Good day, ladies and gentlemen. And welcome to the First Quarter TASER International Incorporated Earnings Conference Call. My name is Jennifer, and I’ll be your operator for today. At this time, all participants are in listen-only mode and later, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to your host for today, Mr. Rick Smith, Chief Executive Officer. Please proceed.

Thank you very much. Welcome everybody. Before we get started here, I’ll have Dan read our Safe Harbor statement. We’ll get started.

Yeah. Thank you. 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 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 in the law enforcement market, expansion of product sales to the private security, military and consumer self-defense markets, growth expectations for new and existing profit accounts, expansion of production capability, new product introductions, product safety and our business model. We caution 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 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 accompanying demand for our products, potential delays in 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 deaths, media publicity concerning product uses and allegations of injury and death and a negative impact this could have on sales, product quality risks, potential fluctuations in the 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, governmental investigations and regulations, TASER product tests and reports, dependence 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 back over to Rick Smith.

Great. Thanks Dan. So everybody has no doubt seen in our press release as we came in at a little over $23 million in revenue in the first quarter and generated over $4 million in cash of that revenue base, something we’re proud of and though we have to continue to see the core business generating cash on a quarterly basis. So we’re able to execute the stock buyback for a little over $5 million in the international [ph] cash change not too significant from the end of the year due to cash generation. Similarly, in this quarter we saw product gross margins improve by a little over 1% of revenue, compared to last year that’s as a product only gross margin. The net gross margin did decrease because we are now selling in the dot-com and what used to be over the R&D line it’s now cost of goods sold for operating our data center. SG&A also dropped over last year by about $1 million and yet, I think, we are accomplishing more with that, you may have noticed, if you got to taser.com we’ve launched brand new website, it’s been redesigned to ground up optimize for search engine that search engine results and we believe is giving helped to make our website into the best sales person for the company and valued resources for our distributors. A couple other things to talk about, probably the big one happened just this week and that was the announcement of the new TASER X2. The X2 is basically our middle option now in ECDs. We’ve got entry level of the X26, which has been our workforce since 2003, at the high end, we have the X3. The X2, we believe is the optimal balance of features, price and size. It’s almost…

Thank you. So as Rick indicated revenues for Q1 were $23.1 million, this is down approximately $700,000 or 2.9% from the prior year. The decrease in sales versus the prior year quarter is primarily driven by a few individual significant orders to international customers and a small reduction in the domestic law enforcement spending in Q1 last year and Q1 we kind of saw the tailend of the stimulus funding benefiting us – we just saw that beginning last year by the time we kind of completed the year that was done and we saw a little bit of that impact here in Q1 for 2011. Gross margins of $20 – $12.2 million or 52.8% of revenues are down 3.8% as a percentage of sales. Again following the commercial launch of EVIDENCE.COM platform we’re now putting the as cost of service delivered, the cost of the data center, amortization cost of our e.com software, development efforts into the cost of sales line that has about 5% impact on cost of sales in the quarter. So when you exclude that are actually our margins are actually up versus the prior years when we look at the on kind of a similar basis. So excluding the SaaS costs our gross margins for the quarter would have been 57.8% of sales, which is an improvement of 1.2%. Again, our long-term margins targets for the just the product size, size of business remains at 60%, so we’re getting closer to that and feel good about the work we’re doing, the improvements in that product side of the business. We’re really driven by the efficiencies from the automated cartridge assembly production that we put in place last year, reduce scrap and rework expenses, as well as a more favorable sales mix here in this quarter…

Great. Thanks, Dan. Now going for the rest of 2011 there are five key areas where you’ll see the company is focused. Number one is upgrading our installed base of customers to our latest technology and we believe the X2 is the central thrust of that beam, as I mentioned we believe it provides a compelling feature set to drive an upgrade cycle. Second area is to continue to drive adoption of AXON and EVIDENCE.COM. We made significant investments in this space. We get excellent feedback on the overall capability. The folks who are deploying it are reporting significant drops in complaints against officers, significant improvements in the efficiency of their investigations. We’ve been told criminals entering guilty pleas as soon as they realize the incident were caught on video, things that otherwise would have spent valuable time and resources for the agency and the prosecutor’s office to have to take through trials. Just can’t tell you, it feels like the early days of TASER back in the late ‘90’s in early 2000, I think we’re on to something significant there. Third area is growing our penetration in the international markets. We continue to believe that TASER devices will make such a big impact in North America. It can do so internationally and they have been. We continue to see new countries coming on board with TASER devices and our penetration in the international markets is much, much lower than it is here in the U.S. It’s certainly down in the single digits, so lots of room for growth internationally. The fourth area is continuing to improve our efficiency and profitability. I got to tell you it feels good to see some black ink at the bottom of the income statement for last quarter. We’re very much focused on continuing…

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

Good morning. Eric Wold – Merriman Curhan Ford & Co.: I guess first of all, Dan, just real quick before I get other way, can you run through the unit numbers?

Yeah, of course, certainly we do that. So X26 we sold 12,940 for the quarter. We sold 3,719 M26s. So most of that’s in the international market. X3, we sold 165 in the quarter. C2s, we sold 4,440 for the quarter, so nice quarter for C2s. TASER TMs, we sold 1,789 and then we sold 350,000 and 345 cartridges, so real strong cartridge sales reported, which actually contributed to the sales as well. Eric Wold – Merriman Curhan Ford & Co.: Perfect. And then, I know we’re kind of in the midst of this upgrade cycle, just in general and then obviously replacement cycle possibly for the devices past the useful life and now that combined with an upgrade cycle with the new launch of X3 and X2, I guess, can you quantify what you see in this past quarter in terms of – I know you can’t tell necessarily what unit sales are a replacement but can you maybe give a sense of what percentage of your sales were to new customers versus existing customers?

The sort of the – the bulk of our sales at this point are actually going to be existing customers but that could be anywhere from just a replacement of units to just further penetration within the agency. We’ve got a much deeper penetration at the agency level than we do at the officer level. So it’s tough to tell exactly how much is replacement versus further penetration. But most of our sales are still going to be sort of to the existing customers, especially in North American market. Internationally, I think we still have the opportunity although maybe we’ve sold to a country before there’s a lot of countries which sort of in their very early in the procurement cycle. So I think there are still a lot of opportunities to get what would really be kind of a new customer if they have bought yet in any kind of quantities. Eric Wold – Merriman Curhan Ford & Co.: Now, for an existing customer, is the department is actually replacing TASER that are beyond used life or upgrading, do they typically alert you to that fact that they are doing that and are they – do they do that to try to get – I guess, what do they (inaudible) to get on to, they try to get some kind of trade-in value as well?

Yeah. We’ve seen some of that. Last year, we saw similarly to 2010 we saw lot of that. When we ended the life of the M26 for the North American market last year we saw a lot of those M26 customers come to us and upgrade to X26 or X3 at that point. So we think we got a roughly I’ll say between $5 million and may be $7 million of our sales last year with those upgrades around that M26 program. So we do offer some trade-in credit for some cases to try to drive that cycle even getting a small value for what they have sometimes would be an offside to drive that sales. So we are seeing that cycle start. We think the X2 is actually a more compelling upgrade path especially since most of the installed base is X26s at this point. So having something compelling to upgrade to I think will actually help drive that. Eric Wold – Merriman Curhan Ford & Co.: And then with the budget most probably we’re still kind of under a budget crunch, I mean is there any difference between a department trying to get budget dollars for new TASERs, they’ve never had before versus trying to argue that they need to replace TASER that are on their force now that are end of life or is it basically the same tough situation?

No. I think the optimist in me says that maybe in some respect, it’s easier to upgrade because they’ve seen the benefit and the product. Maybe some of our customers that we’ve seen successfully get budget dollars for upgrades have really made that argument. Hey, this is a product that saved the department a lot of money and workers comp and suspect injury, savings, avoidance of lethal force situation. So the path has proven itself to be valuable for the city. So in some respect hopefully that upgrade cycle is easier because they’ve already made that stuff to purchase the technology and they’ve seen the benefits. So hopefully the upgrade is that that path is smoother, but it’s still tough budget climate. My view is they’re still spending some money. We just need to be at that top of that list of what they are spending their capital dollars on. We think that second shot is a real valuable, very much a life saving officer protecting capability and hopefully our customers find that compelling. Eric Wold – Merriman Curhan Ford & Co.: And then last question, I guess, the budgets or if the economy doesn’t come back in budget do kind of tick back up. Are most departments for this year, you will know kind of, I guess, what percentage of them tend to be on September versus December fiscal year but is it pretty much, if you’re on a September fiscal year, even if things improve is there a chance of getting more dollars in this budget or once the budget, that is done you basically you want to buy stuff you need to use kind of the confiscated dollars if you will?

Yeah, that’s still a major funding source for us and really in a good budget climate. Those add support for your moneys and grants are still a big funding source for us even in a better economy. I am – it still a tough municipal budgets but I think we’re starting to see some indications that’s improving at least in some places we’re seeing sales tax revenues increases, the economy improves. So hopefully over time, we’ll be in a better climate certainly having – we think having a good line up of products as the economy improves really puts as in a good position. Eric Wold – Merriman Curhan Ford & Co.: Right. So we should understand the dynamics, if sales tax trends everything gets much, much better over the next few quarters or next few months, does that matter though if the company knows September budget year. Can they change it this year? Is it really will get some dollars in for the next year’s budget?

That’s probably more of the next year budget for that but I guess my first point was that a lot of the dollars they go to buying TASER are always budgeted. There are some of those assets for put your money and other things you point out as well. And I think that’s going be just – that doesn’t really change. I think better budget climate probably where (inaudible) is that just that money doesn’t get swapped up other places that stays in the place maybe they use it for equipment at that point. Eric Wold – Merriman Curhan Ford & Co.: Perfect. Thank you, guys.

Thank you.

Your next question comes from the line from Peter Mahon from Dougherty. Please proceed. Peter Mahon – Dougherty: Good morning guys. Say I just wanted to dig into the X2 product a little bit. You know, how does that product from a margin perspective impact the X26? You said you were pricing a little bit south of $1,000 a handle and the X26 right now is running probably in the ballpark of somewhere between 700 and 800. Have you elected to lower the price of your X26 with the launch of the X2?

No. Peter Mahon – Dougherty: Okay. So essentially the – from the X26 perspective, the margin in makeup will remain the same, is the X2 margin make up very similar to that?

Yeah. Similar on a percentage basis, obviously with a higher price points the dollar margins per unit or less would be a little better for us. Peter Mahon – Dougherty: Right. Okay. Got it. And then, Dan I just wanted to confirm a couple of housekeeping questions with you, you said that the Arizona tax that was $100,000 item correct?

That’s correct. Peter Mahon – Dougherty: Okay. Now in terms of that SG&A, you guys, it was relatively flat sequentially at 9.3 million, is there anything that you guys can do, should we see a dramatic change in that SG&A numbers throughout the year or we kind of reach the bottom in kind of our cost savings or kind of how should we think about that as the year unfolds?

Yeah. I think that the heavy left on the cost savings is really behind us. We did make some really pretty significant structural changes last year to head count. Certainly, we’re going to look for stability to be sufficient effective and we’re not – we haven’t stopped those efforts. But I think the big dramatic improvement is behind us. I think at this point, I’d like to look at SG&A sort of another leveragable line of the P&L that as we – if we’re effective in growing the business that we’ll see that SG&A as a percentage of sales come down and hit the operating income as a percentage of sales go up. Peter Mahon – Dougherty: Okay. Got it. Great. Thank you. And from the December quarter to the March quarter here, we saw R&D go up on modestly, I assume that has a lot to do with the X2 development. As the year progresses, do you think that we’ll see that number decline? What do we have in the hopper right now that would warrant a $2.5 million to $3 million R&D P&L hit on a quarterly basis and is that the level, what we’re going to see it stay yet or how is that’s going to unfold as the year progresses?

Yeah. That’s a good question. I think we’re going kind of see it stay at that range for the rest of this year. I think certainly even with the launch of the products, you continue to do value engineering on the products you’ve launched. There is still a fair amount of investment still happening on the video side of the business and also in EVIDENCE.COM, the software piece of business that you’ve sort of that part never sleeps, even though that we’ve launched the product or we continue to work on new features and capabilities in excess model. So I think that again that’s – that’ll probably say relative at these levels for the rest of this year but again it’s something that is I expect it to leverage. So R&D as a percentage of sales if we’re successful in growing the top line, I do expect to come down on a percentage basis. Peter Mahon – Dougherty: Okay. Great. Thanks a lot guys.

Good night.

Your next question comes from the line of Steve Dyer from Craig Hallum. Please proceed. Steve Dyer – Craig Hallum: Thank you. Good morning.

Good morning. Steve Dyer – Craig Hallum: Real quick question and I hop down in another call so I’ve done about half way through. The X2, how do you see that sort of that adoption taking place, the move from the M to the X back a few years ago was pretty rapid actually. I mean, do you see a similar move this time or do you think it will be more muted or sort of how do you think that transition takes place?

That’s a great question. There are factors on both sides of that. We did see the X26 flip in its first full quarter of production, it was outselling selling the N26. Of course, at that point of time, we’re in a real stronger economic environment and they both use the same cartridges. So people have had a stock at cartridges good, easily deploy some of the new devices as the GPX coincides with N26. The X2, we believe, provides an even more compelling upgrade in terms of its capabilities and the fact that we were able to engineer into something that’s fundamentally with an ounce or two of the X26 that probably officers perspective, it’s a very good compelling upgrade. It is then probably the strongest positive reaction we’ve had to products and focus groups and market testing, certainly extends the X26 in production. So on the plus side, lot of (inaudible) need to do master these for life, customers are looking for compelling reason to upgrade that’s in our favorite. One thing it slowed down is just it does require a transition of other inventory of expendables as well. We are putting programs here is not announced them yet that will create and it’s a compelling trade-in value, with a full conversion programs be able to take their inventory of cartridges and in just in front of that as well as they roll out the X2. So it’s a – and at this point, we really just started to show to customers on a private basis in the last few weeks, we just announced yesterday so it’s a little early to say other than qualitative where we’re getting very positive feedback. So I think we’ll – unfortunately we’re not going to analyze the future holds until it gets here in terms of the actual conversion rate but I’m pretty optimistic. Steve Dyer – Craig Hallum: And then as far as the X3, are you going to – I guess, kind of keep that around and I guess still offer that kind of now, I guess, making the assumption that that’s not the answer for the upgrade cycle for everybody anyway. Are you going to keep that around or is there more cost associated with doing that than just scrapping it?

No, we’ll absolutely keep the X3 around. It is our top of the line product particularly for SWAT operators with the Arizona (inaudible) because their guys tend to operate out in remote areas in the state by themselves and having not just one backup but two backup shots. It’s particularly important when your next officer might be half an hour away. We also going to just show a purely up from a marketing perspective that having a pre-product lineup, tends to help people with their decision-making. We got three private people kind of take the one in the middle and now with a higher-priced whole-featured product like the X3 from the top end and the relative price scale between X26, the X2 and X3 but that’s really helps position the X2 as a – for most people, it’s going to be the answer we believe, the right combination of size price and features. And we believe that actually keeping X3 even though it’s probably going to sell in smaller unit volumes and to a more specialized unit that the net effect we should up drive overall sales redemption of the X2. Steve Dyer – Craig Hallum: Okay. What’s the progress in some of the ancillary products the XREP and some of those types of things, anything worth talking about there?

In the XREP, we are seeing decent interest internationally. The overall impact ammunition space is considerably smaller than the handheld ECDs. I mean, there are number of occasions where at least we’ll roll up and use a shotgun launch, extended range projectile is really pretty small compared to the average patrol use. So one thing that we are doing within the business is trying to focus our resources on doing fewer projects. So you’ll probably see what you will treat the feature of less of these specialized applications of our technology and we’re more focused on projects that have a higher utility across the broadest base of law enforcement. So worth more PC XREP around in our product line up. We’re not investing overly heavily in it or into, for example, a next generation of the XREP in it. We think our resources are better focused. The two big things that can move us from a product perspective of our compelling upgrade cycle that is compelling for the mass patrol officers. And we think we’ve got that right with X2. And then the on-officer video and digital evidence management and so we’re – it’s been mixed impairment I talked about in our annual report, was going through the exercise of sort of acting, okay, what can we be best in the world at, what are the few things that this company should focus on in just doing it in a world class way, it let’s to – I think the right business decisions about focusing on doing fewer things and doing it better. Steve Dyer – Craig Hallum: For whatever my opinion is worth it, I think that’s the right way to go.

Well, thank you. Steve Dyer – Craig Hallum: How would you categorize kind of the tempo or the climate internationally. I think, it’s historically it’s been kind of fits and starts there for a while. France [ph] is going to put (inaudible) everybody and their brother. How would you – I mean, I know they have some of the same budget issues that we have, how would you categorize the receptiveness to the product now versus a couple of years ago or what are the thoughts there?

Well, I think some of the controversies going down a bit, to be honest, Amnesty International is not as vigorous as they were a few years ago and there is all the controversy in the U.S. and there is a lot of controversy in Canada. I think that is the negatively sort of 1x force to some degree where even the people are really critical in 2005, announced all these devices have replaced modern police (inaudible) and the studies are just beyond compelling about the reduction potential. It’s been a little frustrating that we haven’t seen countries take that next step to go for full deployment on older officers. We’re continuing to have increased competitions on those levels. We’re continuing to have more countries come on and we just had a significant international role in the last couple of weeks here. Over the long haul, we think we are in even better position in this. The international customer base seems to be a bit more risk averse. Anytime you are dealing with national level politics, all that cases, one thing that you really for a bit frankly in the U.K. last year, there was a lot of controversy over the use of the XREP projectile in an unauthorized use in (inaudible). And that lets you a lot of consternation in the media and we actually saw that, I believe that kind of disrupted the normal sales process. I think we’ve kind of passed that now. We’ve gotten things, going to sort it back down into a steady place. So I think we’re actually in a better position than we were several years ago just because time has passed, the days continuing to really surpass – the days continuing to really support technology. In the X2, we’ve even built in some pretty compelling safety features that further reduce the already remote risks of adverse events and we think that can be compelling as well. So I wish I can give you a more direct answer and say we’ve got a couple of countries lined up to find for every officer, but until we get the orders that – we’ve got countries talking about it for years and I share your frustration with (inaudible) situation, we’re quite able to get that ball pass the goal line, but we are – we believe we will in the next 12, 18 months see some significant, very significant international orders on the (inaudible). Steve Dyer – Craig Hallum: Okay. And then one last question, you talked about the SG&A line, the R&D line is that damn good, is it just kind of level that you guys are looking at? Is there any ramp for anything or does it ramp down for anything or how should we think about that?

I think I have still pretty talked about these models. I think it is just kind of range you’re going to see for the least of rest of this year. There is still some valid engineering to do on some of the new products. We still have our investments in EVIDENCE.COM and our apps, the video products that we are making. So I think this is just kind of reasonable level for at least for the rest of 2011. Steve Dyer – Craig Hallum: All right. Perfect. Thanks guys.

All right. Thanks, Steve. Okay. Well, we run almost an hour here. I’d like to thank everybody for your time. I still got a large list that stayed throughout the Q&A to an extending time for us. We’ll look forward to our next call in July. We will be able to talk about on the initial adoption of the X2, you’ll know the answers to some of the questions that were asked today about the future. It’s an exciting year ahead. So thanks for your support, the shareholders. We appreciate the opportunity you have given us to work with some of the finest customers in the world and we’d encourage all of you to come up for our shareholder meeting here in May 26. Come, see the building, see some of the automation equipment. We’ve got some of the new stuff already in production, it’s really world class. And we look forward to meeting every one of our shareholders. So thank you all and have a great day.

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.