Good day ladies and gentlemen and welcome to the first quarter 2009 TASER International Incorporated Earnings Conference Call. My name is Den and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. (Operator instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today’s call Mr. Rick Smith, Chief Executive Officer. Please proceed.

Thank you very much. Before we get started I'm going to have Dan read the Safe Harbor statement.

Thank you. Certain statements contained in this presentation 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 expected revenue and earnings growth, estimations regarding the size of our target markets, successful penetration of law enforcement market, expansion of product sales to private, security, military and consumer and self-defense markets, growth expectations for new and existing accounts, expansion of production capabilities, new product introductions, product safety, and our business model. We cautioned 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 market acceptance of our products, establishment and expansion of our direct and indirect distribution channels, attracting and retaining the endorsement to key opinion leaders and law enforcement community, the level of product technology and price competition for our products, the degree and rate of growth of the markets 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, granting manufacturing and production to meet demand, litigation resulting from alleged product-related injuries and deaths, media publicity concerning product uses and allegations of injury and deaths and a negative impact this could have on sales, product quality risks, potential fluctuations in 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, risk of government investigation regulations, TASER product tests and reports, dependent upon key employees, employee retention risks, and other factors detailed in the company's filings with the Securities and Exchange Commission. With that, I'll turn it back over to Rick Smith, our CEO.

Thanks Dan. While there are many things to be proud of this past quarter, the announcement of EVIDENCE.com was a significant milestone in the evolution of this company. I would return at the end of the call to discuss how we expect this new initiative along with the previously announced AXON on-officer tactical computer to transform the company. But first let's start looking at the results of the first quarter. So for Q1, revenues were $24.6 million up $2.1 million or 9% over last year. Operations continued to demonstrate improvement as gross margins increased to 59.5% compared to 56.8% last year, reflecting our continued focus on efficiencies. Items particularly important when you understand that we had a very high margin – we had a very high rate shield of cartridges this quarter as the UK brought at least over 100,000 cartridges to go with the weapons that they purchased in Q4. So, as you all know cartridges have a much higher labor content, as a percentage of sales in the lower overall margins compared to our ECD's. So it was almost at 60% with a very high ratio of cartridges is really quite an accomplishment for Steve Mercier and his team and operations. Consistent with our strategy in the last year R&D was up $2.1 million or 98% in the first quarter continuing to reflect our commitment to expanding our future technology and product diversification. On GAAP basis, loss from operations was $1.0 million for the first quarter compared to an income of $1.5 million last year. So, if you look at the loss on a GAAP basis there is couple of things there. It is primarily a function of number one increased R&D investment, number two non-cash charges for stock option compensation, which by the way did increasingly toward…

Okay thank you. So as Rick said, sales for the first quarter were $24.6 million, which were up $2.1 million over the prior year, mostly driven by the significant increase in the cop and international business. Sequentially, Q1 sales are down on $140 million from Q4, primarily caused by a decrease in the domestic law enforcement sales due to the continued lower municipal budget spending in the US, but the international sales were approximately $9.1 million in the quarter or 37% of sales. And the increase is mostly driven by the significant order from the UK and also a significant order from Brazil. Gross margins in the quarter were $14.6 million or 59.5% of sales are up 2.7% from the prior year. Increase in margins is the result of several cost-saving initiatives such as the elimination of cash and distributed discounts, lower over time and temporary labor expenses, better productivity, lower warranty expenses, improvements and scrap, partially offset by lower capitalization of overhead and inventory primarily due to the lower cartridge inventory. The sequential reduction in gross margins were driven by the mixed change from higher model electronic control devices to lower margin cartridges mostly driven by large UK cartridge other in Q1. Cartridges in Q1 of 2009 actually represented 32.4% of sales, this compares to 19.8% of sales in Q4 2008, so you can see there is a big shift in mix from the electronic control devices to cartridges. We did see a $919,000 increase in in-direct manufacturing expenses versus the prior year, and again this is mostly driven by lower absorption and capitalization of plan overhead due to lower cartridge inventory. The large UK border basically wiped out majority of our safety stock of cartridges, so that had a negative impact on our amount of overhead that we capitalized on the balance sheet as well. SG&A expenses were $11.4 million for the quarter versus $9.2 million in the prior year, the increase is driven by higher salaries and benefits of 719,000 due to higher headcount as the company has built out its management team and hired support for the new product lines coming into the market, we got consulting and lobbying are up 505,000 due to additional marketing consulting done to support 52 product line and new product launches, as well as IT consulting relates to upgrades or new version of our ERP system. Legal expenses for the quarter were up $450,000 due to more outside legal expert registries as Rick spoke to due to the number of cases going to trial in 2009. Our 123(R) expenses also increased $602,000 to two options granted in 2008 included options granted media which replaced the cash bonus program and cash bonuses were down 93,000 during the first quarter partially offsetting that increase to the 123(R) charge.

I like to make a comment there. I think it is important that shareholders understand that the vast majority of our employees actually opted in to an option equity comp program and gave up cash bonuses for, was it two years or three years, Dan?

Came at two years of cash bonuses, that's right.

So our employees have voluntarily gotten into same boat with the shareholders that we are very much delivers in where the company is going and I just think it is worth pointing that out.

Yes, thanks Rick. I think that is a good point. Sequentially our SG&A expenses are 514,000 over Q4 2008, again this is driven by higher salaries and benefits the $294,000, mostly driven by headcount ads we made during Q4 that we are at a full quarter of expense and Q1 offers some new salary ads in Q1 as well. We had additional stock compensation expense of $194,000 versus the fourth quarter and also had increased legal and professional fees of $350,000 relating to significant increase as per witness expenses during the quarter. We do believe that's more of a timing difference than anything else and also we saw an outside auditing fees up about 197,000 versus the fourth quarter, this is a normal event, obviously the first quarter of each year is the heaviest part of your outside accounting works done to support the work around the 10-K. Our research and development expenses of $4.2 million for the quarter which is an increase of $2.1 million over the prior year again driven by higher salary benefits and 123(R) charges at $1.2 million to support both the hardware development and a new software development teams headquartered in California. Outside development cost of $397,000 for the EVIDENCE.com development and we also had an increased supply cost at $321,000 due to costs associated with developing working prototypes in the new products in the pipeline. I think on the positive note, we just see a sequential decrease in R&D expenses from Q4 2008 as much as the development work is on the outside is now being brought in house at a lower cost and the outside consults are charging similar work. Our heavy investment R&D is driven by our strategy of product line expansion and diversification, therefore we expect our higher R&D spend to…

I am going to talk a little more about our future initiatives. Any of you have not had the opportunity I certainly would invite you to go to EVIDENCE.com and watch the webcast there, it is about a 45 minute webcast that will show you a little better than I can describe just hear her over the phone, where it is that we are going with this new service offering. So with the answer of EVIDENCE.com, we now have the complete solution set that we can take to law enforcement's most challenging problems. Out on the streets with miser at stake our family of TASER ECDs provides the safest and most effective options of police respond resistance. With the eye contact with the computer we streamline the collection and analysis of evidence while preserving and audio/video record from the officer's perspective of what really happened in these incidents, in all incidents, and not TASER incidents, but everything from traffic stops, to the most contagious and dangerous use of force incidents. With EVIDENCE.com we will provide groundbreaking analytical capability for digital information and evidence while preserving a foreseen evidential retail of custody all going to the courts until the last couple of drops. So the point is we are now developing a suite of tools to help our customers not only doing their job in street, but defending their actions and protecting themselves against false allegations and claims against them. And we're building this case ability to EVIDENCE.com in a way that lays the foundation for a secured global network for the law enforcement community. This integrated set of hardware and software tools has the potential we be believe to revolutionize law enforcement in the same way that real-time tactical situation where in this technology have revolutionized the military. If you…

(Operator instructions). Your first question is from the line of Eric Wold from Merriman Curhan & Ford. Please proceed. Eric Wold – Merriman Curhan Ford & Co.: Hey, good morning.

Good morning. Eric Wold – Merriman Curhan Ford & Co.: I guess, first of all, for Dan – you might given up the unit numbers as usual for the second quarter.

Yes, absolutely. So the units for the X26 were 13,392, M26 were 3,941, and the C2 actually saw little bit of a decrease, I think its kind of a seasonal nature first quarter as well weaker for us was 5,111 units and then the cartridges again that was where we saw the huge ramp up in units that went from 284,000 in Q4 to 438,000 in Q1, so 438, 337 in cartridges and then TASER counts were 1,710. Eric Wold – Merriman Curhan Ford & Co.: Okay. And then question on the stimulus plan because applications are coming in now and obviously you are having conversations with Police Departments about their needs, what kind of an evidence have you seen so far kind of just anecdotally about what your – what level of – what kind of – what percentage of the funds or request you kind of you can possibly allocating towards TASER products.

That’s a great question and Rich, we had good visibility into it, but that visibility point I can give you is that we’ve had little over 230 agencies have approached us for assistance with grant writing through our (inaudible) helpline we set our grants. The one of the challenges is law enforcement tends to look at their grants – is information that they are not going to share, so we don’t get a lot of feedback, it appears to be one way information flow. So the (inaudible) for help would provide information, we’ve provided an integrated set of tools, I think cell based model that helps them estimate not only comps but financial savings, benefits and increase the jobs calculator. So we will be going back to our joint customers. The final deadline would be May 18, so we are still out talking to everybody. The last phase of our communication program will be to get customers used incentivize them to share information with us basically by telling them that we are expecting a lot of grant applications related to TASER and that if they would give us a forecast by letting us know what they are put in for. That will help us to reserve inventory in case we do get a surge of orders. But at this point, we're not getting a lot of feedback. Agencies tend to hold their actual grants pretty close to the best. Eric Wold – Merriman Curhan Ford & Co.: Perfect and then, if you look at the AMEA article, maybe a month or so ago whether you estimated this – the grant could generate about a years worth of revenues to the firm. Do you sense of kind of how that came about an estimate?

I was talking with media reporter and he sort of quoted to me what do you think is possible and I just – to may be honest, that’s not a very accurate number, there were no signs behind it and there was more just a matter of their reporter asking, this pretty good job, he is trying to corner me and said, will you agree it might be worth as much as the year of revenue and I forget its not unreasonable. But it’s really hard to say, there is about – out of the 4 billion, there is 2.7 billion that can be used for training and equipment, was proportionate that come towards TASER is going to – it’s really hard to say. So I wouldn't go looking at this as if that was something that we've been able to model, that would represent about 4% of the stimulus funds, we certainly have internal goals. We like to see in terms of the amount of stimulus dollars spent towards TASER products, but your modeling is probably going to be more effective and more accurate than the net number, so it's really just the result of the conversation with the reporter. Eric Wold – Merriman Curhan Ford & Co.: Not with the conservative estimate. I guess, lastly –

I allude to you. Eric Wold – Merriman Curhan Ford & Co.: Would you get a sense that, I know it's early – you haven't shared a lot of that in the request for products with you, but would you get a sense of the majority of the funds would likely go towards kind of the regular TASER's and cartridges or do you think you could see a lot of this being used towards you are getting people involved in AXON earlier than they may otherwise have been.

That’s a great question. One thing we can look at in that respect is the American Conference of Mayors was approached by the Obama Administration to put together a witch list of where they worked out, where they wound spend the money, these were shuffle ready projects, now this is not any indication of what – where the money will actually go, so it’s the best time we are out here, but when the Conference of Mayors came back, there was – of saying huge where we would put the money, there was about – we identified in that list about $2.4 million related to TASER devices, we identified $17.5 million for video equipment particularly in dash cameras with surveillance cameras. So based on that sample, 2.4 to 17.5 what we got to start 8X in the organic budget that were produced sort of through this third-party survey at the Conference of Mayors. So that sort of consistent of what we have seen in general, the budget dollars allocated to video solutions in law enforcement kind of run between 5 and 10X of the budget again that’s very sort of inform able, we’ve seen it from a couple of different sources and that’s one of the reasons we accelerate at the launch of EVIDENCE.com and AXON as we figured – we knew that many agencies would be putting in budget requests for both days or end In-Car Video and frankly what we are trying to do is make sure that these agencies don't tend themselves in by putting in a grant request specific for – in car video. As we talked with our customer base, we’ve been letting them know about AXON, EVIDENCE.com and making sure they write their grants. We are hoping that the language would give them the flexibility to use it for on-officer or in-car video. And I think that measure is really resonated. We’ve got a number of agencies we talked to like Bill Lansdowne, the Chief in San Diego is out on National Public Radio and announced that they basically held offline deploying in car video in favor of AXON and has quietly done that feedback from a significant number of departments. So the – from the stimulus package perspective, there is a bigger pool of funds to go after for the AXON, EVIDENCE.com just based on those factors I gave you previously. Eric Wold – Merriman Curhan Ford & Co.: Perfect. Thank you guys.

Thank you.

Your next question comes from the line of Paul Coster from JP Morgan. Please proceed sir. Paul Coster – JP Morgan: Thanks. Rich, when does the AXON product actually go on sale?

We are currently targeting the end of this summer around the August timeframe that we would begin to field shipments. Paul Coster – JP Morgan: Okay and when does the sort of sales pipeline start to build? Has it already started?

Well, with the law enforcement, they are going to want to go through testing evaluation phase with products and the larger the agencies generally the longer the testing evaluation phase is going to take. So we've got a significant pipeline of interest, but until we can start putting the physical product on people's hands, we are not able to really predict any pipeline flow yet. Other than, its been pretty – it's been very well received, much – I can compare this to one when we were launching TASER into the law enforcement market, that was a much harder fight to get people to accept this concept given electronic weapon years ago when we really entered law enforcement. The management is now two-fold, number one we are coming back, TASER has built a deep relationship with law enforcement not only because of the weapon that we provide it, it’s really impacted their job the streets like for Houston example, that’s a factor frankly where as aggressive as we are in defending law enforcement, officers, they love that. One time when you talk to police, then you are really frustrated about, a cop on the street who is involved in an incident where the agency gets sued and the agency settles, those officers look at that as an affront to their honor, they get very emotional – they do not like these cities stepping up and settling going to get the agency. So its agents have been very aggressive about defending those claims in fact we were appointed where we filed the lawsuit in Ohio against the medical examiner. In that case, where an officer has been charged with murder because of frankly it was a bad ruling from medical examiner and 15 officers were sued. We stepped in when after…

Yeah, I think there is probably – we're still (inaudible) go to market on that. There may be – I certainly think that the – we will have the EVIDENCE.com service up and running right out of the gate, exactly when that revenue start to flowing, I think we still need to work with our sales and marketing to partners to figure out what's the best way to position that, but certainly we want that recurring revenue stream to start looking – and also obviously our customers get use to having to pay for that service. So I think the ramp is really going to be – is a big question, I think the stimulus is probably the biggest wild card right now that could cause a quicker adoption that look like – otherwise happen naturally, but it's so kind of remains to be seen. Paul Coster – JP Morgan: Do you think the product – the AXON product will be – the revenue recognition will be amortized over the life of the service contract essentially?

No, our intent right now is to buy for those two and recognize the product sale upfront and then the service ratably overtime. Paul Coster – JP Morgan: Okay, got it. All right, now with respect to the near term outlook, I realize you don’t issue guidance, but we should be pretty conservative at the second quarter and the first half of the third quarter, it sounds like and then hopefully the stimulus spending will – and the uncertainty around that – it will be relieved and will start to see the some kind of upgrade cycles and new sales kicking in late third quarter, is that the great way of thinking about things here?

Yes, this is Dan. Yes, I think that's the right way to look at. I think not only do the stimulus dollars flow, but any of the money that may be spent on the sidelines as people wait for the stimulus dollars and maybe money that's budgeted right now that gets spot for a quarter or quarter and a half as people wait for the stimulus funds and then – if they don't get the stimulus, then that money still flows in the purchase of stocks, right now I think there is definitely some near-term risk.

Let me add one other thing, on the topic of the AXON revenue recognition, so we've announced pricing at $1700 per AXON unit which is about a third of the customers in car videos, we think it's very favorably positioned competitively, but it's twice the revenue opportunity of the TASER X26 from the sell in opportunity. The recurring revenues, we’ve announced pricing of the EVIDENCE.com service at $100 per officer per month in terms of revenue, so obviously you can do a math on that, that $1200 per year in recurring revenue that again is pretty favorable even compared to the sell in opportunity with the TASER X26. So sort of twice the sell in revenue opportunity, plus recurring revenue opportunities we talked about, but we've have had a number of agencies in some particular market segments like the (inaudible) segment have alerted us that they may prefer to lease the equipment and have an integrated monthly service fee that include both the service and the hardware. So there is unique [ph] possibility we may look into now with the third-party leasing companies, so that we would effectively sell the hardware – to recognize that revenue, but I don’t want to put a line on your hand here that we will not amortize – we may have market techniques where we make a determination given the amount of cash you got on the balance sheet and the wealth of costs that go into leases, we may end up having some segments where we amortize the hardware over the life to get it with the service. Paul Coster – JP Morgan: Okay, last question. Can you give us any outside on what was happening with the National Police in France?

It’s just a challenging thing to try to correct that business. I don’t think you want to confuse, because those guys – because I know every year – every conference call we are talking about predicting the future, we're telling how hard it is, the EVIDENCE.com which we will be able to model the recurring revenue, so at least a portion of our business and a growing portion of our business will become more predictable, that's one of the reasons that we've really focused on launching this new service. Paul Coster – JP Morgan: Thank you.

Your next question comes from the line of Steve Dyer from Craig-Hallum. Please proceed, sir. Steve Dyer – Craig-Hallum:

Good morning. Steve Dyer – Craig-Hallum: Most of mine had been answered, a couple of them a while ago probably a year ago you had talked about installing some automation equipment that would make the production of cartridges a little bit less labor intensive, a little bit more automated which was intended to improve margins. Where are we in that cycle I guess?

Steve Dyer – Craig-Hallum: Okay and then what kind of an improvement I guess do you expect in operations margin vise or I mean nothing to hold you to, but what are the thoughts, I expect I am sure this is – I think at one point was going to be an $8 million or $9 million piece of equipment.

Yes, that’s right. There is a – we are certainly going to see a margin impact, I think the tough thing is you are going to be – you're right out of the gate, we may not be as significant as we will see as you sort of get that piece of equipment running exactly as we would like to see it and thoughts of – a function of the amount of cartridges we are selling each quarter, we certainly would have loved to have it this quarter with the large volume, but we do expect that the price will have a positive ROI and be a thought contributor to margins in the second part of this year.

From a product life cycle management perspective, this is – we are timing this absolute as that equipment is coming online, so some of our newer products like AXON and XREP. So we are able to redeploy our workforce on to some of those other new products. So from a global perspective, it will be a transition period as we are shifting people around, so we should see the cartridge margins improving on a lever basis as we redeploy those people on to some of the other devices that we are making. But this is – it's not to make clean cut off, it's going to be sort of a transition period. Steve Dyer – Craig-Hallum: Okay, thanks. And then the other thing I was wondering if you could give a little bit of additional color on the UK order, I think you shipped some handles in Q4 and then you had indicated a big cartridge shipment in Q1, what sort of left on that initial I guess funding tender or is that pretty much through the pipeline now or not in the field?

Yes, our expectation is really most of those dollars allocated have been used at this point. I think what was significant is, we had the sort of UK central government funding both the purchases of handles and the cartridges, and I think they’ve originally approved the purchase of 10,000 handles. I think really what’s happened, we reallocated some of those dollars into the cartridges because they bought 5000 handles right at the end of 2008 and no cartridges. So given – they typically use about 50 cartridges per year in trading, we knew that they may be coming back just in Q1 for significant cartridge purchases which we did see. And so – they did bought some more handles and then reallocate some of the dollars to the cartridges. At this point, there is still potential sales for the rest of the year through the (inaudible) that’s how it was funded traditionally and then the central government stepped up to make this significant purchase and I think there is still opportunity that's (inaudible) to purchase on their own. Steve Dyer – Craig-Hallum: Okay. All right, great, thank you.

Thanks, Steve.

Your next question comes from the line Greg McKinley from Dougherty. Please proceed, sir. Pete Mann – Dougherty and Company: Yes, hi, this is actually Pete Mann [ph] calling with Greg. Say, I got a couple of questions guys. Looking at the gross margin, we are just under 50% this quarter, which was down from the last three quarters, kind of where do you see that kind of running for 2009 for the last three quarters?

Yes, we have certainly – we saw – the mix impact this quarter, the shift from electronic control devices to cartridges had about a 1.8% impact. So just that – if that alone would have put us back up into the lowest 60s. Certainly our internal target has stayed north of 60, but as I have said on prior calls and unfortunately this quarter I think it’s sort of pore [ph] that out the fact that our mix does have a kind of have a pretty material impact on the margins. I think in the fourth quarter, we enjoyed a real heavy mix of electronic control devices which was beneficial for us. This quarter, we saw a ship back at cartridges, we expect that – the second quarter will have more a traditional mix, but then the other part of the drive is obviously our overall sales volumes will have an impact, we do have fixed cost to carve as well, but our term targets are always to be above 60% and if the sales – depending on sales levels and mix, we certainly think that – those targets are still reasonable. Pete Mann – Dougherty and Company: Fair enough. Now coming along that same topic, where do you guys see EVIDENCE.com and AXON sitting into the gross margin picture. Those going to be like higher margin products, I assume the EVIDENCE.com would be, but how does AXON kind of sit in that picture?

Pete Mann – Dougherty and Company: Excellent. That’s very helpful. Last question, looking at your operating cost, I know you guys mentioned that research and development is going to remain at kind of these levels throughout the rest of the year, but from an SG&A perspective, do you see that your headcount kind of where you wanted to be at or you still kind of pursuing some other people to fill other software holes or other initiatives that you guys are tackling?

Yes, I mean it’s certainly – I think it’s a great question. I mean there is certainly some more hedge we need to add, the – especially around sort of the AXON and EVIDENCE.com products, selling that software as a service is a different animal, there is sales, engineering, talent that we are going to need because it is a little bit more complex as far as how we speck it out and how we implement the product. So there is certainly some infrastructure there that – I think we are sort of nearing the completion of that ramp up of headcount, I think in the near term, we’ve got the Tech Summit, its going to happen in the second quarter which is a incremental expense. We think that the money we are putting there, we think is very well invested because its going to gather both good information about the product features and making sure we are heading the mark that also gives our customers a really good introduction to the product and get them excited about the technology that comes to market. We also have in the second quarter the expenses around the annual report to proxy at the end of shareholders meeting, so there is some incremental things for the second quarter that are kind of unique to the second quarter, but certainly we are paying attention to the cost where we are trying to make sure that we are smart about where we are making the investments and really spending the money where we think we got the best return and investments more strategic, but certainly it’s a little bit of a challenge as we kind of really transform the company and really get ready for the sort of the next phase in the company’s growth cycle. Pete Mann – Dougherty and Company: Okay, great. Thanks a lot guys.

Thank you.

At this time, there are no further questions. I would now like to turn the call back over to Mr. Rick Smith for closing remarks.

Thank you very much. Again it was – I don’t want to overlook to think that on a revenue basis, I believe this [ph] is the strongest first quarter we’ve ever had.

That’s right.

Not many companies are saying that in Q1 2009. So Broadware [ph] seems it has been able to do. As you know historically, we’ve returned funds to shareholders from share repurchases etc. We over the past year, we made the strategic decision as rather than returning cash that we had an outstanding investment opportunity with AXON, EVIDENCE.com and so we’ve been able fund that from our operating cash flow and from our operating income streams, and as you start to model this, you will all realize the total available market opportunity is at least as large as our existing business, so we are thinking obviously on a pro forma basis, the investment made a lot of sense.

Thank you very much.

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect.