Good day, ladies and gentlemen, and welcome to the TASER International second quarter 2008 earnings conference call. My name is Jane, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator instructions) I will now like to turn the presentation over to Mr. Rick Smith, CEO. Please proceed, sir.

Thank you and welcome everyone. Before we get started, I am going to turn over to our Chief Financial Officer, Dan Behrendt to read the Safe Harbor statements, and then we’ll get started.

Okay. Thank you. Safe Harbor statements: Certain statements contained in this presentation maybe deemed to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. And TASER International intent is such forward-looking statements be subject to the Safe Harbor created thereby. Such forward looking statements relate to expected revenue and earnings growth, estimations regarding the size of our target markets, successful penetration of the law enforcement market, expansions of private sales to the private security, military, consumer, self defense markets, growth expectations for new and existing accounts, expansion of production capability, new product introductions, product safety and our business model. We caution that these statements are qualified by important factors that could cause the actual results to differ materially from those reflected by the forward-looking statements herein. Such factors include but are not limited to; market acceptance of our products; establishment and expansion of our direct and indirect distribution channels; attracting or retaining the endorsement of key opinion-leaders in the law enforcement community; the level of product, technology and price competition for our products; the degree and rate of growth of the markets in which we compete, and the accompanying demand for our products; potential delays in the international and domestic orders, implementation risks of manufacturing automation, risks associated with rapid technological change; execution and implementation risks of new technology; new product introduction risks; ramping manufacturing production to meet demand; litigation resulting from alleged product-related injuries and death; media publicity concerning product uses and allegations of injury and deaths and the negative impact which could have on sales; product quality risks; potential fluctuations and quarterly operating results; competition; negative reports concerning TASER device uses; financial and budgetary constraints of prospects and customers; dependence upon sole and limited source suppliers; fluctuations in component pricing; risks of government investigations and regulations; TASER product tests and reports; dependence on key employees; employee retention risks; and other factors detailed in the company's filings with the Securities and Exchange Commission. And with that, I would like to turn the call back over to Rick Smith, our CEO.

Thank you, Dan. Certainly it’s been a challenging economic environment across the board during here in the US. But I would like to start by highlighting one of the real bright spots in our operations, and that is despite the decrease in revenues, our gross margins improved to 64.5% this quarter compared to 60% in the second quarter of 2007. So, we told you a couple of quarters ago, we are putting a renewed, vigorous focus on our internal operations cost control, the margins and those efforts are paying off as we are seeing improvements in our operations. Now, revenues for the quarter were $21.1 million, which is $4.8 million or 18% decrease over the same quarter last year. It’s primarily the result of lower municipal spending in the US resulted from two factors, lower tax income for state and municipal governments primarily associated with decreased property tax revenues given what’s going on in the real estate markets, and you couple that with rising fuel costs, as I’m sure everyone is aware, fuel is a major consumable for law enforcement in their patrol cars using it 24 hours a day, and with (inaudible) from agencies that the unanticipated and significant rise in fuel costs has not only consumed most of their unallocated budgets but has cost them to shift otherwise allocated funds over to fuel, and even then they’ve gotten to a point where many agencies are curtailing patrol shifts. This translated into a decrease particularly in the last two weeks of the quarter, where traditionally TASER International in the last two weeks of the quarter are strongest and we see significant upticks as budgetary dollars flush through again with the quarter. In fact we were tracking to 2007 revenues right until the last two weeks of this last quarter.…

Thanks, Rick.

There’s one other point that I forgot to make there, which is, in most states this exact same verdict would have resulted in no liability for TASER. If a person is found to be greater than 50% responsible for their own death or injury in the vast majority of states, in a significant majority of states and then there can be no award in a case like this. Unfortunately California is not one those states. So, I think that’s an important point to make. And back to Dan.

Thanks, Rick. I’ll start with the income statement for the quarter. As Rick indicated, sales for Q2 were $21.1 million, which is down $4.7 million from the prior year, and sequentially we saw our sales drop $1.4 million from Q1 as we did not see the budget (inaudible) and budgets that we really enjoy in the second quarter each year. The unanticipated increase in fuel cost coupled with shrinking municipal budgets cost lower amounts of budgets has been in the quarter which unfavorably impacted our sales during the second quarter. Gross margins of $13.6 million or 64.5% of sales are up 4.4% for the prior year, the increase in margin was caused by several factors including elimination of most cash and distributed discounts, lower overtime expenses and better productivity and improvements in scarp expense during the quarter. This is the second quarter in a row where we saw margins improve sequentially and margins are up actually 7.7% from the first quarter of this year, and the sequential improvement was driven by much – a lot of the same factors including the curtailed distributed cash discounts, improvements in direct labor efficiency, scarp, material costs and product mix had a favorable impact this quarter with a higher percentage or sales coming from the X26 product. The $1.5 million decrease in indirect manufacturing versus the prior were mostly driven by the lower scarp and greater manufacturing efficiencies during the quarter. SG&A expenses of $9.7 million for the quarter versus $8.3 million in the prior year. The increase again was driven mostly by higher salaries and benefits of $548,000 mostly due to increased headcount, advertising cost mostly relate to the infomercial increased by about $365,000, higher travel expense of $291,000 and higher tradeshow cost of $170,000 were mostly related to the company’s annual tactical…

Thank you. Couple of items to wrap up with, one on the C2 infomercial. We continue to run the infomercial throughout the quarter. It continues to run rate around breakeven. So, we have not yet scaled it up into a national by – in terms of media we are continuing to (inaudible) with the infomercial, and also one of the challenges given the nature of our product that has somewhat difficult for us to obtain network appearances on some of the major networks, although we’ve had some recent success where some of them are coming around and now giving us some approvals. So, we continue to test would be in infomercial looking at different modalities of deployment. We are looking at 30 second and 60 second stocks with a DVD follow-up technique we’ve not yet tried in conjunction with the straight 30-minute time purchases on air. We will be bringing up a more robust e-commerce in online promotional program using the infomercial content. We’ll also be reformatting it to test deploying in-store video using our infomercial at point of sale in different retail environments. So, we’ll continue to focus on that as we move into the latter half of the year, and hopefully a strong retail season. Okay, to wrap up, I’m going to talk a little bit about the ad time again and some of the different product initiatives with TASER. We are very focused on broadening and diversifying our revenue base both by markets by bringing new products up like the C2 that allow us to sell in the consumer market as well as law enforcement, the military markets with products like XREP and Shockwave and the new systems that we are working on in the R&D pipeline that have been funded by the DoD as well as…

Thank you, sir. (Operator instructions) Our first question is from Paul Coster with JP Morgan. Paul Coster – JP Morgan: Thank you and good morning.

Good morning. Paul Coster – JP Morgan: The improvement in gross margins of course is much welcome. And first question really is do you feel that this is sustainable particularly in the context of so many new products coming to market. Traditionally no new products attract lower absorption rates initially instead of way for a while. What’s the outlook say looking out six months and beyond?

Yes, that’s a good question, Paul. This is Dan. Obviously as we look to the new products we are making sure that we have set prices appropriately and make sure that the manufacture ability of the products as they come into commercial production so that the short-term impact is minimized. Certainly our target is to keep gross margins above that 60% level and yes, we feel that we’ve got the right team in place in making the right steps now to continue to drive those efficiencies to offsetting the startups you have in new products but one of the things I think we’ve learned from some of the new products is there it is over the last couple of years is that the criticality of making sure that manufacturability is built in the products from day one and that as we ramp up production there’s not any hiccups and we can go right to commercial production without having any significant impacts to margins.

I don’t know whether we continue to see margins in proving some of their (inaudible) or some product mix since some other things in that as well. That is where Dan is saying we are pretty confident that we'll be able to sustain on the 60% margin levels in our plan. Paul Coster – JP Morgan: The R&D that you are putting into AXON, once you've got AXON ready, assuming at that point that you haven’t got more new products in the pipeline which of course is unrealistic hypothesis, but would R&D then come down in a sort of all things being equaled?

Yes, we are – a lot of that research and development money is being spent on external resources like ModaVista, that’s a significant software element to this. We are also using external design resources mechanically and then there’s of course the PC network software which we are using both outside resources and we are building some internal capabilities as well. So, the short answer is if AXON ended up not being a success, we’ll not build a huge infrastructure that would be an ongoing expense. So, there is the ability to basically push – R&D expenses background at historic levels. Now of course if it takes off like we think it will, then we see that that platform will provide a interesting and exciting platform for us to deliver other types of software services and communication services to our customers. So, on a success basis, we’d probably continue to see R&D levels closer to the new levels that we are at, but it’s not that we’ve invested in internal infrastructure to where it cannot be downwardly adjusted for some reason it didn’t workout. Paul Coster – JP Morgan: Dan, I may have missed it. But can you share any of the unit shipment dates by products?

Sure, sure. On the law enforcement side, the X26 we shipped 14,307 X26s and 447 M26s. We shipped 249,361 cartridges during the quarter, and we shipped 7611 C2s, which is roughly flat with the first quarter. We are hoping as we expand our retailer base there that we could see some improvement over time, but we are roughly flat on the C2 side during Q2. Paul Coster – JP Morgan: Okay. And then finally on AXON, Rick, it just sounds tremendously interesting – I’m curious just to see the – but the UK experiment, what did they actually use to do it, and is that essentially a competitive solution?

Yes. There are some companies in the UK that they’ve been providing both the hardware and then the digital asset management tool set. Again our read on is that there is a more of a system integration type of play we didn’t see a full up tightly integrated component level up-system and was more cameras that appear to be adapted to digital video recorders that appear to be adapted for the application. But yes, it’s certainly not a space where we will be without competition, there will be competition in this space. But we believe that we have between our channel and the engineering between the product as well as some of these capabilities in integration into the radio communications, will provide us some significant competitive advantages. Paul Coster – JP Morgan: Which brings me to my last point, what is the anticipated price point for the AXON solution?

We have announced that system prices will start around $1000 mark. We’ve been – we’ve been trying to – the customers actually with significant positive reaction. We’ve met with the some of the major city police chief’s here in the United States. We have met some of our international customers, and they clearly see the benefits of this technology. We have been also doing research on advanced feature sets that they would like to see incorporated into the device. So, we view that $1000 is probably the starting the point. We anticipate average sales prices would probably be somewhere in that $1000 to $2000 range, over $1000 that we start to integrate more advance features like for example GPS and some other things customers have told us they would if you want to have a premium port. Paul Coster – JP Morgan: Thank you.

Thank you.

The next question is from Steve Dyer with Craig Hallum. Steve Dyer – Craig Hallum: Thanks and good morning guys. Dan, I didn’t hear that TASER CAM number, do you have that?

I’m sorry, yes, TASER CAM, we had 2391 TASER CAMs during the quarter. Steve Dyer – Craig Hallum: Okay. And then the real doubter to me looks like cartridges is lowest number in quite a number of quarters. Is there anything specifically that you guys can chalk that up to?

I think there are a couple of things, one is the budget that we talked about. A lot of times those year end budget monies are used for some other consumables, something they feel pretty comfortable buying. They just put them in their armories, so they are coming back to us with those budget monies for that. Last year in the second quarter, we saw a significant military order that simply cartridge metrics, so actually we shipped a number of cartridges to military customer in Q2 and Q3 of last year. So, that was certainly a driver in the prior year. We had not seen that repeat order thus far this year. But I think the budget flush is probably the biggest reasons especially for this sequential decrease. Steve Dyer – Craig Hallum: Okay. And then if I’m hearing you correctly, gross margin is probably a bit too much to ask, may be to say at current levels but 60% plus seems reasonable?

Yes. I think 60% is reasonable target at this point. As we talked about last quarter, product mix has a big impact as well. They are fairly wide range and all our products are pretty healthy margins especially for manufacturing company. There is a range of almost 20 point between our lowest margin price and our highest margin price. This quarter we did see a larger percentage of sales coming from the X26 product which is one of our better margin price. So, that’s really benefitted us but even with the mix that we’ve seen in the last few quarters, we expect that 60% is a reasonable target. Steve Dyer – Craig Hallum: Okay. And then R&D, you had said in the past $13 million to $15 million, is that still a target for this year?

Absolutely. And we ran about $3 million for this quarter, so that’s still we are comfortable that we’ll be certainly within those constraints. Steve Dyer – Craig Hallum: Okay. And then I guess lastly, I’m curious to see if you seen any kind of anecdotal change in legal activity since the adverse ruling against you guys, if you seen an uptick at all in cases brought or anything out of the ordinary?

We have seen a moderate increase in some of the legal activity. I think we’ve had a total of four cases filed, a couple I think were not related to Heston, one of two of them are (inaudible) best judgments. While we seen a couple of comments I think we are clearly associated with that. So, it’s still balanced significantly from the highs that we saw in the 2005 time frame, but it’s up a little bit over. We are really trending down. We are down about one case, one per quarter. We saw a handful in the second quarter, again not a dramatic number but we did see a little bit of uptick, and we’ll obviously will monitor that closely. I think that depending on where the appeal process goes to stop I think that may drive the future litigation. As we look at it, our case record is still very strong here and the vast majority of these cases is not that very profitable to – So, certainly we think that that long-term trend is still positive. Steve Dyer – Craig Hallum: Okay. Thanks.

The next question is from Eric Wold with Merriman Curhan Ford. Eric Wold – Merriman Curhan Ford: Hi, good morning. Question on the international front. (inaudible) about 11% in the quarter. One, was there any significant weakness you saw from normal customers, in the national it was just question of large orders are now flowing and then two, in the comment related to the back half of the year, you lost any large international orders which are tough to predict, looks like it’s of flat, can you may be walk us – name – but what is going to be the likely level of near term when that you could see in the international front, you got your eye on what may be a high in the sky in the 12 months to 18 months. If you could give us a sense how significant do you think you could move from the national standpoint?

This is Dan. In international I think it’s really more of a sort of a timing difference. We don’t really see, obviously the US economy is certainly challenging a lot more than some of the international economies at this point. I think the sales being little bit of a lower percentage of our total sales this quarter versus maybe some of historic levels. This is really more, I think the timing difference and also to your point that – absence of the large orders. We continue to be very enthused about the long-term prospects for the international part of our business. We see that as a real potential catalyst for growth in the future. I think the tough thing for us is that it’s difficult to predict. We think that several markets are sorted in that early procurement phase including the UK and France, Australia, Singapore, South Korea, all these countries are – we think rounding out their trial phase and getting really into those current phases. The total addressable market in those markets combined is certainly something that is very significant. There is upwards of 500,000 officers in those countries on a combined basis. So, we do expect that we will see some business from those countries over the next 6 to 12 months, but it’s very difficult to predict exactly when we’ll see that. But we are working hard, and we are also working to expand the number of countries we are talking about. We see that – we look at (inaudible) has been very similar around the world, these guys face similar issues and we don’t see that there’s any reason why we can’t broaden the number of countries that we are selling into. Eric Wold – Merriman Curhan Ford: Did you look at where international has been, you have trailing 12 months time, couple of years time in the mid-teenish that kind of range. Would you expect ’09 to be a larger percentage than that?

Yes. I think there’s certainly got potential for that. Again I think – when I look at the business and where, I think the near term opportunities for growth are I think it’s both in the international part of the business and also the consumer part of the business. Both are large addressable markets where fairly low penetration today. So, certainly I think there’s potential for the international to become a bigger part of the business over time. I think that’s – next year obviously we’ll have the AXON product, we’ll start seeing the revenues in the second part of the year. Probably out of the gate that will be probably more of a US product that certainly has some international potential in that product as well. Eric Wold – Merriman Curhan Ford: And then lastly, on AXON and XREP and Shockwave and all those, if you just think about – and I’m looking for guidance if you think about in ’09 once they start to commercialize, I know AXON is kind of a back half product. How significant could those be to ’09 numbers if you could ballpark a percentage of revenues?

This is Rick. Let me start with it. Shockwave is probably the most difficult one to predict because the nature of Shockwave will see some limited deployments with law enforcements swat teams. We could see some deployment in the Correctional environments, where they are using along defense lines or high-risk areas where they may need to incapacitate number of people trying to break out of a facility etcetera. But the really big opportunity for Shockwave is the US military, and traditionally they take a very long time to deploy new products and new technologies. Now there is some exceptions which for example the counter IED, they are spending billions of dollars in rapidly moving devices to the field. So, Shockwave the way I think about it is sort of a proof of concept. There’s been PowerPoint presentations for a decade on non-lethal area denial systems, and we felt it was important to get it out of the PowerPoint and into reality, and start giving out in disforcing [ph] with customers, get it into their hands let them play with it, let them see how powerful capability could be for example to check point in Iraq to be able to have a safe result where they could drop people that are approaching the check point to become soft, where us right now they have to deploy lethal force. But I’m sure, and that is if we get some units in the right hand to the military and they get them in (inaudible) and they determine that this an important part to counter a suicide bomber, that’s an equipment we could see enormous may be I shouldn’t use this types of terms, we could see some very big orders. But it’s a long shot. So, I would think if the Shockwave from…

Thanks Eric.

I will now hand the call back to Mr. Rick Smith for closing remarks.

Okay. We appreciate everybody giving us an overview morning. Obviously, we wish we could have produced better results with the top line, but I’m proud what the team was able to accomplish operationally. Very proud of what they are accomplishing in R&D. I think we are setting a firm base to take this company to the next level. Many of you have been with us from when we went public, and we where in the $6 million revenue range, we have done a lot over the last several years, taking it to $100 million is been exciting, and I think when you see the full picture of what we are doing which we have not for strategic reasons been able to share with everybody, everything that we have going on in R&D in our full product strategy, but as you see it unfold over the next couple of years, I’m confident we are doing the right things to take TASER from the very exciting new tech company to a very established dominant market player in a variety of market segments in the security industry. So, thanks everybody and we look forward to talking to you again in about 90 days.

Ladies and gentlemen, we thank you for your participation in today’s conference call. This concludes your presentation, and you may now disconnect. Have a good day.