Good day, ladies and gentlemen, and welcome to the third quarter 2011 TASER International earnings conference call. My name is Jennifer, and I will 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). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Rick Smith, CEO of TASER International. Please proceed.

Thank you and good morning. Before we get started, I’m going to have our CFO, Dan Behrendt, read the Safe Harbor statement.

Good morning. Safe Harbor statement, 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 of law enforcement market, expansion of product sales to the private security, military and consumer self-defense markets, growth expectations for new and existing accounts, expansion of production capabilities, new product introductions, product safety and our business model. We caution 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 client and indirect distribution channels, attracting and 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 risk for manufacturing automation, risks associated with rapid technological change, execution and implementation risk of new technology, new product introduction risk, 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 the 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, risks of 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 it back over to Rick Smith.

Thanks Dan. Okay, so I’m sure everyone has seen the release this morning. Pretty happy with the results; up 16% over the same quarter last year, with $24.4 million in revenue and the business generating $5.3 million in cash from operations, or that’s 22% of revenue in cash generation. One of the key drivers there was the introduction of the X2 from the second quarter. So this was the first full quarter that the X2 was available to our customers that accounted for about 15% of revenue, which is close to 20% of bookings. And the disparity there is we had a very high attachment rate of extended warranties and training services that are deferred and recognized over time. As we look into next year, we see a run of $300 million upgrade opportunity if we’re successful in helping our customers to upgrade X26 units that are more than five years old. One other point about the X2 is, in our surveys with instructors who teach electronic control devices, we’ve seen 96% of them select the X2 as their preferred full-time carry weapon even over the X26 which was a huge number, a huge achievement actually, because the X26 was such a hit in law enforcement. But the rigorous voice of the customer development process where we put hundreds and hundreds of officers through surveys and focus groups to identify the right feature matrix for the X2 really seems to be paying off. It looks like we do have the next-generation ECD, which should be able to drive growth in the future. This quarter, we also saw international sales continue to grow. It was up over the prior year by $4.4 million year-to-date, up $2.3 million in the third quarter, with large portion of that coming from strong cartridge sales…

Okay, thanks, Rick. So as Rick said, revenues for Q3 were $24.4 million. This is up approximately $3.3 million or 16% from the prior year. The increase is driven mostly by the introduction of the new TASER X2 two-shot taser device, which generated approximately $3.7 million of sales during Q3. As a result, the North American law enforcement sales for third quarter are up about 11% over the prior year. International sales are also up significantly over the prior year due to some sizable follow-on orders during the quarter. Our international sales for the quarter are 19% of sales and we’re running about 22% of our total sales year-to-date at our international; this is up over the prior year. So that’s excellent news to see further penetration. Gross margins of $13.1 million or 53.7% of revenues are up 4.3% as a percentage of sales from the 49.4% the prior year. The improvement is driven by a combination of factors, including the cost of our SaaS datacenter operations and software maintenance revenues for Evidence.com [ph] were reduced over the prior year. We had a lot of dedicated effort in the third quarter of 2010 around just short of final sort of bug fixes and maintenance for the Evidence.com which ended up in operations. Well, that’s behind us, so we’re kind of more of a normalized level for the SaaS datacenter costs and costs to support e.com. We also experienced the more favorable sales mix with higher margin international sales representing a greater percentage of our total. And then we saw an improved leverage of our fixed operating and overhead expenses. And then those were offset by – we did have a generous trading credit for the X2 this quarter, which had about $1 million impact or about 180 basis points. But…

Thanks Dan. We touched on a couple of significant events for the quarter. First, New Jersey, the last remaining holdout state that had prohibited law enforcement from using ECDs has now changed. They have now specifically approved only the X26 and X2 models for use by law enforcement officers in New Jersey. There was a rather rigorous process of evaluation by the AC’s office and we’re delighted to finally cross that important milestone. And I just got back from the International Chiefs of Police Conference in Chicago last week, and I can tell you there was a lot of excitement from the Chiefs in New Jersey they now have this tool available. During the quarter we had a number of a significant orders for the X2. San Bernardino became the first major county sheriff upgrading all of their 1,500 officers to the new X2, and also deploying 20 of the AXON on-officer camera systems. Also critically important with Charlotte-Mecklenburg; for those of you who haven’t put the two pieces of information together, the Turner case where we had the adverse verdict earlier this year which still has not been entered by the way, we’re still in post-trial ruling, but Charlotte is part of their risk mitigation plan, took their X26 units off the streets and do an evaluation, look at their policy, et cetera, and they actually made a determination that part of their response was to upgrade their systems to the new X2s to take advantage of some of the new safety features, particularly the audible alarm and shutdown feature to help avoiding extended duration and the charge metering and the new Trilogy Logs that record more data upon other devices were used and ensure that we’re delivering in a more narrow band of an electrical output to maximize…

(Operator Instructions). Your first 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: Dan, as you have customarily, could you go through kind of product by product and given us the quantities there?

Yes, sure. Thanks Steve. So X26 for the quarter were 10,600 units; X2, we had 4,987 units; M26 1,647 units; we sold 16 X3s; 1,962 C2 ECD devices; 1,751 TASER Cams; and cartridge totaled at 389,676. Steve Dyer – Craig Hallum: Okay, great. And then, am I assume – correct in assuming that we’ll have another quarter of the gross margin impact just on the trading credit?

Yes, we’ll see that in the fourth quarter as well. In the second quarter, the X2 sales were kind of a positive impact, because we – most of those were sold at full price, because they were just sales into our distribution channel. This quarter it’s a lot more trade-ins. But that’s the margin of that – even with that trade-in is good, it’s just a part of what impacts us is we defer some of that revenue, because we’ve realized some warranties in training. Steve Dyer – Craig Hallum: Okay, makes sense. I’m wondering as it relates to the buyback – you guys have obviously done a good job of buying back stock, I’m wondering why the – looks like you bought about 3 million shares in the quarter and the diluted share count didn’t move down much, can you give me a little color there?

It’s based on the weighted average, so it just kind of – it tends to move a little bit slower. But we’ll – you’ll see more of that impact as we go into fourth quarter. Steve Dyer – Craig Hallum: Okay. Do you know the number that you ended the third quarter with offhand on a diluted basis?

Well, we’re about 56.7 on a basic before the options. Steve Dyer – Craig Hallum: Okay. Okay, I will hop back in the queue. Thanks.

Great. Thanks Steve.

Your next question comes from the line of Greg McKinley from Dougherty. Please proceed. Greg McKinley – Dougherty: Yes, good morning. I wonder if you could talk a little bit about from both Evidence.com and AXON, how many agencies are now using the product, how many units have been installed, and maybe slip that number in context of what you think the broader market opportunity is?

Got you. Well, this is Rick. We’re going to give a lot more detail in our year-end call, will be coming up in February. At this point, I would say we’re still in the early phase. We do have several hundred agencies using Evidence.com. That’s the combination of the free introductory version that we do that comes with the TASER devices, so they can store their TASER Logs and TASER Cam files on there. And we actually expect that number to continue to grow, because with the new X2 there is a whole bunch of advanced data features that are making much more compelling for agencies to Evidence.com what we call Lite, which is the free version. And by the way the reason that that’s important is that helps to get agencies over the initial sort of interpretation of using the clouds. So having them sort of using the light version gets them over the line. There is some colorful adjectives we can use about that, but you can probably imagine them, it gets past the initial resistance. In terms of a number of AXON units in the field, we have – I don’t have the number of agencies here, it’s in the dozens of agencies, not in the hundreds of agencies, that have purchased, and then we have a couple of dozen more agencies that are in the testing phase. But we’ve been – I would say on what we call the Evidence.com pro side which is the pay version and the hardware, we’ve identified a number of things that we’re refining in the experience with the products based on the last 18 months or so out in the marketplace. So we’re seeing continued traction, but we’ve not yet hit the knee of the curve in terms of adoption. But we expect next year, we’ll be talking about those numbers in more detail. Greg McKinley – Dougherty: Thank you. And then, on the X2, can you just walk through the history there a little bit again, when did that product officially began shipping, and maybe compare and contrast – you did almost 5,000 units there here in the quarter, compare and contrast how September was versus the June quarter.

Yes, so the – this is Dan. So we sold about 600 units or so in Q2. We introduced it in Q2, so we didn’t start shipping until Q2. In fact, we finished Q2 with a little bit of a backlog. We had about 500 units backlog at the end of Q2. We really just started shipping it in June. So this was the first full quarter. And we sold close to 5,000 units this quarter, including as Rick indicated, a couple of big upgrades in San Bernardino and Charlotte. So I think it’s encouraging as you know that upgrade opportunity is really the compelling thing with X2 is to go back and refill into that install base, and we’ve seen a couple of our bigger customers embrace that right out of the gate which is encouraging. Greg McKinley – Dougherty: Thank you. And then the accounting for that rebate, that $300 rebate, can you remind us how that flows through the P&L?

Yes, so what we do is we basically take out of the sales allowance. So we’re basically reducing the sales of the trade incomes and a package of a TASER device, the holster, six cartridges, some training and extended warranty, the total is about 50/50. We actually just record in revenue about $1250 of that. Greg McKinley – Dougherty: Okay.

And as part of that $1250 is even deferred because the warranty is a little recognized that ratably over the five years. So out of the total sale that starts at $1550, we recognize about a $1000 in the quarter, and then about $250, we’ll recognize over time. Greg McKinley – Dougherty: Thank you.

Sure Greg.

There are no further questions at this time. We will now turn the call over back to the presenters for closing remarks.

Great. Well, I’d like to wish everybody out there a Happy Halloween; I’ll be out trick-or-treating with my kids tonight. Wish you all the best and great holiday season. The momentum here internally for those of you who get a chance to come and visit the company, I think the operations are really hitting their stride, our product development processes have really matured over the last couple of years, I think the physical discipline, we’re seeing it in the cash generation and the improved profitability, and I could be more excited for the future. So thanks for joining us today and we’ll be back for our next conference call in February of next year to report on the full year. Thanks and bye-bye.

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