state and
federal regulatory requirements then in effect and (iii) to deliver on Air Ride
suspended Transport the Equipment freight prepaid, to a carrier selected by
Lessor for shipment to a location selected by Lessor. Any such Equipment shall
be accompanied by all accessories originally included with the Equipment,
including but not limited to, users manuals, service records and certification
from the manufacturer that the Equipment performs in accordance with original
specifications and qualifies for continued maintenance under a manufacturer’s
service and maintenance contract. Equipment that is returned will include the
latest software release provided by the manufacturer to the Lessee for the
Equipment.
(e) At Lessor’s request, Lessee, at its expense, shall store the
Equipment for a period of up to ninety (90) days after the end of the term of
the applicable Lease. During such period, Lessee shall comply with all of the
terms of the Lease, except the obligation to pay Rent, and Lessor shall have
access to the Equipment upon reasonable notice for the purpose of showing the
Equipment to potential purchasers.
7. DISCLAIMER. LESSEE AGREES THAT: (1) LESSOR IS NOT THE MANUFACTURER OR
SUPPLIER OF THE EQUIPMENT OR SOFTWARE (IF ANY) OR THE REPRESENTATIVE OF EITHER;
(2) LESSOR IS NOT REQUIRED TO ENFORCE ANY MANUFACTURER’S WARRANTIES ON BEHALF OF
ITSELF OR OF LESSEE; (3) LESSOR IS NOT OBLIGATED TO INSPECT THE EQUIPMENT OR
SOFTWARE; (4) LESSOR DOES NOT MAKE, AND HAS NOT MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN, COMPLIANCE WITH
SPECIFICATIONS, OPERATION OR CONDITION OF, OR AS TO THE QUALITY OF THE MATERIAL,
EQUIPMENT OR WORKMANSHIP OR SOFTWARE; (5) LESSOR DOES NOT MAKE ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF, OR AS TO TITLE TO, OR
ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
EQUIPMENT OR SOFTWARE. LESSEE FURTHER AGREES THAT LESSOR SHALL NOT BE LIABLE FOR
ANY LIABILITY, LOSS OR DAMAGE CAUSED DIRECTLY OR INDIRECTLY BY THE EQUIPMENT OR
SOFTWARE OR BY ITS INADEQUACY OR BY ANY EQUIPMENT OR SOFTWARE DEFECT, WHETHER OR
NOT LESSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LIABILITY, LOSS OR
DAMAGE. LESSOR SHALL NOT HAVE ANY LIABILITY TO LESSEE OR ANY OTHER PERSON WITH
RESPECT TO ANY OF THE FOLLOWING, REGARDLESS OF ANY NEGLIGENCE OF LESSOR: (1) THE
USE, OPERATION OR PERFORMANCE OF THE EQUIPMENT OR SOFTWARE; (2) ANY INTERRUPTION
OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR LOSS OF GOODWILL OR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR ANY OTHER COMMERCIAL
OR ECONOMIC LOSSES OF ANY KIND WHICH ARE ATTRIBUTABLE TO THE EQUIPMENT OR
SOFTWARE; OR (3) THE DELIVERY, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR
REPLACEMENT OF THE EQUIPMENT OR SOFTWARE.
8. LOSS OR DAMAGE; CASUALTY VALUE. Lessee assumes the risk of any
disappearance of or damage to any part of the Equipment from any cause
whatsoever. Within ten (10) days of learning of any condemnation or other
circumstance where the Equipment is, in Lessee’s reasonable opinion,
irreparably damaged or permanently unfit for use ("Casualty") Lessee will
provide Lessor full details of the Casualty and will pay to Lessor an amount
equal to (i) the sum of all future Monthly Rents payable for the Equipment
under the applicable Lease, with each such payment discounted to its net
present value at a simple interest rate equal to six percent (6%) per annum (or
if not permitted by applicable law, the lowest permitted rate) from the due
date of each such payment to the Monthly Rent payment date immediately
preceding the date of the Casualty; plus an amount equal to the Casualty Value
Percentage of the Total Price of the Equipment ("Casualty Value"); plus (ii)
any other amounts due under the applicable Lease. Monthly Rent will continue to
accrue without abatement until Lessor receives the Casualty Value and all other
amounts (including Monthly Rent payments) then due under the applicable Lease,
at which time the Lease will terminate. At Lessor’s request, Lessee agrees to
sell the Equipment on an "AS IS, WHERE IS" basis without representation or
warranty, and to remit to Lessor any sales or insurance proceeds received (less
any sums paid by Lessee as Casualty Value).
9. INSURANCE. Lessee agrees, at its own expense, to keep the Equipment
insured with companies acceptable to Lessor and to maintain primary coverage
consisting of (i) actual cash value all risk insurance on the Equipment, naming
Lessor as loss payee and (ii) single limit public liability and property damage
insurance of not less than $300,000 per occurrence (or such other amounts as
Lessor may require by notice to Lessee) naming Lessee as insured and Lessor as
additional insured. The insurance will provide for not less than thirty (30)
days notice to Lessor of material changes in or cancellation of the policy.
Premiums for all such insurance will be prepaid. Lessee will deliver evidence
of such insurance to Lessor upon request, and will promptly provide to Lessor

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 147
CRC: 35843
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 2

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 610.17.02.00-2E SN: 0

all information pertinent to any occurrence which may become the basis of a
claim. Lessee will not make claim adjustments with insurers except with
Lessor’s prior written consent. If Lessee fails to provide any insurance
required by the Agreement, Lessor may but is not obligated to insure its own
interest in the Equipment and Lessee agrees to pay the direct or financed cost
thereof (at the highest annual rate permitted by applicable law) and charge for
costs in connection therewith promptly upon receipt of invoices.
10. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and
warrants to Lessor that as of the date of each Lease and of each Certificate of
Acceptance:
(a) Lessee has adequate power and capacity to enter into the Lease,
any documents relative to the purchase of the Equipment leased under such Lease
and any other documents required to be delivered in connection with this Lease
(collectively, the "Documents"); the Documents have been duly authorized,
executed and delivered by Lessee and constitute valid, legal and binding
agreements, enforceable in accordance with their terms; there are no
proceedings presently pending or threatened against Lessee which will impair
its ability to perform under the Lease; and all information supplied to Lessor
is accurate and complete.
(b) Lessee’s entering into the Lease and leasing the Equipment does not
and will not: (i) violate any judgement, order, or law applicable to the Lease,
Lessee or Lessee’s certificate of incorporation or by-laws (if Lessee is a
corporation) or Lessee’s partnership agreement (if Lessee is a partnership); or
(ii) result in the creation of any lien, security interest or other encumbrance
upon the Equipment.
(c) All financial data of Lessee or of any consolidated group of
companies of which Lessee is a member ("Lessee Group"), delivered to Lessor
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis with prior periods and fairly present the
financial position and results from operations of Lessee, or of the Lessee
Group, as of the stated date and period(s). Since the date of the most recently
delivered financial data, there has been no material adverse change in the
financial or operating condition of Lessee or of the Lessee Group.
(d) If Lessee is a corporation or partnership, it is and will be
validly existing and in good standing under laws of the state of its
incorporation or organization; the persons signing the Lease are acting with
the full authority of its board of directors or partners (if Lessee is a
partnership) and hold the offices indicated below their signatures, which are
genuine.
11. LESSEE’S AGREEMENTS. (a) Lessee agrees that it will keep the
Equipment free and clear from all claims, liens and encumbrances and will not
assign, sublet, or grant a security interest in the Equipment or in this Lease
without Lessor’s prior written consent. If and to the extent that the Lease is
deemed a security agreement under the Uniform Commercial Code, and otherwise
for precautionary purposes only, Lessee grants Lessor a first priority security
interest in its interest in the Equipment and in all Equipment leased pursuant
to any Schedule. Such security interest shall secure Lessee’s

Ed#: 3

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 164
CRC: 50192
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 3

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 610.17.03.00-1 SN: 0

Ed#: 5

*P66294/6101703/5*

<PAGE>
3
obligations with respect to all Schedules, Leases and agreements between Lessee
and Lessor. Lessee will notify Lessor in writing, with full particulars, within
ten (10) days after it learns of the attachment of any lien to any Equipment
and of the Equipment’s location.
(b) Lessee will not relocate any unit of Equipment from the Equipment
Location stated on a Schedule without the prior written approval of Lessor
(which shall not be unreasonably withheld). Lessee agrees to notify Lessor
immediately in writing of any change in Lessee’s corporate or business name or
in the location of its chief executive office.
(c) If this is a Type A Lease, Lessee will not take or fail to take any
action which Lessor determines will result in the disqualification of any
Equipment for, or the recapture of, all or any portion of the accelerated cost
recovery deductions permitted by the Internal Revenue Code of 1986, as amended.
Lessee will indemnify Lessor for any loss in Lessor’s after tax economic yields
and cash flows caused by Lessee’s acts or failures to act.
(d) Lessor may inspect the Equipment during normal business hours. At
Lessor’s request, Lessee will attach identifying labels supplied by Lessor
showing Lessor’s ownership in a prominent position on each unit of Equipment.
(e) LESSOR MAY ASSIGN EACH LEASE. LESSEE WAIVES AND AGREES NOT TO ASSERT
AGAINST ANY ASSIGNEE ANY DEFENSE, SET OFF, RECOUPMENT, CLAIM OR COUNTERCLAIM
WHICH LESSEE HAS OR MAY AT ANY TIME HAVE AGAINST LESSOR FOR ANY REASON
WHATSOEVER.
(f) Within one hundred twenty (120) days of the close of each fiscal year
of Lessee, Lessee will deliver to Lessor Lessee’s balance sheet and profit and
loss statement, certified by a recognized firm of certified public accountants.
Upon request, Lessee will deliver to Lessor duplicate copies of Lessee’s most
recent quarterly financial report.
12. INDEMNIFICATION. Lessee agrees to indemnify, defend and keep
harmless Lessor, its agents, successors and assigns, from and against any all
losses, damages, penalties, claims and actions, including legal expenses,
arising out of or in connection with (i) the selection, manufacture, purchase,
acceptance or rejection of Equipment, the ownership of Equipment during the
term of a Lease, and the delivery, lease, possession, maintenance, use,
condition, return or operation of Equipment or (ii) the condition of Equipment
sold or disposed of after or as a result of use by Lessee or any permitted
sublessee of Lessee.
13. DEFAULT. (a) Lessor may declare a Lease in default (a "Default"),
if, with respect to such Lease; (i) Lessor has not received Monthly Rent or any
other Rent (Sections 5 and 15) within ten (10) days after its due date; or (ii)
Lessee or any guarantor violates any other term of a Lease or any term of a
guaranty and fails to correct such violation within ten (10) days after written
notice form Lessor; or (iii) Lessee violates the terms of any license or
agreement for Software; or (iv) Lessee or any guarantor becomes insolvent, is
liquidated or dissolved, stops doing business or assigns its rights or property
for the benefit of creditors; or (v) a petition is filed by or against Lessee
or any guarantor under Title 11 of the United States Code or any successor or
similar law; or (vi) (for individuals) Lessee or any guarantor dies or a
guardian is appointed for Lessee’s or guarantor’s person; or (vii) Lessee (or
any affiliate) is in default of or fails to fulfill the terms of any other
agreement between Lessee and Lessor or any affiliate of either.
(b) At any time after a Default, Lessor may declare a default under any
other Lease or agreement between Lessee (and any affiliate) and Lessor or its
affiliate. Lessor may also enter, with or without legal process, any premises
and take possession of the Equipment. Immediately after a Default, Lessee will
pay to Lessor, as liquidated damages for loss of a bargain and not as a penalty,
an amount equal to the sum of (i) all Rents, including Monthly Rent, and other
sums (e.g. late charges, indemnification, liens) then due under each Lease; plus
(ii) the Casualty Value of the Equipment, calculated as of the Monthly Rent
payment date immediately preceding the Default; together with interest on such
sum accruing to the date of payment at the Overdue Rate (Section 15). Lessee
waives notice of intention to accelerate and notice of acceleration. After a
Default, at the request of Lessor, Lessee will return the Equipment as required
by Section 6. Lessor may, but is not required to, sell or lease the Equipment in
bulk or in individual pieces. If the Lessor intends to sell the Equipment, it
may do so in a public or private sale and is not required to give notice of such
sale. The Equipment need not be displayed at the sale. Lessor may, without
paying rent or providing insurance, use the Equipment Location to store the
Equipment or conduct any sale. The proceeds of any sale or lease will be applied
in the following order of priorities: (1) to pay all of Lessor’s expenses in
taking, removing, holding, repairing and disposing of Equipment; then (2) to pay
any late charges and interest accrued at the Overdue Rate; then (3) to pay
accrued but unpaid Monthly Rent together with any unpaid Casualty Value. Rent
interest and all other due but unpaid sums (including any indemnification and
sums due under other Leases or agreements in default). Any remaining proceeds
will reimburse Lessee for payments which it made to reduce the amounts owed to
Lessor in the preceding sentence. Lessor will keep any excess. If the proceeds
of any sale or lease are not enough to pay the amounts owed to Lessor under this
Section, Lessee will pay the deficiency.
(c) Lessor’s remedies for Default may be exercised instead of or in
addition to each other or any other legal or equitable remedies. Lessor has the
right to set-off any sums received from any source (including insurance
proceeds) against Lessee’s obligations under each Lease. Lessee waives its
right to object to the notice of the time or place of sale or lease and to the
manner and place of any advertising. Lessee waives any defense based on
statutes of limitations or laches in actions for damages. Lessor’s waiver of
any Default is not a waiver of its rights with respect to a different or later
Default.
14. OPTION. (a) LEASE TYPE A ONLY: So long as no Default has occurred,
Lessee has the option (1) to purchase all but not less than all of the
Equipment under a Lease at the end of the Initial Term on an AS-IS WHERE-IS
basis without representation or warranty, for a cash purchase price equal to
the Equipment’s Fair Market Value (plus any applicable sales taxes) determined
as of the end of the Initial Term: or (ii) to extend the Initial Term of a
Lease at the then Fair Market Rental of the Equipment. Lessee must give

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 164
CRC: 50192
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 3

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

Date: 15-MAR-2002 21:10:11.51

JB: P66294 PN: 610.17.03.00-2E SN: 0

irrevocable written notice at least sixty (60) days before the end of the
Initial Term to Lessor that it will purchase the Equipment or extend the
Initial Term. If the Lease is renewed, the Lessee’s obligations (other than the
amount of Monthly Rent to be paid) will remain unchanged. If Lessee fails to
timely exercise one of such options, this Lease shall automatically continue on
the same periodic basis in effect at such time with Rent payable in the same
amount and frequency in effect at such time until the Equipment is returned or
purchased in accordance with the terms hereof. Lessee’s obligations and all
other provisions of this Lease shall continue until such time. "Fair Market
Value" or "Fair Market Rental" means the price or rental which a willing buyer
or lessee (who is neither a lessee in possession nor a used equipment dealer)
would pay for the Equipment in an arm’s length transaction to a willing seller
or lessor who is under no compulsion to sell or lease the Equipment. In
determining "Fair Market Value" or "Fair Market Rental"; (i) the Equipment is
assumed to have been maintained and returned as required by the Lease; (ii) in
the case of any installed Equipment, the Equipment will be valued on an
installed basis; and (iii) cost of removal from the Equipment’s current
location will not be included.
(b) LEASE TYPE B ONLY: So long as no Default has occurred, Lessee may
purchase all but not less than all the Equipment under a Lease on an "AS IS,
WHERE IS" basis, without representation or warranty, at the end of the Initial
Term for a price equal to the Option Price (plus applicable sales tax) stated
on a Schedule. Unless the Option Price is $1.00, Lessee must give Lessor
irrevocable written notice at least thirty (30) days before the end of the
Initial Term that it will purchase the Equipment.
15. MISCELLANEOUS. (a) LEASE TYPE B ONLY: Lessee agrees that for income
tax purposes only, Lessor is treating Lessee as owner of the Equipment and that
Lessee has not received tax advice from Lessor or the Supplier. Lessee
understands that the Equipment may be purchased for cash and that by signing
this Agreement and entering into the applicable Lease, Lessee has chosen to
lease the Equipment. By signing this Agreement, Lessee agrees to pay a lease
charge and lease charge rate. The total lease charge is equal to (i) the
Monthly Rent multiplied by the number of months in the initial Term, plus (ii)
the Option Price, minus (iii) the Total Price set forth in the applicable
Schedule. The lease charge portion of the Monthly Rent payments may be
determined by applying to the Total Price the rate which will amortize such
Total Price (adjusting for any Advance Rent) down to the Option Price at a
constant rate over the Initial Term by payment of the Monthly Rent. The lease
charge rate is the constant rate referred to in the preceding sentence. The
lease charge rate can also be calculated using the Total Price as the present
value, the Option Price as the future value, the Monthly Rent as the payment
and the term as stated herein. The lease charge rate may be higher or lower
than the actual interest rate because of the amortization of certain payments
made to or by the vendor. If this transaction were re-characterized as a
financing, no lease charge, late charge, or post maturity interest charge is
intended to exceed the maximum amount of time price differential or interest,
as applicable, permitted to be charged or collected by applicable law. If this
transaction were re-characterized as a financing and one or more of such
charges exceed such maximum, then such charges will be reduced to the legally
permitted maximum charge and any excess charge will be used to reduce the
initial value of the Total Price or refunded.
(b) Time is of the essence of each Lease. Lessor’s failure at any time to
require that Lessee strictly perform its obligations under any Lease will not
prevent Lessor from later requiring such performance. Lessee agrees, upon
Lessor’s request, to sign any document presented by Lessor from time to time to
protect Lessor’s rights in the Equipment. LESSEE AND LESSOR EACH WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM OR RELATED TO A LEASE.
Lessee also agrees to pay Lessor’s attorneys’ fees and out-of-pocket expenses
in protecting or enforcing its rights under a Lease. Lessee will pay attorney’s
fees and costs of collection, up to the amount permitted by law. Lessor and
Lessee agree that legal fees and costs up to twenty percent (20%) of the amount
then due under this Lease are reasonable.
(c) All required notices will be considered to have been given if sent by
registered or certified mail or overnight courier service to the Lessor at the
address stated above and to the Lessee at its address stated in the Lease, or
at such other place as such addressee may have designated in writing.

Ed#: 5

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 76
CRC: 48020
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 4

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.17.04.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

<PAGE>
4
(d) Each Lease constitutes the entire agreement of the parties with
respect to the lease of the Equipment and supersedes and Incorporates all prior
oral or written agreements or statements. So long as there is no Default,
Lessor shall not interfere with Lessee’s quiet enjoyment of Equipment. If a
provision of a Lease is declared invalid under law, the affected provision will
be considered omitted or modified to conform to applicable law. All other
provisions will remain in full force and effect.
(e) If Lessee fails to comply with any provision of a Lease, Lessor has
the right, but is not obligated, to have such provision brought into
compliance. This right is in addition to the Lessor’s right to declare a
Default. All expenses incurred by Lessor in bringing about such compliance will
be considered Rent which is due to Lessor within five (5) days after the date
Lessor sends to Lessee a written request for payment.
(f) All overdue payments will bear interest at the Overdue Rate, which is
the lower of twenty percent (20%) per annum or the maximum rate allowed by law.
Interest will accrue daily until payment in full is received.
(g) All of Lessor’s rights (including indemnity rights) under a Lease
survive the Lease’s expiration or termination, and are enforceable by Lessor,
its successors and assigns.
(h) If at Lessee’s request, Lessor agrees in its sole discretion to
permit the early termination of any Lease, Lessee agrees to pay Lessor a fee to
compensate Lessor for the privilege of doing so in an amount not greater than
permitted by applicable law.
(i) ARTICLE 2A: THIS LEASE IS A "FINANCE" LEASE AS DEFINED IN ARTICLE 2A
OF THE UNIFORM COMMERCIAL CODE. LESSEE AGREES THAT IT WILL KEEP THE EQUIPMENT
FREE AND CLEAR FROM ALL CLAIMS, LIENS AND ENCUMBRANCES AND WILL NOT ASSIGN,
SUBLET OR GRANT A SECURITY INTEREST IN THE EQUIPMENT OR IN ANY LEASE WITHOUT
LESSOR’S PRIOR WRITTEN CONSENT. To the extent permitted by applicable law,
Lessee hereby waives all rights and remedies conferred upon a Lessee by Article
2A (sections 506-522) of the Uniform Commercial Code, including but not limited
to Lessee’s rights to: (i) cancel or repudiate the Lease; (ii) reject, revoke
acceptance or accept partial delivery of the Equipment or "cover"; (iii)
recover damages from Lessor for any breach of warranty or for any other reason;
and (iv) grant a security interest in any Equipment in Lessee’s possession. To
the extent permitted by applicable law, Lessee also hereby waives any rights
now or hereafter conferred by statute or otherwise that may limit or modify any
of Lessor’s rights or remedies hereunder. Any action by Lessee against Lessor
for any default under any Lease, including breach of warranty or indemnity,
shall be commenced within one (1) year after any such cause of action accrues.
(j) THIS AGREEMENT SHALL BE BINDING AND EFFECTIVE WHEN ACCEPTED BY LESSOR
AT ITS OFFICES IN CONNECTICUT. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN
CONNECTICUT AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
CONNECTICUT LAW. LESSEE AGREES THAT ALL LEGAL ACTIONS IN CONNECTION WITH THIS
AGREEMENT, AT LESSOR’S OPTION, TAKE PLACE IN CONNECTICUT.
THIS AGREEMENT AND ANY SCHEDULE AND ANNEXES THERETO CONSTITUTE THE ENTIRE
AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. THIS
AGREEMENT IS EFFECTIVE AS OF THE EFFECTIVE DATE UPON SIGNING BY BOTH LESSOR AND
LESSEE. A LEASE MAY NOT BE CHANGED EXCEPT BY WRITTEN AGREEMENT SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE PARTY AGAINST WHOM IT IS TO BE ENFORCED.
LESSEE IRREVOCABLY AUTHORIZES LESSOR TO PREPARE AND SIGN ON BEHALF OF LESSEE
ANY INSTRUMENT NECESSARY OR EXPEDIENT FOR FILING, RECORDING OR PERFECTING THE
INTEREST OF LESSOR IN EACH LEASE, THE RELATED EQUIPMENT AND THE PROCEEDS OF
BOTH.
LESSOR:

Ed#: 4

*P66294/6101704/4*

GENERAL ELECTRIC
CAPITAL CORPORATION

LESSEE: Taser International, Inc.

By:

/s/ Eileen Jewell
-------------------------------

By: X
/s/ Thomas P. Smith
-------------------------------

Eileen Jewell
---------------------------------(Print or Type Name)

X
Thomas P. Smith
---------------------------------(Print or Type Name)

Operations Team Leader
---------------------------------(Print or Type Title)

X
President
---------------------------------(Print or Type Title)

Date of Execution: 5/3/01
----------------

Date of Execution: X
4/17/01
---------------Taser ID
Social Security #/
Taxpayer ID: X 860741227
----------------

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 78
CRC: 38178
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 5

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.17.05.00

[E/O]

Date: 15-MAR-2002 21:10:11.51

SN: 0

<PAGE>
5
[GE LOGO]
GE CAPITAL
--------Schedule No. 4070297 001
MASTER LEASE AGREEMENT EFFECTIVE DATE: 04/17/2001
THIS SCHEDULE ("Schedule") incorporates all of the terms of the above
Master Lease Agreement ("Agreement"). This Schedule and the Agreement as it
relates to this Schedule constitutes a lease ("Lease") for the equipment
described below ("Equipment") General Electric Capital Corporation ("Lessor")
and the Lessee indicated below. All terms used and not defined in this Schedule
have the definitions stated in the Agreement.
A. LESSEE:

LEGAL NAME:
TRADE NAME (if any):
ADDRESS:

Taser International, Inc.

LEGAL ENTITY - Type:
State of Organization:
Date of Establishment:

---------------

7860 E McClain Dr Suite 2
Scottsdale, Arizona 85260

B. SUPPLIER:

PerkinElmer Instruments
761 Main Ave.
Norwalk, Connecticut 06859

C. EQUIPMENT LOCATION:
Street Address:
County:
City, State Zip:

7860 E McClain Dr Suite 2
Maricopa
Scottsdale, Arizona 85260

D. DESCRIPTION OF EQUIPMENT:
EQUIPMENT TYPE/MODEL/SERIAL/ID NUMBERS
------------------------------------------PX 2000M
Extended

NUMBER OF UNITS
-------------------

Part # PX2000M-Computer based X-Ray
Warranty

Equipment Price:
Sales Tax:
Freight:
Installation:

Total Price:

E. TRANSACTION TERMS:
Lease Type (check one):

A
X

Initial Term: 48
Rent:
48

B

at

1
1

$36,995.00
---------$ 0.00
-----$450.00
------$500.00
------$37,945.00
----------

(Tax Lease, 0-year property; all Sections other
than 14(b) and 15(a) apply).
(Lease Purchase all Sections other than 4(b),
11(c) and 14(a) apply).

X Monthly

Quarterly

Annual Payments

$953.56

Advance Rent:
Sales Tax:

$ 0.00
0

Total Advance Rent: 0
Last Funding Date:

7/16/2001

Ed#: 3

*P66294/6101705/3*

Casualty Value Percentage:
$1.00
Option Price
Lease Type B Option Price: $1

0

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 65
CRC: 23602
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 6

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.17.06.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

<PAGE>
6
F. ADDITIONAL TERMS (if any):
Lessee’s periodic lease payments are calculated using a lease rate factor
(the "Lease Rate Factor"). The Lease Rate Factor is calculated, in part, using
an interest rate based on the interest rate for swaps (the "Swap Rate") that
most closely approximates the initial term of the Lease as published in the
Federal Reserve Statistical Release H.15 available at
http://www.federalreserve.gov/releases/h15/update on 4/16/2001 (the "Initial
Rate Date"). The Lease Rate Factor will be held until 5/16/2001 (the "Rate
Expiration Date"). If Lessee does not accept the Equipment on or before the
Rate Expiration Date, the Lease Rate Factor and Lessee’s periodic lease payment
may be adjusted if the Swap Rate as reported four (4) business days prior to
acceptance of the Equipment is different than the Swap Rate as reported on the
Initial Rate Date. Lessor will notify Lessee if the Lease Rate Factor changes.
If the Lease Commencement Date is not the first or the fifteenth day of any
calendar month (a "Payment Date"), the Initial Term shall be extended by the
number of days between the Lease Commencement Date and the Payment Date which
first occurs after the Lease Commencement Date, and Lessee’s first payment will
be increased by 1/30th of the Monthly Rent multiplied by the number of days
elapsed from the Lease Commencement Date to the day immediately preceding the
Payment Date which first occurs after the Lease Commencement Date.
__. Payments in Advance - If payments are in advance and the Lease Commencement
Date is a Payment Date, the first payment is due on the Lease Commencement
Date. If the Lease Commencement Date is after the first but before the
fifteenth day of the month, the first payment is due on the fifteenth day of
the month of the Lease Commencement Date. If the Lease Commencement Date is
after the fifteenth day of the month, the first payment is due on the first day
of the month following the Lease Commencement Date.
X_. Payments in Arrears - If payments are in arrears and the Lease Commencement
Date is the first day of the month, the first payment is due on the first day
of the month following the month of the Lease Commencement Date. If payments
are in arrears and the Lease Commencement Date is after the first but before
(or on) the fifteenth day of the month, the first payment is due on the
fifteenth day of the month following the month of the Lease Commencement Date.
If the Lease Commencement Date is after the fifteenth day of the month, the
first payment is due on the first day of the second month following the month
of the Lease Commencement Date.

LESSOR: General Electric Capital Corporation
By: /s/ Eileen Jewell
------------------------------Eileen Jewell
-----------------------------------(Print or Type Name)
Operations Teamleader
-----------------------------------(Print or Type Title)
Date of Approval:

5/2/01
-------------------

Ed#: 7

*P66294/6101706/7*

LESSEE: Taser International, Inc.
By: x /s/Thomas P. Smith
-----------------------------x Thomas P. Smith
-----------------------------(Print or Type Name)
x President
-----------------------------(Print or Type Title)
Date of Execution:

4/17/01
------------

Social Security Or Taxpayer ID No.: Taser ID 860741227
-------------------

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 72
CRC: 35882
P66294.SUB, DocName: EX-10.17, Doc: 4, Page: 7

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 610.17.07.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

<PAGE>
7
[GE CAPITAL Logo]
GE CAPITAL
_________
B - CERTIFICATE OF ACCEPTANCE

ACCOUNT SCHEDULE # 4070297-001

Annex B to Schedule No.001 Effective Date: 4/17/2001 ("Schedule")
Master Lease Agreement Effective Date:
4/17/2001
To General Electric Capital Corporation (LESSOR):
A. LESSEE:

LEGAL NAME:
Taser International, Inc.
TRADE NAME (if any):
ADDRESS:
7860 E McClain Dr Suite 2
Scottsdale, Arizona 85260

B. SUPPLIER:

NAME:
STREET ADDRESS:
CITY, STATE ZIP:

C. EQUIPMENT LOCATION:
STREET ADDRESS:
COUNTY:
CITY, STATE ZIP:

PerkinElmer Instruments
761 Main Ave.
Norwalk, Connecticut 06859
7860 E McClain Dr Suite 2
Maricopa
Scottsdale, Arizona 85260

D. DESCRIPTION OF EQUIPMENT:
EQUIPMENT TYPE/MODEL/SERIAL/ID NUMBERS
------------------------------------------------PX 2000M
Extended

NUMBER OF UNITS
-----------------------

Part # PX2000M-Computer based X-Ray
Warranty

1
1

LESSEE, THROUGH ITS AUTHORIZED REPRESENTATIVE, CERTIFIES TO LESSOR THAT:
(a)All the Equipment has been delivered to and inspected by Lessee on the
Lease Commencement Date specified below pursuant to the above Schedule and
Master Lease Agreement as it relates to such Schedule (the "Lease");
(b)Lessee irrevocably accepts the Equipment for lease under the Lease as of
the Lease Commencement Date: and
(c)No event which would allow the Lessor to declare a Default (Section 13 of
the Master Lease Agreement) has occurred, and all of the representations and
warranties made in the Lease are true as of the Lease Commencement Date.
(d)LESSEE HEREBY EXPRESSLY AUTHORIZES GENERAL ELECTRIC CAPITAL CORPORATION TO
INSERT THE DATE OF ACCEPTANCE/LEASE COMMENCEMENT DATE IN THE SPACE BELOW UPON
THE VERBAL INSTRUCTION OF LESSEE.
LESSEE:

Taser International, Inc.

By: /s/ Thomas P. Smith
------------------------------------Thomas P. Smith
------------------------------------(Print or Type Name)
President
------------------------------------(Print or Type Title)
Date of Acceptance/
Lease Commencement Date:

4/25/01
------------

UPON EXECUTION, PLEASE MAIL TO:
GENERAL ELECTRIC CAPITAL CORPORATION
Danbury Operations Center
ATTN: Marie Sefsik
10 Riverview Drive
Danbury, CT 06810
</TEXT>
</DOCUMENT>

Ed#: 7

*P66294/6101707/7*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P66294.SUB, DocName: EX-23.1, Doc: 5

[B/E]

<DOCUMENT>
<TYPE>
<FILENAME>
<DESCRIPTION>
<TEXT>

EX-23.1
p66294ex23-1.txt
EX-23.1

JB: *

Phone: (602) 223-4455

Operator: BPX31027

PN: DOCHDR 5

Date: 15-MAR-2002 21:10:11.51

SN: *

*DOCHDR/5*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 43
CRC: 12757
P66294.SUB, DocName: EX-23.1, Doc: 5, Page: 1

Phone: (602) 223-4455

Operator: BPX31027

[E/O]

JB: P66294 PN: 623.01.00.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

<PAGE>
1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
TASER International, Inc.:
We have audited the accompanying balance sheets of TASER INTERNATIONAL, INC. (a
Delaware corporation) as of December 31, 2001 and 2000, and the related
statements of operations, stockholders’ equity (deficit) and cash flows for
each of the two years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TASER International, Inc. as
of December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.
As explained in Note 6 to the financial statements, effective January 1, 2001,
concurrent with its change in tax status from an S corporation to a C
corporation, the Company changed its method of accounting for income taxes and
adopted the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes.
/s/ Arthur Andersen LLP
Phoenix, Arizona
February 4, 2002
</TEXT>
</DOCUMENT>

Ed#: 1

*P66294/62301/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P66294.SUB, DocName: EX-99.1, Doc: 6

[B/E]

<DOCUMENT>
<TYPE>
<FILENAME>
<DESCRIPTION>
<TEXT>

EX-99.1
p66294ex99-1.txt
EX-99.1

JB: *

Phone: (602) 223-4455

Operator: BPX31027

PN: DOCHDR 6

Date: 15-MAR-2002 21:10:11.51

SN: *

*DOCHDR/6*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 67
CRC: 64707
P66294.SUB, DocName: EX-99.1, Doc: 6, Page: 1
Description: Exhibit 99.1

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 699.01.00.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 2

*P66294/69901/2*

1
EXHIBIT 99.1
CERTAIN FACTORS TO CONSIDER IN CONNECTION
WITH FORWARD-LOOKING STATEMENTS

WE ARE MATERIALLY DEPENDENT ON ACCEPTANCE OF OUR PRODUCTS BY THE LAW ENFORCEMENT
AND CORRECTIONS MARKET, AND IF LAW ENFORCEMENT AND CORRECTIONS AGENCIES DO NOT
PURCHASE OUR PRODUCTS, OUR REVENUES WILL BE ADVERSELY AFFECTED AND WE MAY NOT BE
ABLE TO EXPAND INTO OTHER MARKETS.
A substantial number of law enforcement and corrections agencies may not
purchase our conducted energy, less-lethal weapons. In addition, if our products
are not widely accepted by the law enforcement and corrections market, we may
not be able to expand sales of our products into other markets. Law enforcement
and corrections agencies may be influenced by claims or perceptions that
conducted energy weapons are unsafe or may be used in an abusive manner. In
addition, earlier generation conducted energy weapons may have been perceived as
ineffective. Sales of our products to these agencies may also be delayed or
limited by these claims or perceptions.
WE SUBSTANTIALLY DEPEND ON SALES OF THE ADVANCED TASER, AND IF THIS PRODUCT IS
NOT WIDELY ACCEPTED, OUR GROWTH PROSPECTS WILL BE DIMINISHED.
In 2001 and 2000, we derived the majority of our revenues from sales of the
ADVANCED TASERs and related cartridges, and expect to depend on sales on this
product for the foreseeable future. A decrease in the prices of or demand for
this product line, or its failure to achieve broad market acceptance, would
significantly harm our growth prospects, operating results and financial
condition.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY IN THE LAW ENFORCEMENT AND CORRECTIONS MARKET AND HAVE BEEN FOCUSED ON
OUR CURRENT BUSINESS STRATEGY FOR ONLY TWO YEARS.
We revised our business strategy in late 1999 to concentrate on the law
enforcement and corrections market. Accordingly, we have a limited operating
history based on which you can evaluate our present business and future
prospects. We face risks and uncertainties relating to our ability to implement
our business plan successfully. Our prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by newly-public
companies that have recently changed their business strategies. If we are
unsuccessful in addressing these risks and uncertainties, our business, results
of operations, financial condition and prospects will be materially harmed.
IF WE ARE UNABLE TO MANAGE OUR PROJECTED GROWTH, OUR GROWTH PROSPECTS MAY BE
LIMITED AND OUR FUTURE PROFITABILITY MAY BE ADVERSELY AFFECTED.
We intend to expand our sales and marketing programs and our manufacturing
capability. Rapid expansion may strain our managerial, financial and other
resources. If we are unable to manage our growth, our business, our operating
results and financial condition could be adversely affected. Our systems,
procedures, controls and management resources also may not be adequate to
support our future operations. We will need to continually improve our
operations, financial and other internal systems to manage our growth
effectively, and any failure to do so may lead to inefficiencies and
redundancies, and result in reduced growth prospects and profitability.
WE MAY FACE PERSONAL INJURY AND OTHER LIABILITY CLAIMS THAT HARM OUR REPUTATION
AND ADVERSELY AFFECT OUR SALES AND FINANCIAL CONDITION.
Our products are often used in aggressive confrontations that may result in
serious, permanent bodily injury to those involved. Our products may cause or be
associated with these injuries. A person injured in a confrontation or otherwise
in connection with the use of our products may bring legal action against us to
recover damages on the basis of theories including personal injury, wrongful
death, negligent design, dangerous product or inadequate warning. We may also be
subject to lawsuits involving allegations of misuse of our products.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 70
CRC: 36012
P66294.SUB, DocName: EX-99.1, Doc: 6, Page: 2
Description: Exhibit 99.1

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 699.02.00.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 2

*P66294/69902/2*

<PAGE>
2
If successful, personal injury, misuse and other claims could have a material
adverse effect on our operating results and financial condition. Although we
carry product liability insurance, significant litigation could also result in a
diversion of management’s attention and resources, negative publicity and an
award of monetary damages in excess of our insurance coverage.
OUR FUTURE SUCCESS IS DEPENDENT ON OUR ABILITY TO EXPAND SALES THROUGH
DISTRIBUTORS AND OUR INABILITY TO RECRUIT NEW DISTRIBUTORS WOULD NEGATIVELY
AFFECT OUR SALES.
Our distribution strategy is to pursue sales through multiple channels with an
emphasis on independent distributors. Our inability to recruit and retain police
equipment distributors who can successfully sell our products would adversely
affect our sales. In addition, our arrangements with our distributors are
generally short-term. If we do not competitively price our products, meet the
requirements of our distributors or end-users, provide adequate marketing
support, or comply with the terms of our distribution arrangements, our
distributors may fail to aggressively market our products or may terminate their
relationships with us. These developments would likely have a material adverse
effect on our sales. Our reliance on the sales of our products by others also
makes it more difficult to predict our revenues, cash flow and operating
results.
WE EXPEND SIGNIFICANT RESOURCES IN ANTICIPATION OF A SALE DUE TO OUR LENGTHY
SALES CYCLE AND MAY RECEIVE NO REVENUE IN RETURN.
Generally, law enforcement and corrections agencies consider a wide range of
issues before committing to purchase our products, including product benefits,
training costs, the cost to use our products in addition to or in place of other
less-lethal products, product reliability and budget constraints. The length of
our sales cycle may range from 60 days to a year or more. We may incur
substantial selling costs and expend significant effort in connection with the
evaluation of our products by potential customers before they place an order. If
these potential customers do not purchase our products, we will have expended
significant resources and received no revenue in return.
MOST OF OUR END-USERS ARE SUBJECT TO BUDGETARY AND POLITICAL CONSTRAINTS THAT
MAY DELAY OR PREVENT SALES.
Most of our end-user customers are government agencies. These agencies often do
not set their own budgets and therefore have little control over the amount of
money they can spend. In addition, these agencies experience political pressure
that may dictate the manner in which they spend money. As a result, even if an
agency wants to acquire our products, it may be unable to purchase them due to
budgetary or political constraints. Some government agency orders may also be
canceled or substantially delayed due to budgetary, political or other
scheduling delays which frequently occur in connection the acquisition of
products by such agencies.
GOVERNMENT REGULATION OF OUR PRODUCTS MAY ADVERSELY AFFECT SALES.
Federal regulation of sales in the United States. Our weapons are not firearms
regulated by the Bureau of Alcohol, Tobacco and Firearms, but are consumer
products regulated by the United States Consumer Product Safety Commission.
Although there are currently no federal laws restricting sales of our weapons in
the United States, future federal regulation could adversely affect sales of our
products.
Federal regulation of international sales. Our weapons are controlled as a
"crime control" product by the United States Department of Commerce, or DOC, for
export directly from the United States. Consequently, we must obtain an export
license from the DOC for the export of our weapons from the United States other
than to Canada. Our inability to obtain DOC export licenses in a timely basis
for sales of our weapons to the majority of our international customers could
significantly and adversely affect our international sales.
State and local regulation. Our weapons are controlled, restricted or their use
prohibited by several state and local governments. Our weapons are banned from
consumer sale or use in seven states: New York, New Jersey, Rhode Island,
Michigan, Wisconsin, Massachusetts and Hawaii. Law enforcement use of our

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 67
CRC: 46506
P66294.SUB, DocName: EX-99.1, Doc: 6, Page: 3
Description: Exhibit 99.1

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 699.03.00.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

Ed#: 2

*P66294/69903/2*

<PAGE>
3
products is also restricted in Michigan, New Jersey, and Rhode Island. Some
municipalities, including Omaha, Nebraska and Washington, D.C. also prohibit
consumer use of our products. Other jurisdictions may ban or restrict the sale
of our products and our product sales may be significantly affected by
additional state, county and city governmental regulation.
Foreign regulation. Certain foreign jurisdictions, including Japan, the United
Kingdom, Australia, Italy and Hong Kong, prohibit the sale of conducted energy
weapons, limiting our international sales opportunities.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY LOSE A COMPETITIVE
ADVANTAGE OR INCUR SUBSTANTIAL LITIGATION COSTS TO PROTECT OUR RIGHTS.
Our future success depends in part upon our proprietary technology. Our
protective measures, including a patent, trademarks and trade secret laws, may
prove inadequate to protect our proprietary rights. Our United States patent on
the construction of the gas cylinder used to store the compress nitrogen in our
cartridges expires in 2015. The holder of the patent on the process by which
compressed gases launch the probes in our cartridges has licensed the technology
covered by the patent for use in electronic weapons only to us and to two other
companies. This patent expires in 2009. The scope of any patent to which we have
or may obtain rights may not prevent others from developing and selling
competing products. The validity and breadth of claims covered in technology
patents involve complex legal and factual questions, and the resolution of such
claims may be highly uncertain, lengthy and expensive. In addition, our patents
may be held invalid upon challenge, others may claim rights in or ownership of
our patents.
WE ARE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WHICH WILL CAUSE US
TO INCUR LITIGATION COSTS AND DIVERT MANAGEMENT ATTENTION FROM OUR BUSINESS.
Any intellectual property infringement claims against us, with or without merit,
could be costly and time-consuming to defend and divert our management’s
attention from our business. If our products were found to infringe a third
party’s proprietary rights, we could be required to enter into royalty or
licensing agreements in order to be able to sell our products. Royalty and
licensing agreements, if required, may not be available on terms acceptable to
us or at all.
In early April 2001, a patent licensee sued us in the United District Court,
Central District of California. The lawsuit alleges that certain technology used
in the firing mechanism for our weapons infringes upon a patent for which the
licensee holds a license, and seeks injunctive relief and unspecified monetary
damages. An outcome that is adverse to us, costs associated with defending the
lawsuit, and the diversion of management’s time and resources as a result of the
claim could harm our business and our financial condition.
COMPETITION IN THE LAW ENFORCEMENT AND CORRECTIONS MARKET COULD REDUCE OUR SALES
AND PREVENT US FROM ACHIEVING PROFITABILITY.
The law enforcement and corrections market is highly competitive. We face
competition from numerous larger, better capitalized and more widely known
companies that make other less-lethal weapons and products, as well as from a
small company that also sells conducted energy less-lethal weapons. Increased
competition may result in greater pricing pressure, lower gross margins and
reduced sales, and prevent us from achieving profitability.
DEFECTS IN OUR PRODUCTS COULD REDUCE DEMAND FOR OUR PRODUCTS AND RESULT IN A
LOSS OF SALES, DELAY IN MARKET ACCEPTANCE AND INJURY TO OUR REPUTATION.
Complex components and assemblies used in our products may contain undetected
defects that are subsequently discovered at any point in the life of the
product. In 2000, we recalled a series of ADVANCED TASERs due to a defective
component. In connection with the recall, we incurred expenses of approximately
$50,000. Defects in our products may result in a loss of sales, delay in market
acceptance, injury to our reputation and increased warranty costs.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 70
CRC: 9981
P66294.SUB, DocName: EX-99.1, Doc: 6, Page: 4
Description: Exhibit 99.1

[E/O]

Phone: (602) 223-4455

Operator: BPX31027

JB: P66294 PN: 699.04.00.00

Date: 15-MAR-2002 21:10:11.51

SN: 0

<PAGE>
4
OUR REVENUES AND OPERATING RESULTS MAY FLUCTUATE UNEXPECTEDLY FROM QUARTER TO
QUARTER, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.
Our revenues and operating results have varied significantly in the past and may
vary significantly in the future due to various factors, including, but not
limited to: increased raw material expenses, changes in our operating expenses,
market acceptance of our products and services, regulatory changes that may
affect the marketability of our products, and budgetary cycles of municipal,
state and federal law enforcement and corrections agencies. As a result of these
other factors, we believe that period- to- period comparisons of our operating
results may not be meaningful in the new term and that you should not rely upon
our performance in a particular period as indicating of our performance in any
future period.
OUR DEPENDENCE ON THIRD PARTY SUPPLIERS FOR KEY COMPONENTS OF OUR WEAPONS COULD
DELAY SHIPMENT OF OUR PRODUCTS AND REDUCE OUR SALES.
We depend on certain domestic and foreign suppliers for the delivery of
components used in the assembly of our products. Our reliance on third-party
suppliers creates risks related to our potential inability to obtain an adequate
supply of components or subassemblies and reduced control over pricing and
timing of delivery of components and sub-assemblies. Specifically, we depend on
suppliers of sub-assemblies, machined parts, injection molded plastic parts,
printed circuit boards, customer wire fabrications and other miscellaneous
customer parts of our products. The final assembly of the cartridges used in the
firing of our weapons was prevented for four weeks beginning in November 2000 by
a supplier’s receipt of defective wire used as a component in the cartridges. We
also do not have long-term agreements with any of our suppliers. Any
interruption of supply for any material components of our products could
significantly delay the shipment of our products and have a material adverse
effect on our revenues, profitability and financial condition.
FOREIGN CURRENCY FLUCTUATIONS MAY REDUCE OUR COMPETITIVENESS AND SALES IN
FOREIGN MARKETS.
The relative change in currency values creates fluctuations in product pricing
for potential international customers. These changes in foreign end-user costs
may result in lost orders and reduce the competitiveness of our products in
certain foreign markets. These changes may also negatively affect the financial
condition of some foreign customers and reduce or eliminate their future orders
of our products.
PENDING LITIGATION MAY SUBJECT US TO SIGNIFICANT LITIGATION COSTS AND DIVERT
MANAGEMENT ATTENTION FROM OUR BUSINESS.
A former distributor of our products has filed a lawsuit in the state of New
York asserting certain rights of exclusive sales representation with respect to
our products. The former distributor claims that he has the exclusive right to
market and sell our products to an extensive list of our current and potential
customers throughout the United States. The suit was dismissed in February 2001
for lack of personal jurisdiction of the New York court. This case is now
pending in the State of Arizona. In addition, in early April 2001, a patent
licensee sued us in the United Stated District Court, Central District of
California. The suit alleges that certain technology used in the firing
mechanism for our weapons infringes upon a patent for which the licensee hold a
license, and seeks injunctive relief and unspecified monetary damages. An
outcome that is adverse to us, costs associated with defending these lawsuits
and the diversion of our management’s time and our resources as a result of
these claims could harm our business or financial condition.
USE OF ESTIMATES MAY DIFFER FROM ACTUAL FINANCIAL RESULTS.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
</TEXT>
</DOCUMENT>
</SUBMISSION>

Ed#: 2

*P66294/69904/2*

FOR IMMEDIATE RELEASE
September 15, 2001

CONTACT:

Phil Smith
Chairman of the Board
TASER International, Inc.
(480) 905-2005

TASER International, Inc. Announces Expected Shortfall in Third Quarter Revenues

SCOTTSDALE, AZ. – TASER International, Inc. (NASDAQ: TASR), a provider of advanced less-lethal weapons
for use in the law enforcement, private security and personal defense markets, today announced an expected
shortfall in third quarter revenues due to delays in the issuance of agency purchase orders previously anticipated for
Q3 of this year. The Company believes these orders will be awarded and shipped in Q4, 2001. The Company's
fiscal third quarter ends September 30, 2001.
Commenting on the expected revenue shortfall, Rick Smith, Chief Executive Officer, said, "We had expected
several large orders, including one foreign national government order, to be awarded during this quarter. We now
believe this order will be received during our fourth quarter. We have strong indications that we have won this
order, but the procurement process will take a few weeks longer than originally expected. Further, the attacks on the
World Trade Center and Pentagon have refocused priorities of some of our American law enforcement customers in
the short term. This situation may cause delays in the normal procurement process for orders we had been
anticipating prior to October 1. Accordingly, our current expectation is for third quarter revenues to be
approximately $1.1 to $1.4 million with the potential for a loss per basic share as high as $0.06 per share.
“Although we are experiencing unexpected delays in orders this quarter, the momentum we have built in the law
enforcement market continues to accelerate and we are optimistic that our sales growth will continue. Following on
our recent hire of Karl Walter as Executive Vice President of Sales and Marketing, we have added a national sales
force of over 50 full-time, independent manufacturer’s representatives. All of these sales representatives will be
trained and deployed by the end of September, giving us a powerful new field sales presence. We believe the
implementation of this new sales force will have a positive impact on our fourth quarter and our 2002 sales growth,”
said Mr. Smith.
About TASER International, Inc.
TASER International, Inc. provides advanced less-lethal weapons for use in the law enforcement, private security,
and personal defense markets. Its flagship ADVANCED TASER® product uses proprietary technology to
incapacitate dangerous, combative, or high-risk subjects that may be impervious to other less-lethal means. This
technology reduces injury rates to suspects and officers, thereby lowering liability risk and improving officer safety.
The ADVANCED TASER is currently in testing or deployment at over 900 law enforcement and correctional
agencies in the U.S. and Canada.
Statements in this press release that are not historical are "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements include a high degree of risk and uncertainty, are predictions only and actual events or results may differ
materially from those projected in such forward-looking statements.
Factors that could cause or contribute to such differences include uncertainty as to the Company's ability to manage
its growth and successfully implement its business plan. These factors and others are more fully described in the
section entitled "Risks Related to Our Business" in the Company's Registration Statement on Form SB-2
(Registration No. 333-55658), as amended, filed with the Securities and Exchange Commission.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 42305
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 1
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 001.00.00.00 SN: 0
Ed#: 1
*P65463/001/1*
EDGAR 2

Table of Contents
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(X)

()

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-16391
TASER INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)

DELAWARE
(State or other jurisdiction
of incorporation or organization)
7860 E. MCCLAIN DRIVE, SUITE 2, SCOTTSDALE, ARIZONA
(Address of principal executive offices)

86-0741227
(I.R.S. Employer
Identification Number)
85260
(Zip Code)

(480) 991-0797
(Issuer’s telephone number)
There were 2,710,754 shares of the issuer’s common stock, par value $0.00001 per share, outstanding as of June 30, 2001.
Transitional Small Business Disclosure Format (Check One): Yes

No

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 64569
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 2
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 002.00.00.00 SN: 0
Ed#: 2
*P65463/002/2*
EDGAR 2

TABLE OF CONTENTS
PART I —FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO UNAUDITED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
PART II—OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 64569
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 2
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 002.00.00.00-1 SN: 0
Ed#: 2
*P65463/002/2*
EDGAR 2

Table of Contents
TASER INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001
TABLE OF CONTENTS
Page

PART I —FINANCIAL INFORMATION
ITEM 1. Financial Statements
Unaudited balance sheets as of June 30, 2001 and June 30, 2000
Unaudited statements of operations for the six months ended June 30, 2001 and 2000
Unaudited statements of cash flows for the six months ended June 30, 2001 and 2000
Notes to unaudited financial statements
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II —OTHER INFORMATION
ITEM 2. Changes in Securities
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES

1
2
3
4
6
8
8
9

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 59894
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 3
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 003.00.00.00 SN: 0
Ed#: 2
*P65463/003/2*
EDGAR 2

Table of Contents
PART I —FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements of TASER International, Inc. (the “Company”) include all adjustments (consisting
only of normal recurring accruals) which management considers necessary for the fair presentation of operating results, financial position
and cash flows as of June 30, 2001 and for the three month and six month periods ended June 30, 2001 and June 30, 2000.
TASER INTERNATIONAL, INC.
BALANCE SHEETS
June 30, 2001 and 2000
(UNAUDITED)
June 30, 2001

Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowance
Inventory
Prepaids and other

$

Total Current Assets
Property and Equipment, net
Other assets

5,232,771
578,816
792,908
58,680

June 30, 2000

$

6,663,175
500,684
80,916

Total Assets
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Current portion of notes payable
Current portion of notes payable to related parties
Current portion of capital lease obligations
Accounts payable and accrued liabilities
Customer deposits
Inventory financing payable
Accrued interest, primarily to related parties

7,244,775

$

849,831

$

—
3,701
60,257
751,973
111,987
—
—

$

110,000
161,312
22,712
716,277
51,631
189,980
195,580

Total Liabilities
Commitments and Contingencies
Stockholders’ Equity (Deficit):
Preferred Stock, 0.00001 par value per share; 25 million shares
authorized; 0 shares issued and outstanding at June 30, 2001 and
2000
Common Stock, 0.00001 par value per share; 50 million shares
authorized; 2,710,754 and 3,177,421 shares issued and outstanding
at June 31, 2001 and 2000
Additional paid-in capital
Deferred compensation
Retained Earnings (Accumulated Deficit)
Total Stockholders’ Equity (Deficit)
$

The accompanying notes are an integral part of these balance sheets.
1

590,679
259,152
—

$

Total Current Liabilities
Notes Payable to Related Parties, net of current portion
Capital Lease Obligations, net of current portion

Total Liabilities and Stockholders’ Equity

12,555
298,771
279,353
0

927,918
1,278,219
67,014

1,447,492
1,778,219
14,587

2,273,151

3,240,298

—

—

44
4,903,206
(86,519)
154,893

32
4,072,741
—
(6,463,240)

4,971,624

(2,390,467)

7,244,775

$

849,831

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 22614
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 4
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

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Table of Contents
TASER INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the three months and six months ended June 30, 2001 and 2000
(UNAUDITED)
Three Months Ended
June 30, 2001

Six Months Ended
June 30, 2001

June 30, 2000

747,755

$ 2,743,905

$ 1,484,819

530,235
127,934

265,244
102,477

1,039,133
215,793

532,609
219,434

Gross Margin
Sales, general and administrative expenses
Research and development expenses

879,405
596,476
13,304

380,034
374,590
975

1,488,979
1,044,841
13,454

732,776
717,682
5,475

Income from Operations
Interest Income
Interest Expense

269,625
16,239
90,439

4,469
—
80,001

430,684
19,918
192,273

9,619
—
152,221

Net Income (Loss) before Taxes
Provision for Income Tax

195,425
78,170

(75,532)
—

258,329
103,436

(142,602)
—

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense

$ 1,537,574

June 30, 2000

$

Net Income (Loss)

$

117,255

$

(75,532)

$

154,893

$

(142,602)

Net Income (Loss) per common and common equivalent
shares
Basic

$

0.05

$

(0.02)

$

0.08

$

(0.04)

$

0.05

$

(0.02)

$

0.08

$

(0.04)

Diluted
Weighted average number of common and common
equivalent shares outstanding:
Basic
Diluted

2,211,878
2,357,327

The accompanying notes are an integral part of these financial statements.
2

3,177,421
3,177,421

1,868,765
2,014,215

3,177,421
3,177,421

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 38473
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 5
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 005.00.00.00 SN: 0
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*P65463/005/1*
EDGAR 2

Table of Contents
TASER INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2001 and 2000
(UNAUDITED)
Six Months Ended
June 30, 2001

Cash Flows from Operating Activities:
Net Income (Loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
Change in assets and liabilities:
Accounts Receivable
Inventory
Prepaids and other
Accounts payable and accrued liabilities
Customer Deposits
Accrued Interest

$

Net Cash used in operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment, net
Purchase of other assets
Net Cash used in investing activities
Cash Flows from Financing Activities:
Net payments under capital leases
Proceeds from notes payable
Payments on notes payable
Payment on financing payable
Additions to deferred financing costs
Deferred compensation
Compensatory stock options
Proceeds from Initial Public Offering
Repurchase of treasury stock

154,893

June 30, 2000

$

(142,602)

75,442

47,403

(266,135)
(571,739)
(34,145)
162,024
(427,342)
(268,134)

(176,850)
(121,186)
22,357
132,973
(10,686)
56,638

(1,175,136)

(191,953)

(215,800)
(85,000)

(46,020)
—

(300,800)

(46,020)

(20,769)
500,000
(2,220,874)
(189,980)
—
(6,599)
—
7,440,522
1,000,000

(6,280)
222,708
(24,732)
—
—
3,927
—
—

Net cash provided by financing activities

$ 6,502,300

$

195,623

Net Increase (Decrease) in Cash and Cash Equivalents

$ 5,026,364

$

(42,350)

Cash and Cash Equivalents, beginning of period

$

206,407

$

54,905

Cash and Cash Equivalents, end of period

$ 5,232,771

$

12,555

Supplemental Disclosure:
Cash paid for interest

$

$

95,583

Cash paid for income taxes
Noncash Investing and Financing Activities:
Fair value of stock warrants issued for IPO costs

150,481
—

—

$

14,569

—

Acquisition of property and equipment under capital leases

$

81,945

$

4,425

Fair value of stock options issued for payment of legal fees

$

33,177

$

—

Fair value of stock options issued for payment of consulting fees

$

8,042

$

3,927

Fair value of stock warrants issued for loan guarantees

$

10,060

The accompanying notes are an integral part of these financial statements.
3

—

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 10038
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 6
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 006.00.00.00 SN: 0
Ed#: 1
*P65463/006/1*
EDGAR 2

Table of Contents
TASER INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 —GENERAL
The accompanying quarterly financial statements of TASER International, Inc. (the “Company”) are unaudited and include all
adjustments (consisting only of normal recurring accruals) considered necessary by management to present a fair statement of the results
of operations, financial position and cash flows. They have been prepared in accordance with the instructions to Form 10-QSB, and,
accordingly, do not include all the information and footnotes required by generally accepted accounting principles for complete financial
statements.
The results of operations for the three-month and six month periods are not necessarily indicative of the results to be expected for the full
year and should be read in conjunction with the financial statements and notes thereto included in the Company’s Registration Statement
on Form SB-2, dated February 14, 2001, as amended. Certain prior year amounts have been reclassified to conform with the current year
presentation.
NOTE 2 —NET SALES
The components of net sales for the three months and six months ended June 30, 2001 and 2000.
For the Three Months Ended
Sales by Product Line:

ADVANCED TASER
AIR TASER
AUTO TASER
Other
Total

June 30, 2001

For the Six Months Ended

June 30, 2000

June 30, 2001

June 30, 2000

$

1,151,166
367,698
—
18,710

$

407,791
330,998
186
8,780

$

2,022,542
665,951
—
55,412

$

732,407
691,822
28,483
32,107

$

1,537,574

$

747,755

$

2,743,905

$

1,484,819

NOTE 3 —INVENTORIES
The inventories are stated at the lower of cost or market; cost is determined using the most recent acquisition cost method that
approximates the first-in, first-out (FIFO) method. A physical count was completed for both years prior to the quarter-end closing. The
components of inventories are as follows:
June 30, 2001

Raw materials and work-in-process
Finished goods
Total

4

June 30, 2000

$

635,066 $
157,842

108,761
170,592

$

792,908 $

279,353

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 27187
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 7
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 007.00.00.00 SN: 0
Ed#: 2
*P65463/007/2*
EDGAR 2

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NOTE 4 —EARNINGS PER SHARE
The Company follows SFAS No. 128, Earnings per Share, which requires the presentation of basic and diluted earnings per share. The
following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for net income
(loss):
Three Months Ended
June 30, 2001

Numerator for basic and diluted earnings per share:
Net Income (Loss)
Denominator for basic earnings per share weighted average shares:
Dilutive effect of shares issuable under stock options and warrants
outstanding*
Denominator for diluted earnings per share adjusted weighted average
shares*
Basic earnings per share
Diluted earnings per share
*

Six Months Ended

June 30, 2000

June 30, 2001

June 30, 2000

$ 117,255 $ (75,532) $ 154,893 $ (142,602)
2,211,878 3,177,421 1,868,765 3,177,421
145,449

—

145,450

—

2,357,327 3,177,421 2,014,215 3,177,421
$
0.05 $
(0.02) $
0.08 $
(0.04)
$
0.05 $
(0.02) $
0.08 $
(0.04)

In computing the loss per share for June 30, 2000, shares issued under stock option plans and warrants were excluded as their effect
was anti-dilutive.

NOTE 5 —SUBSEQUENT EVENT
On July 24, 2001, the Company’s Board of Directors authorized the prepayment of a 10% note payable of $822,528 to a director and
shareholder from a draw down under the Company’s existing line of credit. The terms of the payment included a 7.5% discount, or
$61,690 off the face amount of the note, which was recorded as additional paid in capital. The refinancing of this note will reduce future
interest expense due to the lower rate charged by the bank. Collateral for the line of credit is cash held in a liquid reserves account,
which as of June 30, 2001 was bearing interest at an rate of 3.84%.
5

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 62587
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 8
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 008.00.00.00 SN: 0
Ed#: 1
*P65463/008/1*
EDGAR 2

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following is a discussion of the results of operations and analysis of financial condition for both the three months and the six months
ended June 30, 2001. The following discussion may be understood more fully by reference to the financial statements, notes to the
financial statements, and the Management’s Discussion and Analysis of Financial Condition and Results of Operations section contained
in the Company’s Registration Statement on Form SB-2, dated February 14, 2001, as amended.
Certain statements contained in this report may be deemed to be forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995, and the Company intends that such forward-looking statements be subject to the safe-harbor created
thereby. Such forward-looking statements may relate to (1) expected revenue and earnings growth; (2) the Company’s estimates
regarding the size of its target markets; (3) the ability of the Company to successfully penetrate the law enforcement market; (4) the
growth expectations for existing accounts; (5) the ability of the Company to expand its product sales to the private security, military and
consumer self-defense markets; and (6) the Company’s business model. The Company cautions that these statements are qualified by
important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein. Such
factors include, but are not limited to: (1) market acceptance of the Company’s products; (2) the Company’s ability to establish and
expand its direct and indirect distribution channels; (3) the Company’s ability to attract and retain the endorsement of key opinionleaders in the law enforcement community; (4) the level of product technology and price competition for the Company’s ADVANCED
TASER products; (5) the degree and rate of growth of the markets in which the Company competes and the accompanying demand for
its products; and (6) other factors detailed in the Company’s filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2001 AND JUNE 30, 2000
Net sales. Net sales increased by $790,000, or 105.6%, to $1.5 million for the three months ended June 30, 2001 compared to $748,000
for the three months ended June 30, 2000. Net sales increased $1.2 million, or 84.8%, to $2.7 million for the six months ended June 30,
2001, compared to $1.5 million in the corresponding period in 2000. These increases were due almost entirely to the increased sales of
the ADVANCED TASER, to law enforcement distributors, law enforcement agencies and a large foreign security distributor. The
Company’s policy is to record product revenues at the time the product is shipped. The Company records training revenue as the service
is provided.
For the three months and six months ended June 30, 2001 and 2000, sales by product line were as follows:
For the Three Months Ended
Sales by Product Line:

ADVANCED TASER
AIR TASER
AUTO TASER
Other
Total

June 30, 2001

For the Six Months Ended

June 30, 2000

June 30, 2001

June 30, 2000

$

1,151,166
367,698
—
18,710

$

407,791
330,998
186
8,780

$

2,022,542
665,951
—
55,412

$

732,407
691,822
28,483
32,107

$

1,537,574

$

747,755

$

2,743,905

$

1,484,819

Cost of products sold. Cost of products sold increased by $290,000, or 79%, to $658,000 in the three months ended June 30, 2001
compared to $368,000 in the three months ended June 30, 2000. This increase was primarily due to the manufacturing costs associated
with the increased sales of the ADVANCED TASER product line in the three months ended June, 30, 2001 compared to the three
months ended June 30, 2000. As a percentage of total revenues, cost of products sold decreased to 42.8% of total revenues for the three
months ended June 30, 2001 from 49.2% for the three months ended June 30, 2000 due to the change in the mix of products sold towards
the higher margin ADVANCED TASER product line. Cost of products sold for the six month period increased $503,000, or 66.9%, to
$1.3 million in 2001 compared to $752,000 in 2000. This increase was also due to the increased sales of the ADVANCED TASER
products. As a percentage of total revenues, cost of products sold decreased to 45.7% in the more recent six month period from the
50.6% recorded at the same time last year.
Sales, general and administrative expenses. Sales, general and administrative expenses increased by $234,000, or 62.4%, to $610,000 in
the three months ended June 30, 2001 compared to $376,000 in the three months ended June 30, 2000. As a percentage of total revenues,
sales, general and administrative expenses decreased to 39.7% for the three months ended June 30, 2000. For the six month
6

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 49219
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 9
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 009.00.00.00 SN: 0
Ed#: 2
*P65463/009/2*
EDGAR 2

Table of Contents
period ending June 30, 2001, expenses increased $335,000, or 46.3% to $1.1 million compared to expenses of $723,000 for the
corresponding period in 2000. As a percentage of total revenues, sales, general and administrative expenses decreased to 38.6% from the
six months ended June 30, 2000.
The increase in sales, general and administrative expenses in 2001 versus 2000 was a result of investments in corporate infrastructure and
compliance. In January, 2001, the Company relocated its corporate offices to a new larger space that would facilitate the manufacturing
and assembly operations. Additionally, the Company has invested in new positions in both sales and administrative services to support
the expanding operations. The Company also experienced increased expenses associated with developing and maintaining corporate
compliance and in the development of its investor relations program.
Interest Income. For both the three months and six months ended June 30, 2001, the Company generated interest income of $16,000 and
$20,000 respectively. This income was associated with the investment of the unused IPO funds into a liquid reserve account that paid an
annual interest rate of 3.84% as of June 30, 2001. For the three and six months ended June 30, 2000, interest income was not significant.
Interest expense. Interest expense increased by $10,000 to $90,000 in the three months ended June 30, 2001 from $80,000 in the three
months ended June 30, 2000. For the six month period ended June 30, 2001, interest expense increased $40,000, to $192,000, compared
to $152,000 for the corresponding period in 2000. This increase was the result of interest on additional debt financing from an unrelated
private investor, new capital lease agreements, and additional accrued interest to related parties.
Corporate tax status. Prior to the Company’s re-incorporation in Delaware in February 2001, the Company was an S-corporation, which
allowed all the tax attributes to flow through to stockholders. In preparation for its initial public offering, the Company changed its tax
reporting status to a C-corporation, which was made retroactive January 1, 2001. In accordance with generally accepted accounting
principles, this conversion required the Company to reclassify its $6.8 million of accumulated deficit as a reduction to additional paid in
capital. As a result the June 30, 2001 retained earnings consists entirely of earnings of the corporation after the change in tax status.
Beginning in January, 2001, the Company has estimated and accrued income taxes equal to 40% of pre-tax income. As of June 30, 2001,
the Company accrued $103,000 for the six months ended June 30, 2001. In accordance with S-corporation financial reporting, no similar
expense was accrued for the six month period ending June 30, 2000.
Net Income. Net income increased to $117,000 in the three months ended June 30, 2001 compared to a net loss of $76,000 in the three
months ended June 30, 2000. For the six months ended June 30, 2001, net income increased to $155,000 compared to a net loss of
$143,000 for the corresponding period in 2000. The increase over the prior period was the result of increased sales and product margins,
and a reduction in the selling, general and administrative expenses as a percentage of total sales.
The weighted average diluted net income per share for the three months ended June 30, 2001 was $0.05 compared to a loss of $(0.02) in
the comparable prior period during which there were 966,000 more shares outstanding. The weighted average diluted income per share
for the six months ended June 30, 2001 was $0.08 compared to a loss of $(0.04) for the corresponding period in 2000.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity: On May 11, 2001, the Company completed its initial public offering and received net proceeds, after the underwriting
discount and financing costs, of approximately $8.4 million. As a result, the Company achieved positive working capital of $5.7 million
as of June 30, 2001, compared to a negative working capital of $857,000 at June 30, 2000.
In the six months ended June 30, 2001, the Company used $1.2 million of cash in operations compared to $192,000 used in operations
for the six months ended June 30, 2000. The increase in cash used in operations was due primarily to increase investments in raw
materials inventory to meet anticipated third and fourth quarter sales, to reduce accounts payable to vendors and to pay accrued interest
to related parties. Reduction of customer deposits, as the Company shipped previously paid orders, also resulted in a use of cash.
The Company also used $301,000 of cash in investing activities during the six months ended June 30, 2001, compared to $46,000 for the
same period in 2000. These funds were used to purchase production equipment required to increase production capacity, to
7

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 3519
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 10
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 010.00.00.00 SN: 0
Ed#: 2
*P65463/010/2*
EDGAR 2

Table of Contents
purchase office equipment to furnish the new corporate offices, and to purchase the TASER Trademark and TASER.com web-site.
The net cash flows provided by financing activities were $6.5 million as of June 30, 2001, compared to $196,000 for the six months
ended June 30, 2000. This increase was a direct result of the net proceeds from the IPO less debt repayment.
Capital Resources. Historically, the Company has funded operating losses and expansion of its business through loans from two
shareholders. As of June 30, 2001, the Company generated $155,000 of cash from net income. In addition, the Company had cash and
cash equivalents of $5.2 million at June 30, 2001 as a result of its initial public offering. After payment of debt and accounts payable
during the three months ended June 30, 2001, the Company believes its monthly cash flow from operations will be adequate to cover its
monthly obligations.
The Company has obtained a revolving line of credit from a domestic bank with a total availability of $1.5 million. The line is secured
by substantially all of the Company’s assets, other than intellectual property, and bears interest at prime plus 1%. The line of credit
matures on April 30, 2002 and requires monthly payments of interest only. The Company had no borrowings under the line of credit at
June 30, 2001. See Note 5 to the unaudited financial statements for the periods ended June 30, 2001.
The Company anticipates that cash generated from operations, available borrowings under its line of credit and the proceeds from its
initial public offering will be sufficient to provide for its working capital needs and to fund future growth.
PART II—OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 11, 2001, the Company completed its initial public offering of 800,000 units, at an aggregate offering price of $10.4 million.
Each unit consisted of one and one-half shares of common stock and one and one-half redeemable public warrants, each whole warrant
to purchase one share of common stock. The initial public offering price was $13.00 per unit. The managing underwriter of the offering
was Paulson Investment Company, Inc. The units sold in the offering were registered under the Securities Act of 1933 on a Registration
Statement on Form SB-2, as amended (Registration No. 001-16391). The Securities and Exchange Commission declared the Registration
Statement effective on May 7, 2001.
In connection with the offering, the Company paid a total of approximately $1.1 million in underwriting discounts and expenses. After
deducting the underwriting discounts and commissions and offering costs and expenses paid to third parties, the net proceeds from the
offering to the Company were approximately $8.4 million.
The Company applied approximately $713,000 of net proceeds toward the repayment of notes payable. Of this amount, $100,000 was
paid to a related party for reimbursement of expenses, and $613,000 was paid to an unrelated private lender. The Company also repaid
$300,000 of accrued interest to related parties, and repaid $190,000 to retire a note payable to a vendor.
Since completion of the offering, the Company has also used $572,000 of proceeds to purchase additional raw materials inventory to
increase monthly production and $215,800 to purchase fixed assets being used in both operations and manufacturing. The Company used
$1.5 million to pay down its revolving line of credit with a domestic bank to eliminate monthly interest expense. The balance of the
proceeds were primarily invested in short term liquid reserves account at June 30, 2001. See Note 5 of the unaudited financial statements
for the periods ended June 30, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the three months ended June 30, 2001.
8

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER INT’L
CRC: 13047
P65463.SUB, DocName: 10QSB, Doc: 1, Page: 11
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31154

Date: 13-AUG-2001 13:45:41.03

JB: P65463 PN: 011.00.00.00 SN: 0
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*P65463/011/1*
EDGAR 2

Table of Contents
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TASER INTERNATIONAL, INC.
(Registrant)

Date: August 13, 2001

/s/ Patrick W. Smith
Patrick W. Smith,
Chief Executive Officer

Date: August 13, 2001

/s/ Kathleen C. Hanrahan
Kathleen C. Hanrahan,
Chief Financial Officer
(Principal Financial and Accounting Officer)
9

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P65780.SUB

[B/E]

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JB: *

10QSB
3
0001069183
########
Amy Young @ Bowne
602-817-4787
NONE
09-30-2001
bowne.edgar@bowne.com

Phone: (602) 223-4455

Operator: BPX31857

PN: SUBHDR

*SUBHDR*

Date: 8-NOV-2001 10:50:06.13

SN: *

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P65780.SUB, DocName: 10QSB, Doc: 1

[B/E]

<DOCUMENT>
<TYPE>
<FILENAME>
<DESCRIPTION>
<TEXT>

10QSB
p65780e10qsb.htm
10QSB

JB: *

Phone: (602) 223-4455

Operator: BPX31857

PN: DOCHDR 1

Date: 8-NOV-2001 10:50:06.13

SN: *

*DOCHDR/1*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 11387
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 1
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 001.00.00.00 SN: 0
Ed#: 1
*P65780/001/1*
EDGAR 2

Table of Contents
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 001-16391
TASER INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)

86-0741227
(I.R.S. Employer
Identification Number)

7860 E. MCCLAIN DRIVE, SUITE 2, SCOTTSDALE, ARIZONA
(Address of principal executive offices)

85260
(Zip Code)

(480) 991-0797
(Issuer’s telephone number)
There were 2,710,754 shares of the issuer’s common stock, par value $0.00001 per share, outstanding as of September 30, 2001.
Transitional Small Business Disclosure Format (Check One): Yes

No

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 52863
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 2
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 002.00.00.00 SN: 0
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*P65780/002/5*
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TABLE OF CONTENTS
PART I —FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO UNAUDITED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
PART II—OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 52863
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 2
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 002.00.00.00-1 SN: 0
Ed#: 5
*P65780/002/5*
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Table of Contents
TASER INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Page

PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements
Unaudited balance sheets as of September 30, 2001 and 2000
Unaudited statements of operations for the three and nine months ended
September 30, 2001 and 2000
Unaudited statements of cash flows for the nine months ended September 30, 2001 and 2000
Notes to unaudited financial statements
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II — OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
2

3
4
5
6
8
10
10
11

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 520
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 3
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 003.00.00.00 SN: 0
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*P65780/003/3*
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Table of Contents
PART I —FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements of TASER International, Inc. (the “Company”) include all adjustments (consisting
only of normal recurring accruals) which management considers necessary for the fair presentation of operating results, financial position
and cash flows as of September 30, 2001 and for the three month and nine month periods ended September 30, 2001 and September 30,
2000.
TASER INTERNATIONAL, INC.
BALANCE SHEETS
September 30, 2001 and 2000
(UNAUDITED)
September 30, 2001

September 30, 2000

Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowance
Inventory
Prepaid expenses

$

5,023,102 $
485,142
993,189
75,255

430
207,133
318,142
—

6,576,688
501,129
76,667

525,705
236,242
—

$

7,154,484 $

761,947

$

— $
455,691
58,411
760,838
722,013
123,005
—
838

104,000
150,978
22,062
—
468,942
200,401
189,980
227,710

Total Current Assets
Property and Equipment, net
Other assets
Total Assets
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Current portion of notes payable
Current portion of notes payable to related parties
Current portion of capital lease obligations
Bank revolving line of credit
Accounts payable and accrued liabilities
Customer deposits
Inventory financing payable
Accrued interest, primarily to related parties
Total Current Liabilities
Notes Payable to Related Parties, net of current portion
Capital Lease Obligations, net of current portion
Total Liabilities
Commitments and Contingencies
Stockholders’ Equity (Deficit):
Preferred Stock, 0.00001 par value per share; 25 million shares authorized; 0 shares
issued and outstanding at September 30, 2001 and 2000
Common Stock, 0.00001 par value per share; 50 million shares authorized; 2,710,754
and 3,177,421 shares issued and outstanding at September 30, 2001 and 2000
Common Stock held in treasury, at cost, 0 and 1,666,667 shares at September 30, 2001
and 2000
Additional paid-in capital
Deferred compensation
Retained Earnings (Accumulated Deficit)
Total Stockholders’ Equity (Deficit)
Total Liabilities and Stockholders’ Equity

$

The accompanying notes are an integral part of these balance sheets.
3

2,120,796
—
57,618

1,364,073
2,778,219
12,406

2,178,414

4,154,698

—

—

44

32

—
4,958,420
(64,935)
82,541

(1,000,000)
4,160,593
—
(6,553,376)

4,976,070

(3,392,751)

7,154,484 $

761,947

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 42311
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 4
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 004.00.00.00 SN: 0
Ed#: 2
*P65780/004/2*
EDGAR 2

Table of Contents
TASER INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 2001 and 2000
(UNAUDITED)
Three Months Ended
Sept. 30, 2001

Nine Months Ended
Sept. 30, 2001

Sept. 30, 2000

867,730

$ 4,023,181

$ 2,352,548

470,550
163,084

317,010
93,423

1,509,693
378,877

849,619
312,857

645,642
776,871
7,521

457,297
388,977
—

2,134,611
1,821,713
20,975

1,190,072
1,106,811
5,475

Income (Loss) from Operations
Interest Income
Interest Expense

(138,750)
47,477
(29,477)

68,320
—
(158,457)

291,923
67,396
(221,750)

77,786
152
(310,677)

Net Income (Loss) before Taxes
Provision (Benefit) for Income Tax

(120,750)
(48,409)

(90,137)
—

137,569
55,028

(232,739)
—

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense

$ 1,279,276

Gross Margin
Sales, general and administrative expenses
Research and development expenses

Sept. 30, 2000

$

Net Income (Loss)

$

(72,341)

$

(90,137)

$

82,541

$

(232,739)

Net Income (Loss) per common and common equivalent
shares
Basic

$

(0.03)

$

(0.03)

$

0.04

$

(0.07)

$

(0.03)

$

(0.03)

$

0.03

$

(0.07)

Diluted
Weighted average number of common and common
equivalent shares outstanding:
Basic
Diluted

2,710,754
2,710,754

The accompanying notes are an integral part of these financial statements.
4

3,177,421
3,177,421

2,146,370
2,374,064

3,177,421
3,177,421

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 32653
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 5
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 005.00.00.00 SN: 0
Ed#: 1
*P65780/005/1*
EDGAR 2

Table of Contents
TASER INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2001 and 2000
(UNAUDITED)
Nine Months Ended
Sept. 30, 2001

Cash Flows from Operating Activities:
Net Income (Loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
Change in assets and liabilities:
Accounts Receivable
Inventory
Prepaids and other
Accounts payable and accrued liabilities
Customer Deposits
Accrued Interest

$

Net Cash used in operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment, net
Purchase of other assets
Net Cash used in investing activities
Cash Flows from Financing Activities:
Net payments under capital leases
Proceeds from notes payable
Payments on notes payable
Payment on financing payable
Deferred compensation
Compensatory stock options
Proceeds from Initial Public Offering
Repurchase of treasury stock

82,541

Sept. 30, 2000

$

(232,739)

118,726

75,728

(172,461)
(772,020)
(50,720)
132,064
(416,324)
(267,296)

(85,211)
(159,975)
14,043
(106,047)
138,084
88,768

(1,345,490)

(267,349)

(255,279)
(85,000)

(51,435)
—

(340,279)

(51,435)

(32,011)
500,000
(2,224,574)
(189,980)
14,986
—
7,434,042
1,000,000

(9,112)
1,220,000
(38,358)
—
—
91,779
—
$ (1,000,000)

Net cash provided by financing activities

$

6,502,463

$

264,309

Net Increase (Decrease) in Cash and Cash Equivalents

$

4,816,694

$

(54,475)

Cash and Cash Equivalents, beginning of period

$

206,408

$

54,905

Cash and Cash Equivalents, end of period

$

5,023,102

$

430

Supplemental Disclosure:
Cash paid for interest

$

221,695

$

137,820

Cash paid for income taxes

—

—

$

14,569

—

Exchange of shares from related party for note payable

$

—

$

1,000,000

Addition to APIC for prepayment of note payable

$

61,690

$

—

Acquisition of property and equipment under capital leases

$

81,945

$

4,425

Fair value of stock options issued for payment of legal fees

$

33,177

$

—

Fair value of stock options issued for payment of consulting fees

$

8,042

$

13,917

Fair value of stock warrants issued for loan guarantees

$

10,060

$

77,862

Noncash Investing and Financing Activities:
Fair value of stock warrants issued for IPO costs

The accompanying notes are an integral part of these financial statements.
5

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 38046
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 6
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 006.00.00.00 SN: 0
Ed#: 1
*P65780/006/1*
EDGAR 2

Table of Contents
TASER INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 — GENERAL
The accompanying quarterly financial statements of TASER International, Inc. (the “Company”) are unaudited and include all
adjustments (consisting only of normal recurring accruals) considered necessary by management to present a fair statement of the results
of operations, financial position and cash flows. They have been prepared in accordance with the instructions to Form 10-QSB, and,
accordingly, do not include all the information and footnotes required by generally accepted accounting principles for complete financial
statements.
The results of operations for the three-month and nine month periods are not necessarily indicative of the results to be expected for the
full year and should be read in conjunction with the financial statements and notes thereto included in the Company’s Registration
Statement on Form SB-2, dated February 14, 2001, as amended. Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE 2 — NET SALES
The components of net sales for the three months and nine months ended September 30, 2001 and 2000.
For the Three Months Ended
Sales by Product Line:

ADVANCED TASER
AIR TASER
AUTO TASER
Other
Total

For the Nine Months Ended

Sept. 30, 2001

Sept. 30, 2000

Sept. 30, 2001

Sept. 30, 2000

$ 1,026,954
245,718
120
6,484

$ 636,663
224,072
146
6,849

$ 3,049,496
911,669
80
61,936

$ 1,369,070
915,894
28,629
38,955

$ 1,279,276

$ 867,730

$ 4,023,181

$ 2,352,548

NOTE 3 — INVENTORIES
The inventories are stated at the lower of cost or market; cost is determined using the most recent acquisition cost method that
approximates the first-in, first-out (FIFO) method. A physical count was completed for both years prior to the quarter-end closing. The
components of inventories are as follows:
Sept. 30, 2001

Raw materials and work-in-process
Finished goods
Total

6

Sept. 30, 2000

$

723,144
270,045

$

199,246
118,896

$

993,189

$

318,142

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 65336
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 7
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 007.00.00.00 SN: 0
Ed#: 3
*P65780/007/3*
EDGAR 2

Table of Contents
NOTE 4 — EARNINGS PER SHARE
The Company follows SFAS No. 128, Earnings per Share, which requires the presentation of basic and diluted earnings per share. The
following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for net income
(loss):
Three Months Ended

Numerator for basic and diluted earnings per share:
Net Income (Loss)
Denominator for basic earnings per share weighted average
shares:
Dilutive effect of shares issuable under stock options and
warrants outstanding*
Denominator for diluted earnings per share adjusted weighted
average shares*
Basic earnings per share
Diluted earnings per share
*

Nine Months Ended

Sept. 30, 2001

Sept. 30, 2000

Sept. 30, 2001

Sept. 30, 2000

$

$

$

$ (232,739)

$
$

(72,341)

(90,137)

82,541

2,710,754

3,177,421

2,146,370

3,177,421

—

—

227,694

—

2,710,754
(0.03)
(0.03)

$
$

3,177,421
(0.03)
(0.03)

$
$

2,374,064
0.04
0.03

$
$

3,177,421
(0.07)
(0.07)

In periods of losses, diluted net loss per share is based upon the weighted average number of common shares outstanding during the
period. As the Company had a net loss for the three months ended September 30, 2001 and 2000, as well as the nine months ended
September 30, 2000, the Company’s common stock options and warrants were excluded as their effective was anti-dilutive. The
total number of stock options and warrants outstanding were 555,453 and 172,714 as of September 30, 2001 and September 30,
2000, respectively.
7

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 3692
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 8
Description: Form 10-QSB

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 008.00.00.00 SN: 0
Ed#: 5
*P65780/008/5*
EDGAR 2

[E/O]

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following is a discussion of the results of operations and analysis of financial condition for both the three months and the nine
months ended September 30, 2001. The following discussion may be understood more fully by reference to the financial statements,
notes to the financial statements, and the Management’s Discussion and Analysis of Financial Condition and Results of Operations
section contained in the Company’s Registration Statement on Form SB-2, dated February 14, 2001, as amended.
Certain statements contained in this report may be deemed to be forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995, and the Company intends that such forward-looking statements be subject to the safe-harbor created
thereby. Such forward-looking statements may relate to (1) expected revenue and earnings growth; (2) the Company’s estimates
regarding the size of its target markets; (3) the ability of the Company to successfully penetrate the law enforcement market; (4) the
growth expectations for existing accounts; (5) the ability of the Company to expand its product sales to the private security, military and
consumer self-defense markets; and (6) the Company’s business model. The Company cautions that these statements are qualified by
important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein. Such
factors include, but are not limited to: (1) market acceptance of the Company’s products; (2) the Company’s ability to establish and
expand its direct and indirect distribution channels; (3) the Company’s ability to attract and retain the endorsement of key opinionleaders in the law enforcement community; (4) the level of product technology and price competition for the Company’s ADVANCED
TASER products; (5) the degree and rate of growth of the markets in which the Company competes and the accompanying demand for
its products; and (6) other factors detailed in the Company’s filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
Net sales. Net sales increased by $412,000, or 47.4%, to $1.28 million for the three months ended September 30, 2001 compared to
$868,000 for the three months ended September 30, 2000. Net sales increased $1.67 million, or 71.0%, to $4.02 million for the nine
months ended September 30, 2001, compared to $2.35 million in the corresponding period in 2000. These increases were due almost
entirely to the increased sales of the ADVANCED TASER, to law enforcement distributors, law enforcement agencies and a follow on
order from a large foreign security distributor.
Management believes the attacks of September 11, 2001 have led the aviation industry to more actively evaluate the potential uses of
effective less-lethal weapons. The Company has begun assisting market leaders in this industry with their evaluation of the use of
TASER products in safeguarding passengers and aircraft. The Company believes sales to the aviation industry could increase its sales
volume both in the fourth quarter of 2001 as well as fiscal 2002, but has not included revenue from this industry in published guidance
pending the outcome of proposed federal legislative changes now under consideration.
The Company's policy is to record product revenue at the time the product is shipped. The Company records training revenue as the
service is provided.
For the three months and nine months ended September 30, 2001 and 2000, sales by product line were as follows:
For the Three Months Ended
Sales by Product Line:

ADVANCED TASER
AIR TASER
AUTO TASER
Other
Total

Sept. 30, 2001

For the Nine Months Ended

Sept. 30, 2000

Sept. 30, 2001

Sept. 30, 2000

$

1,026,954
245,718
120
6,484

$

636,663
224,072
146
6,849

$

3,049,496
911,669
80
61,936

$

1,369,070
915,894
28,629
38,955

$

1,279,276

$

867,730

$

4,023,181

$

2,352,548

Cost of products sold. Cost of products sold increased by $223,000, or 54.4%, to $634,000 in the three months ended September 30, 2001
compared to $410,000 in the three months ended September 30, 2000. As a percentage of total revenues, cost of products sold increased
to 49.5% of total revenues for the three months ended September 30, 2001 from 47.3% for the three months ended September 30, 2000.
This increase was due to the increased labor cost associated with added assembly operators to meet anticipated future production
demand, and the addition of indirect personnel to manage the growing material and production flows. Cost of products sold for the nine
month period increased $726,000, or 62.5%, to $1.89 million in 2001 compared to $1.16 million in 2000. This increase was due to the
increased sales of the ADVANCED TASER products. As a percentage of total revenues, cost of products sold decreased to 46.9% in the
more recent nine month period from the 49.4% recorded in the same period last year.
Gross Margins. Gross margins increased by $188,000 or 41.2%, to $645,000 in the three months ended September 30, 2001 compared to
$457,000 in the three months ended September 30, 2000. Gross margins in the third quarter were principally affected by three factors:
lower sales than anticipated for the third quarter of 2001 as a result of orders deferred to the fourth quarter and increased indirect
manufacturing expenses offset by the change in ratio of lower margin Air Cartridges to higher margin ADVANCED TASERs shipped
8

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 39701
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 9
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 009.00.00.00 SN: 0
Ed#: 2
*P65780/009/2*
EDGAR 2

Table of Contents
during the third quarter of 2001. Gross margins for the for the nine month period increased $945,000 or 79.4%, to $2.1 million in 2001
compared to $1.2 million in 2000. This increase is due primarily to the increased volume of sales of ADVANCED TASER products.
Sales, general and administrative expenses. Sales, general and administrative expenses increased by $388,000, or 99.7%, to $777,000 in
the three months ended September 30, 2001 compared to $389,000 in the three months ended September 30, 2001. As a percentage of
total revenues, sales, general and administrative expenses increased to 60.7% for the three months ended September 30, 2001. For the
nine month period ended September 30, 2001, expenses increased $715,000, or 64.6% to $1.82 million compared to expenses of
$1.11 million for the corresponding period in 2000. As a percentage of total revenues, sales, general and administrative expenses
decreased to 45.3% in the most recent period from 47.0% in the nine months ended September 30, 2001.
The increase in sales, general and administrative expenses in 2001 versus 2000 was a result of investments in corporate infrastructure and
compliance. The Company has invested in new positions in both sales and administrative services to support the expanding operations. In
addition, during the third quarter of 2001, the Company contracted with six new independent sales organizations employing more than 50
field sales representatives. Included in the higher sales and marketing costs for the quarter ended September 30, 2001 are the costs
associated with training and outfitting these individuals with full line demonstration kits for promoting the Company’s products. The
Company also continued to experience increased expenses associated with maintaining corporate reporting compliance and its newly
established investor relations program.
Interest Income. For both the three months and nine months ended September 30, 2001, the Company generated interest income of
$47,500 and $67,000 respectively. This income was associated with the investment of the unapplied proceeds from the Company’s May
2001 initial public offering into a liquid reserve account that paid an annual interest rate of 3.13% as of September 30, 2001. For the
three and nine months ended September 30, 2000, interest income was not significant.
Interest expense. Interest expense decreased by $129,000 to $29,500 in the three months ended September 30, 2001 from $158,000 in the
three months ended September 30, 2000. For the nine month period ended September 30, 2001, interest expense decreased by $89,000 to
$222,000, compared with $311,000 for the corresponding period in 2000. This decrease was the result of retiring debt through the use of
proceeds from the Company’s initial public offering, as well as the refinancing, with a more favorable interest rate, of a note payable to a
director and shareholder in July, 2001, through the use of the Company’s line of credit.
Corporate tax status. Prior to the Company’s re-incorporation in Delaware in February 2001, the Company was an S-corporation, which
allowed all the tax attributes to flow through to stockholders. In preparation for its initial public offering, the Company changed its tax
reporting status to a C-corporation, which was made retroactive January 1, 2001. In accordance with generally accepted accounting
principles, this conversion required the Company to reclassify its $6.8 million of accumulated deficit as a reduction to additional paid in
capital. As a result, the retained earnings at September 30, 2001 consist entirely of earnings of the Company after the change in tax
status.
Beginning in January, 2001, the Company estimated and accrued income taxes equal to 40% of pre-tax income. As of September 30,
2001, the Company accrued $55,000 for the nine months ended September 30, 2001. In accordance with S-corporation financial
reporting, no similar expense was recorded for the nine-month period ended September 30, 2000.
Net Income (Loss). Net loss decreased to $72,000 in the three months ended September 30, 2001 compared to a net loss of $90,000 in
the three months ended September 30, 2000. For the nine months ended September 30, 2001, net income increased to $83,000 compared
to a net loss of $233,000 for the corresponding period in 2000. The increase in net income over the prior nine-month period was the
result of increased sales and product margins, and a reduction in the selling, general and administrative expenses as a percentage of total
sales. The decrease in net income for the three month period ended September 30, 2001, from the amount previously projected was
primarily the result of increased manufacturing and operating expenses compounded by lower than anticipated sales.
As previously stated, the Company experienced delays in orders during the third quarter of 2001. A portion of these delays resulted from
the reassignment to other duties of some law enforcement employees involved in the order process. And, one other expected order was
delayed as a result of budgetary paperwork. Management believes these orders will be received and shipped in the coming months.
Net income was also impacted in the three month period ending September 30, 2001 by increases in manufacturing and operating
expenses resulting from the addition of employees and infrastructure required to support the anticipated growth in sales volume. The
Company expected these increases to be absorbed by increased sales volumes. However, when sales were deferred to future dates, the
costs for these improvements decreased both gross margins and net income for the period.
The weighted average basic net loss per share for the three months ended September 30, 2001 was $(0.03) compared to a loss per share
of $(0.03) in the comparable prior period during which there were 467,000 more shares outstanding. The weighted average diluted
income per share for the nine months ended September 30, 2001 was $0.03 compared to a loss per share of $(0.07) for the corresponding
period in 2000.
9

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 4521
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 10
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 010.00.00.00 SN: 0
Ed#: 2
*P65780/010/2*
EDGAR 2

Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
Liquidity: On May 11, 2001, the Company completed its initial public offering and received net proceeds, after the underwriting
discount and financing costs, of approximately $8.4 million. As a result, the Company achieved positive working capital of $4.5 million
as of September 30, 2001, compared to a negative working capital of $838,000 at September 30, 2000.
In the nine months ended September 30, 2001, the Company used $1.3 million of cash in operations compared to $267,000 used in
operations for the nine months ended September 30, 2000. The increase in cash used in operations was due primarily to increase
investment in raw materials inventory to meet anticipated third and fourth quarter sales, and to reduce accrued interest. Reduction of
customer deposits, as the Company shipped previously paid orders, also resulted in a use of cash.
The Company also used $340,000 of cash in investing activities during the nine months ended September 30, 2001, compared to $51,000
for the same period in 2000. These funds were used to purchase production equipment required to increase production capacity, to
purchase office equipment to furnish the new corporate offices, and to purchase the TASER Trademark and TASER.com web-site.
The net cash flows provided by financing activities were $6.5 million for the nine months ended September 30, 2001, compared to
$264,000 for the nine months ended September 30, 2000. This increase was a direct result of the net proceeds from the Company’s initial
public offering less debt repayment.
Capital Resources. Historically, the company has funded operating losses and expansion of its business through loans from two
shareholders. As of September 30, 2001, the company generated $83,000 of cash from net income. In addition, the Company had cash
and cash equivalents of $5.0 million at September 30, 2001 as a result of its initial public offering. After payment of debt and accounts
payable during the three months ended September 30, 2001, the Company believes its monthly cash flow from operations will be
adequate to cover its monthly obligations.
The Company has obtained a revolving line of credit from a domestic bank with a total availability of $1.5 million. The line is secured
by substantially all of the Company’s assets, other than intellectual property, and bears interest at prime plus 1% or 7% at September 30,
2001. The line of credit matures on April 30, 2002 and requires monthly payments of interest only. The outstanding balance under the
line of credit at September 30, 2001 was $761,000.
The Company anticipates that cash generated from operations, available borrowings under its line of credit and the proceeds from its
initial public offering will be sufficient to provide for its working capital needs and to fund future growth.
PART II—OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 11, 2001, the Company completed its initial public offering of 800,000 units, at an aggregate offering price of $10.4 million.
Each unit consisted of one and one-half shares of common stock and one and one-half redeemable public warrants, each whole warrant
to purchase one share of common stock. The initial public offering price was $13.00 per unit. The units sold in the offering were
registered under the Securities Act of 1933 on a Registration Statement on Form SB-2, as amended (Registration No. 001-16391), which
became effective on May 7, 2001. During the three months ended September 30, 2001, the Company did not utilize funds raised through
the offering. These funds remained in short term liquid reserves accounts.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the three months ended September 30, 2001.
10

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 35357
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 11
Description: Form 10-QSB

[E/O]

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Operator: BPX31857

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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TASER INTERNATIONAL, INC.
(Registrant)

Date: November 8, 2001

/s/ Patrick W. Smith
Patrick W. Smith,
Chief Executive Officer

Date: November 8, 2001

/s/ Kathleen C. Hanrahan
Kathleen C. Hanrahan,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
11

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
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602-817-4787
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09-30-2001
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Phone: (602) 223-4455

Operator: BPX31857

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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 11387
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 1
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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EDGAR 2

Table of Contents
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 001-16391
TASER INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)

86-0741227
(I.R.S. Employer
Identification Number)

7860 E. MCCLAIN DRIVE, SUITE 2, SCOTTSDALE, ARIZONA
(Address of principal executive offices)

85260
(Zip Code)

(480) 991-0797
(Issuer’s telephone number)
There were 2,710,754 shares of the issuer’s common stock, par value $0.00001 per share, outstanding as of September 30, 2001.
Transitional Small Business Disclosure Format (Check One): Yes

No

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 52863
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 2
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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TABLE OF CONTENTS
PART I —FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO UNAUDITED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
PART II—OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 52863
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 2
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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Table of Contents
TASER INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Page

PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements
Unaudited balance sheets as of September 30, 2001 and 2000
Unaudited statements of operations for the three and nine months ended
September 30, 2001 and 2000
Unaudited statements of cash flows for the nine months ended September 30, 2001 and 2000
Notes to unaudited financial statements
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II — OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
2

3
4
5
6
8
10
10
11

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 520
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 3
Description: Form 10-QSB

[E/O]

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Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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PART I —FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements of TASER International, Inc. (the “Company”) include all adjustments (consisting
only of normal recurring accruals) which management considers necessary for the fair presentation of operating results, financial position
and cash flows as of September 30, 2001 and for the three month and nine month periods ended September 30, 2001 and September 30,
2000.
TASER INTERNATIONAL, INC.
BALANCE SHEETS
September 30, 2001 and 2000
(UNAUDITED)
September 30, 2001

September 30, 2000

Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowance
Inventory
Prepaid expenses

$

5,023,102 $
485,142
993,189
75,255

430
207,133
318,142
—

6,576,688
501,129
76,667

525,705
236,242
—

$

7,154,484 $

761,947

$

— $
455,691
58,411
760,838
722,013
123,005
—
838

104,000
150,978
22,062
—
468,942
200,401
189,980
227,710

Total Current Assets
Property and Equipment, net
Other assets
Total Assets
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Current portion of notes payable
Current portion of notes payable to related parties
Current portion of capital lease obligations
Bank revolving line of credit
Accounts payable and accrued liabilities
Customer deposits
Inventory financing payable
Accrued interest, primarily to related parties
Total Current Liabilities
Notes Payable to Related Parties, net of current portion
Capital Lease Obligations, net of current portion
Total Liabilities
Commitments and Contingencies
Stockholders’ Equity (Deficit):
Preferred Stock, 0.00001 par value per share; 25 million shares authorized; 0 shares
issued and outstanding at September 30, 2001 and 2000
Common Stock, 0.00001 par value per share; 50 million shares authorized; 2,710,754
and 3,177,421 shares issued and outstanding at September 30, 2001 and 2000
Common Stock held in treasury, at cost, 0 and 1,666,667 shares at September 30, 2001
and 2000
Additional paid-in capital
Deferred compensation
Retained Earnings (Accumulated Deficit)
Total Stockholders’ Equity (Deficit)
Total Liabilities and Stockholders’ Equity

$

The accompanying notes are an integral part of these balance sheets.
3

2,120,796
—
57,618

1,364,073
2,778,219
12,406

2,178,414

4,154,698

—

—

44

32

—
4,958,420
(64,935)
82,541

(1,000,000)
4,160,593
—
(6,553,376)

4,976,070

(3,392,751)

7,154,484 $

761,947

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 42311
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 4
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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TASER INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 2001 and 2000
(UNAUDITED)
Three Months Ended
Sept. 30, 2001

Nine Months Ended
Sept. 30, 2001

Sept. 30, 2000

867,730

$ 4,023,181

$ 2,352,548

470,550
163,084

317,010
93,423

1,509,693
378,877

849,619
312,857

645,642
776,871
7,521

457,297
388,977
—

2,134,611
1,821,713
20,975

1,190,072
1,106,811
5,475

Income (Loss) from Operations
Interest Income
Interest Expense

(138,750)
47,477
(29,477)

68,320
—
(158,457)

291,923
67,396
(221,750)

77,786
152
(310,677)

Net Income (Loss) before Taxes
Provision (Benefit) for Income Tax

(120,750)
(48,409)

(90,137)
—

137,569
55,028

(232,739)
—

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense

$ 1,279,276

Gross Margin
Sales, general and administrative expenses
Research and development expenses

Sept. 30, 2000

$

Net Income (Loss)

$

(72,341)

$

(90,137)

$

82,541

$

(232,739)

Net Income (Loss) per common and common equivalent
shares
Basic

$

(0.03)

$

(0.03)

$

0.04

$

(0.07)

$

(0.03)

$

(0.03)

$

0.03

$

(0.07)

Diluted
Weighted average number of common and common
equivalent shares outstanding:
Basic
Diluted

2,710,754
2,710,754

The accompanying notes are an integral part of these financial statements.
4

3,177,421
3,177,421

2,146,370
2,374,064

3,177,421
3,177,421

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 32653
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 5
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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TASER INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2001 and 2000
(UNAUDITED)
Nine Months Ended
Sept. 30, 2001

Cash Flows from Operating Activities:
Net Income (Loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
Change in assets and liabilities:
Accounts Receivable
Inventory
Prepaids and other
Accounts payable and accrued liabilities
Customer Deposits
Accrued Interest

$

Net Cash used in operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment, net
Purchase of other assets
Net Cash used in investing activities
Cash Flows from Financing Activities:
Net payments under capital leases
Proceeds from notes payable
Payments on notes payable
Payment on financing payable
Deferred compensation
Compensatory stock options
Proceeds from Initial Public Offering
Repurchase of treasury stock

82,541

Sept. 30, 2000

$

(232,739)

118,726

75,728

(172,461)
(772,020)
(50,720)
132,064
(416,324)
(267,296)

(85,211)
(159,975)
14,043
(106,047)
138,084
88,768

(1,345,490)

(267,349)

(255,279)
(85,000)

(51,435)
—

(340,279)

(51,435)

(32,011)
500,000
(2,224,574)
(189,980)
14,986
—
7,434,042
1,000,000

(9,112)
1,220,000
(38,358)
—
—
91,779
—
$ (1,000,000)

Net cash provided by financing activities

$

6,502,463

$

264,309

Net Increase (Decrease) in Cash and Cash Equivalents

$

4,816,694

$

(54,475)

Cash and Cash Equivalents, beginning of period

$

206,408

$

54,905

Cash and Cash Equivalents, end of period

$

5,023,102

$

430

Supplemental Disclosure:
Cash paid for interest

$

221,695

$

137,820

Cash paid for income taxes

—

—

$

14,569

—

Exchange of shares from related party for note payable

$

—

$

1,000,000

Addition to APIC for prepayment of note payable

$

61,690

$

—

Acquisition of property and equipment under capital leases

$

81,945

$

4,425

Fair value of stock options issued for payment of legal fees

$

33,177

$

—

Fair value of stock options issued for payment of consulting fees

$

8,042

$

13,917

Fair value of stock warrants issued for loan guarantees

$

10,060

$

77,862

Noncash Investing and Financing Activities:
Fair value of stock warrants issued for IPO costs

The accompanying notes are an integral part of these financial statements.
5

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 38046
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 6
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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TASER INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 — GENERAL
The accompanying quarterly financial statements of TASER International, Inc. (the “Company”) are unaudited and include all
adjustments (consisting only of normal recurring accruals) considered necessary by management to present a fair statement of the results
of operations, financial position and cash flows. They have been prepared in accordance with the instructions to Form 10-QSB, and,
accordingly, do not include all the information and footnotes required by generally accepted accounting principles for complete financial
statements.
The results of operations for the three-month and nine month periods are not necessarily indicative of the results to be expected for the
full year and should be read in conjunction with the financial statements and notes thereto included in the Company’s Registration
Statement on Form SB-2, dated February 14, 2001, as amended. Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE 2 — NET SALES
The components of net sales for the three months and nine months ended September 30, 2001 and 2000.
For the Three Months Ended
Sales by Product Line:

ADVANCED TASER
AIR TASER
AUTO TASER
Other
Total

For the Nine Months Ended

Sept. 30, 2001

Sept. 30, 2000

Sept. 30, 2001

Sept. 30, 2000

$ 1,026,954
245,718
120
6,484

$ 636,663
224,072
146
6,849

$ 3,049,496
911,669
80
61,936

$ 1,369,070
915,894
28,629
38,955

$ 1,279,276

$ 867,730

$ 4,023,181

$ 2,352,548

NOTE 3 — INVENTORIES
The inventories are stated at the lower of cost or market; cost is determined using the most recent acquisition cost method that
approximates the first-in, first-out (FIFO) method. A physical count was completed for both years prior to the quarter-end closing. The
components of inventories are as follows:
Sept. 30, 2001

Raw materials and work-in-process
Finished goods
Total

6

Sept. 30, 2000

$

723,144
270,045

$

199,246
118,896

$

993,189

$

318,142

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 65336
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 7
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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NOTE 4 — EARNINGS PER SHARE
The Company follows SFAS No. 128, Earnings per Share, which requires the presentation of basic and diluted earnings per share. The
following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for net income
(loss):
Three Months Ended

Numerator for basic and diluted earnings per share:
Net Income (Loss)
Denominator for basic earnings per share weighted average
shares:
Dilutive effect of shares issuable under stock options and
warrants outstanding*
Denominator for diluted earnings per share adjusted weighted
average shares*
Basic earnings per share
Diluted earnings per share
*

Nine Months Ended

Sept. 30, 2001

Sept. 30, 2000

Sept. 30, 2001

Sept. 30, 2000

$

$

$

$ (232,739)

$
$

(72,341)

(90,137)

82,541

2,710,754

3,177,421

2,146,370

3,177,421

—

—

227,694

—

2,710,754
(0.03)
(0.03)

$
$

3,177,421
(0.03)
(0.03)

$
$

2,374,064
0.04
0.03

$
$

3,177,421
(0.07)
(0.07)

In periods of losses, diluted net loss per share is based upon the weighted average number of common shares outstanding during the
period. As the Company had a net loss for the three months ended September 30, 2001 and 2000, as well as the nine months ended
September 30, 2000, the Company’s common stock options and warrants were excluded as their effective was anti-dilutive. The
total number of stock options and warrants outstanding were 555,453 and 172,714 as of September 30, 2001 and September 30,
2000, respectively.
7

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 3692
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 8
Description: Form 10-QSB

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

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Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following is a discussion of the results of operations and analysis of financial condition for both the three months and the nine
months ended September 30, 2001. The following discussion may be understood more fully by reference to the financial statements,
notes to the financial statements, and the Management’s Discussion and Analysis of Financial Condition and Results of Operations
section contained in the Company’s Registration Statement on Form SB-2, dated February 14, 2001, as amended.
Certain statements contained in this report may be deemed to be forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995, and the Company intends that such forward-looking statements be subject to the safe-harbor created
thereby. Such forward-looking statements may relate to (1) expected revenue and earnings growth; (2) the Company’s estimates
regarding the size of its target markets; (3) the ability of the Company to successfully penetrate the law enforcement market; (4) the
growth expectations for existing accounts; (5) the ability of the Company to expand its product sales to the private security, military and
consumer self-defense markets; and (6) the Company’s business model. The Company cautions that these statements are qualified by
important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein. Such
factors include, but are not limited to: (1) market acceptance of the Company’s products; (2) the Company’s ability to establish and
expand its direct and indirect distribution channels; (3) the Company’s ability to attract and retain the endorsement of key opinionleaders in the law enforcement community; (4) the level of product technology and price competition for the Company’s ADVANCED
TASER products; (5) the degree and rate of growth of the markets in which the Company competes and the accompanying demand for
its products; and (6) other factors detailed in the Company’s filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
Net sales. Net sales increased by $412,000, or 47.4%, to $1.28 million for the three months ended September 30, 2001 compared to
$868,000 for the three months ended September 30, 2000. Net sales increased $1.67 million, or 71.0%, to $4.02 million for the nine
months ended September 30, 2001, compared to $2.35 million in the corresponding period in 2000. These increases were due almost
entirely to the increased sales of the ADVANCED TASER, to law enforcement distributors, law enforcement agencies and a follow on
order from a large foreign security distributor.
Management believes the attacks of September 11, 2001 have led the aviation industry to more actively evaluate the potential uses of
effective less-lethal weapons. The Company has begun assisting market leaders in this industry with their evaluation of the use of
TASER products in safeguarding passengers and aircraft. The Company believes sales to the aviation industry could increase its sales
volume both in the fourth quarter of 2001 as well as fiscal 2002, but has not included revenue from this industry in published guidance
pending the outcome of proposed federal legislative changes now under consideration.
The Company's policy is to record product revenue at the time the product is shipped. The Company records training revenue as the
service is provided.
For the three months and nine months ended September 30, 2001 and 2000, sales by product line were as follows:
For the Three Months Ended
Sales by Product Line:

ADVANCED TASER
AIR TASER
AUTO TASER
Other
Total

Sept. 30, 2001

For the Nine Months Ended

Sept. 30, 2000

Sept. 30, 2001

Sept. 30, 2000

$

1,026,954
245,718
120
6,484

$

636,663
224,072
146
6,849

$

3,049,496
911,669
80
61,936

$

1,369,070
915,894
28,629
38,955

$

1,279,276

$

867,730

$

4,023,181

$

2,352,548

Cost of products sold. Cost of products sold increased by $223,000, or 54.4%, to $634,000 in the three months ended September 30, 2001
compared to $410,000 in the three months ended September 30, 2000. As a percentage of total revenues, cost of products sold increased
to 49.5% of total revenues for the three months ended September 30, 2001 from 47.3% for the three months ended September 30, 2000.
This increase was due to the increased labor cost associated with added assembly operators to meet anticipated future production
demand, and the addition of indirect personnel to manage the growing material and production flows. Cost of products sold for the nine
month period increased $726,000, or 62.5%, to $1.89 million in 2001 compared to $1.16 million in 2000. This increase was due to the
increased sales of the ADVANCED TASER products. As a percentage of total revenues, cost of products sold decreased to 46.9% in the
more recent nine month period from the 49.4% recorded in the same period last year.
Gross Margins. Gross margins increased by $188,000 or 41.2%, to $645,000 in the three months ended September 30, 2001 compared to
$457,000 in the three months ended September 30, 2000. Gross margins in the third quarter were principally affected by three factors:
lower sales than anticipated for the third quarter of 2001 as a result of orders deferred to the fourth quarter and increased indirect
manufacturing expenses offset by the change in ratio of lower margin Air Cartridges to higher margin ADVANCED TASERs shipped
8

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 39701
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 9
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 009.00.00.00 SN: 0
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*P65780/009/2*
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Table of Contents
during the third quarter of 2001. Gross margins for the for the nine month period increased $945,000 or 79.4%, to $2.1 million in 2001
compared to $1.2 million in 2000. This increase is due primarily to the increased volume of sales of ADVANCED TASER products.
Sales, general and administrative expenses. Sales, general and administrative expenses increased by $388,000, or 99.7%, to $777,000 in
the three months ended September 30, 2001 compared to $389,000 in the three months ended September 30, 2001. As a percentage of
total revenues, sales, general and administrative expenses increased to 60.7% for the three months ended September 30, 2001. For the
nine month period ended September 30, 2001, expenses increased $715,000, or 64.6% to $1.82 million compared to expenses of
$1.11 million for the corresponding period in 2000. As a percentage of total revenues, sales, general and administrative expenses
decreased to 45.3% in the most recent period from 47.0% in the nine months ended September 30, 2001.
The increase in sales, general and administrative expenses in 2001 versus 2000 was a result of investments in corporate infrastructure and
compliance. The Company has invested in new positions in both sales and administrative services to support the expanding operations. In
addition, during the third quarter of 2001, the Company contracted with six new independent sales organizations employing more than 50
field sales representatives. Included in the higher sales and marketing costs for the quarter ended September 30, 2001 are the costs
associated with training and outfitting these individuals with full line demonstration kits for promoting the Company’s products. The
Company also continued to experience increased expenses associated with maintaining corporate reporting compliance and its newly
established investor relations program.
Interest Income. For both the three months and nine months ended September 30, 2001, the Company generated interest income of
$47,500 and $67,000 respectively. This income was associated with the investment of the unapplied proceeds from the Company’s May
2001 initial public offering into a liquid reserve account that paid an annual interest rate of 3.13% as of September 30, 2001. For the
three and nine months ended September 30, 2000, interest income was not significant.
Interest expense. Interest expense decreased by $129,000 to $29,500 in the three months ended September 30, 2001 from $158,000 in the
three months ended September 30, 2000. For the nine month period ended September 30, 2001, interest expense decreased by $89,000 to
$222,000, compared with $311,000 for the corresponding period in 2000. This decrease was the result of retiring debt through the use of
proceeds from the Company’s initial public offering, as well as the refinancing, with a more favorable interest rate, of a note payable to a
director and shareholder in July, 2001, through the use of the Company’s line of credit.
Corporate tax status. Prior to the Company’s re-incorporation in Delaware in February 2001, the Company was an S-corporation, which
allowed all the tax attributes to flow through to stockholders. In preparation for its initial public offering, the Company changed its tax
reporting status to a C-corporation, which was made retroactive January 1, 2001. In accordance with generally accepted accounting
principles, this conversion required the Company to reclassify its $6.8 million of accumulated deficit as a reduction to additional paid in
capital. As a result, the retained earnings at September 30, 2001 consist entirely of earnings of the Company after the change in tax
status.
Beginning in January, 2001, the Company estimated and accrued income taxes equal to 40% of pre-tax income. As of September 30,
2001, the Company accrued $55,000 for the nine months ended September 30, 2001. In accordance with S-corporation financial
reporting, no similar expense was recorded for the nine-month period ended September 30, 2000.
Net Income (Loss). Net loss decreased to $72,000 in the three months ended September 30, 2001 compared to a net loss of $90,000 in
the three months ended September 30, 2000. For the nine months ended September 30, 2001, net income increased to $83,000 compared
to a net loss of $233,000 for the corresponding period in 2000. The increase in net income over the prior nine-month period was the
result of increased sales and product margins, and a reduction in the selling, general and administrative expenses as a percentage of total
sales. The decrease in net income for the three month period ended September 30, 2001, from the amount previously projected was
primarily the result of increased manufacturing and operating expenses compounded by lower than anticipated sales.
As previously stated, the Company experienced delays in orders during the third quarter of 2001. A portion of these delays resulted from
the reassignment to other duties of some law enforcement employees involved in the order process. And, one other expected order was
delayed as a result of budgetary paperwork. Management believes these orders will be received and shipped in the coming months.
Net income was also impacted in the three month period ending September 30, 2001 by increases in manufacturing and operating
expenses resulting from the addition of employees and infrastructure required to support the anticipated growth in sales volume. The
Company expected these increases to be absorbed by increased sales volumes. However, when sales were deferred to future dates, the
costs for these improvements decreased both gross margins and net income for the period.
The weighted average basic net loss per share for the three months ended September 30, 2001 was $(0.03) compared to a loss per share
of $(0.03) in the comparable prior period during which there were 467,000 more shares outstanding. The weighted average diluted
income per share for the nine months ended September 30, 2001 was $0.03 compared to a loss per share of $(0.07) for the corresponding
period in 2000.
9

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 4521
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 10
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 010.00.00.00 SN: 0
Ed#: 2
*P65780/010/2*
EDGAR 2

Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
Liquidity: On May 11, 2001, the Company completed its initial public offering and received net proceeds, after the underwriting
discount and financing costs, of approximately $8.4 million. As a result, the Company achieved positive working capital of $4.5 million
as of September 30, 2001, compared to a negative working capital of $838,000 at September 30, 2000.
In the nine months ended September 30, 2001, the Company used $1.3 million of cash in operations compared to $267,000 used in
operations for the nine months ended September 30, 2000. The increase in cash used in operations was due primarily to increase
investment in raw materials inventory to meet anticipated third and fourth quarter sales, and to reduce accrued interest. Reduction of
customer deposits, as the Company shipped previously paid orders, also resulted in a use of cash.
The Company also used $340,000 of cash in investing activities during the nine months ended September 30, 2001, compared to $51,000
for the same period in 2000. These funds were used to purchase production equipment required to increase production capacity, to
purchase office equipment to furnish the new corporate offices, and to purchase the TASER Trademark and TASER.com web-site.
The net cash flows provided by financing activities were $6.5 million for the nine months ended September 30, 2001, compared to
$264,000 for the nine months ended September 30, 2000. This increase was a direct result of the net proceeds from the Company’s initial
public offering less debt repayment.
Capital Resources. Historically, the company has funded operating losses and expansion of its business through loans from two
shareholders. As of September 30, 2001, the company generated $83,000 of cash from net income. In addition, the Company had cash
and cash equivalents of $5.0 million at September 30, 2001 as a result of its initial public offering. After payment of debt and accounts
payable during the three months ended September 30, 2001, the Company believes its monthly cash flow from operations will be
adequate to cover its monthly obligations.
The Company has obtained a revolving line of credit from a domestic bank with a total availability of $1.5 million. The line is secured
by substantially all of the Company’s assets, other than intellectual property, and bears interest at prime plus 1% or 7% at September 30,
2001. The line of credit matures on April 30, 2002 and requires monthly payments of interest only. The outstanding balance under the
line of credit at September 30, 2001 was $761,000.
The Company anticipates that cash generated from operations, available borrowings under its line of credit and the proceeds from its
initial public offering will be sufficient to provide for its working capital needs and to fund future growth.
PART II—OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 11, 2001, the Company completed its initial public offering of 800,000 units, at an aggregate offering price of $10.4 million.
Each unit consisted of one and one-half shares of common stock and one and one-half redeemable public warrants, each whole warrant
to purchase one share of common stock. The initial public offering price was $13.00 per unit. The units sold in the offering were
registered under the Securities Act of 1933 on a Registration Statement on Form SB-2, as amended (Registration No. 001-16391), which
became effective on May 7, 2001. During the three months ended September 30, 2001, the Company did not utilize funds raised through
the offering. These funds remained in short term liquid reserves accounts.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the three months ended September 30, 2001.
10

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 35357
P65780.SUB, DocName: 10QSB, Doc: 1, Page: 11
Description: Form 10-QSB

[E/O]

Phone: (602) 223-4455

Operator: BPX31857

Date: 8-NOV-2001 10:50:06.13

JB: P65780 PN: 011.00.00.00 SN: 0
Ed#: 3
*P65780/011/3*
EDGAR 2

Table of Contents
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TASER INTERNATIONAL, INC.
(Registrant)

Date: November 8, 2001

/s/ Patrick W. Smith
Patrick W. Smith,
Chief Executive Officer

Date: November 8, 2001

/s/ Kathleen C. Hanrahan
Kathleen C. Hanrahan,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
11

FOR IMMEDIATE RELEASE
October 22, 2001

CONTACT:

Phil Smith
Chairman of the Board
TASER International, Inc.
(480) 905-2005

TASER® International, Inc. Reports Third Quarter Results and Provides Guidance Through 2002
SCOTTSDALE, AZ., October 22, 2001 - TASER International, Inc. (Nasdaq: TASR), a provider of advanced lesslethal weapons for use in the law enforcement, private security and personal defense markets, today reported third
quarter and year-to-date financial results as well as guidance for the fourth quarter of 2001 and fiscal 2002. The
Company reported revenue of $1.3 million for the quarter ended September 30, 2001, an increase of $412,000 or
47% over revenue of $868,000 reported for the same quarter ended September 30, 2000. The Company also
reported a net loss of ($72,000) or ($0.03) per share, for the third quarter of 2001, compared with a net loss of
($90,000), or ($0.03) per share, in the same period last year. Per share calculations for the September 30, 2001
quarter are based on approximately 2.7 million weighted average basic shares outstanding, compared with 3.2
million shares in the third quarter of 2000. (1)
The revenues were approximately $500,000 below company guidance given at the end of Q2, but within the range
provided by the company in a September 13, 2001 press release. The reduction in anticipated revenue was primarily
attributable to the delay of one major order that is now expected in Q4 of this year.
Gross margin increased to $646,000 in the third quarter of 2001, compared with $457,000 for the same period in
2000. However, as a percentage of sales, gross margins decreased 2.2%, to 50.5% in the third quarter of 2001,
compared with 52.7% in the same period in 2000. The decrease in margin is largely attributed to the lower than
anticipated sales coupled with a slight increase in the indirect manufacturing expenses associated with building the
infrastructure to support future growth and product demand.
Commenting on the third quarter results, Rick Smith, Chief Executive Officer, said, "We are disappointed in not
closing a significant order which was expected in the third quarter, but we continue to make excellent progress in
penetrating the law enforcement market with the ADVANCED TASER M26. During the third quarter we added
approximately 129 new accounts. Recent M26 deployments include Los Angeles Department of Public Safety,
Phoenix, Denver, Baltimore, Oklahoma City, Boca Raton police departments, and Citrus County (Florida) Sheriffs.
We are now are approaching 1000 police departments currently using and evaluating the M26.”
“To further accelerate our market penetration, TASER International expanded its field sales force to include the
hiring of six new manufacturer’s representative firms. By implementing this program, our Sales force has been
increased by approximately 50 trained sales representatives now available in Q4. These representatives have been
tasked with developing increased sales of the ADVANCED TASER products through both the law enforcement and
commercial distribution channels, enabling the Company to obtain a much broader market and service coverage for
its products.”
“With the terrible attacks of September 11, 2001 there has been a renewed emphasis and interest in effective lesslethal weapons. In fact, many security agencies are now investigating tactical applications of less-lethal weapons
including our ADVANCED TASER M26. In the near term, most local law enforcement agencies will be focussed
primarily on a heightened terrorist alert, a condition that has already impacted the timing of several orders. With the
new situation the United States now faces, as a country under attack, there will be a much larger opportunity for
TASER International, Inc. to establish its technology as the dominant less-lethal platform in the future.”
“For the remainder of this fiscal year, we will continue to focus on further penetrating our core law enforcement
market with the goal of leveraging this success to expand into the Private Security and Consumer markets, both
domestically and internationally. Based on our results for the first nine months of 2001 of $0.04 earnings per share
(EPS) and the visibility we currently have on the rest of the year, we are targeting revenue in the range of $2.0 to
$2.3 million and EPS of $0.06 to $0.10 for the fourth quarter of 2001. Furthermore, we are targeting revenue of
$12 million and net income of $1.35 million, or basic EPS of $0.50 for 2002. These guidance numbers do not
include potential revenues from the airline security industry,” said Mr. Smith.

About TASER International, Inc.
TASER International, Inc. provides advanced less-lethal weapons for use in the law enforcement, private security,
and personal defense markets. Its flagship ADVANCED TASER® product uses proprietary technology to
incapacitate dangerous, combative, or high-risk subjects that may be impervious to other less-lethal means. This
technology reduces injury rates to suspects and officers, thereby lowering liability risk and improving officer safety.
The ADVANCED TASER is currently in testing or deployment at over 900 law enforcement and correctional
agencies in the U.S. and Canada.
Certain statements contained in this document may be deemed to be forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995, and TASER International intends that such forward-looking
statements be subject to the safe-harbor created thereby. Such forward-looking statements relate to: 1) expected
revenue and earnings growth; 2) the Company’s estimates regarding the size of its target markets; 3) the ability of
TASER to successfully penetrate the law enforcement market; 4) the growth expectations for existing accounts; 5)
the ability of TASER to expand its product sales to the private security, military and consumer self-defense markets;
and 6) the Company’s target business model. TASER cautions that these statements are qualified by important
factors that could cause actual results to differ materially from those reflected by the forward-looking statements
herein. Such factors include, but are not limited to: 1) market acceptance of the Company’s products; 2) TASER’s
ability to establish and expands its direct and indirect distribution channels; 3) TASER’s ability to attract and retain
the endorsement of key opinion-leaders in the law enforcement community; 4) the level of product technology and
price competition for the Company’s Advanced TASER product; 5) the degree and rate of growth of the markets in
which TASER competes and the accompanying demand for its products; and 6) other factors detailed in the
Company’s filings with the Securities and Exchange Commission.
TASER International Inc.
Statements of Operations

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense
Total Cost of Products Sold
Gross Margin
Sales, general and administrative
Research and development
Income from Operations
Interest Income
Interest Expense
Income (Loss) before Income Taxes
Income Tax Expense
Net Income (Loss)

For the Three Months Ended September 30,
2001
2000
$867,730
$1,279,276
317,010
93,423
410,433
457,297
388,977
0
68,320
0
158,457
(90,137)
$(90,137)

470,549
163,084
633,633
645,643
776,871
7,521
(138,749)
47,477
29,477
(120,749)
( 48,409)
$ (72,340)

Earnings (loss) per share

$ (0.03)

$

Weighted Average Shares Outstanding

3,177,421 (1)

2,710,754

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense

(0.03)

For the nine Months Ended September 30,
2001
2000
$2,352,548
$4,023,181
849,619
312,857

1,509,693
378,877

Total Cost of Products Sold
Gross Margin
Sales, general and administrative
Research and development
Income from Operations
Interest Income
Interest Expense
Income (Loss) before Income Taxes
Income Tax Expense
Net Income (Loss)

1,162,476
1,190,072
1,106,811
5,475
77,786
152
310,677
(232,739)
$( 232,739)

1,888,570
2,134,611
1,821,713
20,975
291,923
67,396
221,750
137,569
55,027
$ 82,542

Earnings (loss) per share

$

$

(0.07)
3,177,421 (1)

Weighted Average Shares Outstanding

0.04

2,146,370

TASER International Inc.
Balance Sheets
December 31, 2000

September 30, 2001

Current Assets:
Cash and cash equivalents
Accounts receivable, net
Inventory, net
Prepaids and other assets
Total Current Assets
Property and equipment, net
Total Assets

$ 206,408
312,681
221,169
24,535
764,793
274,273
$1,039,066

$5,023,101
485,142
993,189
151,921
6,653,355
501,129
$7,154,484

Liabilities and Stockholders’ Deficit:
Current portion of note payable
Current portion of notes payable to related parties
Current portion of capital lease obligations
Bank revolving line of credit
Accounts payable and accrued liabilities
Customer deposits
Notes payable to related parties, net of current
Capital lease obligations
Total Liabilities

$ 289,980
124,574
22,171
0
858,083
539,329
2,778,219
43,925
4,656,281

$

Stockholders’ Equity (Deficit):
Common stock
Additional paid in capital
Deferred compensation
Treasury stock
Accumulated equity (deficit)
Total Stockholders’ Equity (Deficit)

32
4,256,558
(79,920)
(1,000,000)
(6,793,885)
(3,617,215)

Total Liabilities and Stockholders’ Equity (Deficit)
(1)

$1,039,066

0
455,691
58,411
760,838
722,851
123,005
0
57,618
2,178,414

44
4,958,420
( 64,935)
82,541
4,976,070
$7,154,484

The reduction in the total shares outstanding from 3.2 million shares as of 9/30/00 to the 2.2 million shares
as of 9/30/01 is a result of TASER’s repurchase of 1.7 million shares from Mr. Bruce Culver in July of
2000, adjusted by the weighted average impact of the 1.2 million shares sold in the IPO in May, 2001.

To be added to TASER International, Inc.’s email list for company news, please send your email address to
phil@TASER.com
###

FOR RELEASE ON FEBRUARY 11, 2002 AT 4:45 P.M. EST
February 11, 2002

CONTACT:
Phil Smith
Chairman of the Board
TASER International, Inc.
(480) 905-2005

TASER® International, Inc. Reports Record Fourth Quarter and Year 2001 Results
Company Achieves Fourth Quarter 167% Revenue Growth and $0.16 EPS
SCOTTSDALE, Ariz., February 11, 2002 – TASER International, Inc. (Nasdaq: TASR, TASRW) reported record
revenue of $2.8 million for the quarter ended December 31, 2001, a 167% increase over revenue of $1.1M reported
in the fourth quarter of 2000. The company also reported net income of $432,000, or $0.16 per share (basic) and
$0.13 per share (diluted), for the fourth quarter of 2001, compared with a net loss of $(241,000), or $(0.16) per
share, in the same period last year.* In addition, during the fourth quarter of 2001 the Company recorded a net
deferred tax asset of $154,000 as a benefit in its income tax provision.
The increase in net income is a result of the higher than anticipated ADVANCED TASER® unit sales to both the
law enforcement and airline industries during the fourth quarter. Included in these figures were initial orders to
both Los Angeles Police Department (LAPD) and United Airlines (NYSE: UAL).
Gross margin increased to $1.8 million in the fourth quarter of 2001, or 64.3% of revenues, compared with $384,000
or 36.2% of revenues for the same period in 2000. The increase in gross margin is attributed to the higher level of
ADVANCED TASER product sales and lower manufacturing overhead as a percent of sales.
Commenting on the fourth quarter and fiscal year-end results, Rick Smith, chief executive officer for TASER
International said, "We continue to see steady growth in the law enforcement sector of our market with many new
police departments testing and deploying our ADVANCED TASER each month. In December 2001, Los Angeles
Police Department became one of TASER International’s largest police deployments by purchasing an initial order
of 500 M26 units and more than 6,500 cartridges. We consider this a major accomplishment as LAPD is not only
known worldwide, but also revered as one of the leading law enforcement trendsetters.
“We also continue to pursue the potential for further airline sales. United Airlines became the first major airline to
purchase the ADVANCED TASER weapon system for deployment in every aircraft cockpit, by taking title to 1,300
M26 units in December 2001. United Airlines will install its ADVANCED TASERs immediately following formal
Federal Aviation Administration approval. In addition to United Airlines, we are in discussion with other major
domestic and international carriers about the safety and effectiveness of using our weapons on board their flight
decks. We hope this education process will aid in obtaining final approval by the Secretary of Transportation for
placement on board commercial aircraft worldwide.
“As demonstrated by our fourth quarter performance, we remain focused on growing both our top and bottom line.
I’m particularly pleased we were able to achieve a 100% year-to-date increase in revenue over the same period last
year, as well as yielding our first profitable year, with an after tax profit of 7.5% of sales for the year. Our
profitability, coupled with increased cash flow and more than $5.6 million in cash, should provide us with adequate
resources to finance our current growth initiatives for the coming year,” continued Smith.
* Basic per share calculations for the three months ended December 31, 2001 are based on approximately 2.72
million weighted average shares outstanding, compared with 1.51 million shares in the fourth quarter of 2000.

- more -

About TASER International, Inc.
TASER International, Inc. provides advanced less-lethal weapons for use in the law enforcement, private security,
and personal defense markets. Its flagship ADVANCED TASER® product uses proprietary technology to
incapacitate dangerous, combative, or high-risk subjects that may be impervious to other less-lethal means. This
technology reduces injury rates to suspects and officers, thereby lowering liability risk and improving officer safety.
The ADVANCED TASER is currently in testing or deployment at over 1100 law enforcement and correctional
agencies in the U.S. and Canada.
To be added to TASER International, Inc.’s email list for company news, please send your email address to
phil@TASER.com.

- more -

Certain statements contained in this document may be deemed to be forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995, and TASER International intends that such forward-looking
statements be subject to the safe-harbor created thereby. Such forward-looking statements relate to: 1) expected
revenue and earnings growth; 2) the Company’s estimates regarding the size of its target markets; 3) the ability of
TASER to successfully penetrate the law enforcement market; 4) the growth expectations for existing accounts; 5)
the ability of TASER to expand its product sales to the private security, military and consumer self-defense markets;
and 6) the Company’s target business model. TASER cautions that these statements are qualified by important
factors that could cause actual results to differ materially from those reflected by the forward-looking statements
herein. Such factors include, but are not limited to: 1) market acceptance of the Company’s products; 2) TASER’s
ability to establish and expands its direct and indirect distribution channels; 3) TASER’s ability to attract and retain
the endorsement of key opinion-leaders in the law enforcement community; 4) the level of product technology and
price competition for the Company’s Advanced TASER product; 5) the degree and rate of growth of the markets in
which TASER competes and the accompanying demand for its products; and 6) other factors detailed in the
Company’s filings with the Securities and Exchange Commission.
TASER International Inc.
Statements of Operations
For the Three Months Ended December 31,
2001
2000
$1,060,071
$2,830,092

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense
Total Cost of Products Sold
Gross Margin
Sales, general and administrative
Research and development
Income (Loss) from Operations
Interest Income
Interest Expense
Income (Loss) before Income Taxes
Income Tax Expense
Net Income (Loss)

500,556
175,357
675,913
384,158
507,321
1,662
(124,825)
115,685
(240,510)
$(240,510)

794,977
216,233
1,011,210
1,818,882
1,301,513
37,037
480,332
27,890
25,764
482,458
49,970
$ 432,488

Basic Earnings (loss) per share
Basic Weighted Average Shares Outstanding

$
(.16)
1,510,754

$
.16
2,721,057

Diluted Earnings (loss) per share
Diluted Weighted Average Shares Outstanding

$
(.16)
1,510,754 (1)

$
.13
3,445,070

(1) Approximately 186,049 options and warrants were not included in the computation of diluted earnings per share for 2000 as their effect
would be anti-dilutive.

- more -

For the Year Ended December 31,
2000
$3,412,620

Net Sales
Cost of Products Sold:
Direct manufacturing expense
Indirect manufacturing expense
Total Cost of Products Sold
Gross Margin
Sales, general and administrative
Research and development
Income (Loss) from Operations
Interest Income
Interest Expense
Income (Loss) before Income Taxes
Income Tax Expense
Net Income (Loss)

2001
$6,853,272

1,350,175
488,214
1,838,389
1,574,231
1,613,979
7,137
( 46,885)
426,362
( 473,247)
$( 473,247)

2,304,669
609,762
2,914,431
3,938,841
3,123,224
43,362
772,255
95,286
247,515
620,026
104,997
$ 515,029

Basic Earnings (loss) per share
Basic Weighted Average Shares Outstanding

$(

.019)
2,482,976

$
.22
2,303,386

Diluted Earnings (loss) per share
Diluted Weighted Average Shares Outstanding

$(

.019)
2,482,976 (2)

$
.17
3,027,398

(2) Approximately 186,049 options and warrants were not included in the computation of diluted earnings per share for 2000 as their effect would
be anti-dilutive.

TASER International Inc.
Balance Sheets
December 31, 2000
Current Assets:
Cash and cash equivalents
Accounts receivable, net
Inventory, net
Prepaids and other assets
Total Current Assets
Property and equipment, net
Other Assets
Total Assets
Liabilities and Stockholders’ Equity (Deficit):
Revolving Line of Credit
Current portion of long term debt and capital leases
Accounts payable and accrued liabilities
Total Current Liabilities
Deferred Tax Liability
Notes payable to related parties, net of current
Capital lease obligations, net of current portion
Total Liabilities

$ 206,408
312,681
221,169
24,535
764,793
274,273
$1,039,066

$5,636,100
765,328
801,926
218,486
7,421,840
560,423
72,416
$8,054,679

$

$ 760,838
507,525
1,187,294
2,455,657
19,311
50,978
2,525,946

436,725
1,397,412
1,834,137
2,778,219
43,925
4,656,281

Stockholders’ Equity (Deficit):
Common stock
Additional paid in capital
Deferred compensation
Treasury stock
Retained Earnings (Deficit)
Total Stockholders’ Equity (Deficit)

32
4,256,558
(79,920)
(1,000,000)
(6,793,885)
(3,617,215)

Total Liabilities and Stockholders’ Equity (Deficit)

$1,039,066
###

December 31, 2001

44
5,073,599
( 59,939)
515,029
5,528,733
$8,054,679