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Registration Statement on Form SB-2, Taser Intl, 2001

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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 48
CRC: 8738
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 1

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 950.01.00.00

[E/O]

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 2

*P64567/95001/2*

<PAGE>
1
JEFFREY S. CRONN

(503) 802-2048
FAX (503) 972-3748
jeffc@tonkon.com
April 30, 2001

Via Edgar
--------Mr. Mark Austin
Division of Corporation Finance
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549-0404
TASER International, Inc.
Registration Statement on Form SB-2
Registration No. 333-55658, Amendment No. 2
------------------------------------------Dear Mr. Austin:
On behalf of TASER International, Inc., a Delaware corporation
(the "Company"), transmitted through the Edgar system for filing pursuant to the
Securities Act of 1933, as amended, is Amendment No. 3 to the above referenced
Registration Statement on Form SB-2, as amended (No. 333-55658) (the
"Registration Statement").
The majority of the changes to the Registration Statement have
been made in response to the Staff’s comments set forth in its letter of April
23, 2001 (the "Comment Letter"). Certain other changes reflect a decrease in the
number of units to be offered by the Company in the offering from 1,100,000 to
800,000 and a related change in the composition of the units offered so that
each unit consists of one and one-half shares of the Company’s common stock and
one and one-half warrants, each whole warrant to purchase one share of the
Company’s common stock. Other changes were to file additional exhibits and
update and clarify information contained in the Company’s earlier filings.
This letter also responds to the substantive points raised in
the Comment Letter. The numbered responses below correspond to your numbered
comments and requests. Also, as requested by the Commission in its telephone
conversation with the Company and certain of its representatives on
April 26, 2001, included with this letter is Exhibit No. 60 a. - d. to my
letter to the Commission dated April 13, 2001, as such exhibit has been
amended as of April 30,

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 54
CRC: 37949
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 2

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 950.02.00.00

Date: 7-MAY-2001 15:05:10.86

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*P64567/95002/2*

<PAGE>
2
Mr. Mark Austin
April 30, 2001
Page 2
2001, to properly reflect the deemed fair value of certain recent issuances of
the Company’s securities.
Prospectus
---------1. The Registration Statement includes information reviewed or
passed upon by Arthur Andersen LLP, independent public accountants, and Tonkon
Torp LLP, legal counsel to the Company. The Company has or will file the consent
of each of these experts to their reference in the Registration Statement as
exhibits to the Registration Statement. The Registration Statement does not
include information provided, reviewed or passed upon by any other person in
reliance upon such person’s status as an expert. Accordingly, the Company is not
required to file the consent of any other expert as an exhibit to the
Registration Statement pursuant to Rule 436(a) of the Securities Act.
In response to the Staff’s comment, the Company has amended the
Registration Statement to more clearly identify information obtained from
publicly available sources and information based on the Company’s belief.
Cover Page
---------2. The Company has revised its description of the separation of
the unit on the cover page as requested.
Prospectus Summary
-----------------3. The Company has revised the first paragraph of the Prospectus
Summary in response to the Staff’s comment and in connection with a telephone
conversation between you and Mr. Thomas P. Palmer of our office.
Risk Factors
-----------4. The Company has added the requested risk factor to the Risk
Factors section of the Registration Statement after the litigation risk factor
in response to the Staff’s comment.
5. The requested general revisions to the risk factor headings
and disclosures have been made.
6. As requested, the Company has removed mitigating language
from its risk factors.
7. The Company has reached an agreement with its former turnkey
supplier in Mexico for the return of its production equipment and the purchase
of remaining component inventory on normal, commercial 30-day terms. As a
result, the Company has not

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 49
CRC: 35709
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 3

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 950.03.00.00

Date: 7-MAY-2001 15:05:10.86

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*P64567/95003/2*

<PAGE>
3
Mr. Mark Austin
April 30, 2001
Page 3
experienced any unusual delays or material costs in relocating its product
assembly operations from Mexico to the United States and has deleted the cited
risk factor.
8. The requested revision to the cited risk factor has been
made.
Dilution
-------9. The requested disclosure has been added to the last paragraph
in the Dilution section of the Registration Statement. The Company has not used
the 80/20 split of the purchase price between the share and warrant portion of
the unit in calculating dilution. As disclosed, $8.67 represents the assumed
aggregate value of one share of common stock and one public warrant.
Business
-------Range
10. The Company has revised the last sentence of the bullet
point "Range" under "The ADVANCED TASER solution" in the Business section of the
Registration Statement in response to the Staff’s comment.
Products
11. The National Institute of Justice classifies personal body
armor into seven classes or types based on different levels of ballistic
resistance. Type III body armor provides the second highest level of protection;
it prevents penetration of bullets from all handguns and high-powered rifle
rounds, but does not provide protection from armor piercing rifle shells. We
have amended the second to the last sentence of the second paragraph of
"Products" in the Business section of the Registration Statement in response to
the Staff’s comment. Accompanying this letter as Exhibit 11 is the relevant
portion of a National Institute of Justice study, "Ballistic Resistance of
Personal Body Armor." The study is available to the public at no charge from
National Law Enforcement and Corrections Technology Center, P.O. Box 1160,
Rockville, MD, 20849-1160 or online at http://www.nlectc.org.
Manufacturing
12. The requested disclosure has been added to the final
paragraph of "Manufacturing" in the Business section of the Registration
Statement.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 51
CRC: 59132
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 4

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 950.04.00.00

Date: 7-MAY-2001 15:05:10.86

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<PAGE>
4
Mr. Mark Austin
April 30, 2001
Page 4
Competition
13. The requested discussion has been added as the final two
sentences of the first paragraph of "Competition" in the Business section of the
Registration Statement.
Legal Proceedings
14. As requested, the Company has identified the former
distributor under "Legal Proceedings" in the Business section of the
Registration Statement. The Company has also expanded the discussion provided in
such subsection to disclose the recent filing of a new complaint.
Management
---------15. The requested disclosure has been added to the description
of the experience of Phillips W. Smith in the Management section of the
Registration Statement.
Underwriting
-----------16. The requested disclosure has been added as the fourth
paragraph of the Underwriting section of the Registration Statement.
17. No materials other than the prospectus have been supplied to
participants in the Company’s "friends and family" program.
18. An investor must deposit one thousand dollars ($1,000.00) to
open an account with Paulson Investment Company. This minimum deposit amount
applies to participants in the Company’s "friends and family" program. This
minimum amount is not tied to the price of the securities purchased through the
program.
19. The requested disclosure has been added as the last sentence
under "Lock-Up Agreements" in the Underwriting section of the Registration
Statement.
PART II
------Item 26.
--------

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*P64567/95004/4*

Recent Sales of Unregistered Securities
---------------------------------------

20. The Company has revised Item 26 of Part II of the
Registration Statement in response to the Staff’s comment.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 55
CRC: 42686
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 5

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Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 950.05.00.00

Date: 7-MAY-2001 15:05:10.86

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*P64567/95005/2*

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5
Mr. Mark Austin
April 30, 2001
Page 5
ACCOUNTING COMMENTS
------------------Prior Comment #39
----------------21. As suggested in its response to prior comment 39, the
Company has valued its inventory for the periods presented in accordance with
United States generally accepted accounting principles. The Company has and will
continue to use full absorption accounting. It evaluates the impact of the
application of manufacturing overhead to inventory value at the close of each
accounting period and adjusts its financial statements accordingly. To more
clearly describe its inventory valuation method, the Company has modified Note
2.b. to its financial statements.
22. As stated in its response to comment 21, the Company will
continue to value its inventory using full absorption accounting in future
accounting periods.
Prior Comment #49
----------------23. As requested, the Company has amended its Balance Sheets to
reflect the treasury stock transaction.
Prior Comment #52
----------------24. As requested, the Company has amended its Statements of
Stockholders’ Deficit to reflect the treasury stock transaction.
Prior Comment #60
----------------25-29. The requests of the Staff set forth in comments 25-29
were reviewed at length during a conference call on April 26, 2001 among Messrs.
Hartz and Bair of the Office of the Chief Accountant, the Company’s Chief
Executive Officer and Chief Financial Officer, and representatives of the
Company’s independent public accountants and counsel. As a result of such call,
the Company has recorded additional interest expense in the amount of
approximately $67,000 with respect to certain option and warrant grants in May
and July 2000, as reflected in the financial statements and notes filed in
connection with Amendment No. 3 to the Registration Statement.
30. The Company has accounted for the referenced securities
issuances in accordance with SFAS No. 123. The Company has valued the securities
based on the price of its common stock on the date of issuance reduced to
exclude the present value of any expected dividends during the life of the
security minus the present value of the exercise price. In each case, the
Company assumed no dividends and a risk free interest rate of 5% over the life
of the securities.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 48
CRC: 10330
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 6

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 950.06.00.00

Date: 7-MAY-2001 15:05:10.86

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*P64567/95006/3*

<PAGE>
6
Mr. Mark Austin
April 30, 2001
Page 6
<R>
The Company issued a former employee options to purchase 3,333
shares of its common stock in May 2000 in connection with the termination of
employment of the former employee and his provision of a loan to the Company.
The options are exercisable at $0.22 per share and have a life of five years.
Using an estimated fair value per share of the common stock in May 2000 of $5.00
and the above assumptions, the Company calculated the minimum value of such
options to be $16,045 and recorded this amount as interest expense in 2000.
</R>
<R>
In July 2000, the Company issued Bruce Culver a warrant to
purchase 22,727 shares of its common stock at a price of $3.30 per share in
connection with his provision of a $1.5 million loan to the Company. These
warrants have a life of five years. Using an estimated fair value per share of
the common stock in July 2000 of $6.00 and the above assumptions, the Company
calculated the minimum value of such options to be $77,862 and recorded this
amount as interest expense in 2000.
</R>
Prior Comment #62
----------------31. The disclosure provided in the Use of Proceeds section of
the Registration Statement has been revised to indicate the composition of the
amount of accrued interest on notes payable to stockholders to be paid. The
$300,000 accounts payable amount listed in the Company’s Capitalization table is
a sum due to certain of the Company’s third party trade vendors, none of which
are stockholders or otherwise related parties of the Company.
Closing Comments
---------------32. The Company has taken into account the Staff’s closing
comments. As requested, we will provide the Staff marked copies of the amended
Form SB-2. The Company filed all remaining exhibits with Amendment No. 3 to its
SB-2, other than Exhibits 5.1, Opinion of Tonkon Torp LLP, and 23.1, Consent of
Tonkon Torp LLP, which will be filed by amendment.
The Company and the underwriters currently anticipate requesting
that the Registration Statement be declared effective on or about May 7, 2001.
We therefore would appreciate your prompt review of this letter and Amendment
No. 3. A formal acceleration request will be filed in accordance with Rule 461.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 18
CRC: 64896
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 7

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 950.07.00.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
7
Mr. Mark Austin
April 30, 2001
Page 7
In the interim, we look forward to discussing with you any
further comments or questions you may have regarding the Company’s responses set
forth in this letter and Amendment No. 3. Please direct your comments to me by
calling me at the telephone number above or to Thomas P. Palmer of our office at
(503) 802-2018.
Very truly yours,
/s/ Jeffrey S. Cronn
--------------------Jeffrey S. Cronn
JSC/ch

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*P64567/95007/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 34
CRC: 54788
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 8

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 951.01.00.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
8
U.S. DEPARTMENT OF JUSTICE
Office of Justice Programs
National Institute of Justice
===============================================================================
BALLISTIC RESISTANCE OF PERSONAL
BODY ARMOR
NIJ STANDARD-0101.04
Supersedes NIJ Standard-0101.03, Ballistic Resistance
of Police Body Armor dated April 1987

Coordination by:
Office of Law Enforcement Standards
National Institute of Standards and Technology
Gaithersburg, MD 20899-8102
Prepared for:
National Institute of Justice
Office of Science and Technology
Washington, DC 20531
September 2000

NCJ 183651

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*P64567/95101/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 53
CRC: 40419
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 9

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 951.02.00.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

9
NIJ STANDARD - 0101.04
NIJ STANDARD
FOR
BALLISTIC RESISTANCE OF PERSONAL BODY ARMOR
1. PURPOSE AND SCOPE

The purpose of this standard is to establish minimum performance
requirements and test methods for the ballistic resistance of personal body
armor intended to protect the torso against gunfire. This standard is a general
revision of NIJ Standard - 0101.03, dated April 1987, updating the labeling
requirements, acceptance criteria, test ammunition, procedures, and other items
throughout the standard.
The scope of the standard is limited to ballistic resistance only; this
standard does not address threats from knives and sharply pointed instruments,
which are different types of threat.
2. NIJ BODY ARMOR CLASSIFICATION
Personal body armors covered by this standard are classified into seven
classes, or types, by level of ballistic performance. The ballistic threat
posed by a bullet depends, among other things, on its composition, shape,
caliber, mass, angle of incidence, and impact velocity. Because of the wide
variety of bullets and cartridges available in a given caliber and because of
the existence of handloaded ammunition, armors that will defeat a standard test
round may not defeat other loadings in the same caliber. For example, an armor
that prevents complete penetration by a 40 S&W test round may or may not defeat
a 40 S&W round with higher velocity. In general, an armor that defeats a given
lead bullet may not resist complete penetration by other bullets of the same
caliber of different construction or configuration. The test ammunition
specified in this standard represent general, common threats to law enforcement
officers.
As of the year 2000, ballistic resistant body armor suitable for full time
wear throughout an entire shift of duty is available in classification Types I,
IIA, II, and IIIA, which provide increasing levels of protection from handgun
threats. Type I body armor, which was first issued during the NIJ demonstration
project in 1975, is the minimum level of protection that any officer should
have. Officers seeking protection from lower velocity 9 mm and 40 S&W
ammunition typically wear Type IIA body armor. For protection against high
velocity 357 Magnum and higher velocity 9 mm ammunition, officers traditionally
select Type II body armor. Type IIIA body armor provides the highest level of
protection available in concealable body armor and provides protection from
high velocity 9 mm and 44 Magnum ammunition.
Type IIIA armor is suitable for routine wear in many situations; however,
departments located in hot, humid climates may need to carefully evaluate their
use of Type IIIA body armor for their officers. Types III and IV armor, which
protect against high powered rifle rounds, are
1

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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 58
CRC: 64992
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 10

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 951.03.00.00

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Date: 7-MAY-2001 15:05:10.86

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<PAGE>
10
<R>
clearly intended for use only in tactical situations when the threat warrants
such protection (see app. C).
The classification of an armor panel that provides two or more levels of
NIJ ballistic protection at different locations on the ballistic panel shall be
that of the minimum ballistic protection provided at any location on the panel.
2.1

TYPE I (22 LR; 380 ACP)

This armor protects against .22 caliber Long Rifle Lead Round Nose (LR LRN)
bullets, with nominal masses of 2.6g (40 gr) impacting at a minimum velocity of
320 m/s (1050 ft/s) or less, and 380 ACP Full Metal Jacketed Round Nose (FMJ RN)
bullets, with nominal masses of 6.2 g (95 gr) impacting at a minimum velocity of
312 m/s (1025 ft/s) or less.
2.2

TYPE IIA (9 mm; 40 S&W)

This armor protects against 9 mm Full Metal Jacketed Round Nose (FMJ RN)
bullets, with nominal masses of 8.0 g (124 gr) impacting at minimum velocity of
332 m/s (1090 ft/s) or less, and 40 S&W caliber Full Metal Jacketed (FMJ)
bullets, with nominal masses of 11.7 g (180 gr) impacting at a minimum velocity
of 312 m/s (1025 ft/s) or less. It also provides protection against the threats
mentioned in section 2.1.
2.3

TYPE II (9 mm; 357 MAGNUM)

This armor protects against 9 mm Full Metal Jacketed Round Note (FMJ RN)
bullets, with nominal masses of 8.0 g (124 gr) impacting at a minimum velocity
of 358 m/s (1175 ft/s) or less, and 357 Magnum Jacketed Soft Point (JSP)
bullets, with nominal masses of 10.2 g (158 gr) impacting at a minimum velocity
of 427 m/s (1400 ft/s) or less. It also provides protection against the threats
mentioned in sections 2.1 and 2.2.
2.4

TYPE IIIA (HIGH VELOCITY 9 mm; 44 MAGNUM)

This armor protects against 9 mm Full Metal Jacketed Round Nose (FMJ RN)
bullets, with nominal masses of 8.0g (124 gr) impacting at a minimum velocity of
427 m/s (1400 ft/s) or less, and 44 Magnum Jacketed Hollow Point (JHP) bullets,
with nominal masses of 15.6 g (240 gr) impacting at a minimum velocity of 427
m/s (1400 ft/s) or less. It also provides protection against most handgun
threats, as well as the threats mentioned in sections 2.1, 2.2, and 2.3.
2.5

TYPE III (RIFLES)

This armor protects against 7.62 mm Full Metal Jacketed (FMJ) bullets (U.S.
Military designation M80), with nominal masses of 9.6 g (148 gr) impacting at a
minimum velocity of 838 m/s (2750 ft/s) or less. It also provides protection
against the threats mentioned in sections 2.1, 2.2, 2.3, and 2.4.
2.6

TYPE IV (ARMOR PIERCING RIFLE)

</R>

2

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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 37
CRC: 43476
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 11

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 951.04.00.00

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<PAGE>
11
This armor protects against .30 caliber armor piercing (AP) bullets (U.S.
Military designation M2 AP), with nominal masses of 10.8 g (166 gr) impacting at
a minimum velocity of 869 m/s (2850 ft/s) or less. It also provides at least
single hit protection against the threats mentioned in sections 2.1, 2.2, 2.3,
2.4, and 2.5.
2.7

SPECIAL TYPE

A purchaser having a special requirement for a level of protection other
than one of the above standard types and threat levels should specify the exact
test round(s) and minimum reference impact velocities to be used, and indicate
that this standard shall govern in all other aspects.
3. DEFINITIONS
3.1

ANGLE OF INCIDENCE

The angle between the line of flight of the bullet and the perpendicular
to the front surface of the backing material fixture as shown in figure 1.
[ANGLE OF INCIDENCE GRAPHIC]
3.2

ARMOR CARRIER

A component of the armor sample or armor panel whose primary purpose is to
retain the ballistic panel and provide a means of supporting and securing the
armor garment to the user. These carriers are not generally ballistic resistant.
3.3

ARMOR PANEL

The portion of an armor sample that generally consists of an external
carrier and its internal ballistic protection component(s) (e.g., the front and
back panels).
3.4

ARMOR SAMPLE
3

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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 53
CRC: 37729
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 12
Description: Response ltr EX

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 952.00.00.00

Date: 7-MAY-2001 15:05:10.86

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*P64567/952/2*

Ed#: 2

12
EXHIBIT 60 a. - d.
TASER INTERNATIONAL, INC.
ISSUANCES OF OPTIONS, WARRANTS AND COMMON STOCK
FROM JANUARY 1, 1999 THROUGH APRIL 2001
(AMENDED APRIL 30, 2001)

<TABLE>
<CAPTION>
NUMBER OF
SHARES/RIGHT
TO PURCHASE
NUMBER OF
SHARES
-----<C>
16,667

PRICE PER SHARE
--------------<C>
$0.66

DEEMED FAIR VALUE
PER SHARE AT
TIME OF ISSUANCE
---------------<C>
$0.66

10,000

$0.66

$0.66

Option to purchase
Common Stock

10,000

$0.66

$0.66

Raymond G. Rivera

Option to purchase
Common Stock

16,667

$0.60

$0.60

1/1/99

Stephen D. Tuttle

Option to purchase
Common Stock

14,167

$0.60

$0.60

Shareholder
Officer

1/1/99

Kathleen C. Hanrahan

Option to purchase
Common Stock

16,667

$0.60

$0.60

Officer

1/1/99

Stacie L. Sundberg

Option to purchase
Common Stock

10,000

$0.60

$0.60

Employee

1/1/99

Milan Cerovic

Option to purchase
Common Stock

12,500

$0.60

$0.60

Employee

1/1/99

Stephanie McGuire

Option to purchase
Common Stock

833

$0.60

$0.60

Employee

1/1/99

Paula J. Dobbs

Option to purchase
Common Stock

833

$0.60

$0.60

Employee

1/1/99

Sharon K. Antico

Option to purchase
Common Stock

833

$0.60

$0.60

Employee

1/1/99

Bruce R. Culver

Common Stock

1,666,667

$0.60

$0.60

Shareholder
Director

DATE OF
TRANSACTION
----------<S>
1/1/99

PURCHASER
--------<C>
Phillips W. Smith

SECURITY
-------<C>
Option to purchase
Common Stock

1/1/99

Patrick W. Smith

Option to purchase
Common Stock

1/1/99

Thomas P. Smith

1/1/99

</TABLE>

AFFILIATIONS AT
TIME OF ISSUANCE
---------------<C>
Shareholder
Director
Officer
Shareholder
Director
Officer
Shareholder
Director
Officer
Shareholder
Employee

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 55
CRC: 63408
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 13
Description: Response ltr EX

[E/O]

<PAGE>
<TABLE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 953.00.00.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

*P64567/953/2*

Ed#: 2

13

<CAPTION>

DATE OF
TRANSACTION
----------<S>
5/13/99

NUMBER OF
SHARES/RIGHT
TO PURCHASE
NUMBER OF
SHARES
-----<C>
8,333

PRICE PER SHARE
--------------<C>
$0.60

DEEMED FAIR VALUE
PER SHARE AT
TIME OF ISSUANCE
---------------<C>
$0.60

AFFILIATIONS AT
TIME OF ISSUANCE
---------------<C>
Employee

3,958

$7.20

$7.20

Lender

151,515

$3.30

$3.30

PURCHASER
--------<C>
Hans Marrero

SECURITY
-------<C>
Option to purchase
Common Stock

6/1/99

B&M Distributing

Option to purchase
Common Stock

9/1/99

Bruce R. Culver

Common Stock

1/15/00

Robert Stratbucker

Option to purchase
Common Stock

3,030

$3.30

$3.30

Shareholder
Director
Consultant

5/15/00

Jami Hill

Option to purchase
Common Stock

500

$3.30

$3.30

Employee

5/26/00

Malcolm W. Sherman

Option to purchase
Common Stock

3,333

$0.22

$5.00

Director
Officer

7/31/00

Bruce R. Culver

Warrant to purchase
Common Stock

22,727

$3.30

$5.00

Shareholder
Director

Robert Stratbucker

Option to purchase
Common Stock

1,667

$3.30

$8.00

Consultant

12/1/00

Karl F. Walter

Option to purchase
Common Stock

6,667

$3.30

$8.00

Director

12/1/00

Matthew R. McBrady

Option to purchase
Common Stock

6,667

$3.30

$8.00

Director

1/23/01

Phil Purer

Warrant to purchase
Common Stock

5,000

$10.00

$10.00

Lender

2/13/01

Patrick W. Smith

Option to purchase
Common Stock

60,000

*

*

2/13/01

Thomas P. Smith

Option to purchase
Common Stock

60,000

*

*

2/13/01

Raymond G. Rivera

Option to purchase
Common Stock

30,000

**

**

Shareholder
Director
Officer
Shareholder
Director
Officer
Shareholder
Employee

2/13/01

Stephen D. Tuttle

Option to purchase
Common Stock

20,000

**

**

9/1/00

</TABLE>
2

Shareholder
Officer

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 47
CRC: 34320
P64567A3.SUB, DocName: CORRESP, Doc: 1, Page: 14
Description: Response ltr EX

[E/O]

<PAGE>
<TABLE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 954.00.00.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

*P64567/954/1*

Ed#: 1

14

<CAPTION>
NUMBER OF
SHARES/RIGHT
TO PURCHASE
NUMBER OF
SHARES
-----<C>
32,500

PRICE PER SHARE
--------------<C>
**

DEEMED FAIR VALUE
PER SHARE AT
TIME OF ISSUANCE
---------------<C>
**

AFFILIATIONS AT
TIME OF ISSUANCE
---------------<C>
Officer

25,000

**

**

Employee

Option to purchase
Common Stock

28,000

**

**

Employee

Stephanie McGuire

Option to purchase
Common Stock

1,500

**

**

Employee

2/13/01

Paula J. Dobbs

Option to purchase
Common Stock

5,000

**

**

Employee

2/13/01

Sharon K. Antico

Option to purchase
Common Stock

5,000

**

**

Employee

2/13/01

Hans Marrero

Option to purchase
Common Stock

20,000

**

**

Employee

2/13/01

Jami Hill

Option to purchase
Common Stock

3,000

**

**

Employee

2/13/01

Steve Ward

Option to purchase
Common Stock

1,000

**

**

Consultant

DATE OF
TRANSACTION
----------<S>
2/13/01

PURCHASER
--------<C>
Kathleen C. Hanrahan

SECURITY
-------<C>
Option to purchase
Common Stock

2/13/01

Stacie L. Sundberg

Option to purchase
Common Stock

2/13/01

Milan Cerovic

2/13/01

</TABLE>
*The per share exercise price of this option is equal to 110% of the value of
the common stock portion of the initial per share public offering price of the
units offered by the Company in this offering.
**The per share exercise price of this option is equal to the value of the
common stock portion of the initial per share public offering price of the units
offered by the Company in this offering.
3
</TEXT>
</DOCUMENT>

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 5504
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 1

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 001.00.00.00 SN: 14 Ed#: 8
*P64567/001/8*
EDGAR 2

[B/E]

<R>

As filed with the Securities and Exchange Commission on April , 2001
</R>

Registration No. 333-55658

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

Amendment No. 3
</R>

To
Form SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

TASER INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Delaware
(State or other Jurisdiction of
Incorporation or Organization)

3699
(Primary Standard Industrial
Classification Code Number)

86-0741227
(I.R.S. Employer
Identification Number)
Patrick W. Smith,
Chief Executive Officer
TASER International, Inc.
7860 E. McClain Drive, Suite 2
Scottsdale, Arizona 85260
(480) 991-0797
(Name, address and telephone
number of agent for service)

7860 E. McClain Drive, Suite 2
Scottsdale, Arizona 85260
(480) 991-0797
(Address and telephone number of
principal executive offices and
principal place of business)

Copies to:
<R>

Thomas P. Palmer, Esq.
Jeffrey S. Cronn, Esq.
Tonkon Torp LLP
888 S.W. Fifth Avenue, Suite 1600
Portland, Oregon 97204
(503) 802-2018

Mark A. von Bergen, Esq.
Joshua E. Husbands, Esq.
Weiss Jensen Ellis & Howard
2300 U.S. Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204
(503) 243-2300

</R>

Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities
Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 5504
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 1

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 001.00.00.00-1 SN: 14 Ed#: 8
*P64567/001/8*
EDGAR 2

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
The registrant hereby amends this registration statement on such date or dates as may be necessary to
delay its effective date until the registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act
of 1933 or until the registration statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 44636
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 2

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 002.00.00.00 SN: 15 Ed#: 6
*P64567/002/6*
EDGAR 2

CALCULATION OF REGISTRATION FEE
<R>

Amount to be
Registered

Proposed
Maximum Offering
Price Per
Security(1)

Proposed
Maximum Aggregate
Offering Price

920,000

$14.00

$12,880,000

(i) one and one-half shares of common stock, and

1,380,000

—

—

(ii) one and one-half warrants, each whole warrant to
purchase one share of common stock

1,380,000

—

—

Title of Each Class of Securities to be Registered
Units, each consisting of(2)

Underwriters’ warrants(3)

80,000

Units issuable upon exercise of underwriters’ warrants,
each consisting of

80,000

$16.80

$1,344,000

(i) one and one-half shares of common stock, and

120,000

—

—

(ii) one and one-half warrants, each whole warrant to
purchase one share of common stock

120,000

—

—

1,500,000

$15.40

$23,100,000

Common stock issuable upon exercise of warrants,
including warrants underlying underwriters’ warrants(4)
Total

$37,324,000

[Additional columns below]
</R>

[Continued from above table, first column(s) repeated]
<R>

Title of Each Class of Securities to be Registered
Units, each consisting of(2)

Amount of
Registration Fee
$3,220

(i) one and one-half shares of common stock, and

—

(ii) one and one-half warrants, each whole warrant to
purchase one share of common stock

—

Underwriters’ warrants(3)
Units issuable upon exercise of underwriters’ warrants, each
consisting of

$336

(i) one and one-half shares of common stock, and

—

(ii) one and one-half warrants, each whole warrant to
purchase one share of common stock

—

Common stock issuable upon exercise of warrants,
including warrants underlying underwriters’ warrants(4)
Total

$5,775
$9,331(5)

</R>
<R>

(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(g) under the
Securities Act of 1933.
</R>
<R>

(2) Includes 120,000 units which Paulson Investment Company, Inc., the representative of the underwriters, has
the option to purchase to cover over-allotments, if any.
</R>
<R>

(3) In connection with the sale of the units, TASER International, Inc. will issue to the underwriters warrants to
purchase, in the aggregate, up to 80,000 units.
</R>
<R>

(4) Pursuant to Rule 416 under the Securities Act of 1933, there are also being registered such additional shares

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 44636
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 2

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 002.00.00.00-1 SN: 15 Ed#: 6
*P64567/002/6*
EDGAR 2

and warrants as may be issuable pursuant to the anti-dilution provisions of the public warrants and the
underwriters’ warrants.
</R>
<R>

(5) TASER International, Inc. previously paid registration fees in the aggregate amount of $9,514 in connection
with the filing of its Registration Statement on Form SB-2 and Amendment No. 2 thereto on February 14 and
April 13, 2001, respectively.
</R>

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 16104
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 3

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 003.00.00.00 SN: 29 Ed#: 12
*P64567/003/12*
EDGAR 2

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
<R>

SUBJECT TO COMPLETION, DATED APRIL 30, 2001
</R>

PRELIMINARY PROSPECTUS
<R>

800,000 Units
</R>

<R>

This is an initial public offering of units by TASER International, Inc. Each unit consists of one and one-half
shares of common stock and one and one-half redeemable public warrants, each whole warrant to purchase one
share of common stock. We expect that the initial public offering price will be between $13 and $14 per unit. Prior
to this offering, there has been no public market for our securities. We have filed an application to list the units, the
common stock and the public warrants on The Nasdaq SmallCap Market under the symbols “TASRU,” “TASR”
and “TASRW,” respectively.
</R>
<R>

The common stock and warrants will trade only as a unit for at least 30 days following this offering. The
representative of the underwriters will then determine when the units separate, after which the common stock and
the public warrants will trade separately. The representative intends to separate the units 30 days after this offering
absent unforeseen circumstances.
</R>

Investing in these units involves significant risks. See “Risk Factors” beginning on page 4.
Per Unit
Initial public offering price
Underwriting discount
Proceeds to TASER International, Inc

$
$
$

Total
$
$
$

The Securities and Exchange Commission and state securities regulators have not approved or
disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
<R>

Paulson Investment Company, Inc. is the representative of the underwriters. We have granted the representative
the option for a period of 45 days to purchase up to an additional 120,000 units to cover over-allotments.
</R>

PAULSON INVESTMENT COMPANY, INC.
<R>

MERCER PARTNERS, INC.
</R>
<R>

Investment
</R>
<R>

Banking
</R>

The date of this prospectus is

, 2001.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 2125
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 4

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 004.00.00.00 SN: 26 Ed#: 15
*P64567/004/15*
EDGAR 2

PROSPECTUS SUMMARY
<R>

The following summary highlights material information which is presented in more detail elsewhere in this
prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the
“Risk Factors” section, the financial statements and the notes to the financial statements.
</R>
<R>

Historical information regarding our securities has been adjusted to reflect a 1-for-6 reverse stock split effected
in connection with our reincorporation in Delaware on February 12, 2001. Except as otherwise indicated, all
information in this prospectus assumes no exercise of the representative’s over-allotment option or the
underwriters’ warrants. References to “we,” “us,” the “company” or “TASER” mean TASER International, Inc.,
unless otherwise indicated.
</R>

Our Company
TASER International, Inc. develops, assembles and markets less-lethal, conducted energy weapons primarily for
use in the law enforcement and corrections market. Our ADVANCED TASER weapon offers improved
performance over other less-lethal force options used by law enforcement agencies. It can temporarily incapacitate
virtually any individual regardless of pain tolerance, drug use, or body size — factors that cause other less-lethal
options to have decreased effectiveness. The ADVANCED TASER also has a comparable or lower injury rate than
other less-lethal weapons and has had no reported long-term, adverse after-effects.
The ADVANCED TASER uses compressed nitrogen to shoot two small probes up to 21 feet. These barbed
probes are connected to the weapon by high-voltage insulated wires. When the probes make contact with the target,
the ADVANCED TASER transmits powerful electrical pulses along the wires and into the body of the target
through up to two inches of clothing. These electrical pulses impair voluntary muscle control so that the subject
cannot perform coordinated action.
Nearly all law enforcement agencies authorize the use of less-lethal weapons, including pepper sprays, impact
devices, and conducted energy weapons such as TASERs. Effective less-lethal weapons may increase the safety of
law enforcement officers, decrease suspect injuries, improve community relations, reduce litigation and police
department medical and liability insurance costs, and potentially save lives.
Since December 1999, over 400 police departments in the United States have made initial purchases of our
products, and 15 police departments, including San Diego, Sacramento and Albuquerque, have purchased our
products for every patrol officer. In addition, at February 1, 2001, more than 200 other police departments were
evaluating the use of the ADVANCED TASER.
The key elements of our growth strategy are:
• To expand sales in the law enforcement and corrections market, which we believe to be the opinion leader for
all other markets for less-lethal weapons;
• To expand into the related private security and military markets;
• To expand into the consumer market;
• To develop enhanced less-lethal weapons and technologies, such as longer-range TASERs and TASERs with
multiple shot capabilities; and
• To acquire related businesses that enhance our strategic position.
Our corporate headquarters is located at 7860 East McClain Drive, Suite 2, Scottsdale, Arizona 85260 and our
telephone number is (480) 991-0797. Our website address is www.eTASER.com. Information contained on our
website or any other website does not constitute a part of this prospectus.
1

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 63958
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 5

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 005.00.00.00 SN: 24 Ed#: 10
*P64567/005/10*
EDGAR 2

This Offering
<R>

Securities offered

800,000 units. Each unit consists of one and one-half shares of common stock and
one and one-half public warrants, each whole warrant to purchase an additional
share of common stock. See “Description of Securities.”

</R>

The common stock and public warrants will trade only as a unit for at least
30 days following this offering. The representative of the underwriters will then
determine when the units separate, after which the common stock and the public
warrants will trade separately.
<R>

Public warrants

The public warrants included in the units will be exercisable commencing 30 days
after this offering. The exercise price of a public warrant is 110% of two-thirds of
the initial public offering price of the units. The public warrants expire on the fifth
anniversary of the closing of this offering.

</R>
<R>

We have the right to redeem the public warrants issued in this offering at a
redemption price of $0.25 per public warrant, after providing 30 days prior
written notice to the public warrant holders, if at the time of the notice, the basic
net income per share of our common stock as confirmed by audit for a 12-month
period preceding the date of the notice is equal to or greater than $1.00.
</R>
<R>

Common stock outstanding after 2,710,754 shares
this offering
</R>

Use of proceeds

Proposed Nasdaq SmallCap
Market symbols
Common stock
Units offered in
this
Public warrants
included in the units

Sales and marketing, purchases of inventory, repayment of stockholder and other
debt, working capital, research and development, and production tooling. See
“Use of Proceeds.”

TASR
offering TASRU
TASRW

<R>

The number of shares of common stock outstanding after this offering is based on 1,510,754 shares outstanding
as of March 15, 2001. The number of shares of common stock outstanding after this offering assumes no exercise of
the representative’s over-allotment option and does not include an aggregate of 1,927,049 shares of common stock
that may become outstanding as follows:
</R>
<R>

• 434,322 shares of common stock issuable upon exercise of stock options outstanding as of March 15, 2001,
with a weighted average exercise price of $4.94;
</R>

• 52,727 shares of common stock issuable upon exercise of warrants outstanding as of March 15, 2001, with a
weighted average exercise price of $4.71;
<R>

• 1,200,000 shares of common stock issuable upon exercise of the public warrants; and
</R>
<R>

• 120,000 shares of common stock issuable upon exercise of the underwriters’ warrants and 120,000 shares of
common stock issuable upon exercise of the public warrants underlying the underwriters’ warrants.
</R>

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 63958
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 5

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 005.00.00.00-1 SN: 24 Ed#: 10
*P64567/005/10*
EDGAR 2

2

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 4809
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 6

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 006.00.00.00 SN: 25 Ed#: 22
*P64567/006/22*
EDGAR 2

SUMMARY FINANCIAL INFORMATION
<R>

Years Ended December 31,
1999

2000

Statements of Operations Data:
Net sales
Gross margin
Loss from operations
Net loss

$ 2,208,488
120,002
(1,386,838)
(1,666,733)

$3,412,620
1,574,231
(46,885)
(473,247)

Basic and diluted net loss per share of common stock

$

$

Basic and diluted shares of common stock

(0.54)
3,076,410

(0.19)

2,482,976

</R>
<R>

December 31, 2000
Actual

As adjusted

Balance Sheet Data:
Working capital (deficiency)
Property and equipment, net
Total assets
Total long-term debt

$(1,069,344)
274,273
1,039,066
2,822,144

$6,580,656
1,024,273
8,737,212
2,822,144

Stockholders’ equity (deficit)

$(3,617,215)

$4,782,785

</R>

The as adjusted balance sheet data reflects:
<R>

• the receipt of approximately $8,400,000 as the estimated net proceeds from the sale of 800,000 units offered by
us in this offering at an assumed public offering price of $13.00 per unit, after deducting the underwriting
discount, expense allowance and estimated offering expenses; and
</R>

• our planned use of the net proceeds of this offering.

We have rights to the following registered trademarks: TASER® and AIR TASER ®. We also have the following
unregistered trademarks: TASER Wave™, T-Wave™, AUTO TASER™, ADVANCED TASER™ and AFID™. Each
other trademark, trade name or service mark appearing in this prospectus belongs to its respective holder.
3

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 21011
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 7

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 007.00.00.00 SN: 30 Ed#: 11
*P64567/007/11*
EDGAR 2

RISK FACTORS
This offering involves a high degree of risk. You should carefully consider the following risk factors and all
other information contained in this prospectus before purchasing any units. Any of the following risks could
materially harm our business, operating results and financial condition, and could result in a decrease in the
trading price of our units, common stock or public warrants, or in a complete loss of your investment.
Risks Related to Our Business
We have no history of profitable operations and may incur future losses.
<R>

Since our inception in 1993, we have incurred significant losses. Our net losses for the years ended
December 31, 1999 and 2000 were $1.7 million and $473,000, respectively. We may never achieve or sustain
profitability. At December 31, 2000, we had an accumulated deficit of approximately $6.8 million and negative
stockholders’ equity of $3.6 million. We also had a net working capital deficit of $2.4 million and $1.1 million at
December 31, 1999 and 2000, respectively. In addition, we expect our operating expenses to increase significantly
as we expand our sales and marketing efforts and otherwise support our expected growth. Given these planned
expenditures, we may incur additional losses in the near future.
</R>

Our business is difficult to evaluate because we have a limited operating history in the law enforcement and
corrections market and have been focused on our current business strategy for only approximately one and onehalf years.
We revised our business strategy in late 1999 to concentrate on the law enforcement and corrections market.
Accordingly, we have a limited operating history based on which you can evaluate our present business and future
prospects. We face risks and uncertainties relating to our ability to implement our business plan successfully. Our
prospects must be considered in light of the risks, expenses and difficulties frequently encountered by newly-public
companies that have recently changed their business strategies. If we are unsuccessful in addressing these risks and
uncertainties, our business, results of operations, financial condition and prospects will be materially harmed.
<R>

We are materially dependent on acceptance of our products by the law enforcement and corrections market, and
if law enforcement and corrections agencies do not purchase our products, our revenues will be adversely
affected and we may not be able to expand into other markets.
</R>
<R>

A substantial number of law enforcement and corrections agencies may not purchase our conducted energy,
less-lethal weapons. In addition, if our products are not widely accepted by the law enforcement and corrections
market, we may not be able to expand sales of our products into other markets. Law enforcement and corrections
agencies may be influenced by claims or perceptions that conducted energy weapons are unsafe or may be used in
an abusive manner. In addition, earlier generation conducted energy weapons may have been perceived as
ineffective. Sales of our products to these agencies may also be delayed or limited by these claims or perceptions.
</R>

We substantially depend on sales of the ADVANCED TASER, and if this product is not widely accepted, our
growth prospects will be diminished.
In 2000, we derived the majority of our revenues from sales of ADVANCED TASERs and related cartridges,
and expect to depend on sales of this product for the foreseeable future. A decrease in the prices of or demand for
this product line, or its failure to achieve broad market acceptance, would significantly harm our growth prospects,
operating results and financial condition.
4

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 29013
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 8

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 008.00.00.00 SN: 23 Ed#: 10
*P64567/008/10*
EDGAR 2

If we are unable to manage our projected growth, our growth prospects may be limited and our future
profitability may be adversely affected.
We intend to expand our sales and marketing programs and our manufacturing capability. Rapid expansion may
strain our managerial, financial and other resources. If we are unable to manage our growth, our business, operating
results and financial condition could be adversely affected. Our systems, procedures, controls and management
resources also may not be adequate to support our future operations. We will need to continually improve our
operational, financial and other internal systems to manage our growth effectively, and any failure to do so may
lead to inefficiencies and redundancies, and result in reduced growth prospects and profitability.
<R>

We may face personal injury and other liability claims that harm our reputation and adversely affect our sales
and financial condition.
</R>
<R>

Our products are often used in aggressive confrontations that may result in serious, permanent bodily injury to
those involved. Our products may cause or be associated with these injuries. A person injured in a confrontation or
otherwise in connection with the use of our products may bring legal action against us to recover damages on the
basis of theories including personal injury, wrongful death, negligent design, dangerous product or inadequate
warning. We may also be subject to lawsuits involving allegations of misuse of our products. If successful, personal
injury, misuse and other claims could have a material adverse effect on our operating results and financial
condition. Although we carry product liability insurance, significant litigation could also result in a diversion of
management’s attention and resources, negative publicity and an award of monetary damages in excess of our
insurance coverage.
</R>
<R>

Our future success is dependent on our ability to expand sales through distributors and our inability to recruit
new distributors would negatively affect our sales.
</R>
<R>

Our distribution strategy is to pursue sales through multiple channels with an emphasis on independent
distributors. Our inability to recruit and retain police equipment distributors who can successfully sell our products
would adversely affect our sales. In addition, our arrangements with our distributors are generally short-term. If we
do not competitively price our products, meet the requirements of our distributors or end-users, provide adequate
marketing support, or comply with the terms of our distribution arrangements, our distributors may fail to
aggressively market our products or may terminate their relationships with us. These developments would likely
have a material adverse effect on our sales. Our reliance on the sales of our products by others also makes it more
difficult to predict our revenues, cash flow and operating results.
</R>

We expend significant resources in anticipation of a sale due to our lengthy sales cycle and may receive no
revenue in return.
Generally, law enforcement and corrections agencies consider a wide range of issues before committing to
purchase our products, including product benefits, training costs, the cost to use our products in addition to or in
place of other less-lethal products, product reliability and budget constraints. The length of our sales cycle may
range from 60 days to a year or more. We may incur substantial selling costs and expend significant effort in
connection with the evaluation of our products by potential customers before they place an order. If these potential
customers do not purchase our products, we will have expended significant resources and received no revenue in
return.
Most of our end-users are subject to budgetary and political constraints which may delay or prevent sales.
Most of our end-user customers are government agencies. These agencies often do not set their own budgets and
therefore have little control over the amount of money they can spend. In addition, these agencies experience
political pressure that may dictate the manner in which they spend money. As a result, even if an agency wants to
acquire our products, it may be unable to purchase them due to budgetary or political constraints. Some government
agency orders may also be canceled or substantially
5

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 32277
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 9

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 009.00.00.00 SN: 23 Ed#: 11
*P64567/009/11*
EDGAR 2

delayed due to budgetary, political or other scheduling delays which frequently occur in connection with the
acquisition of products by such agencies.
Government regulation of our products may adversely affect sales.
Federal regulation of sales in the United States. Our weapons are not firearms regulated by the Bureau of
Alcohol, Tobacco and Firearms, but are consumer products regulated by the United States Consumer Product Safety
Commission. Although there are currently no federal laws restricting sales of our weapons in the United States,
future federal regulation could adversely affect sales of our products.
Federal regulation of international sales. Our weapons are controlled as a “crime control” implement by the
United States Department of Commerce, or DOC, for export directly from the United States. Consequently, we
must obtain an export license from the DOC for the export of our weapons from the United States other than to
Canada. While we have a history of timely obtaining DOC export licenses for sales of our weapons to the majority
of our international customers, unforeseen changes in U.S. export regulations could significantly and adversely
affect our international sales.
State and local regulation. Our weapons are currently controlled, restricted or their use prohibited by several
state and local governments. Our weapons are banned from consumer sale or use in seven states: New York, New
Jersey, Rhode Island, Michigan, Wisconsin, Massachusetts and Hawaii. Law enforcement use of our products is also
restricted in Michigan, New Jersey, Rhode Island and Hawaii. Some municipalities, including Omaha, Nebraska
and Washington, D.C., also prohibit consumer use of our products. Other jurisdictions may ban or restrict the sale
of our products, and our product sales may be significantly affected by additional state, county and city
governmental regulation.
Foreign regulation. Certain foreign jurisdictions, including Japan, the United Kingdom, Australia, Italy and
Hong Kong, prohibit the sale of conducted energy weapons, limiting our international sales opportunities.
If we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial
litigation costs to protect our rights.
Our future success depends in part upon our proprietary technology. Our protective measures, including a
patent, trademarks and trade secret laws, may prove inadequate to protect our proprietary rights. Our United States
patent on the construction of the gas cylinder used to store the compressed nitrogen in our cartridges expires in
2015. The holder of the patent on the process by which compressed gases launch the probes in our cartridges has
licensed the technology covered by the patent for use in electronic weapons only to us and to two other companies.
This patent expires in 2009. The scope of any patent to which we have or may obtain rights may not prevent others
from developing and selling competing products. The validity and breadth of claims covered in technology patents
involve complex legal and factual questions, and the resolution of such claims may be highly uncertain, lengthy,
and expensive. In addition, our patents may be held invalid upon challenge, others may claim rights in or ownership
of our patents.
<R>

We are subject to intellectual property infringement claims, which will cause us to incur litigation costs and
divert management attention from our business.
</R>

Any intellectual property infringement claims against us, with or without merit, could be costly and timeconsuming to defend and divert our management’s attention from our business. If our products were found to
infringe a third party’s proprietary rights, we could be required to enter into royalty or licensing agreements in order
to be able to sell our products. Royalty and licensing agreements, if required, may not be available on terms
acceptable to us or at all.
<R>

In early April 2001, a patent licensee sued us in the United States District Court, Central District of California.
The lawsuit alleges that certain technology used in the firing mechanism for our weapons infringes upon a patent for
which the licensee holds a license, and seeks injunctive relief and unspecified
</R>

6

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 8067
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 10

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 010.00.00.00 SN: 18 Ed#: 10
*P64567/010/10*
EDGAR 2

<R>

monetary damages. An outcome that is adverse to us, costs associated with defending the lawsuit, and the diversion
of management’s time and our resources as a result of the claim could harm our business and our financial
condition.
</R>

Competition in the law enforcement and corrections market could reduce our sales and prevent us from
achieving profitability.
The law enforcement and corrections market is highly competitive. We face competition from numerous larger,
better capitalized and more widely known companies that make other less-lethal weapons and products, as well as
from a small company that also sells conducted energy less-lethal weapons. Increased competition may result in
greater pricing pressure, lower gross margins and reduced sales, and prevent us from achieving profitability.
Defects in our products could reduce demand for our products and result in a loss of sales, delay in market
acceptance and injury to our reputation.
Complex components and assemblies used in our products may contain undetected defects that are subsequently
discovered at any point in the life of the product. In 2000, we recalled a series of ADVANCED TASERs due to a
defective component in connection with which we incurred expenses of approximately $9,000 and recorded an
additional charge of approximately $41,000 to account for related future expenses. Defects in our products may
result in a loss of sales, delay in market acceptance, injury to our reputation and increased warranty costs.
Our revenues and operating results may fluctuate unexpectedly from quarter to quarter, which may cause our
stock price to decline.
Our revenues and operating results have varied significantly in the past and may vary significantly in the future
due to various factors, including changes in our operating expenses, market acceptance of our products and services,
regulatory changes that may affect the marketability of our products, and budgetary cycles of municipal, state and
federal law enforcement and corrections agencies. As a result of these and other factors, we believe that period-toperiod comparisons of our operating results may not be meaningful in the near term and that you should not rely
upon our performance in a particular period as indicative of our performance in any future period.
<R>

Our dependence on third-party suppliers for key components of our weapons could delay shipment of our
products and reduce our sales.
</R>
<R>

We depend on certain domestic and foreign suppliers for the delivery of components used in the assembly of
our products. Our reliance on third-party suppliers creates risks related to our potential inability to obtain an
adequate supply of components or subassemblies and reduced control over pricing and timing of delivery of
components and subassemblies. Specifically, we depend on suppliers of sub-assemblies, machined parts, injection
molded plastic parts, printed circuit boards, custom wire fabrications and other miscellaneous custom parts for our
products. The final assembly of the cartridges used in the firing of our weapons was prevented for four weeks
beginning in November 2000 by a supplier’s receipt of defective wire used as a component in the cartridges. We
also do not have long-term supply agreements with any of our suppliers. Any interruption of supply for any material
components of our products could significantly delay the shipment of our products and have a material adverse
effect on our revenues, profitability and financial condition.
</R>

Foreign currency fluctuations may reduce our competitiveness and sales in foreign markets.
<R>

The relative change in currency values creates fluctuations in product pricing for potential international
customers. These changes in foreign end-user costs may result in lost orders and reduce the competitiveness of our
products in certain foreign markets. These changes may also negatively affect the financial condition of some
foreign customers and reduce or eliminate their future orders of our products.
</R>

7

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 9768
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 11

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 011.00.00.00 SN: 21 Ed#: 10
*P64567/011/10*
EDGAR 2

<R>

If we were to default under our revolving credit agreement, the bank could proceed against substantially all of
our assets, making it impossible for us to continue operations.
</R>
<R>

We have recently entered into a revolving credit agreement with a bank and pledged substantially all of our
assets, other than our intellectual property, to secure such indebtedness. If for any reason we were unable to meet
our payment obligations, we would be in default under such agreement and the bank could declare our debt
immediately due and payable and proceed against its collateral. In such event, much of our equipment and inventory
would likely be sold to others, and we would be unable to continue operations.
</R>
<R>

Pending litigation may subject us to significant litigation costs and divert management attention from our
business.
</R>
<R>

A former distributor of our products has filed a lawsuit in the state of New York asserting certain rights of
exclusive sales representation with respect to our products. The former distributor claims that he has the exclusive
right to market and sell our products to an extensive list of our current and potential customers throughout the
United States. The suit was dismissed in February 2001 for lack of personal jurisdiction of the New York court. In
March 2001, the former distributor appealed the dismissal. In addition, in early April 2001, a patent licensee sued us
in the United States District Court, Central District of California. The lawsuit alleges that certain technology used in
the firing mechanism for our weapons infringes upon a patent for which the licensee holds a license, and seeks
injunctive relief and unspecified monetary damages. An outcome that is adverse to us, costs associated with
defending these lawsuits and the diversion of our management’s time and our resources as a result of these claims
could harm our business or financial condition.
</R>

Risks Related to This Offering
We may use the proceeds of this offering in ways that do not improve our operating results or the market value of
our securities.
We intend to use the net proceeds from this offering for increased sales and marketing efforts, purchases of
inventory, repayment of a portion of our stockholder and other debt, general corporate purposes, research and
development, and purchases of production tooling and equipment. Repayment of our debt will not directly improve
our operating results. Our management will retain broad discretion and significant flexibility in applying the net
proceeds from this offering. If our management does not apply the proceeds effectively, our business will be
harmed.
You will suffer immediate and substantial dilution of your investment.
<R>

We anticipate that the initial public offering price of the units will be substantially higher than the net tangible
book value per share of our common stock after this offering. As a result, you will incur immediate dilution of
approximately $6.91, or 81%, in net tangible book value for each share of our common stock included in the units
you purchase.
</R>

There has been no prior market for our securities and a public market for our securities may not develop or be
sustained.
Prior to this offering, you could not buy or sell our securities publicly. If an active public market for our
securities does not develop after this offering, the market price of our securities may fall below their initial public
offering price, and the liquidity of your investment may be significantly limited.
The initial public offering price of our units may not accurately reflect their future market performance.
The initial public offering price of the units has been determined based on negotiations between the
underwriters’ representative and us. The initial public offering price may not be indicative of future market
8

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 33651
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 12

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 012.00.00.00 SN: 21 Ed#: 10
*P64567/012/10*
EDGAR 2

performance and may bear no relationship to the price at which our units, common stock or public warrants will
trade.
The price of our securities may be volatile, which may lead to losses by investors.
The stock market has recently experienced significant price and volume fluctuations. You may not be able to
resell our securities at or above the initial public offering price. The price of our securities may fluctuate
significantly in response to a number of factors, including:
• Our quarterly operating results;
• Changes in earnings estimates by analysts and whether our earnings meet or exceed such estimates;
• Announcements of technological innovations by us or our competitors;
• Additions or departures of key personnel; and
• Other events or factors that may be beyond our control.
Volatility in the market price of our securities could lead to claims against us. Defending these claims could
result in significant litigation costs and a diversion of our management’s attention and resources.
Future sales of our common stock by our existing stockholders could decrease the trading price of our common
stock.
<R>

Sales of a large number of shares of our common stock in the public markets after this offering, or the potential
for such sales, could decrease the trading price of our common stock and could impair our ability to raise capital
through future sales of our common stock. Upon completion of this offering, there will be 2,710,754 shares of our
common stock outstanding. The 1,200,000 shares of common stock sold in this offering and the 1,200,000 shares of
common stock reserved for issuance upon exercise of the public warrants sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act of 1933, unless such shares are
purchased by our “affiliates,” as that term is defined in such act. An additional 1,927,049 shares of common stock,
including shares issuable upon exercise of the underwriters’ warrants, may become outstanding upon exercise or
conversion of options or warrants currently outstanding or sold in this offering, subject to various lock-up
agreements prohibiting the sale of such shares for one year following completion of this offering.
</R>

The exercise of previously issued options and warrants may dilute your investment in our shares and impair our
ability to obtain equity financing.
As of March 15, 2001, in addition to the 1,510,754 shares outstanding, there were currently outstanding options
to purchase 434,322 shares of our common stock, 119,055 of which were currently exercisable. We have reserved
an additional 259,000 shares of our common stock for issuance pursuant to options that may be granted in the future
to key employees, and others, under our 2001 Stock Option Plan. In addition, we have issued warrants to acquire up
to 52,727 shares of our common stock. While such options and warrants are outstanding, the holders of such
securities have the opportunity to profit from a rise in the value or market price of our common stock, and the
exercise of these options and warrants could dilute the then book value per share of our common stock. The
existence of these options and warrants could adversely affect the terms at which we could obtain additional equity
financing. Moreover, the holders of the options and warrants may be expected to exercise them at a time when we
could obtain equity capital on terms more favorable than those provided by the options and warrants.
We will need to comply with federal and state securities laws to maintain the tradeability of our securities.
We must maintain in effect the registration statement filed with the Securities and Exchange Commission with
respect to the units and must also comply with the securities laws of a state for the units, common stock and public
warrants to be tradeable in that state. If we do not comply with federal or
9

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 58930
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 13

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 013.00.00.00 SN: 23 Ed#: 10
*P64567/013/10*
EDGAR 2

state securities laws, your ability to sell the securities offered by this prospectus may be significantly reduced.
Certain of our directors or investors will personally benefit from the use of the proceeds of this offering.
We will use the proceeds from this offering to repay approximately $100,000 of unreimbursed business
expenses to our chairman and to retire the interest accrued through March 1, 2001 on our outstanding stockholder
notes. In addition, if the over-allotment option granted to the representative of the underwriters is exercised in full,
approximately $1.3 million in stockholder notes, including a note issued to our chairman, will be retired. This debt
matures July 1, 2002, unless extended.
Our directors and executive officers will continue to control us after this offering, which may lead to conflicts
with stockholders over corporate governance.
<R>

Following completion of this offering, our directors and executive officers will beneficially own approximately
53% of our outstanding common stock. These stockholders, acting together, would be able to significantly influence
all matters requiring approval by our stockholders, including the election of directors and significant corporate
transactions, such as mergers or other business combination transactions. This control may have the effect of
delaying or preventing a third party from acquiring or merging with us. In addition, prior to the appointment of
disinterested, independent directors to our board of directors in January 2001, certain past transactions, including
issuances of stock and options to and borrowings from officers and directors, were not approved by two
disinterested, independent directors at the time of the transaction.
</R>

We do not intend to pay cash dividends in the foreseeable future.
Any investors who have or anticipate any need for immediate income from their investment should not purchase
any of the units offered hereby.
<R>

Provisions of our charter documents and Delaware law may have anti-takeover effects that could hinder a
change in our corporate control, which may cause the market price of our securities to decline.
</R>

Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger or
acquisition that a stockholder may consider favorable. These provisions include:
• authorizing our board of directors to issue preferred stock without stockholder approval;
• providing for a classified board of directors with staggered, three-year terms; and
• allowing written stockholder actions only by unanimous consent.
Provisions of Delaware law, including provisions that prohibit business combinations with entities holding
greater than a threshold amount of voting stock, also may discourage, delay or prevent someone from acquiring or
merging with us, which may cause the market price of our securities to decline.
You should not rely upon our forward-looking statements.
Some of the statements made in this prospectus discuss future events and developments, including our future
business strategy and our ability to generate revenue, income and cash flow. In some cases, you can identify
forward-looking statements by words or phrases such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential,” “continue,” “our future success depends,” “seek to continue,” or the
negative of these words or phrases, or comparable words or phrases. These statements are only predictions. Actual
events or results may differ materially. In evaluating these statements, you should specifically consider various
facts, including the risks outlined under “Risk Factors.” These factors may cause our actual results to differ
materially from any forward-looking statement. Although we believe that the expectations reflected in the forwardlooking statements are reasonable, we cannot guarantee future results, levels of activity, performance or
achievements. We are under no duty to update any of the forward-looking statements after the date of this
prospectus to conform these statements to actual results.
10

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 3556
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 14

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 014.00.00.00 SN: 29 Ed#: 10
*P64567/014/10*
EDGAR 2

USE OF PROCEEDS
<R>

We estimate that the net proceeds from the sale of the 800,000 units that we are selling in this offering will be
approximately $8,400,000, or $9,772,800 if the representative exercises its over-allotment option in full, based on
an assumed public offering price of $13.00 per unit, and after deducting the underwriting discount, expense
allowance, and estimated offering expenses of $752,000 payable by us.
</R>

We expect to allocate the net proceeds of this offering as follows:
<R>

Approximate
Amount
Payment of note payable to stockholder
Accrued interest on notes payable to stockholders
Payment of notes due to unrelated private lender, including accrued
interest
Payment of note to third party vendor
Purchases of inventory
Sales and marketing programs
Research and development
Production tooling and equipment
Other working capital/general corporate purposes
Total

$ 100,000
300,000

Approximate
Percentage
1%
4

612,000
190,000
1,700,000
2,820,000
750,000
750,000
1,178,000

7
2
20
34
9
9
14

$8,400,000

100%

</R>

The debt we intend to repay includes:
• a $99,794 note at an interest rate of 10% payable to Phillips Smith, our chairman and a stockholder, for
unreimbursed business expenses;
<R>

• $300,400 of accrued interest on notes payable to Bruce Culver, a director and stockholder, and Phillips Smith,
consisting of $268,300 outstanding at December 31, 2000 and accrued interest for the period from January 1,
2001 through March 31, 2001 of approximately $32,100;
</R>

• $611,500 of notes and accrued interest at interest rates ranging from 11% to 18%, payable to an unrelated
private lender; and
• a $189,980 note at an interest rate of 10% payable to a third-party vendor.
Further, if the representative exercises its over-allotment option in full, we will repay the principal on other
outstanding stockholder notes of approximately $1.3 million which currently mature in July 2002.
We may use the portion of the net proceeds of this offering currently allocated to other working capital/general
corporate purposes to take advantage of early payment discounts which may be available from our suppliers, prepay
some of our capital leases or reduce our current liabilities other than amounts owing to related parties. Although we
currently have no agreements or commitments to do so, we may also use a portion of the net proceeds to license or
acquire new products, technologies or intellectual property or to acquire or invest in businesses complimentary to
ours. We have no current plans or proposals pending for any such acquisitions or investments. Pending application
of the net proceeds, we intend to invest the net proceeds in interest-bearing, investment grade securities.
The foregoing discussion is merely an estimate based on our current business plan. Our actual expenditures may
vary depending upon circumstances not yet known, such as the time actually required to reach a positive cash flow
or to successfully expand the market for our products.
11

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 41939
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 15

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 015.00.00.00 SN: 25 Ed#: 11
*P64567/015/11*
EDGAR 2

DIVIDEND POLICY
We have never declared or paid any cash dividends on our shares of common stock and do not anticipate paying
any cash dividends in the foreseeable future. Currently, we intend to retain any future earnings for use in the
operation and expansion of our business. Any future decision to pay cash dividends will be at the discretion of our
board of directors and will depend upon our financial condition, results of operations, capital requirements and
other factors our board of directors may deem relevant.
12

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 12851
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 16

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 016.00.00.00 SN: 25 Ed#: 10
*P64567/016/10*
EDGAR 2

CAPITALIZATION
<R>

The following table sets forth our capitalization at December 31, 2000 on an actual basis and on a pro forma
basis, after giving effect to our reincorporation in Delaware, our related 1-for-6 reverse stock split, and the sale of
800,000 units offered hereby at an estimated price of $13.00 per unit and the proposed application of the estimated
net proceeds therefrom. This table should be read in conjunction with, and is qualified by, the financial statements
and notes thereto included elsewhere in this prospectus.
</R>
<R>

December 31, 2000
Actual
Current portion of note payable(1)
Current portion of notes payable to stockholders
Accounts payable
Note payable to a third party vendor
Accrued interest on notes payable to stockholders

$

$
Long-term notes payable to stockholders and others, and capital lease
obligations, excluding current portion
Stockholders’ equity (deficit) Preferred stock $0.00001 par value,
25,000,000 shares authorized; no shares issued and outstanding
Common stock $0.00001 par value, 50,000,000 shares authorized;
1,510,754 shares issued and outstanding actual, 2,710,754 shares issued
and outstanding pro forma(2)
Additional paid-in capital
Common Stock held in treasury, at cost, 1,666,667 shares as of
December 31, 2000
Deferred compensation
Retained earnings (deficit)(3)
Total stockholders’ equity (deficit)
Total capitalization (deficiency)

Pro Forma

(dollars in thousands)
100
$ —
125
—
300
—
190
—
268
—
983

$

—

$ 2,822

$2,822

—

—

—
3,257

—
4,863

—
(80)
(6,794)

—
(80)
—

(3,617)

4,783

$ (795)

$7,605

</R>

(1) Subsequent to December 31, 2000, an unrelated private lender loaned us $500,000, which is due to be repaid,
with accrued interest, from proceeds from this offering upon its closing or by July 1, 2002, whichever is earlier.
<R>

(2) Does not include (i) 434,322 shares of common stock issuable upon exercise of stock options issued pursuant to
our stock option plans, which have a weighted average exercise price of $4.94 per share, (ii) an additional
52,727 shares of common stock issuable upon exercise of warrants outstanding, which have a weighted average
exercise price of $4.71, (iii) the shares of common stock exercisable upon exercise of the public warrants, and
(iv) the shares of common stock underlying the units issuable upon exercise of the representative’s overallotment option or the underwriters’ warrants.
</R>
<R>

(3) Our accumulated deficit, which was $6.8 million at December 31, 2000, was reclassified into additional paid-in
capital upon the termination of our S-corporation tax status in the first quarter of 2001.
</R>

DILUTION
If you invest in our units, your interest will be diluted to the extent of the difference between the public offering
price per share of our common stock and the as adjusted net tangible book value per share of our common stock
after this offering. For purposes of the dilution computation and the following tables, we have allocated the full
purchase price of a unit to the share of common stock included in the unit and
13

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 9215
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 17

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 017.00.00.00 SN: 21 Ed#: 11
*P64567/017/11*
EDGAR 2

<R>

nothing to the warrant included in the unit. As of December 31, 2000, our net tangible book value was a negative
$3,617,215, or a deficiency of $2.39 per share of common stock. Net tangible book value per share represents the
amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of
shares of common stock outstanding. Dilution in net tangible book value per share represents the difference between
the amount per share paid by the purchasers of our units in this offering and the net tangible book value per share of
our common stock immediately afterwards. Without taking into effect any changes in the net tangible book value
after December 31, 2000, other than to give effect to the sale of 800,000 units, each consisting of one and one-half
shares of common stock and one and one-half warrants, each whole warrant to purchase one share of common
stock, in this offering at the assumed initial public offering price of $13.00 per unit, in the aggregate, or $8.67 per
one share of common stock and one warrant to purchase one share of common stock, and the application of the net
proceeds of this offering, the net tangible book value of TASER as of December 31, 2000 would have been
$4,782,785, or $1.76 per share. This represents an immediate increase of $4.15 per share of common stock to
existing stockholders and an immediate dilution of $6.91 per share of common stock to the new investors who
purchase units in this offering. The following table illustrates this per share dilution:
</R>
<R>

Assumed initial public offering price per one share of common stock and
one warrant to purchase one share of common stock
Net tangible book value (deficiency) per share before this offering
Increase in net tangible book value per share attributable to new
investors

$8.67
$(2.39)
$ 4.15

As adjusted net tangible book value per share after this offering

$1.76

Dilution in net tangible book value per share to new investors

$6.91

</R>

The following table summarizes as of December 31, 2000 the differences between the existing stockholders and
the new investors with respect to the number of shares of common stock purchased, the total consideration paid, and
the average price per share paid:
<R>

Shares Purchased
Number
Existing stockholders
New investors
Total

Total Consideration

Percent

Amount

Percent

1,510,754
1,200,000

56%
44%

$ 3,189,548
10,400,000

23%
77%

2,710,754

100%

$13,589,548

100%

Average Price
Per Share
$2.11
$8.67

</R>
<R>

The above computations assume no exercise of outstanding options to purchase 434,322 shares of our common
stock as of March 15, 2001, which have a weighted average exercise price of $4.94 per share, or outstanding
warrants to purchase 52,727 shares of our common stock as of March 15, 2001, which have a weighted average
exercise price of $4.71 per share, the representative’s over-allotment option, the public warrants included in units
sold in this offering or the underwriters’ warrants, as the exercise of such securities would be anti-dilutive. If the
representative’s over-allotment option is exercised in full, dilution per share to new investors would be $6.54 per
share of common stock.
</R>

14

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 24746
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 18

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 018.00.00.00 SN: 23 Ed#: 11
*P64567/018/11*
EDGAR 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with
the financial statements and related notes to the financial statements included elsewhere in this prospectus. This
discussion contains forward-looking statements that relate to future events or our future financial performance.
These statements involve known and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these forward-looking statements. These risks and
other factors include, among others, those listed under “Risk Factors” and those included elsewhere in this
prospectus.
Overview
We began operations in Arizona in 1993 for the purpose of developing and manufacturing less-lethal selfdefense devices. From inception until the introduction of our first product, the AIR TASER, in 1994, we were in the
development stage and focused our efforts on product development, raising capital, hiring key employees and
developing marketing materials to promote our product line.
In 1995 and 1996, we focused our efforts on promoting retail sales and establishing distribution channels for the
AIR TASER product line. However, our marketing efforts were limited by a non-compete agreement prohibiting
the company from marketing or selling our products to the U.S. law enforcement and military markets.
Accordingly, initial sales of the AIR TASER were limited to the consumer market. While early sales in this market
were promising, by the end of 1996 we were unable to establish consistent sales channels in the consumer
marketplace and sales declined. In late 1996, we relocated our production facilities to Mexico to reduce production
costs.
In 1997, we introduced our second product line, the AUTO TASER. The initial market response to the AUTO
TASER suggested the demand for this product would more than compensate for the declining AIR TASER sales.
Because of strong pressure from pre-production orders, we accelerated the development of the AUTO TASER. As a
result of this acceleration, production costs of the AUTO TASER far exceeded initial projections, and we
experienced a substantial amount of AUTO TASER returns due to product defects.
The non-compete agreement that had precluded sales to the law enforcement and military markets expired in
1998. During this year, we focused our development efforts on the ADVANCED TASER product line, a redesigned
and enhanced version of the AIR TASER, targeted primarily to the U.S. law enforcement and corrections market.
During 1998, in addition to $66,000 paid to outside research and development consultants, we also incurred
substantial internal unallocated expenses associated with the development of the ADVANCED TASER. Further,
end-user sales of the AUTO TASER continued to decline, and product returns remained higher than expectations.
In August 1999, the AUTO TASER product line was discontinued and we closed our production facility in
Mexico. We sold all remaining finished goods associated with the AUTO TASER product line by the end of the
first quarter of 2000. Following closure of our Mexican facility, we outsourced the production of the AIR TASER
and certain non-proprietary assemblies to a third-party assembler. We shifted our focus to completion of the
ADVANCED TASER development project and introduced the first ADVANCED TASER units for sale to law
enforcement customers in December 1999. As a result of these activities and product development expenses, we had
accumulated a deficit of $6.3 million by December 31, 1999.
The first full year of the ADVANCED TASER product line sales was 2000. We spent the year focusing on
building the distribution channel for marketing the product line and developing a nationwide training campaign to
introduce the product line to law enforcement agencies, primarily in North America.
In the first quarter of 2001, we discontinued the outsourcing of the final assembly of our products and moved
such final assembly to our facility in Scottsdale, Arizona. As a result of this change, we anticipate
15

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 13716
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 19

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 019.00.00.00 SN: 23 Ed#: 11
*P64567/019/11*
EDGAR 2

that our direct labor costs will represent a larger portion of our total costs of products sold, but that our total costs of
products sold, including direct material and labor and overhead costs, will be slightly lower as a percentage of our
net sales in 2001.
Results of Operations
Years ended December 31, 1999 and 2000
The following table shows the percentage of total revenues represented by selected items included in our
statements of operations:
<R>

Year Ended
December 31,
1999

2000

Net Sales
Less Costs of Products Sold:
Direct Manufacturing Expense
Indirect Manufacturing Expense

100%

100%

45.3%
49.2%

39.6%
14.3%

Total Cost of Products Sold
Gross Margin
Sales, General and Administrative Expense
Research and Development Expense

94.5%
5.4%
65.3%
2.9%

53.9%
46.1%
47.3%
0.2%

Loss from Operations
Interest Expense

(62.8)%
12.7%

(1.4)%
12.5%

Net Loss

(75.5)%

(13.9)%

</R>

Net sales. Net sales increased $1.2 million, or 54.5%, from $2.2 million for the year ended December 31, 1999
to $3.4 million for the year ended December 31, 2000. The increase was due almost entirely to the first full year of
sales of the ADVANCED TASER, primarily to law enforcement agencies. The increase in sales was partially offset
by the decline in AUTO TASER sales due to the discontinuation of this product line and somewhat lower sales of
the AIR TASER to consumers.
For the years ended December 31, 1999 and 2000, sales by product line were as follows:
Product Line

1999

%

2000

%

ADVANCED TASER (including cartridges and accessories)
AIR TASER (including cartridges and accessories)
AUTO TASER (including accessories)
Miscellaneous sales (components, freight, services, equipment)

$ 80,000
1,311,000
601,000
216,000

4%
59%
27%
10%

$2,099,000
1,241,000
24,000
49,000

62%
36%
1%
1%

Net sales

$2,208,000

100%

$3,413,000

100%

Cost of products sold. Cost of products sold decreased from $2.1 million in 1999, or 94.5% of net sales, to $1.8
million in 2000, or 53.9% of net sales. The decrease in cost of products sold as a percentage of net sales was due
primarily to the lower direct production costs associated with the AIR and ADVANCED TASERs, which averaged
29.8% of gross sales as compared to 59.8% of gross sales for the AUTO TASER, and a one-time charge related to
the phase out of the AUTO TASER product line of approximately $355,000 in 1999 included in indirect
manufacturing expense. In 2001, we anticipate our cost of products sold will decrease as a percentage of net sales
due to lower labor costs, greater labor productivity, lower materials cost and greater operating control, all in
connection with the transfer of our product assembly operations from Mexico to the United States.
16

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 16494
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 20

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 020.00.00.00 SN: 24 Ed#: 11
*P64567/020/11*
EDGAR 2

For the two years ended December 31, 2000, our principal product costs included the following:
• Direct materials: For the first eight months of 1999, direct materials included raw materials as well as supplies
used in production. From September 1999 through February 2001, direct materials included our purchase price
of finished goods from our contract manufacturer and raw materials. Direct materials represented the majority
of our direct manufacturing expense.
• Direct labor: Direct labor represented the expenses incurred in our Scottsdale, Arizona facility for the assembly
and packaging of sub-assemblies. Once finished, these sub-assemblies were transferred to our contract
manufacturer for insertion into our finished products. In the first eight months of 1999, direct labor included
wages paid to employees in our Mexican production facility.
• Shipping expense: Shipping expense included those costs associated with shipping finished products to our
customers. These costs included freight paid to ship orders, special handling charges and related transaction
fees.
• Indirect manufacturing expense: Indirect manufacturing expense included the indirect costs associated with
producing our products, such as rent on production facilities, depreciation on production equipment and
tooling, engineering and support salaries and other indirect manufacturing costs.
In 2001, our product cost structure will be significantly different than in 1999 and 2000 primarily due to the
discontinuation of our use of our contract assembler. Specifically, our cost of direct materials will include only the
cost of components and supplies required to manufacture our finished goods. Our direct labor and manufacturing
costs will continue to be allocated to cost of products sold, but should be lower than in 2000 due to the
consolidation of our product manufacturing and assembly operations at our new facility in Scottsdale, Arizona.
Gross margin. Gross margin increased $1.5 million, or 1211.8%, from $120,000 in 1999 to $1.6 million in
2000. Our gross profit margin was 5.4% of net sales in 1999 compared to 46.1% in 2000 due to increased sales of
higher margin ADVANCED TASER products and the one-time write off of $355,000 taken in 1999 as a result of
the phase out of the AUTO TASER. We anticipate our gross margin will increase to approximately 60% of net sales
in 2001 primarily due to increased sales of higher margin ADVANCED TASER products, partially offset by
relocation costs associated with the transfer of our product assembly operations from Mexico to the United States.
Sales, general and administrative expenses. Sales, general and administrative expenses increased by $171,000,
or 11.9%, from $1.4 million in 1999 to $1.6 million in 2000. Sales, general and administrative expenses were
65.3% of net sales in 1999 compared to 47.3% of net sales in 2000. These costs increased to support the sales of the
ADVANCED TASER and include sales commissions and product demonstration costs. However, sales, general and
administrative expenses declined as a percentage of sales in 2000 due to the fixed nature of certain of these costs
and increased gross margins attributable to the ADVANCED TASER product line.
<R>

Interest expense. Interest expense increased by $146,000, or 52.3%, from $280,000 in 1999 to $426,000 in
2000. The increase reflects the cost of the higher level of related party debt in 2000 over 1999, primarily used to
fund working capital. In addition, we issued warrants and options in 2000 valued at $93,907 to certain stockholders
in return for providing loans to us.
</R>

Corporate tax status. Prior to our reincorporation in Delaware in February 2001, we were an S-corporation,
which allowed all the tax attributes to flow through to the stockholders. In February 2001, we changed our tax
reporting status to that of a C-corporation. When we changed our reporting status, our accumulated shareholder
deficit was converted to additional paid-in capital. As a result, there are also no net operating loss carry forwards
available to us.
<R>

Net loss. Our net loss decreased $1.2 million, or 71.6%, from $1.7 million in 1999 to $473,000 in 2000. Basic
and diluted net loss per common share was $0.54 in 1999 compared to $0.19 in 2000. The
</R>

17

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 29998
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 21

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 021.00.00.00 SN: 20 Ed#: 11
*P64567/021/11*
EDGAR 2

reduced net loss in 2000 resulted primarily from increased sales volume and increased gross margins attributable to
sales of the ADVANCED TASER line.
Liquidity and Capital Resources
We have sustained significant operating losses since our inception. In 1999 and 2000, we financed our
operations through advances from and investments by major stockholders, and bank financing guaranteed by major
stockholders.
Liquidity. We had a working capital deficiency of $2.4 million at December 31, 1999 and $1.0 million at
December 31, 2000. The improvement in working capital from 1999 to 2000 was largely due to the extension of
short-term related party debt in 1999 to long-term debt in 2000. In both 1999 and 2000, cash was used primarily to
fund operating losses and for investment in property and equipment.
<R>

In 2000 we generated cash from operations of $8,000, primarily as a result of a significant customer deposit of
$440,000 received in December 2000. In 1999, operations consumed $704,000 in cash. We have not historically
generated sufficient cash from operations to fund future growth or to repay our long-term debt that principally
comes due July 1, 2002. However, we anticipate that our cash flow from operations will be at least break-even in
2001 because we expect our sales will increase and our cost of products sold will decrease as a percentage of our
total revenues, generating both positive cash flow and net income. We believe that, with anticipated cash flow from
operations for 2001 and the completion of this offering, our cash resources will be adequate to meet our expected
future liquidity needs for approximately the next two years.
</R>
<R>

Capital resources. We have funded our operating deficits primarily through loans from two major stockholders,
Phillips Smith and Bruce Culver. Our indebtedness to these stockholders totaled $2.9 million at December 31, 2000.
$1.3 million of this debt matures in July 2002 and bears interest at a rate of 10%.
</R>
<R>

In the event this offering is not completed, we have an agreement with Messrs. Smith and Culver whereby we
may extend the maturity date of their outstanding notes for a period not to exceed 24 months. We also may retire
the debt at any time without penalty. In addition, Mr. Culver has established a non-revocable letter of credit in the
amount of $500,000 on our behalf that we can use to fund any shortfalls in our monthly capital requirements. This
letter of credit expires on the earlier of the closing of this offering or December 31, 2001.
</R>

Subsequent to December 31, 2000, an unrelated private lender loaned us $500,000 to fund working capital. The
related promissory note carries interest at 18% and matures at the earlier of the completion of this offering or July
2002. In return for his loan, we granted him 5,000 ten-year warrants with an exercise price of $10 per share. The
fair value of these warrants is approximately $9,600.
<R>

Also subsequent to December 31, 2000, we obtained a revolving line of credit with a bank with a total
commitment of up to $1.5 million. The line was fully used to repay a $1.5 million promissory note to Bruce Culver,
is secured by assets of Mr. Culver and substantially all of our assets other than our intellectual property, and has an
interest rate of bank prime plus 1%. The line matures on April 30, 2002 and requires us to make monthly interest
payments until such date.
</R>

Capital commitments. At December 31, 2000, we had no material commitments for capital expenditures. Other
commitments include rental payments under operating leases for office space and equipment, and commitments
under employment contracts with our chief executive officer, president, and chief financial officer.
18

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 38457
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 22

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 022.00.00.00 SN: 30 Ed#: 11
*P64567/022/11*
EDGAR 2

BUSINESS
Company overview
We develop, assemble and market less-lethal, conducted energy weapons primarily for use in the law
enforcement and corrections market. Over 400 police departments in the United States have made initial purchases
of our products and 15 police departments, including San Diego, Sacramento, and Albuquerque, have purchased our
products for every patrol officer. As of February 1, 2001, more than 200 additional police departments were
evaluating our newest product, the ADVANCED TASER.
We sell two principal products. We introduced the AIR TASER in 1994 and targeted it primarily at the
consumer market. We designed the AIR TASER to look like a cellular telephone or other consumer electronic item,
rather than a weapon. The terms of an agreement we signed with Electronic Medical Laboratories, Inc., doing
business as Tasertron, the original licensee of a patent on certain technology used in our weapons, precluded us
from selling our products to United States law enforcement, corrections and military agencies until February 1998.
After expiration of this agreement, we introduced the ADVANCED TASER, an upgraded and redesigned version of
the AIR TASER, to appeal to the law enforcement and corrections market. It uses the same basic operating principle
as the AIR TASER but produces four times the AIR TASER’s power output. It is also pistol-shaped to make it
easier for police officers to use. The ADVANCED TASER can be sold with an integrated laser sight and a built-in
memory option to record the time and date of up to 585 firings. We believe the ADVANCED TASER will also
appeal to the private security, military and consumer markets, and intend to pursue sales in these markets after
further penetrating the law enforcement and corrections market.
Industry background
The market for less-lethal weapons includes law enforcement agencies, correctional facilities, military agencies,
private security guard companies and retail consumers. We believe law enforcement officials are the opinion leaders
regarding market acceptance of new security products. In recent years, successful new security products — such as
the GLOCK handgun and the Mag-Lite flashlight — were first marketed to and accepted by police departments. We
therefore focus on the law enforcement agency segment of the market for less-lethal weapons.
<R>

According to a 1997 report issued by a unit of the United States Department of Justice, nearly all local police
departments and all federal law enforcement agencies have a use-of-force policy that dictates the level of force its
officers can use to respond to various situations. A police officer is trained to use only the minimum force necessary
to overcome the threat of injury or violence posed by a suspect. For example, under most policies, an officer may
not use lethal force unless a subject poses a threat of significant bodily injury or fatality to the officer or other
persons.
</R>
<R>

In fact, studies by the Associated Press have concluded that most police officers never deploy lethal force in the
course of their careers. While the vast majority of law enforcement officers around the world are armed with
firearms, only a small percentage will actually ever use them. A 1996 study jointly published by the United States
Department of Justice and the National Institute of Justice, however, indicates that police officers use less-lethal
force on a regular basis. Less-lethal force can range from a control hold to the use of a baton, chemical spray, or
other means to control a subject that is actively resisting the officer.
</R>

Police officers are often injured while trying to subdue a suspect with less-lethal force. Traditional tactics such
as using a baton or fist to control a suspect result not only in a significant risk of injury to the suspect, but also a
significant risk that the officer will be injured. If an officer can subdue a suspect from a safe distance using effective
less-lethal weapons, he greatly reduces the probability that he or the suspect, as well as bystanders, will be injured
during a confrontation.
A variety of new less-lethal weapons have been developed to address the need to temporarily incapacitate an
attacker without causing permanent injury or fatality. These weapons vary in approach, but
19

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 29995
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 23

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 023.00.00.00 SN: 20 Ed#: 11
*P64567/023/11*
EDGAR 2

generally include stun guns, batons and clubs, chemical sprays, rubber bullets, pepper balls and other impact
munitions. Each weapon has distinct advantages and disadvantages, and law enforcement agencies require different
tools for different situations. We believe that the following characteristics of less-lethal weapons are the most
important to law enforcement agencies:
• Effectiveness: temporary incapacitation of aggressive suspects;
• Range: variable distance over which the weapon is effective;
• Safety: low risk of injury or death;
• Ease of use: simple operation, low maintenance and no contamination;
• Dependability: reliability in many environments, product durability;
• Accountability: tracking to reduce misuse of the weapon; and
• Cost: low cost per use and possible reduction of litigation expense.
The ADVANCED TASER solution
<R>

All our products are designed to perform well in terms of the above characteristics. We believe the
ADVANCED TASER, however, offers the best combination of these characteristics currently available in a lesslethal weapon. In our opinion, this superior performance could make the ADVANCED TASER the less-lethal
weapon of choice in many situations for law enforcement agencies and other security services.
</R>

• Effectiveness
<R>

Most less-lethal weapons rely upon a pain response for effect. A less-lethal weapon that inflicts only pain may
not stop the most dangerous and aggressive suspects. The ADVANCED TASER is designed to cause complete yet
temporary physical incapacitation, not just discomfort or distraction. In volunteer testing and field use, the
ADVANCED TASER has incapacitated even highly focused individuals who have demonstrated the ability to fight
through other less-lethal weapons that rely only on pain.
</R>

• Range
<R>

Batons and chemical sprays can only be used from close distances, usually less than five feet. Rubber bullets,
beanbag rounds, and similar less-lethal impact weapons must be used at distances greater than 30 feet to minimize
suspects’ injuries. Therefore, we believe that other less-lethal weapons as a group are generally ineffective between
five and thirty feet. The ADVANCED TASER is designed to operate within this range. Since it is equally effective
between zero and five feet, we believe the ADVANCED TASER represents a more versatile less-lethal weapon for
encounters taking place within 21 feet.
</R>

• Safety
In tests involving over 1,000 human volunteers and in hundreds of field applications, the ADVANCED TASER
has had no reported long-term, adverse after-effects. In field uses, our technology has been found to have a
comparable or lower risk of injury to officers and suspects than other less-lethal technologies. Further, the recovery
time from an application of the ADVANCED TASER is generally less than one minute. In contrast, recovery time
from the application of chemical sprays can range from ten minutes to one hour. Recovery time from the effect of
impact rounds can vary from hours to weeks, depending on bruising and bone breakage.
• Ease of Use
The ADVANCED TASER is shaped and designed to function like a standard handgun. Accordingly, it is easy
for law enforcement officers to use during stressful situations, since their firearms training familiarizes them with
the muscle movements required for its operation. It can be reloaded and fired again as quickly as a spent cartridge
can be removed and a replacement cartridge inserted, typically in less than five seconds. Further, the weapon
requires no maintenance other than a periodic battery check. The

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 29995
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 23

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 023.00.00.00-1 SN: 20 Ed#: 11
*P64567/023/11*
EDGAR 2

20

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 26051
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[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 024.00.00.00 SN: 21 Ed#: 11
*P64567/024/11*
EDGAR 2

ADVANCED TASER also does not leave contaminating residues, unlike chemical sprays that may contaminate
buildings, vehicles or other closed facilities or officer uniforms.
• Dependability
The ADVANCED TASER operates effectively under a variety of unfavorable conditions, such as wind and
rain, that render chemical sprays less effective. The ADVANCED TASER housing is constructed of high tensilestrength polycarbonate to withstand the rigors of typical police use.
• Accountability
The ADVANCED TASER incorporates features designed to reduce inappropriate use. Our cartridges contain
numerous confetti-like Anti-Felon Identification tags, or AFIDs, which are scattered when the unit is fired. AFID
tags recovered from usage sites can thus help identify the owner of the cartridge used. The ADVANCED TASER
we market to law enforcement and corrections agencies also comes with a data port that records the exact time, date
and duration of up to 585 firings.
• Cost
The ADVANCED TASER is sold to law enforcement agencies for approximately $400 per unit. The air
cartridge ammunition is priced under $18 per shot. These prices are competitive with impact munitions and most
other specialized less-lethal weapons, with the exception of the least expensive chemical sprays. However, the
indirect costs of decontaminating buildings, vehicles, and uniforms resulting from the use of chemical sprays can
place the ADVANCED TASER at an overall cost advantage per use.
In addition, litigation costs for law enforcement agencies can be significant. Reducing the number of injuries
and fatalities caused by law enforcement officers may reduce the number of suits filed against agencies for
excessive use of force, wrongful death and injury. Further, reducing officer injuries minimizes medical claims and
lost time for work-related injuries.
<R>

As with other less-lethal weapons, we believe that these characteristics, particularly safety, may also have the
benefit of increasing goodwill between law enforcement agencies and their communities. Community relations
considerations can be particularly important at a time when almost any interaction with police can be videotaped
and scrutinized by the media and the public.
</R>

Our strategy
Key elements of our strategy for growth include the following:
• Fully exploit the expanding law enforcement and corrections market.
Our goal is to make the ADVANCED TASER the dominant less-lethal weapon for use by law enforcement and
corrections agencies. Law enforcement officials are often viewed as experts with regard to weapons and other
security products. As a result, we believe that widespread acceptance of the ADVANCED TASER in this market
will enhance its credibility and represent a necessary first step toward expanding sales of our products in additional
markets.
• Expand into private security, military, and consumer markets.
After increasing our presence in the law enforcement and corrections market, we intend to expand our
penetration in the private security, military and consumer self-defense markets. We believe the same performance
characteristics that will enable our products to succeed in the law enforcement and corrections market will also
appeal to potential customers in these additional markets.
• Develop enhanced less-lethal weapon technologies.
We intend to improve our less-lethal weapons technology to provide further growth and market opportunities.
Among other things, we intend to develop multiple shot capability and greater effective range. These innovations
may increase our revenues by allowing us to sell upgraded less-lethal weapons and accessories, both to existing and
potential new customers.
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Name: TASER
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Phone: (602) 223-4455

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*P64567/025/11*
EDGAR 2

• Acquire businesses that enhance our strategic position.
We may acquire businesses that will complement our growth strategy and enhance our competitive position in
our markets. However, we have no current plans for such acquisitions.
Markets
Law enforcement and corrections
<R>

Federal, state and local law enforcement agencies in the United States currently represent the primary target
market for the ADVANCED TASER. According to United States Bureau of Justice statistics, there were nearly
19,000 of these agencies in the United States in 1996 that employed about 740,000 full-time, sworn law
enforcement officers. In 1999, the United States Bureau of the Census estimated that there were more than 450,000
correctional officers in the United States.
</R>

Acceptance of the ADVANCED TASER by United States police departments has been fairly rapid since its
introduction in December 1999. We believe it could prove equally suitable for use in correctional facilities. The
ADVANCED TASER is particularly useful in these confined and crowded settings since it provides a means of
bringing virtually any individual under control without requiring the use of lethal force. We anticipate that some
correctional officers will be armed with ADVANCED TASERs, particularly as its performance attributes become
more familiar to the wider law enforcement community.
In the law enforcement market, over 400 police departments have made initial purchases of the ADVANCED
TASER for testing or deployment. In addition, 15 police departments, including San Diego, Sacramento, and
Albuquerque, purchased enough of our weapons to issue one to each of their patrol officers.
Private security firms and guard services
A report of the Security Industry Association for 1999-2000 estimated that there were over 1.7 million privately
employed security guards or personnel in the United States. They represent a broad range of individuals, including
bodyguards, commercial and government building security guards, commercial money carrier employees, and many
others. We believe that security personnel armed with ADVANCED TASERs could be as effective in many
circumstances as those armed with conventional firearms. At the same time, arming guards with ADVANCED
TASERs may reduce the potential liability of private security companies and personnel.
A number of environments can prove problematic for the use of conventional firearms. The use of conventional
firearms in airplanes, for example, poses a significant threat to the integrity of the aircraft and the safety of the
passengers. Conventional firearms may also be inappropriate in subways, buses, transit systems, banks and casinos.
In many of these crowded environments, the contamination associated with the use of chemical sprays could also
pose significant problems.
One large private security force overseas has ordered over 1,000 ADVANCED TASERs for delivery in Spring
2001. We are in the early stage of pursuing additional opportunities for sales of the ADVANCED TASER in private
security markets, and have made only limited sales to date.
Consumer/personal protection
<R>

A 1997 survey sponsored by the National Institute of Justice found that, in 1994, 44 million Americans owned
192 million firearms, 65 million of which were handguns. We believe these handgun owners represent one segment
of a potentially large consumer market for our products.
</R>

As a result of our shift in focus, the share of our sales made to consumer markets fell sharply from 1999 to
2000. In 1999, sales to consumers represented 88% of total sales while these sales dropped to only 32% of total
sales in 2000. We expect the relative share of sales to consumer markets to remain small in the next few years.
Given the size of the potential consumer market, however, we believe consumer sales
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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 350
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Phone: (602) 223-4455

Operator: BPX31319

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*P64567/026/11*
EDGAR 2

could contribute a substantial portion of our revenues in the future, particularly if the ADVANCED TASER
becomes more established in the law enforcement and corrections market.
Military
Military police forces may use the ADVANCED TASER for purposes similar to those of civilian police units.
Military peace-keeping forces also perform policing functions, and the ADVANCED TASER may prove an
effective tool for these operations. The ADVANCED TASER may also be used by armed forces to reduce the
possibility of civilian casualties resulting from combat operations on battlefields consisting of both civilians and
combatants. We have yet to pursue sales opportunities in the military market.
Products
Our weapons use compressed nitrogen to shoot two small electrified probes up to a maximum distance of 21
feet. The probes and compressed nitrogen are stored in a replaceable cartridge attached to the base of the weapon.
Our proprietary replacement cartridges are sold separately.
<R>

After firing, the probes discharged from our cartridges remain connected to the weapon by high-voltage
insulated wires that transmit electrical pulses into the target. These electrical pulses, which we call TASER-Waves
or T-Waves, are transmitted through the body’s nerves in a manner similar to the transmission of signals used by the
brain to communicate with the body. The T-Waves temporarily overwhelm the normal electrical signals within the
body’s nerve fibers, impairing subjects’ ability to control their bodies or perform coordinated actions. T-Waves can
penetrate up to two inches of clothing and up to a class 3 bullet resistant vest, the second most protective of seven
classes of bullet resistant vests. The initial effect lasts up to five seconds and the charge can be repeated for up to
approximately ten minutes by repeatedly firing the weapon.
</R>

Since all our weapons use the same cartridges, we can support multiple platforms and still achieve economies of
scale in cartridge production. Our cartridges contain numerous colored, confetti-like tags bearing the cartridge’s
serial number. These tags, referred to as Anti-Felon Identification tags, or AFIDs, are scattered when one of our
weapons is fired. We require sellers of our products to participate in the AFID program by registering buyers of our
cartridges. In many cases, we can use AFIDs to identify the registered owner of cartridges fired.
We introduced our initial product, the AIR TASER, in 1994. We designed the AIR TASER to look like a
cellular telephone rather than a weapon to target the consumer electronics market. Currently, the AIR TASER
product line consists of the AIR TASER, a cartridge that shoots two small electrified probes up to 15 feet, an
optional laser sight, and a number of holstering accessories. We continue to target the AIR TASER line to the
consumer market.
We developed the ADVANCED TASER product line, launched in December 1999, primarily for the law
enforcement and corrections market. The ADVANCED TASER M26 is our primary product in this market and is
sold exclusively to law enforcement and corrections agencies. The ADVANCED TASER M26 offers the following
improvements over the AIR TASER:
• Increased effectiveness: the ADVANCED TASER has four times the power of the AIR TASER and has
proven effective in incapacitating over 99% of volunteers tested.
• Better accountability: the ADVANCED TASER’s memory system records the time, date, and duration of up to
585 firings. By downloading this information periodically, law enforcement and corrections agencies can track
every use of the ADVANCED TASER. These agencies can use this data to investigate potential misuse.
<R>

• Ease of use: law enforcement and corrections officers have reported to us that the ADVANCED TASER’s
familiar pistol shape and integrated laser sight minimize the training required for officers and make it easier to
use.
</R>

23

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 36480
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Phone: (602) 223-4455

Operator: BPX31319

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JB: P64567 PN: 027.00.00.00 SN: 20 Ed#: 11
*P64567/027/11*
EDGAR 2

Our products are sold primarily through our network of distributors at a wide range of prices. Our most
inexpensive consumer product is the entry-level consumer AIR TASER, with a retail price of $99. Our high-end
consumer model, the ADVANCED TASER M18L with integrated laser sight, retails for $600. The ADVANCED
TASER M26 is currently our best selling item. Distributors sell the M26 to law enforcement and corrections
agencies for $400. Retail cartridge prices range from $16 to $30 per unit.
In addition to weapons and cartridges, we sell holsters, attachments, cases and other accessories that
complement our core products. Although to date these accessories have generated limited sales, they offer
additional revenue opportunities and attractive margins.
We offer a lifetime warranty on the AIR TASER. Under this warranty, we will replace any AIR TASER that
fails to operate properly for a $25 fee. The AIR TASER is designed to disable an attacker for up to 30 seconds, and
we encourage users to leave the unit and flee after firing it. As a result, we also provide free replacement units to
consumers who follow this suggested procedure. To qualify for the replacement unit, users must file a police report
that describes the incident and confirms the use of the AIR TASER. Historically, approximately 2% of the AIR
TASERs sold by us have been returned by end users in connection with a warranty claim. Warranty costs under the
AIR TASER replacement policy have been minimal to date.
We offer a no-questions-asked lifetime replacement policy on the ADVANCED TASER. If the weapon fails to
operate properly for any reason, we will replace it for a fee of $25. The fee is intended to help defray the handling
and repair costs associated with product returns. This policy is attractive to our law enforcement and corrections
agency customers. In particular, it avoids disputes regarding the source or cause of any defect. Due to our recent
introduction of the ADVANCED TASER, we have created a reserve for product returns based on a 7% return rate.
In 2000, we recalled a series of ADVANCED TASERs due to a defective component in connection with which we
incurred expenses of approximately $9,000 and recorded an additional charge of approximately $41,000 to account
for related future expenses.
Sales and marketing
Law enforcement and corrections agencies represent our primary target market. In this market, the decision to
purchase the ADVANCED TASER is normally made by a group of people including the agency head, his training
staff, and weapons experts. The decision sometimes involves political decision-makers such as city council
members. The decision-making process can take as little as a few weeks or as long as several years.
United States distribution. With the exception of several accounts to which we sell directly, the vast majority of
our law enforcement agency sales in the United States occur through our network of more than 25 independent
regional police equipment distributors. To service these distributors and assist us in expanding sales to new ones, we
retain two manufacturer’s representatives that call on potential distributors. We compensate our manufacturer’s
representatives solely on a commission basis, calculated as a percentage of the sales they complete. Sales in the
consumer market are made through different independent distributors, dealers, and retailers. We provide our
distributors with performance-based incentive programs.
International distribution. As a result of our shift in focus to the United States law enforcement and corrections
market, our international sales efforts are currently limited to presentations and training seminars conducted by
TASER personnel. We recently began introducing the ADVANCED TASER in Europe and parts of the Middle
East, South America and Asia, but have yet to devote significant resources to these markets. Sales outside the
United States and Canada accounted for 48% and 18% of total revenues in 1999 and 2000, respectively. In 2001,
we expect international sales to account for approximately 10% of our total sales.
We have worked in the past with more than 20 foreign distributors. These foreign distributors purchase products
from us and resell them to sub-distributors, retail dealers or end users. We continue to
24

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Phone: (602) 223-4455

Operator: BPX31319

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*P64567/028/11*
EDGAR 2

provide most foreign distributors with short-term exclusive contracts to sell our products in a designated region.
Although many of these relationships are inactive, we continue to ship products as ordered.
Training Programs. Most law enforcement and corrections agencies will not purchase new weapons until a
training program is in place to certify all officers in their proper use. We offer an eight-hour class that certifies law
enforcement and corrections agency trainers as instructors in the use of the ADVANCED TASER. We have
certified over 2,500 law enforcement training officers as ADVANCED TASER instructors. Our certification
program is designed to make it easier for departments to comply with these training requirements.
Fifty of our certified instructors have undergone further training and become certified as master instructors. We
authorize these individuals to train other law enforcement and corrections agency trainers, not just end-users within
these organizations. Twenty-five of our master instructors have agreed to conduct ADVANCED TASER training
classes on a regular basis. These instructors independently organize and promote their own training sessions, and we
provide them with logistical support. They are independent professional trainers, serve as local area TASER
experts, and assist our distributors in conducting TASER demonstrations at other police departments within their
regions. Through the end of 2000, we did not charge for attendance at these classes but now charge $195 per
attendee. We pay master instructors a per-session training fee and a share of the attendance fees collected at each
session that they conduct. These training sessions have led directly to the sale of ADVANCED TASERs to a
number of police departments.
Communications. In addition to our training programs, we regularly participate in a variety of trade shows and
conferences. Our marketing efforts also benefit from significant free news coverage. Other marketing
communications include video e-mails, press releases, and conventional print advertising in law enforcement trade
publications. Our website also contains similar marketing information.
Manufacturing
<R>

We have installed a new production line in our facility in Scottsdale, Arizona, where we have historically
assembled the compressed nitrogen containers used in our air cartridges. After a review of our operating costs and
changes in regulations pertaining to the export of the technology used to produce our weapons, we elected to move
assembly operations from our subcontractor in Guaymas, Mexico to our new facility in Scottsdale. We own all of
the additional production equipment used for the final assembly of our products in the Guaymas facility, and expect
to move it to Scottsdale no later than May 2001.
</R>

Our Scottsdale facility has approximately 6,000 square feet of assembly and warehouse space. We plan to
employ between 15 and 25 assembly personnel by the end of 2001. After the move, our production capabilities will
support the assembly of 2,000 ADVANCED TASERs, 1,000 AIR TASERs, and 24,000 cartridges per month on a
single shift. We can expand our production capabilities by adding additional personnel and a second shift with
negligible new investment in tooling and equipment. We expect our Scottsdale facility and tooling to be sufficient
to support our current growth projections at least through 2003.
<R>

We currently purchase finished circuit boards from First Electronics, Inc. and injection-molded plastic
components from Frontier Tool & Mold, Inc., each located in Phoenix. Although we currently obtain these
components from single source suppliers, we own the injection-molded component tooling used in their production.
As a result, we believe we could obtain alternative suppliers without incurring significant production delays. We
also purchase small machined parts from Asia Sourcing of Taiwan, China, and custom cartridge assemblies from
McDavis Company of Arizona City, Arizona. We believe that these or readily available alternative suppliers can
consistently meet our needs for these components. We acquire most of our components on a purchase order basis
and do not have long-term contracts with suppliers. We believe that our relations with our suppliers are good.
</R>

25

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
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Phone: (602) 223-4455

Operator: BPX31319

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JB: P64567 PN: 029.00.00.00 SN: 19 Ed#: 11
*P64567/029/11*
EDGAR 2

Competition
<R>

In the law enforcement and corrections market, the ADVANCED TASER competes directly with the conducted
energy weapon sold by Electronic Medical Research Laboratories, Inc., doing business as Tasertron. Tasertron is
the sole remaining manufacturer of the original TASER weapon introduced in the 1970s. At March 31, 2001, over
430 police departments had purchased, in the aggregate, over 4,000 ADVANCED TASERs. We believe that
approximately 400 police departments actively deploy the Tasertron weapon.
</R>
<R>

We believe The ADVANCED TASER also competes indirectly with a variety of other less lethal alternatives.
In the consumer market, the AIR TASER competes directly with a conducted energy weapon introduced by Bestex,
Inc. in 1996, called the Dual-Defense, and indirectly with other less-lethal alternatives.
</R>

Law enforcement and corrections market. Tasertron had an exclusive license to sell TASER products in the
North American law enforcement and corrections market until February 1998. Compared to the Tasertron unit, our
ADVANCED TASER offers reduced size, additional power, and a more convenient pistol-shaped design. We
believe agencies choosing to employ a conducted energy weapon will prefer to adopt a single weapon system. Since
its introduction, the ADVANCED TASER has competed successfully against the Tasertron unit, even in agencies
that had previously purchased Tasertron units.
Other less-lethal weapons, sold by companies such as Armor Holdings, Inc. and Jaycor, Inc., compete with our
ADVANCED TASER indirectly. Many law enforcement and corrections personnel consider less-lethal weapons to
be distinct tools, each best-suited to a particular set of circumstances. Consistent with this tool kit approach,
purchasing any given tool does not preclude the purchase of one or several more. In other cases, budgetary
considerations and limited space on officers’ belts dictate that only a limited number of less-lethal weapons will be
purchased and carried. We believe the ADVANCED TASER’s versatility, effectiveness, and low injury rate enable
it to compete effectively against other less-lethal alternatives.
Consumer market. Conducted energy weapons have gained limited acceptance in the consumer market for lesslethal weapons. These weapons compete with other less-lethal weapons such as stun guns, batons and clubs, and
chemical sprays. The primary competitive factors in the consumer market include a weapon’s cost, its effectiveness,
and its ease of use. The widespread adoption of the ADVANCED TASER by law enforcement agencies may help
us overcome a perceived historic lack of consumer confidence in conducted energy weapons.
Regulation
United States regulation. The AIR TASER and ADVANCED TASER are subject to the same regulations.
Neither weapon is considered a “firearm” by the Bureau of Alcohol, Tobacco, and Firearms. Therefore, no
firearms-related regulations apply to the sale and distribution of our weapons within the United States. In the 1980s,
however, many states introduced regulations restricting the sale and use of stun guns, inexpensive hand-held shock
devices. We believe existing stun gun regulations also apply to our weapon systems.
In many cases, the law enforcement and corrections market is subject to different regulations than the consumer
market. Where different regulations exist, we assume the regulations affecting the consumer market also apply to
the private security market except as the applicable regulations otherwise specifically
26

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
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Phone: (602) 223-4455

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*P64567/030/11*
EDGAR 2

provide. Based on a review of current regulations, we have determined the following states regulate the sale and use
of our weapon systems:
State
Connecticut
Florida
Hawaii
Illinois
Indiana
Massachusetts
Michigan
New Jersey
New York
North Carolina
North Dakota
Rhode Island
Washington
Wisconsin

Law Enforcement Use
Legal
Legal
Prohibited
Legal
Legal
Legal
Prohibited (except for evaluation)
Prohibited
Legal
Legal
Legal
Prohibited
Legal
Legal

Consumer Use
Legal, subject to restrictions
Legal, subject to restrictions
Prohibited
Legal, subject to restrictions
Legal, subject to restrictions
Prohibited
Prohibited
Prohibited
Prohibited
Legal, subject to restrictions
Legal, subject to restrictions
Prohibited
Legal, subject to restrictions
Prohibited

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

Law Enforcement Use
Legal
Legal
Legal
Legal
Legal
Legal
Legal
Legal

Consumer Use
Prohibited
Prohibited
Prohibited
Prohibited
Legal, subject to restrictions
Prohibited
Prohibited
Prohibited

United States export regulation. Our weapon systems are considered a crime control product by the United
States Department of Commerce. Accordingly, the export of our weapon systems is regulated under export
administration regulations. As a result, we must obtain export licenses from the Department of Commerce for all
shipments to foreign countries other than Canada. Most of our requests for export licenses have been granted, and
the need to obtain these licenses has not caused a material delay in our shipments. The need to obtain licenses,
however, has limited or impeded our ability to ship to certain foreign markets. In addition, export regulations
prohibit the further shipment of our products from foreign markets in which we hold an export license for the
products to foreign markets in which we do not hold an export license for the products.
In addition, in the fall of 2000, the Department of Commerce introduced new regulations restricting the export
of the technology used in our weapon systems. These regulations apply to both the technology incorporated in our
weapon systems and in the processes used to produce them. The technology export regulations do not apply to
production that takes place within the United States. After moving our final assembly to our Scottsdale facility,
these technology export regulations will no longer apply to us but will still apply to certain of our suppliers located
outside of the United States.
Foreign regulation. Foreign regulations are numerous and often unclear. We prefer to work with an exclusive
distributor who is familiar with applicable regulations in each of our foreign markets. Experience with foreign
distributors in the past indicates that restrictions may prohibit certain sales of our products in a number of countries.
The countries in which we are aware of restrictions include Belgium, Denmark, Hong Kong, Italy, Japan, New
Zealand, Norway, Sweden, Switzerland, and the United Kingdom. In
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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
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Phone: (602) 223-4455

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*P64567/031/11*
EDGAR 2

Australia, Canada, and India, we are also aware that sales of our products are permitted to law enforcement and
corrections agencies but prohibited to consumers.
Intellectual property
We protect our intellectual property with a variety of patents and trademarks. In addition, we use confidentiality
agreements with employees and some suppliers to ensure the safety of our trade secrets. We hold a United States
patent on the construction of the gas cylinder used to store the compressed nitrogen in our cartridges. This patent
expires in 2015. We and two other companies are the only licensees for use in electronic weapons of the technology
described in a United States patent held by John H. Cover, Jr. The licenses held by the other licensees may not be
transferred and their rights under the licenses may not be expanded or modified without our approval. Mr. Cover’s
patent covers the process by which compressed gases launch the probes in our cartridges and expires in 2009.
Using this compressed gas technology instead of gunpowder prevents our products from being classified as firearms
by the Bureau of Alcohol, Tobacco and Firearms. We also have a broad-based patent application pending covering
the energy wave form we developed for the ADVANCED TASER.
We own the AIR TASER and TASER registered trademarks. We also have several unregistered trademarks.
<R>

In early April 2001, James F. McNulty, Jr. sued us in the United States District Court, Central District of
California. The lawsuit alleges that certain technology used in the firing mechanism for our weapons infringes upon
a patent for which Mr. McNulty holds a license, and seeks injunctive relief and unspecified monetary damages. We
believe we do not infringe this patent, that Mr. McNulty’s claims are without merit and that the litigation will have
no material adverse effect on our business, operating results or financial condition.
</R>

Research and development
Our research and development initiatives are led by our internal personnel and make use of specialized
consultants when necessary. These initiatives include bio-medical research as well as electrical and mechanical
engineering design. Future development projects will focus on reducing the size, extending the range, and
improving the functionality of our weapons. Total research and development expenditures were $64,000 in 1999
and $7,100 in 2000.
Employees
As of December 31, 2000, we had 16 full-time employees. Six employees were involved in sales, marketing and
training. Two were employed in research, development and engineering. We also employed four administrative
personnel and four in production support. Our employees are not covered by any collective bargaining agreement,
and we have never experienced a work stoppage. We believe that our relations with our employees are good.
Facilities
We conduct our operations from a modern 11,800-square-foot facility located in Scottsdale, Arizona. The
monthly rent for this facility is approximately $11,000. Our lease expires on January 1, 2006. We believe this
facility will meet our needs for the next three years and that additional space will be available on reasonable terms
upon the expiration of our current lease or if we require additional space.
Legal proceedings
<R>

In February 2000, Thomas N. Hennigan, a distributor of our products from late 1997 through early 2000 sued us
in the United States District Court, Southern District of New York. Mr. Hennigan claims the exclusive right to sell
our products to many of the largest law enforcement, corrections, and military agencies in the United States. He
seeks monetary damages in the aggregate amount of $400 million
</R>

28

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 12151
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[B/E]

Phone: (602) 223-4455

Operator: BPX31319

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JB: P64567 PN: 032.00.00.00 SN: 25 Ed#: 11
*P64567/032/11*
EDGAR 2

<R>

against us and certain of our officers allegedly arising in connection with his service to us as a distributor on
theories of our failure to pay commissions, breach of contract, interference with contract, and on related theories.
We signed no contracts with Mr. Hennigan. We also believe that he has no reasonable basis for claims to informal
or implied contractual rights. As a result, we believe his claims are without merit, and the litigation will have no
material adverse affect on our business, operating results or financial condition. Mr. Hennigan’s suit was dismissed
in February 2001 for lack of personal jurisdiction of the New York court. In March 2001, he appealed the dismissal.
</R>
<R>

In early April 2001, James F. McNulty, Jr. sued us in the United States District Court, Central District of
California. The lawsuit alleges that certain technology used in the firing mechanism for our weapons infringes upon
a patent for which Mr. McNulty holds a license, and seeks injunctive relief and unspecified monetary damages. We
believe we do not infringe this patent, that Mr. McNulty’s claims are without merit and that the litigation will have
no material adverse effect on our business, operating results or financial condition.
</R>

Corporate information
We were incorporated in Arizona in September 1993 as ICER Corporation. We changed our name to AIR
TASER, Inc. in December 1993, and to TASER International, Incorporated in April 1998. In February 2001, we
reincorporated in Delaware as TASER International, Inc.
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Name: TASER
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Phone: (602) 223-4455

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*P64567/033/13*
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MANAGEMENT
Directors and executive officers
Our directors and executive officers are as follows:
Name

Age

Phillips W. Smith
Patrick W. Smith
Thomas P. Smith
Bruce R. Culver
Matthew R. McBrady
Karl F. Walter
Kathleen C. Hanrahan

63
30
33
55
30
54
37

Position
Chairman
Chief Executive Officer and Director
President and Director
Director
Director
Director
Chief Financial Officer

<R>

Phillips W. Smith is the chairman of our board of directors. Dr. Smith has served as a director since 1993.
Since August 1997, Dr. Smith has served on the board of directors of Pentawave, Inc., a developer of cross-media
publishing software. Dr. Smith was chairman of the board of Pentawave from January 1999 through October 2000
and its chief executive officer from January through March 1999. From June 1990 to September 1997, Dr. Smith
served as the president and chief executive officer of Zycad Corporation, a developer of engineering and
manufacturing applications software. Dr. Smith holds a B.S.E. degree from West Point, an M.B.A. degree from
Michigan State University, and a Ph.D. in Business Administration from St. Louis University.
</R>

Patrick W. Smith is the chief executive officer and a co-founder of TASER. Mr. Smith has served as our chief
executive officer and as a director since 1993. Mr. Smith holds a B.S. degree in Biology and Neurobiology from
Harvard University, an M.B.A. degree from the University of Chicago, and a Masters Degree in International
Finance from the University of Leuven in Leuven, Belgium.
Thomas P. Smith is the president and a co-founder of TASER. Mr. Smith has served as our president since
April 1994 and as a director since 1993. Mr. Smith holds a B.S. degree in Ecology and Evolutionary Biology from
the University of Arizona and an M.B.A. degree from Northern Arizona University.
Bruce R. Culver has served as a director of TASER since January 1994. Mr. Culver co-founded Professional
Staff, P.L.C., a human resource management company, and has served on its board of directors since April 1990. In
March 1993, Mr. Culver organized and has since remained the chief executive officer of Culver Distributions, Inc.,
doing business as California Distribution Company, providing warehouse and distribution services to internet
companies. Since April 1997, Mr. Culver has served on the board of Pentawave, Inc., becoming its chairman in
October 2000.
Matthew R. McBrady has served as a director of TASER since January 2001. From August 1998 though
July 1999, Mr. McBrady served as a member of the staff of President Clinton’s Council of Economic Advisers. In
December 1997, Mr. McBrady began working as a financial and analytical consultant for Avenue A, Inc, an internet
marketing company, and served as its vice president of analytics from June 1999 through October 1999.
Mr. McBrady taught corporate finance courses at the University of Southern California during the summer terms of
1997 and 1998, at Harvard College from September 1996 through May 1997, and at Harvard Business School
during the spring term of 1998. Mr. McBrady holds a B.S. in Economics from Harvard University, an M.S. in
International Economics from Oxford University, and expects to receive a Ph.D. in Corporate and International
Finance from Harvard University in June 2001.
Karl F. Walter has served as a director of TASER since January 2001. Mr. Walter was a co-founder of Glock,
Inc., a subsidiary of GLOCK GmbH, an Austrian semi-automatic pistols manufacturer. From January 1994 through
February 1997, Mr. Walter worked as a director of law enforcement sales for Sturm
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Ruger Co., a firearms manufacturer. Since March 1997, Mr. Walter has worked as the program manager for AV
Technology International, LLC, a builder of armored vehicles.
Kathleen C. Hanrahan is our chief financial officer, serving in that position since November 2000.
Ms. Hanrahan first joined TASER in January 1996 as an internal controls consultant and became our controller in
March 1996.
Our certificate of incorporation provides that we have no less than three and no more than nine directors divided
into three classes (Class 1, Class 2, and Class 3), with members of each class serving for staggered three-year terms.
As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other
classes continuing for the remainder of their respective three-year terms. Messrs. Phillips Smith and Bruce Culver
have been designated as Class 1 directors, whose term expires at the 2001 annual meeting; Messrs. Patrick Smith
and Karl Walter have been designated as Class 2 directors, whose term expires at the 2002 annual meeting; and
Messrs. Thomas Smith and Matthew McBrady have been designated as Class 3 directors, whose term expires at the
2003 annual meeting.
Each officer serves at the discretion of our board of directors. No officer is subject to an agreement that requires
the officer to serve TASER for a specified number of years. Mr. Thomas Smith and Mr. Patrick Smith are Dr.
Phillips Smith’s sons. No other family relationships exist among our directors and executive officers.
Director compensation
Prior to 2001, directors were not compensated for their service on the board. Beginning in 2001, independent
directors will receive $1,250 per quarter. In addition, in December 2000, Messrs. McBrady and Walter each
received options to purchase 6,667 shares vesting ratably over four years at an exercise price of $3.30 per share.
Directors are also reimbursed for expenses incurred in connection with attendance at meetings.
Committees of the board of directors
Our board of directors has an Audit Committee consisting of Mr. McBrady and Mr. Walter, and a
Compensation Committee consisting of Mr. Culver and Mr. Walter. The Audit Committee meets with management
and our independent public accountants to determine the adequacy of our internal controls and other financial
reporting matters. The Compensation Committee reviews and recommends to the board of directors the
compensation and benefits of our officers, reviews general policy matters relating to compensation and benefits of
our employees and administers the issuance of stock options and discretionary cash bonuses to our officers,
employees, directors and consultants. We intend to appoint only independent directors to the Audit and
Compensation Committees.
Executive compensation
The following table sets forth information regarding compensation awarded to, earned by or paid to our chief
executive officer for all services rendered to us during 1998, 1999 and 2000. None of our executive officers earned
in excess of $100,000 in 2000.
Summary Compensation Table
Annual Compensation
Name and Principal Position
Patrick W. Smith
Chief Executive Officer

Year

Salary

Bonus

Long Term Compensation
Securities Underlying Options
(#)

2000
1999
1998

$65,208
$49,161
$43,205

$2,500
—
—

—
10,000
—

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Option grants in last fiscal year
We did not grant any options to our chief executive officer during the year ended December 31, 2000.
Fiscal year end option values
The following table sets forth information regarding the number and value of unexercised options held by our
chief executive officer on December 31, 2000. He did not exercise any options to purchase common stock during
2000.
Number of Securities
Underlying Options at Fiscal
Year End(#)
Name
Patrick W. Smith

Value of Unexercised In-theMoney Options at Fiscal
Year End($)(1)

Exercisable

Unexercisable

Exercisable

Unexercisable

6,672

3,328

$46,895

$26,505

(1) Based on the estimated fair value of our common stock as of December 31, 2000, determined by our board of
directors to be $8.00 per share.
Stock option plans
We have two stock option plans: the 1999 stock option plan and the 2001 stock option plan.
The 1999 stock option plan authorized us to issue options to purchase up to 833,333 shares of our common
stock. Under this plan, we have issued options to purchase 143,322 shares at $0.22 to $7.20 per share, including
10,000 options to Patrick W. Smith. We will issue no further options under the plan. The plan is administered by
our board of directors. Subject to the provisions of this plan, the board determines who will receive options, the
number of options granted, the manner of exercise and the exercise price of the options. The term of incentive stock
options granted under the plan may not exceed ten years, or five years for options granted to an optionee owning
more than 10% of our voting stock. The exercise price of an incentive stock option granted under this plan must be
equal to or greater than the fair market value of the shares of our common stock on the date the option is granted.
The exercise price of a non-qualified option granted under this plan must be equal to or greater than 85% of the fair
market value of the shares of our common stock on the date the option is granted. An incentive stock option granted
to an optionee owning more than 10% of our voting stock must have an exercise price equal to or greater than 110%
of the fair market value of our common stock on the date the option is granted.
The 2001 stock option plan authorizes us to issue options to purchase up to 550,000 shares of our common
stock. Under this plan, we have granted options to purchase 291,000 shares at an exercise price equal or greater than
the value of the common stock portion of the initial per unit public offering price in this offering, including 60,000
options to Patrick W. Smith. The plan is administered by our board of directors. Subject to the provisions of this
plan, the board determines who will receive options, the number of options granted, the manner of exercise and the
exercise price of the options. The term of incentive stock options granted under the plan may not exceed ten years,
or five years for incentive stock options granted to an optionee owning more than 10% of our voting stock. The
exercise price of an incentive stock option granted under this plan must be equal to or greater than the fair market
value of the shares of our common stock on the date the option is granted. The exercise price of a non-qualified
option granted under this plan must be equal to or greater than 85% of the fair market value of the shares of our
common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than
10% of our voting stock must have an exercise price equal to or greater than 110% of the fair market value of our
common stock on the date the option is granted.
Employment agreements
In July 1998, we entered into an employment agreement with Patrick W. Smith pursuant to which he agreed to
serve as our chief executive officer. The agreement is for an initial three-year term ending June 30, 2001, and is
automatically renewed for a two-year term on such date and every two years
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thereafter unless we give Mr. Smith one-year prior notice of termination, if the termination is without cause. The
agreement provides for annual base compensation in the amount of $65,000, which amount may be increased based
on performance. In 2000, Mr. Smith’s salary was increased to $90,000. We may terminate this agreement with or
without cause. Should we terminate the agreement without cause, upon a change of control or upon his death or
disability, our chief executive officer is entitled to compensation equal to 12, 24 or 18 months of salary,
respectively.
CERTAIN TRANSACTIONS
In 1998, Mr. Bruce R. Culver, a director of TASER, loaned us $622,525. In March 1998, $150,000 of such
amount was converted into 20,833 shares of our common stock at an estimated value of $7.20 per share. In
December 1998, we issued Mr. Culver a promissory note for $472,525, the remaining amount due. The note bears
interest at a rate of 10% per year and matures July 1, 2002.
<R>

In 1999, Mr. Culver loaned us $1,500,000. In return, in April 1999, we issued him a promissory note for
$500,000 at an effective interest rate of 27.1% per year to mature October 31, 2000, and 1,666,667 shares of our
common stock at a price of $0.60 per share. These shares were subject to a repurchase agreement between
Mr. Culver and us that allowed us to repurchase the shares if we met certain operating performance criteria. We met
the criteria and repurchased the shares from Mr. Culver in July 2000 in exchange for a promissory note in the
amount of $1,000,000. We consolidated this note and the April 1999 note into a new note for $1,500,000 which
carried interest at bank prime, which was 9.5% at December 31, 2000, plus 1%. We repaid the new note in full in
April 2001 with the proceeds of a loan from a commercial bank.
</R>

In March 1999, Mr. Culver loaned us $100,000, and in July 1999, Mr. Culver loaned us $50,000. The related
notes carry interest at a rate of 10% and mature July 2002. In May 2000, Mr. Culver loaned us an additional
$200,000 at an interest rate of 10%, due July 1, 2002.
<R>

We have used all amounts loaned to us by Mr. Culver to fund our working capital needs. As of April 30, 2001,
the aggregate principal amount due to Mr. Culver under the above notes outstanding on such date was $822,525
plus accrued interest of $166,637. Under certain circumstances, Mr. Culver has agreed to extend the maturity of
these notes.
</R>

In September 1999, we sold Mr. Culver 151,515 shares of our common stock for $3.30 per share for an
aggregate purchase price of $500,000.
In July 2000, we issued Mr. Culver a warrant to purchase 22,727 shares of our common stock at a price of $3.30
per share in connection with his provision of a $1,500,000 loan to us in such month. These warrants expire July 31,
2005.
<R>

In 1998, Mr. Phillips W. Smith, our chairman, loaned us $725,691 to fund our working capital needs. In
March 1998, $150,000 was converted into 20,833 shares of common stock at an estimated fair value of $7.20 per
share and $120,000 was repaid. In December 1998, we issued a promissory note for $455,691, the remaining
amount due. The note bears interest at a rate of 10% per year and matures July 1, 2002. Further, Mr. Smith has
deferred expenses in the amount of $99,794, which has been formalized in a note bearing 10% interest, which
matured December 31, 2000. Under certain circumstances, Mr. Smith has agreed to extend the maturity of these
notes. As of April 30, 2001, the aggregate principal amount due to Mr. Smith under these notes was $555,485 plus
accrued interest of $136,042.
</R>

In the event this offering is not completed, we have an agreement with Mr. Smith and Mr. Culver whereby we
may extend the maturity date of their outstanding notes for a period not to exceed 24 months. We may retire the
debt at any time without penalty. In addition, Mr. Culver has established a non-revocable letter of credit in the
amount of $500,000 on our behalf that we may use to fund any shortfalls in monthly working capital requirements
until we can make other financing arrangements, and provided us a related letter of support.
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In 1999, Mr. Smith worked as a full-time advisor to us and was compensated solely by a five-year option on
16,667 shares of our common stock with an exercise price of $0.66 per share.
In July 1999, Malcolm W. Sherman, a stockholder, loaned us $75,000 to acquire production equipment. The
related note carries interest at 9.18% and matures July 1, 2001. In May 2000, we issued Mr. Sherman an option to
purchase 3,333 shares of our common stock at an exercise price of $0.22 per share in connection with his
continuing provision of services to us following his retirement as a full-time employee and in consideration of his
provision of the loan.
Our board of directors has approved all transactions that we have entered into with related parties. However,
until January 2001, we did not have any disinterested, independent directors serving on our board of directors.
Consequently, none of our related party transactions effected prior to such date were approved by disinterested,
independent directors at the time of the transaction. Our two disinterested, independent directors have since
determined that our related party transactions that were entered into prior to such date and continue in effect,
including the outstanding loans from Messrs. Culver and Smith to us, are on terms no less favorable to us than we
could obtain from unaffiliated parties, and have ratified these transactions. We derived no revenue from related
party transactions during the fiscal year ended December 31, 2000.
On an ongoing basis, all related party transactions will be reviewed by our board of directors. It is the policy of
our board of directors that all proposed transactions by us with our directors, officers, five-percent stockholders and
their affiliates, including forgiveness of any loan from us to any such person, be entered into or approved only if
such transactions are on terms no less favorable to us than we could obtain from unaffiliated parties, are reasonably
expected to benefit us and are approved by a majority of the disinterested, independent members of our Board of
Directors. Such independent directors are authorized to consult with independent legal counsel at our expense in
determining whether to approve any such transaction.
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PRINCIPAL STOCKHOLDERS
<R>

The following table sets forth certain information regarding the beneficial ownership of our common stock as of
March 15, 2001, and as adjusted to reflect the sale of 800,000 units in this offering, by:
</R>

• each person or group of affiliated persons known to be the beneficial owner of more than 5% of our
outstanding common stock;
• each of our directors;
• our chief executive officer; and
• all of our directors and executive officers as a group.
As of such date, there were 1,510,754 shares of common stock outstanding before giving effect to the sale of
units in this offering. We believe that, except as otherwise described below, each named beneficial owner has sole
voting and investment power with respect to the shares listed.
<R>

Number of
Shares
Beneficially
Owned

Name of Beneficial Owner
Bruce R. Culver(1)
Phillips W. Smith(2)
Patrick W. Smith(3)
Thomas P. Smith(4)
Malcolm W. Sherman(5)
Karl F. Walter(6)
Matthew R. McBrady(7)
All directors and executive officers as a group (7 persons)(8)

491,146
388,943
363,118
219,208
123,796
417
417
1,478,921

Percentage
Beneficially
Owned Before
This Offering
31.9%
25.4%
23.8%
14.4%
8.2%
*
*
92.1%

Percentage
Beneficially
Owned After
This Offering
17.9%
14.2%
13.3%
8.0%
4.6%
*
*
52.7%

</R>

The address of each person identified in this table is c/o 7860 East McClain Drive, Suite 2, Scottsdale, Arizona
85260.
As of March 15, 2001, we had nine stockholders.
* less than 1%
<R>

(1) Includes 31,061 shares subject to warrants that are exercisable within 60 days.
</R>
<R>

(2) Includes 21,297 shares subject to options or warrants that are exercisable within 60 days.
</R>
<R>

(3) Includes 12,784 shares subject to options that are exercisable within 60 days.
</R>

(4) Includes 12,784 shares subject to options that are exercisable within 60 days.
(5) Includes 3,333 shares subject to options that are exercisable within 60 days.
(6) Includes 417 shares subject to options that are exercisable within 60 days.
(7) Includes 417 shares subject to options that are exercisable within 60 days.
(8) Includes 94,432 shares subject to options or warrants that are exercisable within 60 days.
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DESCRIPTION OF SECURITIES
<R>

Upon completion of the offering, our authorized capital stock will consist of 50,000,000 shares of common
stock, $0.00001 par value, and 25,000,000 shares of preferred stock, $0.00001 par value, of which there will be
2,710,754 shares of common stock and no shares of preferred stock outstanding. Our certificate of incorporation
and bylaws provide further information about our capital stock.
</R>

Units
<R>

Each unit consists of one and one-half shares of common stock and one and one-half public warrants, each
whole warrant to purchase one additional share of common stock. The common stock and warrants will trade only
as a unit for at least 30 days following this offering. The representative of the underwriters will then determine
when the units separate, after which the common stock and the public warrants will trade separately.
</R>

Common stock
Holders of our common stock are entitled to one vote for each share on all matters submitted to a stockholder
vote and may not cumulate their votes. Holders of common stock are entitled to share in all dividends that the board
of directors, in its discretion, declares from legally available funds. In the event of our liquidation, dissolution or
winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having preference over the common stock.
Holders of our common stock have no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to our common stock. The rights of the holders of common stock are subject to
any rights that may be fixed for holders of preferred stock. All outstanding shares of common stock are, and the
shares underlying all options and public warrants will be, duly authorized, validly issued, fully paid and nonassessable upon our issuance of these shares.
Preferred stock
Our certificate of incorporation provides for the issuance of up to 25,000,000 shares of preferred stock. As of
the date of this prospectus, there are no outstanding shares of preferred stock. Subject to certain limitations
prescribed by law and the rights and preferences of the preferred stock, our board of directors is authorized, without
further stockholder approval, from time-to-time to issue up to an aggregate of 25,000,000 shares of our preferred
stock, in one or more additional series. Each new series of preferred stock may have different rights and preferences
that may be established by our board of directors. A majority of our disinterested, independent directors must
approve any issuance by us of our preferred stock.
The rights and preferences of future series of preferred stock may include:
• number of shares to be issued;
• dividend rights and dividend rates;
• right to convert the preferred stock into a different type of security;
• voting rights attributable to the preferred stock;
• right to receive preferential payments upon a liquidation of the company;
• right to set aside a certain amount of assets for payments relating to the preferred stock; and
• prices to be paid upon redemption of the preferred stock.
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Public warrants
General
<R>

Each public warrant entitles the holder to purchase one share of our common stock at an exercise price per share
of 110% of two-thirds of the initial public offering price of the units. The exercise price is subject to adjustment
upon the occurrence of certain events as provided in the public warrant certificate and summarized below. Our
public warrants may be exercised at any time during the period commencing 30 days after this offering and ending
on the fifth anniversary date of the closing of this offering, which is the expiration date. Those of our public
warrants which have not previously been exercised will expire on the expiration date. A public warrant holder will
not be deemed to be a holder of the underlying common stock for any purpose until the public warrant has been
properly exercised.
</R>

Separate transferability
<R>

Our common stock and public warrants will trade only as a unit for at least 30 days following this offering. The
representative of the underwriters will then determine when the units separate, after which the common stock and
the public warrants will trade separately. The representative intends to separate the units 30 days after this offering
absent unforeseen circumstances. We will announce in advance the separation of the units by a public press release.
Upon separation, unit holders will receive certificates for the common stock and public warrants in exchange for
their unit certificates. Unit holders will receive cash in the place of any fractional shares of common stock or
fractional warrants created in connection with the separation of the units. The amount of cash paid for any fractional
interest will be equal to the current market value of such fractional interest, which will be the current market value
of one whole interest multiplied by the applicable fraction thereof.
</R>

Redemption
<R>

We have the right to redeem the public warrants issued in this offering at a redemption price of $0.25 per public
warrant after providing 30 days prior written notice to the public warrant holders, if at the time of the notice, the
basic net income per share of our common stock as confirmed by audit for a 12-month period preceding the date of
the notice is equal to or greater than $1.00. We will send the written notice of redemption by first class mail to
public warrant holders at their last known addresses appearing on the registration records maintained by the transfer
agent for our public warrants. No other form of notice by publication or otherwise will be required. If we call the
public warrants for redemption, they will be exercisable until the close of business on the business day next
preceding the specified redemption date.
</R>

Exercise
A public warrant holder may exercise our public warrants only if an appropriate registration statement is then in
effect with the Securities and Exchange Commission and if the shares of common stock underlying our public
warrants are qualified for sale under the securities laws of the state in which the holder resides.
<R>

Our public warrants may be exercised by delivering to our transfer agent the applicable public warrant
certificate on or prior to the expiration date or the redemption date, as applicable, with the form on the reverse side
of the certificate executed as indicated, accompanied by payment of the full exercise price for the whole number of
public warrants being exercised. Warrants may only be exercised to purchase whole shares. Public warrant holders
will receive cash equal to the current market value of any fractional interest, which will be the value of one whole
interest multiplied by the fraction thereof, in the place of fractional warrants that remain after exercise if they would
then hold warrants to purchase less than one whole share. Fractional shares will not be issued upon exercise of our
public warrants.
</R>

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Adjustments of exercise price
The exercise price is subject to adjustment if we declare any stock dividend to stockholders or effect any split or
reverse split with respect to our common stock. Therefore, if we effect any stock split or reverse split with respect to
our common stock, the exercise price in effect immediately prior to such stock split or reverse split will be
proportionately reduced or increased, respectively. Any adjustment of the exercise price will also result in an
adjustment of the number of shares purchasable upon exercise of a public warrant or, if we elect, an adjustment of
the number of public warrants outstanding.
Prior warrants
As of the date of this prospectus, we had issued and outstanding warrants to purchase 52,727 shares of our
common stock at a weighted average exercise price of $4.71, the forms of which have been filed as exhibits to the
registration statement of which this prospectus is a part.
Registration rights
<R>

All holders of registration rights contained in agreements with us have waived such rights in connection with
this offering. In connection with this offering, we have granted Paulson Investment Company, Inc., representative
of the underwriters of this offering, warrants to purchase shares of our common stock. These underwriters’
warrants, as well as the shares of common stock and warrants included in the units issuable upon exercise of the
underwriters’ warrants, are being registered on the registration statement of which this prospectus is a part. We will
cause the registration statement to remain effective until the earlier of the time that all of the underwriters’ warrants
have been exercised and the date which is five years after the effective date of this offering. The common stock and
warrants issued to the representative upon exercise of these warrants will be freely tradeable. We will bear all
expenses incurred in connection with the registration of the shares of common stock and warrants included in the
units issuable upon the exercise of the underwriters’ warrants.
</R>

Federal income tax considerations
The following discussion sets forth the material federal income tax consequences, under current law, relating to
the purchase and sale of the units and the underlying common stock and warrants. The discussion is a summary and
does not deal with all aspects of federal taxation that may be applicable to an investor. It does not consider specific
facts and circumstances that may be relevant to a particular investor’s tax position. Some holders, such as dealers in
securities, insurance companies, tax exempt organizations, foreign persons and those holding common stock or
warrants as part of a straddle or hedge transaction, may be subject to special rules that are not addressed in this
discussion. This discussion is based only on current provisions of the Internal Revenue Code of 1986, as amended,
and on administrative and judicial interpretations as of the date of this prospectus, all of which are subject to
change. You should consult your own tax advisor as to the specific tax consequences to you of this offering,
including the applicability of federal, state, local and foreign tax laws.
Allocation of Purchase Price
Each unit as a whole will have a tax basis equal to the cost of the unit. The measure of income or loss from
some of the transactions described below depends on the tax basis in each of the warrant and the share of common
stock comprising the unit. We have allocated the purchase price between the warrant and the common stock so that
the tax basis for the warrant will be equal to 20% of the price of the unit and the tax basis for the common stock will
be equal to 80% of the price of the unit. If you disagree with the allocation, please see your tax advisor for advice
on how to notify the Internal Revenue Service that you disagree with the allocation and claim a different basis.
38

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 39084
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 42

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 042.00.00.00 SN: 18 Ed#: 12
*P64567/042/12*
EDGAR 2

Exercise or Sale of Warrants
<R>

No gain or loss will be recognized by a holder of a warrant on the purchase of shares of common stock for cash
on an exercise of a warrant, except that gain will be recognized to the extent cash is received in the place of
fractional shares or warrants. The tax basis of common stock received upon exercise of a warrant will equal the sum
of the tax basis of the exercised warrant and the exercise price. The holding period of the common stock acquired
will begin on the date the warrant is exercised. It does not include the period during which the warrant was held.
</R>

Gain or loss from the sale or other disposition of a warrant will be capital gain or loss to its holder if the
common stock to which the warrant relates would have been a capital asset in the holder’s hands. This capital gain
or loss will be long-term capital gain or loss if the holder has held the warrant for more than one year at the time of
the sale, disposition or lapse. If we redeem a warrant, the holder generally will realize capital gain or loss.
Individuals generally have a maximum federal income tax of 20% on long term capital gains. The deduction of
capital losses is subject to limitations.
Sale of Common Stock
A holder who sells common stock other than in connection with a tax free reorganization of involving us will
recognize gain or loss in an amount equal to the difference between the amount realized and the holder’s tax basis in
the common stock. Generally, the holder’s tax basis in the common stock will equal the portion of the unit price that
was allocable to the common stock. If the common stock is a capital asset in the holder’s hands, gain or loss upon
the sale of the common stock will be a long-term or short-term capital gain or loss, depending on whether the
common stock has been held for more than one year. Individuals generally have a maximum federal income tax of
20% on long-term capital gains. The deduction of capital losses is subject to limitations.
Expiration of Warrants Without Exercise
If a holder of a warrant allows it to expire or lapse without exercise, the expiration or lapse will be treated as a
sale or exchange of the warrant on the expiration date. The holder will have a loss equal to the amount of such
holder’s tax basis in the lapsed warrant. If the warrant is a capital asset in the hands of the holder, the loss will be a
long-term or short-term capital loss, depending on whether the warrant was held for more than one year. The
deduction of capital losses is subject to limitations.
Anti-takeover provisions of our charter documents
Our certificate of incorporation and bylaws include a number of provisions that may have the effect of delaying
or preventing a change of control of TASER:
• Our board is divided into three classes, with each class serving a three-year staggered term, so that one-third of
the board is elected each year;
• The authorized number of our directors can be changed only by resolution of the board of directors;
• We can issue preferred stock without any vote or further action by stockholders;
• Any action required or permitted to be taken by our stockholders at an annual or a special meeting is valid only
if it is properly brought before the meeting, and written stockholder action is valid only if unanimous; and
• Our bylaws limit persons who may call a special meeting of our stockholders.
These provisions may deter hostile takeovers or delay changes in control of our management, which could depress
the market price of our securities.
Transfer agent and public warrant agent
The transfer agent for our common stock and public warrants is US Stock Transfer Corporation, Glendale,
California.
39

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 30652
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 43

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 043.00.00.00 SN: 21 Ed#: 11
*P64567/043/11*
EDGAR 2

SHARES ELIGIBLE FOR FUTURE SALE
This offering
<R>

Upon completion of this offering, we expect to have 2,710,754 shares of common stock outstanding, assuming
no exercise of outstanding options or warrants, or 2,890,754 shares if the representative’s over-allotment is
exercised in full. Of these shares, the 1,200,000 shares of common stock issued as part of the units sold in this
offering will be freely tradeable without restrictions or further registration under the Securities Act of 1933, except
that any shares purchased by our “affiliates,” as that term is defined under the Securities Act, may generally only be
sold in compliance with the limitations of Rule 144 under the Securities Act. The 1,200,000 shares of common
stock underlying the public warrants issued as part of the units sold in this offering will also be freely tradeable after
exercise of the warrants, except for shares held by our affiliates.
</R>

Outstanding restricted stock
The 1,510,754 outstanding shares of common stock held by our existing stockholders are restricted securities
within the meaning of Rule 144 and may not be sold in the absence of registration under the Securities Act unless
an exemption from registration is available, including the exemption from registration offered by Rule 144. Holders
of all of our outstanding restricted shares of common stock have agreed not to sell or otherwise dispose of any of
their shares of common stock for a period of one year after completion of this offering, without the prior written
consent of Paulson Investment Company, Inc., subject to certain limited exceptions. Prior to the expiration of this
lock-up period, no shares of our outstanding restricted common stock may be sold in the public market pursuant to
Rule 144. After the expiration of this lock-up period, or earlier with the prior written consent of Paulson Investment
Company, Inc., all 1,510,754 of these outstanding restricted shares may be sold in the public market pursuant to
Rule 144.
In general, under Rule 144, as currently in effect, beginning 90 days after the date of this prospectus, a person
who has beneficially owned restricted shares for at least one year, including a person who may be deemed to be our
affiliate, may sell within any three-month period a number of shares of common stock that does not exceed a
specified maximum number of shares. This maximum is equal to the greater of 1% of the then outstanding shares of
our common stock or the average weekly trading volume in the common stock during the four calendar weeks
immediately preceding the sale. Sales under Rule 144 are also subject to restrictions relating to manner of sale,
notice and availability of current public information about us. In addition, under Rule 144(k) of the Securities Act, a
person who is not our affiliate, has not been an affiliate of ours within three months prior to the sale and has
beneficially owned shares for at least two years would be entitled to sell such shares immediately without regard to
volume limitations, manner of sale provisions, notice or other requirements of Rule 144.
Preferred stock
As of March 15, 2001, we had no shares of preferred stock outstanding.
Options
Beginning 90 days after the date of this prospectus, certain shares issued or issuable upon the exercise of options
granted by us prior to the date of this prospectus will also be eligible for sale in the public market pursuant to
Rule 701 under the Securities Act, except that
of these shares are subject to the lock-up agreements
discussed above. Pursuant to Rule 701, persons who purchase shares upon exercise of options granted under a
written compensatory plan or contract may sell such shares in reliance on Rule 144 without having to comply with
the holding period requirements of Rule 144, and in the case of non-affiliates, without having to comply with the
public information, volume limitation or notice provisions of Rule 144. As of March 15, 2001, we had options
outstanding to purchase 434,322 shares of common stock which have not been exercised and which become
exercisable at various times in
40

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 18216
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 44

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 044.00.00.00 SN: 20 Ed#: 11
*P64567/044/11*
EDGAR 2

the future. Any shares issued upon the exercise of these options will be eligible for sale pursuant to Rule 701.
We intend to file registration statements on Form S-8 under the Securities Act to register approximately 434,322
shares of our common stock issuable under our stock option plans. These registration statements are expected to be
filed within three to six months after the completion of this offering. Shares of our common stock issued upon the
exercise of stock options after the effective date of the Form S-8 registration statements will be eligible for resale in
the public market without restriction, subject to Rule 144 limitations and the lock-up agreements discussed above.
Warrants
As of March 15, 2001, we had warrants outstanding to purchase 52,727 shares of common stock which have not
been exercised and which are currently exercisable. Any shares issued upon the exercise of these warrants will be
eligible for sale pursuant to Rule 144, except that these shares are also subject to the lock-up agreements discussed
above.
<R>

Underwriters’ warrants
</R>
<R>

In connection with this offering, we have agreed to issue to the underwriters warrants to purchase 80,000 units.
The underwriters’ warrants will be exercisable into units at any time during the four-year period commencing one
year after the effective date of this offering. We will cause the registration statement to remain effective until the
earlier of the time that all of the underwriters’ warrants have been exercised and the date which is five years after
the effective date of this offering. The common stock and warrants issued to the representative upon exercise of
these warrants will be freely tradeable.
</R>

41

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 12018
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 45

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 045.00.00.00 SN: 19 Ed#: 10
*P64567/045/10*
EDGAR 2

UNDERWRITING
Paulson Investment Company, Inc. is acting as the representative of the underwriters. We and the underwriters
named below have entered into an underwriting agreement with respect to the units being offered. In connection
with this offering and subject to certain conditions, each of the underwriters named below has severally agreed to
purchase, and we have agreed to sell, the number of units set forth opposite the name of each underwriter.
<R>

Underwriters

Number of Units

Paulson Investment Company, Inc.
Mercer Partners, Inc.
Total
</R>

The underwriting agreement provides that the underwriters are obligated to purchase all of the units offered by
this prospectus, other than those covered by the over-allotment option, if any units are purchased. The underwriting
agreement also provides that the obligations of the several underwriters to pay for and accept delivery of the units
are subject to the approval of certain legal matters by counsel and certain other conditions. These conditions include
the requirements that no stop order suspending the effectiveness of the registration statement be in effect and that no
proceedings for such purpose have been instituted or threatened by the Securities and Exchange Commission.
The representative has advised us that the underwriters propose to offer our units to the public initially at the
offering price set forth on the cover page of this prospectus and to selected dealers at such price less a concession of
not more than $ per unit. The underwriters and selected dealers may reallow a concession to other dealers,
including the underwriters, of not more than $ per unit. After completion of the initial public offering of the
units, the offering price, the concessions to selected dealers and the reallowance to their dealers may be changed by
the underwriters.
<R>

A limited number of units, not to exceed four percent of the units sold in this offering, will be allocated and sold
to certain of our employees, friends and family members and to selected law enforcement officers as part of this
offering. No specific number of units have been reserved for this purpose. The units sold to these purchasers will be
sold at the initial public offering price of the units and will not be subject to a lock-up agreement.
</R>

The underwriters have informed us that they do not expect to confirm sales of our units offered by this
prospectus to any accounts over which they exercise discretionary authority.
Over-allotment option
Pursuant to the underwriting agreement, we have granted Paulson Investment Company, Inc. an option,
exercisable for 45 days from the date of this prospectus, to purchase up to an additional
units on the same
terms as the units being purchased by the underwriters from us. Paulson Investment Company, Inc. may exercise the
option solely to cover over-allotments, if any, in the sale of the units that the underwriters have agreed to purchase.
If the over-allotment option is exercised in full, the total public offering price, underwriting discounts and
commissions, and proceeds to us before offering expenses will be $
,$
and $
, respectively.
Stabilization
Until the distribution of the units offered by this prospectus is completed, rules of the Securities and Exchange
Commission may limit the ability of the underwriters to bid for and to purchase units. As an exception to these
rules, the underwriters may engage in transactions that stabilize the price of the units. Paulson Investment Company,
Inc., on behalf of the underwriters, may engage in over-allotment sales, stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934.
42

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 32097
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 46

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 046.00.00.00 SN: 17 Ed#: 10
*P64567/046/10*
EDGAR 2

• Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position.
• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum.
• Syndicate covering transactions involve purchases of the common stock and public warrants in the open market
after the distribution has been completed in order to cover syndicate short positions. The underwriters may also
elect to reduce any short position by exercising all or part of the over-allotment option to purchase additional
units as described above.
• Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the units
originally sold by the syndicate member are purchased in a syndicate covering transaction to cover syndicate
short positions.
Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase
in this offering. Covered short sales are sales made in an amount not greater than the representative’s over-allotment
option to purchase additional shares in this offering. In determining the source of shares to close out the covered
short position, the underwriters will consider, among other things, the price of shares available for purchase in the
open market as compared with the price at which they may purchase shares through the over-allotment option.
Naked short sales are sales in excess of the over-allotment option. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who purchase in this offering.
In general, the purchase of a security to stabilize or to reduce a short position could cause the price of the
security to be higher than it might be otherwise. These transactions may be effected on The Nasdaq SmallCap
Market or otherwise. Neither we nor the underwriters can predict the direction or magnitude of any effect that the
transactions described above may have on the price of the units. In addition, neither we nor the underwriters can
represent that the underwriters will engage in these types of transactions or that these types of transactions, once
commenced, will not be discontinued without notice.
Indemnification
The underwriting agreement provides for indemnification between us and the underwriters against specified
liabilities, including liabilities under the Securities Act, and for contribution by us and the underwriters to payments
that may be required to be made with respect to those liabilities. We have been advised that, in the opinion of the
Securities and Exchange Commission, indemnification for liabilities under the Securities Act is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Underwriters’ compensation
We have agreed to sell the units to the underwriters at the initial offering price of $
, less the
%
underwriting discount. The underwriting agreement also provides that upon the closing of the sale of the units
offered, Paulson Investment Company, Inc. will be paid a nonaccountable expense allowance equal to 2.5 percent of
the gross proceeds from the sale of the units offered by this prospectus, including the over-allotment option.
<R>

We have also agreed to issue warrants to the underwriters to purchase from us up to
units at an exercise
price per unit equal to 120% of the offering price per unit. These warrants are exercisable during the four-year
period beginning one year from the date of effectiveness of the registration statement. These warrants, and the
securities underlying the warrants, are not transferable for one year following the effective date of the registration,
except to an individual who is an officer or partner of an underwriter, by will or by the laws of descent and
distribution, and are not redeemable. These warrants will have registration rights. We will cause the registration
statement to remain effective until the earlier of the time that all of the underwriters’ warrants have been exercised
and the date which is five years after the
</R>

43

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 4873
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 47

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 047.00.00.00 SN: 24 Ed#: 9
*P64567/047/9*
EDGAR 2

<R>

effective date of this offering. The common stock and warrants issued to the underwriters upon exercise of these
warrants will be freely tradeable.
</R>
<R>

The holders of the underwriters’ warrants will have, in that capacity, no voting, dividend or other stockholder
rights. Any profit realized by the representative on the sale of the securities issuable upon exercise of the
underwriters’ warrants may be deemed to be additional underwriting compensation. The securities underlying the
underwriters’ warrants are being registered on the registration statement. During the term of the underwriters’
warrants, the holders thereof are given the opportunity to profit from a rise in the market price of our common
stock. We may find it more difficult to raise additional equity capital while the underwriters’ warrants are
outstanding. At any time at which the underwriters’ warrants are likely to be exercised, we may be able to obtain
additional equity capital on more favorable terms.
</R>

Lock-up agreements
<R>

Our officers, directors and other stockholders have agreed that for a period of one year from the date this
registration statement becomes effective that they will not sell, contract to sell, grant any option for the sale or
otherwise dispose of any of our equity securities, or any securities convertible into or exercisable or exchangeable
for our equity securities, other than through intra-family transfers or transfers to trusts for estate planning purposes,
without the consent of Paulson Investment Company, Inc., as the representative of the underwriters, which consent
will not be unreasonably withheld. Paulson Investment Company, Inc. may consent to an early release from the oneyear lock-up period if in its opinion the market for the common stock would not be adversely impacted by such
sales and in cases of an officer, director or other stockholder’s financial emergency. We are unaware of any officer,
director or current stockholder who intends to ask for consent to dispose of any of our equity securities during the
lock-up period.
</R>

Determination of offering price
Before this offering, there has been no public market for the units and the common stock and public warrants
contained in the units. Accordingly, the initial public offering price of the units offered by this prospectus and the
exercise price of the public warrants were determined by negotiation between us and the underwriters. Among the
factors considered in determining the initial public offering price of the units and the exercise price of the public
warrants were:
• our history and our prospects;
• the industry in which we operate;
• the status and development prospects for our proposed products and services;
• our past and present operating results;
• the previous experience of our executive officers; and
• the general condition of the securities markets at the time of this offering.
The offering price stated on the cover page of this prospectus should not be considered an indication of the
actual value of the units. That price is subject to change as a result of market conditions and other factors, and we
cannot assure you that the units, or the common stock and public warrants contained in the units, can be resold at or
above the initial public offering price.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon on our behalf by Tonkon Torp LLP,
Portland, Oregon. Certain legal matters will be passed upon for the underwriters by Weiss Jensen Ellis & Howard,
P.C., Portland, Oregon.
44

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 18065
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 48

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 048.00.00.00 SN: 20 Ed#: 10
*P64567/048/10*
EDGAR 2

EXPERTS
The financial statements as of and for the years ended December 31, 1999 and 2000 included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said firm as experts in auditing and
accounting and in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 under the Securities Act with the Securities and Exchange
Commission with respect to the units offered hereby. This prospectus filed as part of the registration statement does
not contain all of the information contained in the registration statement and exhibits thereto and reference is hereby
made to such omitted information. Statements made in this registration statement are summaries of the terms of
such referenced contracts, agreements or documents and are not necessarily complete. Reference is made to each
such exhibit for a more complete description of the matters involved and such statements shall be deemed qualified
in their entirety by such reference. The registration statement and the exhibits and schedules thereto filed with the
Securities and Exchange Commission may be inspected by you at the Securities and Exchange Commission’s
principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the
Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, (202) 942-8090, and at the Commission’s regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 11400, Chicago,
Illinois 60661. The Commission also maintains a website at http://www.sec.gov that contains reports, proxy
statements and information statements and other information regarding registrants that file electronically with the
Commission. For further information pertaining to us and the units offered by this prospectus, reference is made to
the registration statement.
We intend to furnish our stockholders with annual reports containing financial statements audited by our
independent public accountants.
45

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 30852
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 49

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 051.00.00.00 SN: 10 Ed#: 7
*P64567/051/7*
EDGAR 2

TASER INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
Page
TASER International, Inc.:
Report of Independent Public Accountants
Balance Sheets as of December 31, 1999 and 2000.
Statements of Operations for the Years Ended December 31, 1999 and
2000.
Statements of Stockholders’ Deficit for the Years Ended December 31,
1999 and 2000
Statements of Cash Flows for the Years Ended December 31, 1999 and
2000.
Notes to Financial Statements

F-1

F-2
F-3
F-4
F-5
F-6
F-7

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 40271
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 50

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 052.00.00.00 SN: 13 Ed#: 8
*P64567/052/8*
EDGAR 2

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
TASER International, Inc.:
<R>

We have audited the accompanying balance sheets of TASER International, Inc. (a Delaware corporation) as of
December 31, 1999 and 2000, and the related statements of operations, stockholders’ deficit and cash flows for each
of the two years in the period ended December 31, 2000. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
</R>

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of TASER International, Inc. as of December 31, 1999 and 2000, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
<R>

April 30, 2001
</R>

F-2

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 50547
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 51

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 053.00.00.00 SN: 13 Ed#: 9
*P64567/053/9*
EDGAR 2

TASER INTERNATIONAL, INC.
BALANCE SHEETS
December 31, 1999 and 2000
<R>

1999
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowance of $48,000 in 1999 and
$55,000 in 2000
Inventory
Prepaids and other

$

Total current assets
Property and Equipment, net
Total assets

$

2000

54,905

Total liabilities
Commitments and Contingencies
Stockholders’ Deficit:
Preferred Stock, 0.00001 par value per share; 25 million shares
authorized; 0 shares issued and outstanding at December 31,
1999 and 2000
Common stock, 0.00001 par value per share; 50 million shares
authorized; 3,177,421 and 1,510,754 shares issued and
outstanding at December 31, 1999 and 2000
Additional paid-in capital
Deferred compensation
Common Stock held in treasury, at cost, 0 and 1,666,667 shares at
December 31, 1999 and 2000
Accumulated deficit

312,681
221,169
24,535

349,036
256,110

764,793
274,273

605,146

$ 1,039,066

$

2,762,178
74,781
19,979

1,834,137
2,778,219
43,925

2,856,938

4,656,281

—

—

32
3,256,575
(79,920)

—
(6,320,638)

(17)
(6,793,885)

(2,251,792)

(3,617,215)

$

605,146

$ 1,039,066

</R>

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

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

32
4,068,814
—

Total stockholders’ deficit
Total liabilities and stockholders’ deficit

206,408

121,921
158,167
14,043

Liabilities and Stockholders’ Deficit
Current Liabilities:
Current portion of note payable
$ 112,000
Current portion of notes payable to related parties
1,664,774
Current portion of capital lease obligations
19,176
Accounts payable and accrued liabilities
574,989
Customer deposits
62,317
Inventory financing payable
189,980
Accrued interest, primarily to related parties
138,942
Total current liabilities
Notes Payable to Related Parties, net of current portion
Capital Lease Obligations, net of current portion

$

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 13113
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 52

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 054.00.00.00 SN: 15 Ed#: 8
*P64567/054/8*
EDGAR 2

TASER INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999 and 2000
<R>

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

1999

2000

$ 2,208,488

$3,412,620

1,001,082
1,087,404

1,350,175
488,214

120,002
1,442,613
64,227

1,574,231
1,613,979
7,137

Gross margin
Sales, general and administrative expenses
Research and development expenses
Loss from operations
Interest Expense
Net Loss
Net losses per common and common equivalent share:
Basic
Diluted
Weighted average number of common and common equivalent
shares outstanding:
Basic
Diluted

(1,386,838)
279,895

(46,885)
426,362

$(1,666,733)

$ (473,247)

$

$

(0.54)
(0.54)

3,076,410
3,076,410

(0.19)
(0.19)

2,482,976
2,482,976

</R>

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

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 23876
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 53

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 055.00.00.00 SN: 14 Ed#: 11
*P64567/055/11*
EDGAR 2

[B/E]

TASER INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 1999 and 2000
<R>

Common Stock
Shares

Amount

Additional
Paid-in
Capital

Treasury Stock

Balance, December 31, 1998
Shares sold for cash to stockholder
Issuance of common stock
Stock options granted for payment of
consulting fees
Net loss

1,359,239
1,666,667
151,515

$ 14
17
1

$2,567,432
999,983
499,999

—
—
—

—
—
—

—
—

—
—

—
—

—
—

—
—

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

3,177,421

32

4,068,814

—

—

—

—

(999,983)

—

—

79,920

—

—

—

—

13,917

—

—

—
—

—
—

93,907
—

—
—

—
—

Balance, December 31, 2000.

3,177,421

$ 32

$3,256,575

Shares

(1,666,667)

(1,666,667)

Amount

(17)

(17)

[Additional columns below]
</R>

[Continued from above table, first column(s) repeated]
<R>

Accumulated
Deficit

Total
Stockholders’
Deficit

—
—
—

$(4,653,905)
—
—

$(2,086,459)
1,000,000
500,000

—
—

—
(1,666,733)

1,400
(1,666,733)

—

(6,320,638)

(2,251,792)

Deferred
Compensation
Balance, December 31, 1998
Shares sold for cash to stockholder
Issuance of common stock
Stock options granted for payment of
consulting fees
Net loss
Balance, December 31, 1999.
Repurchase of shares from
Stockholder for note Payable
Stock options granted for payment of
Board fee
Stock options granted for payment of
consulting fee
Stock options and warrants granted
for loan guarantees
Net loss
Balance, December 31, 2000.

$

—

—

(79,920)
—
—
—
$(79,920)

(1,000,000)

—

—

—

13,917

—
(473,247)

93,907
(473,247)

$(6,793,885)

$(3,617,215)

</R>

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

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 33993
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 54

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 056.00.00.00 SN: 15 Ed#: 8
*P64567/056/8*
EDGAR 2

TASER INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 2000
<R>

Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities —
Depreciation
Change in assets and liabilities:
Accounts receivable
Inventory
Prepaids and other
Accounts payable and accrued liabilities
Customer deposits
Accrued interest

1999

2000

$(1,666,733)

$ (473,247)

Net cash (used in) provided by operating activities

124,803

90,474
607,165
16,598
(95,150)
62,317
101,650

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

(704,226)

8,466

(133,760)

(99,759)

(19,195)
—
728,344
(1,329,635)
1,500,000
—
1,400

(16,266)
(12,000)
163,238
—
—
(79,920)
187,744

Cash Flows from Investing Activities:
Purchases of property and equipment, net
Cash Flows from Financing Activities:
Net payments under capital leases
Payments on note payable
Net proceeds from notes payable to related parties
Net borrowings (payments) under line of credit
Issuance of common stock
Deferred compensation
Compensatory stock options

179,453

Net cash provided by financing activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, beginning of year

880,914

242,796

42,928
11,977

151,503
54,905

Cash and Cash Equivalents, end of year

$

54,905

$ 206,408

Supplemental Disclosure:
Cash paid for interest

$

179,171

$ 239,552

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

$

33,635

Exchange of shares from related party for note payable

$

—

Fair value of stock options issued for payment of consulting
fees

$

1,400

$

13,917

Fair value of stock options and warrants issued for loan
guarantees

$

0

$

93,907

Fair value of stock options and warrants issued for Board fees

$

0

$

79,920

$

$1,000,000

</R>

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

43,207

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 15453
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 55

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 057.00.00.00 SN: 11 Ed#: 8
*P64567/057/8*
EDGAR 2

TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 2000
1. The Company
a. History and Nature of Organization
TASER International, Inc. (TASER or the Company) was incorporated and began operations in Arizona in 1993
for the purpose of developing and manufacturing less-lethal, self-defense devices. From its inception until the
Company commenced production in December 1994, the Company was in the development stage. During the
period leading up to the start of production, the Company’s activities included raising capital, hiring key personnel
and obtaining the necessary licenses. All production costs during the period from inception through December 31,
1995, consisting of research and development activities and limited product manufacturing, were expensed as
incurred.
Through 1996, the Company was developing its signature product, the AIR TASER, and establishing the
marketing channels to promote retail sales. Significant nonrecurring expenditures were incurred, including research
and development costs, the development of marketing and sales materials, the purchase of the licensing rights to the
TASER technology and trademark, and the relocation of the manufacturing operations to Mexico, which resulted in
significant operating losses.
In 1997, the Company introduced a new product, the AUTO TASER. As a result of significant expenditures for
research and development, manufacturing difficulties, scrap, engineering changes and other costs associated with
the start up of this product line, the Company continued to experience operating losses in 1997, 1998 and 1999.
This product line was discontinued August 1, 1999.
In 1998, the Company formally changed its name from Air Taser, Inc. to TASER International, Inc. and began
development of its ADVANCED TASER product, which was introduced for sale in December 1999.
b. Financing
The Company has been financed primarily from advances from and investments by major stockholders and
bank financing guaranteed by major stockholders. Since inception, the Company has sustained significant operating
losses and has, at December 31, 2000, a deficit in working capital of approximately $1,069,000. In addition, new
capital will be required to fund further product development, market penetration, working capital and future
operations. The Company believes that additional financing will be available under terms and conditions that are
acceptable to it. However, there can be no assurance that additional financing will be available.
<R>

Subsequent to year end, the Company closed a loan for $500,000 from an unrelated private lender, and
management believes its operating cash flow throughout 2001 will be positive. In addition, in the event the
Company’s contemplated initial public offering is not completed, the Company has an agreement with two major
stockholders whereby the Company may, at the Company’s sole option, extend the maturity date of the
stockholders’ outstanding notes for a period not to exceed 24 months. The Company may also, at the Company’s
sole option, retire such debt at any time without penalty. In addition, a major stockholder has established a nonrevocable letter of credit in the amount of $500,000 on the Company’s behalf that the Company can use to fund any
shortfalls in the Company’s monthly capital requirements. The letter of credit expires at the earlier of the closing of
this offering or December 31, 2001.
</R>

c. Initial Public Offering
<R>

The Company is contemplating an initial public offering (IPO) of 800,000 units at an estimated price of $13 per
unit, consisting of one and one-half shares of common stock and one and one-half warrants, each whole warrant to
purchase one share of common stock (Note 11).
</R>

F-7

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 45346
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 56

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 058.00.00.00 SN: 17 Ed#: 10
*P64567/058/10*
EDGAR 2

TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
d. Reincorporation and Restatement of Shares
In February 2001, the Company reincorporated in the State of Delaware. In connection with the reincorporation,
the Company completed a 1-for-6 share reverse stock split. The accompanying financial statements and footnotes
have been restated for the lower number of shares of common stock outstanding for all periods presented.
2. Summary of Significant Accounting Policies
a. Cash and Cash Equivalents
Cash and cash equivalents include funds on hand and short-term investments with original maturities of three
months or less.
b. Inventory
Inventories are stated at the lower of cost or market; cost is determined using the most recent acquisition cost
method which approximates the first-in, first-out (FIFO) method. Inventories consisted of the following at
December 31:
Raw materials and work-in-process
Finished goods

1999

2000

$131,007
27,160

$153,506
67,663

$158,167

$221,169

<R>

Inventory cost in 1999 and 2000 includes primarily the cost paid to an outsourced manufacturer, which included
charges for material, labor and overhead.
</R>

c. Property and Equipment
Property and equipment are stated at cost. Additions and improvements are capitalized while ordinary
maintenance and repair expenditures are charged to expense as incurred. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.
d. Long-Lived Assets
The Company periodically evaluates the carrying value of long-lived assets in accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. Under SFAS 121, long-lived assets to be held and used in operations are
reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be
fully recoverable. An impairment loss is recognized if the sum of the expected long-term undiscounted cash flow is
less than the carrying amount of the long-lived assets being evaluated. The Company has not recognized any
impairment losses during the two year period ended December 31, 2000.
e. Customer Deposits
The Company requires certain deposits in advance of shipment for foreign customer sales orders. At
December 31, 2000, customer deposits consisted primarily of one foreign customer sales order.
F-8

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 53040
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 57

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 059.00.00.00 SN: 10 Ed#: 8
*P64567/059/8*
EDGAR 2

TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
f. Cost of Products Sold
During 2000, the Company outsourced the assembly of its finished goods, but continued to manufacture certain
small, proprietary components internally. Prior to August 1999, all finished goods were assembled internally. At
December 31, 2000, cost of products sold represents net amounts paid to a vendor to acquire finished goods sold to
customers and the manufacturing costs, including material, labor and overhead related to the proprietary
components the Company manufactures internally. Prior to August 1999, costs of products sold included the
manufacturing costs, including materials, labor and overhead related to finished goods and components. Shipping
costs incurred related to product delivery are also included in cost of products sold.
At December 31, 1999, included within cost of products sold is a one-time charge related to the phase-out of the
AUTO TASER product line of approximately $355,000.
g. Revenue Recognition
The Company recognizes revenues when products are shipped and all sales are final. The Company charges
certain of its customers shipping fees, which are recorded as a component of net sales.
On December 3, 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition in Financial Statements,which provides additional guidance in applying generally
accepted accounting principles for revenue recognition in financial statements. The issuance of SAB No. 101 did
not have a material impact on the revenue recognition method of the Company.
h. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
i. Advertising Costs
The Company expenses the production cost of advertising as incurred or the first time the advertising takes
place. The Company incurred advertising costs of $24,652 and $35,035 in 1999 and 2000, respectively. Advertising
costs are included in sales, general and administrative expenses in the statements of operations.
j. Warranty Costs
The Company warrants its products from manufacturing defects for their lives and will replace any defective
units with a new one for a $25 fee. In 2000, the Company recalled a series of ADVANCED TASERs due to a
defective component in connection with which the Company incurred warranty expense of approximately $9,000
and recorded an additional charge of $41,000 to cover estimated future warranty costs based upon the number of
units sold and the estimated defect rate using its prior actual experience.
k. Research and Development Expenses
The Company expenses research and development costs as incurred. The Company incurred product
development expense of $64,227 and $7,137 in 1999 and 2000, respectively.
F-9

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 34724
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 58

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 060.00.00.00 SN: 17 Ed#: 10
*P64567/060/10*
EDGAR 2

TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
l. Income Taxes
The Company, since inception, has qualified as an S corporation under the Internal Revenue Code, and
accordingly, is not directly subject to income taxes. There is no provision or benefit for income taxes reflected in
the accompanying financial statements, since items of taxable income and losses are reported in the individual
returns of stockholders.
Subsequent to December 31, 2000, the Company reincorporated in the State of Delaware and elected to be taxed
as a C corporation. Net operating losses (NOLs) prior to the change to a C corporation accrued to the individual
stockholders. Accordingly, such losses are not available to reduce future taxes payable by the Company as a
C corporation.
Upon termination of the S status, the Company is required to implement SFAS No. 109, “Accounting for
Income Taxes” which requires the calculation of existing temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Management does not expect such
implementation to have a significant impact on the Company.
Had the Company been a C corporation in 1999 and 2000, no federal or state income tax benefit would have
been recorded for the NOLs discussed above because their realizability could not be determined as more likely than
not. Accordingly, no pro forma benefit for federal or state income taxes is recorded as if the Company were taxed as
a C corporation for any of the periods presented. Additionally, the accumulated deficit at the time of the S election
termination will be reclassified to additional paid-in capital.
m. Concentration of Credit Risk and Major Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts
receivable, accounts payable and notes payable to related parties. Sales are typically made on credit and the
Company generally does not require collateral. The Company performs ongoing credit evaluations of its customers’
financial condition and maintains an allowance for estimated potential losses. Accounts receivable are presented net
of an allowance for doubtful accounts. Provision for bad debts was $32,250 and $72,905 at December 31, 1999 and
2000, respectively.
For the years ended December 31, 1999 and 2000, sales by product were as follows:
1999

2000

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

Geographic:
United States
Other countries

Sales to customers outside of the United States are denominated in U.S. dollars.
F-10

$1,311
601
80
216

$1,241
24
2,099
49

$2,208

$3,413

52%
48

82%
18

100%

100%

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
CRC: 36109
P64567A3.SUB, DocName: SB-2/A, Doc: 2, Page: 59

[B/E]

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

JB: P64567 PN: 061.00.00.00 SN: 17 Ed#: 9
*P64567/061/9*
EDGAR 2

TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
n. Financial Instruments
The Company’s financial instruments include cash, accounts receivable and accounts payable. Due to the shortterm nature of these instruments, the fair value of these instruments approximates their recorded value. The
Company does not have any financial instruments with off-balance sheet risk.
The Company has notes payable to stockholders at varying terms which, based on the short-term nature of the
notes and financing obtained from outside sources, the Company believes are stated at their estimated fair market
value.
o. Segment Information
The Company has adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information. This statement requires disclosure of certain information about the Company’s operating segments,
products, geographic areas in which it operates and major customers. This statement also allows a company to
aggregate similar segments for reporting purposes. Management has determined that its operations can be
aggregated into one reportable segment. Therefore, no separate segment disclosures have been included in the
accompanying notes to the financial statements.
p. Stock-Based Compensation
The Company measures compensation costs related to stock option plans using the intrinsic value method and
provides pro forma disclosures of net income (loss) and earnings (loss) per common share as if the fair value based
method had been applied in measuring compensation costs. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company’s common stock at the date of measurement over
the amount an employee must pay to acquire the stock and is amortized over the vesting period, generally three
years.
q. Comprehensive Income
The Company has adopted SFAS No. 130, Reporting Comprehensive Income. This statement requires that all
components of comprehensive income be reported in the financial statements in the period in which they are
recognized. During the years ended December 31, 1999 and 2000, the Company did not have any components of
comprehensive income requiring separate reporting in the Company’s financial statements.
r. Income (Loss) Per Common Share
Income (loss) per common share is computed in accordance with SFAS No. 128, Earnings Per Share. Basic
income (loss) per common share is based upon the weighted average shares outstanding. Diluted income (loss) per
common share is based on the weighted average shares outstanding and dilutive common stock equivalents.
Approximately 144,875 and 186,049 options and warrants were not included in the computation of diluted earnings

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-3.2, Doc: 4, Page: 3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 603.02.03.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

3
TABLE OF CONTENTS

<R>
<TABLE>
<S>
<C>
ARTICLE I: OFFICES...........................................................1
Section 1.01 Registered Office.........................................1
Section 1.02. Other Offices............................................1
ARTICLE II: MEETINGS OF STOCKHOLDERS.........................................1
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section

2.01.
2.02.
2.03.
2.04.
2.05.
2.06.
2.07.
2.08.
2.09.
2.10.
2.11.
2.12.
2.13.

Place of Meetings........................................1
Time of Meetings.........................................1
Annual Meetings..........................................1
Special Meetings.........................................2
Purpose of Special Meeting...............................3
Notice of Meetings.......................................3
Waiver of Notice.........................................3
Quorum; Adjournment......................................3
Vote Required............................................4
Voting Rights............................................4
Proxies..................................................4
Action in Writing........................................5
Closing of Books; Record Date............................5

ARTICLE III: DIRECTORS.......................................................5
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section

3.01.
3.02.
3.03.
3.04.
3.05.
3.06.
3.07.
3.08.
3.09.
3.10.

General Powers...........................................5
Number and Qualification.................................5
Classes and Terms........................................5
Vacancies................................................6
Meetings.................................................6
Committees...............................................8
Telephone Conference Meetings............................8
Compensation.............................................9
Limitation of Director Liability.........................9
Resignation and Removal..................................9

ARTICLE IV: OFFICERS.........................................................9
Section
Section
Section
Section
Section
Section
Section
Section
Section
</TABLE>
</R>

4.01.
4.02.
4.03.
4.04.
4.05.
4.06.
4.07.
4.08.
4.09.

Ed#: 4

*P64567/6030203/4*

Selection: Qualifications................................9
Salaries................................................10
Term of Office..........................................10
Chairman of the Board...................................10
Chief Executive Officer.................................10
President...............................................11
Vice-Presidents.........................................11
Secretary and Assistant Secretary.......................11
Chief Financial Officer.................................11

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-3.2, Doc: 4, Page: 4

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 603.02.04.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

4

<R>
<TABLE>
<S>
<C>
ARTICLE V. CERTIFICATES FOR SHARES..........................................12
Section
Section
Section
Section
Section
Section
Section
Section
Section
ARTICLE VI:

5.01.
5.02.
5.03.
5.04.
5.05.
5.06.
5.07.
5.08.
5.09.

Issuance of Shares and Fractional Shares...............12
Form of Certificate....................................12
Facsimile Signatures...................................13
Lost, Stolen, or Destroyed Certificates................13
Transfers of Stock.....................................13
Uncertificated Shares..................................13
Closing of Transfer Books: Record Date.................14
Registered Stockholders................................14
Stock Options and Agreements...........................14

DIVIDENDS......................................................14

Section 6.01.
Section 6.02.
Section 6.03.

Method of Payment......................................14
Closing of Books: Record Date..........................15
Reserves...............................................15

ARTICLE VII: CHECKS.........................................................15
ARTICLE VIII: CORPORATE SEAL................................................15
ARTICLE IX: FISCAL YEAR.....................................................15
ARTICLE X: AMENDMENTS.......................................................15
ARTICLE XI: BOOKS AND RECORDS...............................................16
Section 11.01. Books and Records......................................16
Section 11.02. Computerized Records...................................16
Section 11.03. Examination and Copying by Stockholders................16
ARTICLE XII: LOANS AND ADVANCES.............................................16
Section 12.01. Loans, Guarantees, and Suretyship......................16
Section 12.02. Advances to Officers, Directors, and Employees.........17
ARTICLE XIII: INDEMNIFICATION...............................................17
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section

13.01.
13.02.
13.03.
13.04.
13.05.
13.06.
13.07.
13.08.
13.09.
13.10.
13.11.
13.12.
13.13.
13.14.

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Directors and Officers.................................17
Employees and Other Agents.............................18
Good Faith.............................................18
Advances of Expenses...................................19
Enforcement............................................19
Non-Exclusivity of Rights..............................20
Survival of Rights.....................................20
Insurance..............................................20
Amendments.............................................20
Savings Clause.........................................20
Certain Definitions....................................20
Notification and Defense of Claim......................21
Exclusions.............................................22
Subrogation............................................23

ARTICLE XIV: DEFINITIONS AND USAGE..........................................23
</TABLE>
</R>

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BYLAWS OF TASER INTERNATIONAL, INC.
ARTICLE I: OFFICES
Section 1.01 Registered Office.

The registered office of Taser International, Inc. (the "Corporation")
in the State of Delaware shall be that set forth in the Certificate of
Incorporation or in the most recent amendment of the Certificate of
Incorporation or in a certificate prepared by the Board of Directors and filed
with the Secretary of State of Delaware changing the registered office.
Section 1.02. Other Offices.
The Corporation may also have offices and places of business at such
other places of business both within and without the State of Delaware as the
Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II: MEETINGS OF STOCKHOLDERS
Section 2.01. Place of Meetings.
All meetings of the stockholders of the Corporation shall be held at
its registered office or at such other place within or without the State of
Delaware as shall be stated by the Board of Directors in the notice of the
meeting. In the absence of designation otherwise, meetings shall be held at the
principal executive offices of the Corporation in the State of Arizona.
Section 2.02. Time of Meetings.
The Board of Directors shall designate the time and day for each
meeting. In the absence of such designation, all meetings of the stockholders
shall be held at 1:00 p.m., Mountain Time.
Section 2.03. Annual Meetings.
Section 2.03-a. Business to be Transacted. Except as otherwise
required by law or regulation, no business proposed by a stockholder to be
considered at an annual meeting of the stockholders (including the nomination of
any person to be elected as a director of the Corporation) shall be considered
by the stockholders at that meeting unless, no later than sixty (60) days before
the annual meeting of stockholders or (if later) ten (10) days after the first
public notice of that meeting is sent to stockholders, the Corporation receives
from the stockholder proposing that business a written notice that sets forth:
(1) the nature of the proposed business with reasonable particularity, including
the exact text of any proposal to be presented for adoption, and the reasons for
conducting that business at the annual meeting; (2) with respect to each such
stockholder, that stockholder’s name and address (as they appear on the records
of
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<R>
the Corporation), business address and telephone number, residence address
and telephone number, and the number of shares of each class of stock of the
Corporation beneficially owned by that stockholder; (3) any interest of the
stockholder in the proposed business; (4) the name or names of each person
nominated by the stockholder to be elected or re-elected as a director, if any;
and (5) with respect to each nominee, that nominee’s name, business address and
telephone number, and residence address and telephone number, the number of
shares, if any, of each class of stock of the Corporation owned directly and
beneficially by that nominee, and all information relating to that nominee that
is required to be disclosed in solicitations of proxies for elections of
directors, or is other required, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, or any provision of law subsequently replacing
Regulation 14A, together with a duly acknowledged letter signed by the nominee
stating his or her acceptance of the nomination by that stockholder, stating his
or her intention to serve as a director if elected, and consenting to being
named as a nominee for director in any proxy statement relating to such
election. The person presiding at the annual meeting shall determine whether
business (including the nomination of any person as a director) has been
properly brought before the meeting and, if the facts so warrant, shall not
permit any business (or voting with respect to any particular nominee) to be
transacted that has not been properly brought before the meeting.
Notwithstanding any other provision of the Certificate of Incorporation or any
provision of law that might otherwise permit a lesser or no vote, and in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or by the
Certificate of Incorporation, the affirmative vote of the holders of not less
than 66.67% of the voting power of the then outstanding shares of capital stock
entitled to vote thereon (the "Voting Stock"), voting together as a single
class, shall be required to amend or repeal, or to adopt a provision
inconsistent with, this Section 2.03-a.
</R>
Section 2.03-b. Date and Time. Annual meetings of stockholders shall be
held at such date and time as shall be designated by the Board of Directors and
stated in the notice of the meeting.
Section 2.03-c. Election of Directors. At each annual meeting of
stockholders beginning in 2001, the stockholders, voting as provided in the
Certificate of Incorporation or in these Bylaws, shall elect directors to
succeed directors whose terms are expiring, each such director to hold office
until the third annual meeting of stockholders after his or her election and
until his or her successor is elected and qualified or until his or her earlier
death, resignation or removal.
Section 2.04. Special Meetings.
<R>
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
may only be called and proposed by: (i) the Chairman of the Board; (ii) the
Chief Executive Officer; (iii) the holder(s) of a majority of the voting power
of the Voting Stock; or (iv) the Board of Directors pursuant to a resolution
adopted by a majority of the then-authorized number of directors. Such request
shall state the purpose or purposes of the proposed meeting.
</R>
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Section 2.05. Purpose of Special Meeting.

Business transacted at any special meeting of the stockholders shall be
limited to the matters stated in the notice of such meeting, or other matters
necessarily incidental therefore.
Section 2.06. Notice of Meetings.
Notice of stockholder meetings shall be in writing. Such notice shall
state the place, date and time of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. A copy of such
notice shall be either delivered personally or mailed, postage prepaid, to each
stockholder of record entitled to vote at such meeting pursuant to Section 2.13
hereof not less than ten (10) nor more than sixty (60) days before such meeting.
If mailed, it shall be directed to each stockholder at his or her address as it
appears upon the records of the Corporation, and upon such mailing of any such
notice, the service thereof shall be complete, and the time of the notice shall
begin to run from the date that such notice is deposited in the mail for
transmission to such stockholder. Personal delivery of any such notice to a
corporation, an association, or a partnership shall be accomplished by personal
delivery of such notice to any officer of a corporation or an association or to
any member of a partnership.
Section 2.07. Waiver of Notice.
Notice of any meeting of the stockholders may be waived before, at, or
after such meeting in a writing signed by the stockholder or representative
thereof entitled to vote the shares so represented. Such waiver shall be filed
with the Secretary or entered upon the records of the meeting.
Section 2.08. Quorum; Adjournment.
The holders of a majority of the voting power of all shares entitled to
vote, present in person or represented by proxy, shall constitute a quorum for
the transaction of all business at meetings of the stockholders, except as may
be otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the original meeting in accordance with the notice thereof.
If a quorum is present when a duly called or held meeting is convened, the
stockholders present in person or represented by proxy may continue to transact
business until adjournment notwithstanding the withdrawal of enough stockholders
originally present in person or by proxy to leave less than a quorum, and for
the purposes of voting pursuant to Section 2.09 hereof, stockholders holding a
majority of the voting power of all shares entitled to vote shall be deemed to
be present in person.
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Section 2.09. Vote Required.

When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the voting power of all shares entitled to vote present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one that by express provision of statute or of
the Certificate of Incorporation or of these Bylaws requires a different vote,
in which case such express provision shall govern the vote required.
Section 2.10. Voting Rights.
Except as may be otherwise required by statute or the Certificate of
Incorporation or these Bylaws, every stockholder of record of the Corporation
shall be entitled at each meeting of the stockholders to one vote for each share
of stock standing in his or her name on the books of the Corporation.
Section 2.11. Proxies.
At any meeting of the stockholders, any stockholder may be represented
and vote by a proxy or proxies appointed by an instrument in writing, signed by
the stockholder, and filed with the Secretary at or before the meeting. In
addition, a stockholder may cast or authorize the casting of a vote by a proxy
by transmitting to the Corporation or the Corporation’s duly authorized agent
before the meeting, an appointment of a proxy by means of a telegram, cablegram,
or any other form of electronic transmission, including telephonic transmission,
whether or not accompanied by written instructions of the stockholder. The
electronic transmission must set forth or be submitted with information from
which it can be determined that the appointment was authorized by the
stockholder. If it is determined that a telegram, cablegram, or other electronic
transmission is valid, the inspectors of election or, if there are no
inspectors, the other persons making that determination shall specify the
information upon which they relied to make that determination.
An appointment of a proxy or proxies for shares held jointly by two or
more stockholders is valid if signed by any one of them, unless and until the
Corporation receives from any one of those stockholders written notice denying
the authority of such other person or persons to appoint a proxy or proxies or
appointing a different proxy or proxies, in which case no proxy shall be
appointed unless the instrument shall otherwise provide. No proxy shall be voted
or acted upon after three (3) years from its date, unless the proxy provides for
a longer period. Subject to the above, any duly executed proxy shall continue in
full force and effect and shall not be revoked unless written notice of its
revocation or a duly executed proxy bearing a later date is filed with the
Secretary of the Corporation. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable proxy.
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Section 2.12. Action in Writing.

Subject to the terms of any preferred stock of the Corporation, any
action required or permitted to be taken by the stockholders of the Corporation
must be taken at a duly called annual or special meeting of such stockholders or
by written consent of all (but not less than all) stockholders entitled to vote
in lieu of such a meeting.
Section 2.13. Closing of Books; Record Date.
The Board of Directors may fix, or authorize an officer to fix, a date,
not more than sixty (60) nor less than ten (10) days preceding the date of any
meeting of the stockholders of the Corporation, as a record date for the
determination of the stockholders of record on the date so fixed or their legal
representatives shall be entitled to notice of and to vote at such meeting,
notwithstanding any transfer of shares on the books of the Corporation against
the transfer of shares during the whole or any part of such period.
ARTICLE III: DIRECTORS
Section 3.01. General Powers.
The business of the Corporation shall be managed by its Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are by statute or by the Certificate of Incorporation
or by these Bylaws permitted, directed or required to be exercised or done by
the Board of Directors.
Section 3.02. Number and Qualification.
The number of directors that shall constitute the whole Board of
Directors shall from time to time be fixed exclusively by the Board of Directors
by a resolution adopted by a majority of the whole Board of Directors serving at
the time of that vote. In no event shall the number of directors that constitute
the whole Board of Directors be fewer than three (3), nor greater than nine (9).
No decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. Directors of the Corporation need not be elected
by written ballot. Directors need not be stockholders.
Section 3.03. Classes and Terms.
The Board of Directors of the Corporation shall be divided into three
classes designated Class A, Class B, and Class C, respectively, all as nearly
equal in number as possible, with each director then in office receiving the
classification that at least a majority of the Board of Directors designates.
The initial term of office of directors of Class A shall expire at the annual
meeting of stockholders of the Corporation in 2001, of Class B shall expire at
the annual meeting of stockholders of the Corporation in 2002, and of Class C
shall expire at the annual meeting of stockholders of the Corporation in 2003,
and in all cases a director shall serve until the director’s successor is
elected and qualified or until his earlier death, resignation or removal. At
each annual meeting of stockholders beginning with the annual meeting of
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<R>
stockholders in 2001, each director elected to succeed a director whose term is
then expiring shall hold office until the third annual meeting of stockholders
after his or her election and until his or her successor is elected and
qualified or until his or her earlier death, resignation or removal. If the
number of directors that constitutes the whole Board of Directors is changed as
permitted by the Certificate of Incorporation or these Bylaws, the majority of
the whole Board of Directors that adopts the change shall also fix and determine
the number of directors comprising each class; provided, however, that any
increase or decrease in the number of directors shall be apportioned among the
classes as equally as possible. Notwithstanding any provision of the Certificate
of Incorporation or any provision of law that might otherwise permit a lesser or
no vote, and in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by the Certificate of Incorporation, the affirmative vote of 66.67% of
the Voting Stock, voting together as a single class, shall be required to amend
or repeal, or to adopt any provision inconsistent with, this Section 3.03.
</R>
Section 3.04. Vacancies.
<R>
Vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office, or other cause, and
newly-created directorships resulting from any increase in the authorized number
of directors, may be filled by no less than a majority vote of the remaining
directors then in office, though less than a quorum, who are designated to
represent the same class or classes of stockholders that the vacant position,
when filled, is to represent or by the sole remaining director (but not by the
stockholders except as required by law); provided, however, that, with respect
to any directorship to be filled by the Board of Directors by reason of an
increase in the number of directors: (a) such directorship shall be for a term
of office continuing only until the next election of one or more directors by
the stockholders; and (b) the Board of Directors may not fill more than two such
directorships during the period between any two successive annual meetings of
stockholders. Each director chosen in accordance with this provision shall
receive the classification of the vacant directorship to which he or she has
been appointed or, if it is a newly-created directorship, shall receive the
classification that at least a majority of the Board of Directors designates and
shall hold office until the first meeting of stockholders held after his or her
election for the purpose of electing directors of that classification and until
his or her successor is elected and qualified or until his or her earlier death,
resignation, or removal from office. Notwithstanding any provision of the
Certificate of Incorporation or any provision of law that might otherwise permit
a lesser or no vote, and in addition to any affirmative vote of the holders of
any particular class or series of the capital stock of the Corporation required
by law or by the Certificate of Incorporation, the affirmative vote of 66.67% of
the Voting Stock, voting together as a single class, shall be required to amend
or repeal, or to adopt any provision inconsistent with, this Section 3.04.
</R>
Section 3.05. Meetings.
Section 3.05-a. Place of Meetings. The Board of Directors may hold
meetings, both regular and special, either within or without the State of
Delaware.
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Section 3.05-b. Regular Meetings. As soon as practicable after
each regular election of directors, the Board of Directors shall meet at the
registered office of the Corporation, or at such other place within or without
the State of Delaware as may be designated by the Board of Directors, for the
purpose of electing the officers of the Corporation and for the transaction of
such other business as shall come before the meeting. Other regular meetings of
the Board of Directors may be held without notice at such time and place within
and without the State of Delaware as shall from time to time be determined by
resolution of the Board of Directors.
Section 3.05-c. Special Meetings. Special meetings of the
Board of Directors may be called by the Chairman, Chief Executive Officer, or a
majority of the then directors, and shall be held at such time and place as
shall be designated in the notice thereof.
Section 3.05-d. Notice. Notice of a special meeting shall be
given to each Director at least twenty-four (24) hours before the time of the
meeting. Said notice shall be in writing and state the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called.
Whenever any provision of law, the Certificate of Incorporation, or the Bylaws
require notice to be given, any director may, in writing, either before or after
the meeting, waive notice thereof. Without notice, any director, by his or her
attendance at and participation in the action taken at the meeting, shall be
deemed to have waived notice thereof.
Section 3.05-e. Quorum: Voting Requirements: Adjournment. A
majority of the Board of Directors then in office shall constitute a quorum for
the transaction of business, and the act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation or these Bylaws.
If a quorum shall not be present at any meeting of the Board
of Directors, the directors present thereat may adjourn the meeting to another
time or place, and no notice as to such adjourned meeting need be given other
than by announcement at the meeting at which such adjournment is taken. If a
quorum is present at the call of a meeting, the directors may continue to
transact business until adjournment notwithstanding the withdrawal of enough
directors to leave less than a quorum.
Section 3.05-f. Organization of Meetings. At all meetings of
the Board of Directors, the Chairman of the Board, or in his absence, the Chief
Executive Officer, or in his absence, any director appointed by the Chief
Executive Officer, shall preside, and the Secretary, or in his absence, any
person appointed by the Chairman, shall act as Secretary.
Section 3.05-g. Action in Writing. Except as may be otherwise
required by statute or the Certificate of Incorporation, any action required or
permitted to be taken at any meeting of the Board of Directors of the
Corporation or of any committee thereof may be taken by written consent in lieu
of a meeting, if all members of the Board or committee consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
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Section 3.05-h. Absent Directors. A director may give advance
written consent or opposition to a proposal to be acted on at a meeting of the
Board of Directors. Such advance written consent or opposition shall be
ineffective unless the writing is delivered to the Chief Executive Officer,
Chairman or Secretary of the Corporation prior to the meeting at which such
proposal is to be considered. If the director is not present at the meeting,
consent or opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but such consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected, such substantial
similarity to be determined in the sole judgment of the presiding officer at the
meeting.
Section 3.06. Committees.
Section 3.06-a. Designation. The Board of Directors may
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
Section 3.06-b. Limitations on Authority. No committees of the
Corporation shall have authority as to any of the following matters:
(a) Approving or adopting, or recommending to the
stockholders any action or matter expressly required by law to be submitted to
stockholders for approval; or
(b) Adopting, amending or repealing any bylaw of the
Corporation.
Section 3.06-c. Minutes of Committee Meetings. Committees
shall keep regular minutes of their proceedings and report the same to the Board
of Directors when required.
Section 3.07. Telephone Conference Meetings.
Any Director or any member of a duly constituted committee of the Board
of Directors may participate in any meeting of the Board of Directors or of any
duly constituted committee thereof by means of a conference telephone or other
comparable communication technique whereby all persons participating in such a
meeting can hear and communicate with each other. For the purpose of
establishing a quorum and taking any action at such a meeting, the members
participating in such a meeting pursuant to this Section 3.07 shall be deemed
present in person at such meeting.
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Section 3.08. Compensation.

Unless otherwise provided by the Board of Directors, directors shall be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors or a committee thereof. Directors who are not employees of the
Corporation shall be paid at least $500 for attendance at each meeting of the
Board of Directors, or any committee thereof, unless a different sum is fixed by
resolution of the Board of Directors. Directors may also receive other
compensation, such as stock options or grants, for their service as directors or
committee members as determined by the Board of Directors. Nothing herein
contained shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 3.09. Limitation of Director Liability.
A director shall not be liable to the Corporation or its stockholders
for dividends illegally declared, distributions illegally made to stockholders,
or any other actions taken in good faith reliance upon financial statements of
the Corporation represented to the director to be correct by the Chief Executive
Officer of the Corporation or the officer having charge of its books of account
or certified by an independent or certified public accountant to fairly reflect
the financial condition of the Corporation; nor shall the director be liable if
in good faith in determining the amount available for dividends or distributions
the Board values the assets in a manner allowable under applicable law.
Section 3.10. Resignation and Removal.
<R>
A director may resign at any time by giving written notice to the
Secretary or Assistant Secretary. Such resignation shall take effect on the date
of the receipt of such notice or at such later date as specified therein. A
director of any class of directors of the Corporation may be removed before the
expiration date of that director’s term of office only by an affirmative vote of
the holders of 66.67% of the voting power of the Voting Stock, voting together
as a single class. Notwithstanding any provision of the Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or no
vote, and in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law or by
the Certificate of Incorporation, the affirmative vote of 66.67% of the Voting
Stock, voting together as a single class, shall be required to amend or repeal,
or to adopt any provision inconsistent with, this Section 3.10.
</R>
ARTICLE IV: OFFICERS
Section 4.01. Selection: Qualifications.
Section 4.01-a. Election: Qualifications. The Board of
Directors at its next meeting after each annual meeting of the stockholders
shall choose a Chairman of the Board, a Chief Executive Officer, a Secretary, a
Chief Financial Officer, and such other officers or agents as it deems
necessary, none of whom need be members of the Board.
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Section 4.01-b. Additional Officers. The Board of Directors
may choose a President, additional Vice Presidents, Assistant Secretaries and
Assistant Treasurers and such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board.
Section 4.02. Salaries.
The salaries of all officers, and of the Chairman of the Corporation,
shall be fixed by the Board of Directors on an annual basis.
Section 4.03. Term of Office.
The officers of the Corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time with or without cause by the
affirmative vote of a majority of the Board of Directors. Any officer may resign
at any time by giving written notice to the Chief Executive Officer or the
Secretary of the Corporation. Any vacancy occurring in any office of the
Corporation by death, resignation, removal, or otherwise shall be filled by the
Board of Directors.
Section 4.04. Chairman of the Board.
The Chairman of the Board of Directors shall preside at all meetings of
the Board of Directors and of the stockholders and shall perform such other
duties as he or she may be directed to perform by the Board of Directors.
Section 4.05. Chief Executive Officer.
The Chief Executive Officer of the Corporation shall have general
active management of the business of the Corporation. Unless the Board has
elected a Chairman of the Board of Directors, the Chief Executive Officer shall
preside at meetings of the stockholders of the Corporation and at meetings of
the Board of Directors. The Chief Executive Officer may execute and deliver in
the name of the Corporation any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the Corporation, except in cases in
which the authority to sign and deliver is required by law to be exercised by
another person or is expressly delegated by the Board to some other officer or
agent of the Corporation; may delegate the authority to execute and deliver
documents to other officers of the Corporation; shall maintain records of and,
whenever necessary, certify any proceedings of the stockholders and the Board;
shall perform such other duties as may from time to time be prescribed by the
Board; and, in general, shall perform all duties usually incident to the office
of the Chief Executive Officer.
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Section 4.06. President.

The President of the Corporation shall have general active management
of the business of the Corporation in the absence or disability of the Chief
Executive Officer. He shall also generally assist the Chief Executive Officer
and exercise such other powers and perform such other duties as are delegated to
him by the Chief Executive Officer or Chairman, or as the Board of Directors
shall prescribe.
Section 4.07. Vice-Presidents.
Unless otherwise determined by the Board of Directors, the Vice
Presidents, if any, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President. They shall also
generally assist the Chief Executive Officer and the President and exercise such
other powers and perform such other duties as are delegated to them by the Chief
Executive Officer or the President or as the Board of Directors shall prescribe.
Section 4.08. Secretary and Assistant Secretary.
The Secretary or Assistant Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all the proceedings
of the meetings of the stockholders and of the Board of Directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required, and shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Chairman or the
Board of Directors, under whose supervision he shall be.
The Assistant Secretary, or if there be more than one, the assistant
secretaries in the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election) shall, in the absence
of the Secretary or in the event of inability or refusal to act by the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Chairman, or Board
of Directors, may, from time to time, prescribe.
Section 4.09. Chief Financial Officer.
Section 4.09-a. Custody of Funds and Accounting. The Chief
Financial Officer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors.
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Section 4.09-b. Disbursements and Reports. The Chief Financial
Officer shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Chief Executive Officer and the Board of Directors, at the regular
meetings of the Board, or when the Board of Directors so requires, an account of
all his transactions as Chief Financial Officer and of the financial condition
of the Corporation.
Section 4.09-c. Bond. If required by the Board of Directors,
the Chief Financial Officer shall give the Corporation a bond in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration, upon the expiration of his term of office or his resignation,
retirement, or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
ARTICLE V. CERTIFICATES FOR SHARES
Section 5.01. Issuance of Shares and Fractional Shares.
The Board of Directors is authorized to issue shares and fractional
shares of stock of the Corporation up to the full amount authorized by the
Certificate of Incorporation in such amounts as may be determined by the Board
of Directors and as permitted by law.
Section 5.02. Form of Certificate.
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors of the Corporation may resolve that some or
all of any or all classes or series of its stock will be uncertificated shares
as provided in Section 5.06. Certificates shall be signed by the Chairman of the
Board or the President and by the Secretary or Assistant Secretary of the
Corporation, certifying the number of shares of capital stock owned by him in
the Corporation. If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the designations,
preferences, and relative, participating, optional, or other special rights of
the various classes of stock or series thereof and the qualifications,
limitations, or restrictions of such rights, together with a statement of the
authority of the Board of Directors to determine the relative rights and
preferences of subsequent classes or series, shall be set forth in full on the
face or back of the certificate which the Corporation shall issue to represent
such stock, or, in lieu thereof, such certificate shall contain a statement that
the stock is, or may be, subject to certain rights, preferences, or restrictions
and that a statement of the same will be furnished without charge by the
Corporation upon request by any stockholder. Certificates representing the
shares of the capital stock of the Corporation shall be in such form not
inconsistent with law or the Certificate of Incorporation or these Bylaws as
shall be determined by the Board of Directors.
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Section 5.03. Facsimile Signatures.

Whenever any certificate is countersigned or otherwise authenticated by
a transfer agent, transfer clerk, or registrar, then a facsimile of the
signatures of the officers or agents of the Corporation may be printed or
lithographed upon such certificate in lieu of the actual signatures. In case any
officer or officers who shall have signed, or whose facsimile signature shall
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death, resignation,
or otherwise, before such certificate or certificates shall have been delivered
by the Corporation, such certificate or certificates may nevertheless be adopted
by the Corporation and be signed and delivered as though the person or persons
who signed such certificate or certificates, or whose facsimile signature or
signatures shall have been used thereon, had not ceased to be the officer or
officers of the Corporation.
Section 5.04. Lost, Stolen, or Destroyed Certificates.
The Board of Directors may direct a certificate or certificates to be
issued in place of a certificate or certificates previously issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates or uncertificated shares, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 5.05. Transfers of Stock.
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books;
except that the Board of Directors may, by resolution duly adopted, establish
conditions upon the transfer of shares of stock to be issued by the Corporation,
and the purchasers of such shares shall be deemed to have accepted such
conditions on transfer upon the receipt of the certificate representing such
shares, provided that the restrictions shall be referred to on the certificates
or the purchaser shall have otherwise been notified thereof.
Section 5.06. Uncertificated Shares.
Unless prohibited by the Certificate of Incorporation or these Bylaws,
some or all of any or all classes and series of the Corporation’s shares may be
uncertificated shares. Upon receipt of proper transfer instructions from the
registered owner of uncertificated shares, such uncertificated shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation. Within a reasonable time after the
issuance or
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transfer of uncertificated shares, the Corporation shall send to the
new stockholder the information required by Section 5.02 to be stated on
certificates. If this Corporation becomes a publicly held corporation which
adopts, in compliance with Section 17 of the Securities Exchange Act of 1934, a
system of issuance, recordation, and transfer of its shares by electronic or
other means not involving an issuance of certificates, this information is not
required to be sent to new stockholders.
Section 5.07. Closing of Transfer Books: Record Date.
The Board of Directors or an officer of the Corporation authorized by
the Board may close the stock transfer books of the Corporation for a period not
exceeding sixty (60) days preceding the date of any meeting of stockholders as
provided in Section 2.13 hereof or the date for payment of any dividend as
provided in Section 6.02 hereof or the date for the allotment of rights or the
date when any change or conversion or exchange of capital stock shall go into
effect. In lieu of closing the stock transfer books as aforesaid, the Board of
Directors or an officer of the Corporation authorized by the Board may fix, in
advance, a date, not exceeding sixty (60) days preceding the date for payment of
any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to receive
payment.
Section 5.08. Registered Stockholders.
The Corporation shall be entitled to recognize the exclusive right of
the persons registered on its books as the owners of shares to receive dividends
and to vote as such owners and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided in the laws of Delaware.
Section 5.09. Stock Options and Agreements.
In addition to any stock options, plans, or agreements into which the
Corporation may enter, any stockholder of the Corporation may enter into an
agreement giving any other stockholder or stockholders or any third party an
option to purchase any of his stock in the Corporation, and such shares of stock
shall thereupon be subject to such agreement and transferable only upon proof of
compliance therewith; provided, however, that a copy of such agreement shall be
filed with the Corporation and reference thereto placed upon the certificates
representing said shares of stock.
ARTICLE VI: DIVIDENDS
Section 6.01. Method of Payment.
Dividends upon the capital stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
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Section 6.02. Closing of Books: Record Date.

The Board of Directors or an officer of the Corporation authorized by
the Board may fix a date not exceeding sixty (60) days preceding the date fixed
for the payment of any dividend as the record date for the determination of the
stockholders entitled to receive payment of the dividend and, in such case, only
stockholders of record on the date so fixed shall be entitled to receive payment
of such dividend notwithstanding any transfer of shares on the books of the
Corporation after the record date. The Board of Directors or an officer of the
Corporation authorized by the Board may close the books of the Corporation
against the transfer of shares during the whole or any part of such period. If
the Board of Directors or an officer of the Corporation authorized by the Board
fails to fix such a record date, the record date shall be the thirtieth (30th)
day preceding the date of such payment.
Section 6.03. Reserves.
Before payment of any dividend, there may be set aside out of the funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves for meeting contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Board shall think conducive to the interest of the Corporation,
and the Board may modify or abolish any such reserve in the manner in which it
was created.
ARTICLE VII: CHECKS
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
ARTICLE VIII: CORPORATE SEAL
The Corporation shall have no corporate seal.
ARTICLE IX: FISCAL YEAR
The fiscal year of the Corporation shall end on December 31 unless
otherwise fixed by resolution of the Board of Directors.
ARTICLE X: AMENDMENTS
<R>
These Bylaws shall not be adopted, altered, amended or repealed except
in accordance with the provisions of the Certificate of Incorporation and these
Bylaws. Unless a different requirement is mandated by the Certificate of
Incorporation or these Bylaws, adoption, alteration, amendment or repeal of
these Bylaws requires the affirmative action of a majority of the directors then
in office or the vote of the holders of not less than 66.67% of the Voting
Stock, voting together as a single class, at an annual meeting of the
stockholders or any special meeting of the stockholders.
</R>
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ARTICLE XI: BOOKS AND RECORDS
Section 11.01. Books and Records.
The Board of Directors of the Corporation shall cause to be kept:

Section 11.01-a. A share register not more than one year old,
giving the names and addresses of the stockholders, the number and classes held
by each, and the dates on which the certificated or uncertificated shares were
issued;
Section 11.01-b. Records of all proceedings of stockholders
and directors; and
Section 11.01-c. Such other records and books of account as
shall be necessary and appropriate to the conduct of the corporate business.
Section 11.02. Computerized Records.
The records maintained by the Corporation, including its share
register, financial records, and minute books, may utilize any information
storage technique, including, for example, computer memory or microimages, even
though that makes them illegible visually, if the records can be converted, by
machine and within a reasonable time, into a form that is legible visually and
whose contents are assembled by related subject matter to permit convenient use
by persons in the normal course of business.
Section 11.03. Examination and Copying by Stockholders.
Every stockholder of record of the Corporation shall have a right to
examine, in person or by agent or attorney, at any reasonable time or times, at
the place or places where usually kept, and upon the showing of a proper
purpose, the Corporation’s stock ledger, a list of its stockholders and its
other books and records, and to make copies or extracts therefrom.
ARTICLE XII: LOANS AND ADVANCES
Section 12.01. Loans, Guarantees, and Suretyship.
The Corporation may lend money to, guarantee an obligation of, become a
surety for, or otherwise financially assist a person, if the transaction, or a
class of transactions to which the transaction belongs, is approved by the
affirmative vote of a majority of the directors present at a lawfully convened
meeting and such action: (a) is in the usual and regular course of business of
the Corporation; (b) is with, or for the benefit of, a related corporation, an
organization with which the Corporation has the power to make donations; (c) is
with, or for the benefit of, an officer or other employee of the Corporation or
a subsidiary, including an officer or employee who is a director of the
Corporation or a subsidiary, and may reasonably be expected, in the judgment of
the Board of Directors, to benefit the Corporation; or (d) has been approved by
the
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affirmative vote of the holders of seventy-five percent (75%) of the Voting
Stock, voting together as a single class. The loan, guarantee, or other
assistance may be with or without interest and may be unsecured or may be
secured in any manner that a majority of the Board of Directors approves,
including, without limitation, a pledge of or other security interest in shares
of the Corporation.
Section 12.02. Advances to Officers, Directors, and Employees.
The Corporation may, without a vote of the directors, advance money to
its directors, officers, or employees to cover expenses that can reasonably be
anticipated to be incurred by them in the performance of their duties and for
which they would be entitled to reimbursement in the absence of an advance.
ARTICLE XIII: INDEMNIFICATION
Section 13.01. Directors and Officers
Section 13.01-a. Indemnity in Third-Party Proceedings. The
Corporation shall indemnify its directors and officers in accordance with the
provisions of this Section 13.01-a if the director or officer was or is a party
to, or is threatened to be made a party to, any proceeding (other than a
proceeding by or in the right of the Corporation to procure a judgment in its
favor), against all expenses, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by the director or officer in connection with
such proceeding if the director or officer acted in good faith and in a manner
the director or officer reasonably believed was in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, the director or officer, in addition, had no reasonable cause to
believe that the director’s or officer’s conduct was unlawful; provided,
however, that the director or officer shall not be entitled to indemnification
under this Section 13.01-a: (1) in connection with any proceeding charging
improper personal benefit to the director or officer in which the director or
officer is adjudged liable on the basis that personal benefit was improperly
received by the director or officer unless and only to the extent that the court
conducting such proceeding or any other court of competent jurisdiction
determines upon application that, despite the adjudication of liability, the
director or officer is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, or (2) in connection with any proceeding (or
part thereof) initiated by such person or any proceeding by such person against
the Corporation or its directors, officers, employees or other agents unless:
(A) such indemnification is expressly required to be made by law, (B) the
proceeding was authorized by the Board of Directors, or (C) such indemnification
is provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Delaware General Corporation Law.
Section 13.01-b. Indemnity in Proceedings by or in the Right
of the Corporation. The Corporation shall indemnify its directors and officers
in accordance with the provisions of this Section 13.01-b if the director or
officer was or is a party to, or is threatened to be made a party to, any
proceeding by or in the right of the Corporation to procure a judgment in its
favor, against all expenses actually and reasonably incurred by the director or
officer in connection with the defense or settlement of such proceeding if the
director or officer acted in good faith and in a manner the director or officer
reasonably believed was in or not opposed to the best interests of the
corporation; provided, however, that the director or officer shall not be
entitled to indemnification under this Section 13.01-b: (1) in connection with
any proceeding in which the director or officer has been adjudged liable to the
Corporation unless and only to the extent that the court conducting such
proceeding, or the Delaware Court of Chancery, determines
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upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, the director or officer is fairly and reasonably
entitled to indemnification for such expenses as such court shall deem proper,
or (2) in connection with any proceeding (or part thereof) initiated by such
person or any proceeding by such person against the Corporation or its
directors, officers, employees or other agents unless (A) such indemnification
is expressly required to be made by law, (B) the proceeding was authorized by
the Board of Directors, or (C) such indemnification is provided by the
Corporation, in its sole discretion, pursuant to the powers vested in the
Corporation under the Delaware General Corporation Law.
Section 13.02. Employees and Other Agents
The Corporation may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article XIII to directors and officers of the Corporation.
Section 13.03. Good Faith.
Section 13.03-a. For purposes of any determination under this
Article XIII, a director or officer shall be deemed to have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding to have had no reasonable cause to believe that his or her conduct
was unlawful, if his or her action is based on information, opinions, reports
and statements, including financial statements and other financial data, in each
case prepared or presented by:
1. one or more officers or employees of the
Corporation whom the director or officer believed to be reliable and competent
in the matters presented;
2. counsel, independent accountants or other persons
as to matters which the director or officer believed to be within such person’s
professional or expert competence; or
3. with respect to a director, a committee of the
Board of Directors upon which such director does not serve, as to matters within
such committee’s designated authority, which committee the director believes to
merit confidence; so long as, in each case, the director or executive officer
acts without knowledge that would cause such reliance to be unwarranted.
Section 13.03-b. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal proceeding, that he had reasonable cause to believe that his or her
conduct was unlawful.
Section 13.03-c. The provisions of this Section 13.03 shall
not be deemed to be exclusive or to limit in any way the circumstances in which
a person may be deemed to have met the applicable standard of conduct set forth
by the Delaware General Corporation Law.
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*P64567/6030223/3*

23
Section 13.04. Advances of Expenses

The Corporation shall pay the expenses incurred by its directors or
officers in any proceeding (other than a proceeding brought for an accounting of
profits made from the purchase and sale by the director or officer of securities
of the corporation within the meaning of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provision of any state statutory
law or common law) in advance of the final disposition of the proceeding at the
written request of the director or officer, if the director or officer: (a)
furnishes the Corporation a written affirmation of the director’s or officer’s
good faith belief that the director or officer is entitled to be indemnified
under this Article XIII, and (b) furnishes the Corporation a written undertaking
to repay the advance to the extent that it is ultimately determined that the
director or officer is not entitled to be indemnified by the Corporation. Such
undertaking shall be an unlimited general obligation of the director or officer
but need not be secured. Advances pursuant to this Section 13.04 shall be made
no later than 10 days after receipt by the Corporation of the affirmation and
undertaking described in clauses (a) and (b) above, and shall be made without
regard to the director’s or officer’s ability to repay the amount advanced and
without regard to the director’s or officer’s ultimate entitlement to
indemnification under this Article XIII. The Corporation may establish a trust,
escrow account or other secured funding source for the payment of advances made
and to be made pursuant to this Section 13.04 or of other liability incurred by
the director or officer in connection with any proceeding.
Section 13.05. Enforcement
Without the necessity of entering into an express contract, all rights
to indemnification and advances to directors and officers under this Article
XIII shall be deemed to be contractual rights and be effective to the same
extent and as if provided for in a contract between the Corporation and the
director or officer. Any director or officer may enforce any right to
indemnification or advances under this Article XIII in any court of competent
jurisdiction if: (a) the Corporation denies the claim for indemnification or
advances, in whole or in part, or (b) the Corporation does not dispose of such
claim within 45 days of request therefor. It shall be a defense to any such
enforcement action (other than an action brought to enforce a claim for
advancement of expenses pursuant to, and in compliance with, Section 13.01 of
this Article XIII) that the director or officer is not entitled to
indemnification under this Article XIII. However, except as provided in Section
13.12 of this Article XIII, the Corporation shall not assert any defense to an
action brought to enforce a claim for advancement of expenses pursuant to
Section 13.04 of this Article XIII if the director or officer has tendered to
the Corporation the affirmation and undertaking required thereunder. The burden
of proving by clear and convincing evidence that indemnification is not
appropriate shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors or independent legal counsel) to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because the director or officer has met the
applicable standard of conduct nor an actual determination by the Corporation
(including its Board of Directors or independent legal counsel) that
indemnification is improper because the director or officer has not met such
applicable standard of conduct, shall be asserted as a defense to the action or
create a presumption that the director or officer is not entitled to
indemnification under this Article XIII or otherwise. The director’s or
officer’s expenses incurred in connection with successfully establishing such
person’s right to indemnification or advances, in whole or in part, in any
proceeding shall also be paid or reimbursed by the Corporation.
Bylaws-Taser International, Inc.
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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-3.2, Doc: 4, Page: 24

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 603.02.24.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6030224/3*

24
Section 13.06. Non-Exclusivity of Rights

The rights conferred on any person by this Article XIII shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding office. The Corporation is authorized to enter into individual
contracts with any or all of its directors, officers, employees or agents
respecting indemnification and advances, to the fullest extent not prohibited by
the Delaware General Corporation Law.
Section 13.07. Survival of Rights
The rights conferred on any person by this Article XIII shall continue
as to a person who has ceased to be a director, officer, employee or other agent
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 13.08. Insurance
To the fullest extent permitted by the Delaware General Corporation
Law, the Corporation, upon approval by the Board of Directors, may purchase
insurance on behalf of any person required or permitted to be indemnified
pursuant to this Article XIII.
Section 13.09. Amendments
Any repeal or modification of this Article XIII shall only be
prospective and shall not affect the rights under this Article XIII in effect at
the time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any director, officer, employee or agent of the
Corporation.
Section 13.10. Savings Clause
If this Article XIII or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer to the full extent not
prohibited by any applicable portion of this Article XIII that shall not have
been invalidated, or by any other applicable law.
Section 13.11. Certain Definitions
For the purposes of this Article XIII, the following definitions shall
apply:
Section 13.11-a. The term "PROCEEDING" shall include any
threatened, pending or completed action, suit or proceeding, whether brought in
the right of the Corporation or otherwise, and whether of a civil, criminal,
administrative or investigative nature, in which the director or officer may be
or may have been involved as a party, witness or otherwise, by reason of the
fact that the director or officer is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, whether or not serving in such capacity at
the time any liability or expense is incurred for which indemnification or
reimbursement can be provided under this Article XIII.
Bylaws-Taser International, Inc.
Page 20

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-3.2, Doc: 4, Page: 25

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 603.02.25.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6030225/3*

25

Section 13.11-b. The term "EXPENSES" includes, without
limitation thereto, expenses of investigations, judicial or administrative
proceedings or appeals, attorney, accountant and other professional fees and
disbursements and any expenses of establishing a right to indemnification under
this Article XIII, but shall not include amounts paid in settlement by the
director or officer or the amount of judgments or fines against the director or
officer.
Section 13.11-c. References to "OTHER ENTERPRISE" include,
without limitation, employee benefit plans; references to "FINES" include,
without limitation, any excise taxes assessed on a person with respect to any
employee benefit plan; references to "SERVING AT THE REQUEST OF THE Corporation"
include, without limitation, any service as a director, officer, employee or
agent which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
its beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "NOT OPPOSED TO THE BEST INTERESTS OF THE CORPORATION" as referred to in
this Article XIII.
Section 13.11-d. References to "THE CORPORATION" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer or employee of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this Article XIII with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
Section 13.11-e. The meaning of the phrase "TO THE FULLEST
EXTENT PERMITTED BY LAW" shall include, but not be limited to: (i) to the
fullest extent authorized or permitted by any amendments to or replacements of
the Delaware General Corporation Law adopted after the date of this Article XIII
that increase the extent to which a corporation may indemnify its directors and
officers, and (ii) to the fullest extent permitted by the provision of the
Delaware General Corporation Law that authorizes or contemplates additional
indemnification by agreement, or the corresponding provision of any amendment to
or replacement of the Delaware General Corporation Law.
Section 13.12. Notification and Defense of Claim
As a condition precedent to indemnification under this Article XIII,
not later than 30 days after receipt by the director or officer of notice of the
commencement of any proceeding the director or officer shall, if a claim in
respect of the proceeding is to be made against the Corporation under this
Article XIII, notify the Corporation in writing of the commencement of the
proceeding. The failure to properly notify the Corporation shall not relieve the
Corporation from any liability which it may have to the director or officer
otherwise than under this Article XIII. With respect to any proceeding as to
which the director or officer so notifies the Corporation of the commencement:
Section 13.12-a. The Corporation shall be entitled to
participate in the proceeding at its own expense.
Bylaws-Taser International, Inc.
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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-3.2, Doc: 4, Page: 26

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 603.02.26.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6030226/3*

26

Section 13.12-b. Except as otherwise provided in this Section
13.12, the Corporation may, at its option and jointly with any other
indemnifying party similarly notified and electing to assume such defense,
assume the defense of the proceeding, with legal counsel reasonably satisfactory
to the director or officer. The director or officer shall have the right to use
separate legal counsel in the proceeding, but the Corporation shall not be
liable to the director or officer under this Article XIII for the fees and
expenses of separate legal counsel incurred after notice from the Corporation of
its assumption of the defense, unless (1) the director or officer reasonably
concludes that there may be a conflict of interest between the Corporation and
the director or officer in the conduct of the defense of the proceeding, or (2)
the Corporation does not use legal counsel to assume the defense of such
proceeding. The Corporation shall not be entitled to assume the defense of any
proceeding brought by or on behalf of the Corporation or as to which the
director or officer has made the conclusion provided for in (1) above.
Section 13.12-c. If two or more persons who may be entitled to
indemnification from the Corporation, including the director or officer seeking
indemnification, are parties to any proceeding, the Corporation may require the
director or officer to use the same legal counsel as the other parties. The
director or officer shall have the right to use separate legal counsel in the
proceeding, but the Corporation shall not be liable to the director or officer
under this Article XIII for the fees and expenses of separate legal counsel
incurred after notice from the Corporation of the requirement to use the same
legal counsel as the other parties, unless the director or officer reasonably
concludes that there may be a conflict of interest between the director or
officer and any of the other parties required by the Corporation to be
represented by the same legal counsel.
Section 13.12-d. The Corporation shall not be liable to
indemnify the director or officer under this Article XIII for any amounts paid
in settlement of any proceeding effected without its written consent, which
shall not be unreasonably withheld. The director or officer shall permit the
Corporation to settle any proceeding that the Corporation assumes the defense
of, except that the Corporation shall not settle any action or claim in any
manner that would impose any penalty or limitation on the director or officer
without such person’s written consent.
Section 13.13. Exclusions
Notwithstanding any provision in this Article XIII, the Corporation
shall not be obligated under this Article XIII to make any indemnification in
connection with any claim made against any director or officer: (a) for which
payment is required to be made to or on behalf of the director or officer under
any insurance policy, except with respect to any excess amount to which the
director or officer is entitled under this Article XIII beyond the amount of
payment under such insurance policy; (b) if a court having jurisdiction in the
matter finally determines that such indemnification is not lawful under any
applicable statute or public policy; (c) in connection with any proceeding (or
part of any proceeding) initiated by the director or officer, or any proceeding
by the director or officer against the Corporation or its directors, officers,
employees or other persons entitled to be indemnified by the Corporation,
unless: (1) the Corporation is expressly required by law to make the
indemnification; (2) the proceeding was authorized by the Board of Directors of
the Corporation; or (3) the director or officer initiated the proceeding
pursuant to Section 13.05 of this Article XIII and the director or officer is
successful in whole or in part in such proceeding; or (d) for an accounting of
profits made from the purchase and sale by the director or officer of securities
of the Corporation within the meaning of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provision of any state statutory
law or common law.
Bylaws-Taser International, Inc.
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BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-3.2, Doc: 4, Page: 27

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 603.02.27.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

27
Section 13.14. Subrogation

In the event of payment under this Article XIII, the Corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of
the director or officer. The director or officer shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
ARTICLE XIV: DEFINITIONS AND USAGE
Whenever the context of these Bylaws requires, the plural shall be read
to include the singular, and vice versa; and words of the masculine gender shall
refer to the feminine gender, and vice versa; and words of the neuter gender
shall refer to any gender.
<R>
The undersigned, Secretary of the Corporation, hereby certifies that
the foregoing is a true and complete copy of the Corporation’s Bylaws as amended
effective April 10, 2001 and the same have not been modified and remain in full
force and effect on the date of this certificate.
</R>
<R>
Dated:

April 24, 2001.

</R>
<R>
</R>

/s/ Kathleen C. Hanrahan
_______________________________
Kathleen C. Hanrahan, Secretary

372437 V4
Bylaws-Taser International, Inc.
Page 23
</TEXT>
</DOCUMENT>

Ed#: 5

*P64567/6030227/5*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-4.3, Doc: 5

[B/E]

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

EX-4.3
p64567a3ex4-3.txt
EX-4.3

JB: *

Phone: (602) 223-4455

Operator: BPX31319

PN: DOCHDR 5

Date: 7-MAY-2001 15:05:10.86

SN: *

*DOCHDR/5*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 50
CRC: 7602
P64567A3.SUB, DocName: EX-4.3, Doc: 5, Page: 1
Description: ex-4.3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.03.01.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

1
Exhibit 4.3
VOID AFTER 5:00 P.M. PACIFIC TIME ON __________, 2006
WARRANTS TO PURCHASE COMMON STOCK

W-_____

Ed#: 4

*P64567/6040301/4*

_________Warrants
TASER INTERNATIONAL, INC.
CUSIP ______________
THIS CERTIFIES THAT

or registered assigns, is the registered holder of the number of Warrants (the
"Warrants") set forth above. Each Warrant entitles the holder thereof to
purchase from TASER International, Inc., a corporation incorporated under the
laws of the state of Delaware (the "Company"), subject to the terms and
conditions set forth hereinafter and in the Warrant and Unit Agreement
hereinafter more fully described (the "Warrant Agreement"), at any time on or
before the close of business on __________, 2006 or, if such Warrant is redeemed
as provided in the Warrant Agreement, at any time prior to the effective time of
such redemption (the "Expiration Date"), one fully paid and non-assessable share
of Common Stock of the Company (the "Common Stock") upon presentation and
surrender of this Warrant Certificate, with the instructions for the
registration and delivery of Common Stock filled in, at the stock transfer
office in Glendale, California, of U.S. Stock Transfer Corporation, Warrant
Agent of the Company (the "Warrant Agent") or of its successor warrant agent or,
if there be no successor warrant agent, at the corporate offices of the Company,
and upon payment of the Exercise Price (as defined in the Warrant Agreement) and
any applicable taxes paid either in cash, or by certified or official bank
check, payable in lawful money of the United States of America to the order of
the Company. Each Warrant entitles the holder to purchase one share of Common
Stock initially for one hundred ten percent (110%) of: two-thirds of the Initial
Public Offering price of the Units (the "Exercise Price"). The number and kind
of securities or other property for which the Warrants are exercisable are
subject to further adjustment in certain events, such as mergers, splits, stock
dividends, recapitalizations and the like, to prevent dilution. Upon 30 days
notice, the Company may redeem any or all outstanding and unexercised Warrants
at any time if the basic net income per share of Common Stock as confirmed by an
audit conducted in accordance with generally accepted accounting principles
applicable in the United States (which such audit may be conducted with respect
to any fiscal year of the Company or any other 12-month period ending on the
last day of a fiscal quarter of the Company, in the Company’s sole discretion),
for an audited 12-month period preceding the date of such notice is equal to or
greater than $1.00, at a price of $0.25 per Warrant. All Warrants not
theretofore exercised or redeemed will expire on _________, 2006.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 55
CRC: 43039
P64567A3.SUB, DocName: EX-4.3, Doc: 5, Page: 2
Description: ex-4.3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.03.02.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040302/3*

2

This Warrant Certificate is subject to all of the terms,
provisions and conditions of the Warrant Agreement, dated as of ____________,
2001 (the "Warrant Agreement"), between the Company and the Warrant Agent, to
all of which terms, provisions and conditions the registered holder of this
Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
incorporated herein by reference and made a part hereof and reference is made to
the Warrant Agreement for a full description of the rights, limitations of
rights, obligations, duties and immunities of the Warrant Agent, the Company and
the holders of the Warrant Certificates. Copies of the Warrant Agreement are
available for inspection at the stock transfer office of the Warrant Agent or
may be obtained upon written request addressed to the Company at 7860 East
McClain Drive, Suite 2, Scottsdale, Arizona 85260, Attention: Chief Financial
Officer.
The Company shall not be required upon the exercise of the
Warrants evidenced by this Warrant Certificate to issue fractions of Warrants,
Common Stock or other securities, but shall make adjustment therefor in cash on
the basis of the current market value of any fractional interest as provided in
the Warrant Agreement.
In certain cases, the sale of securities by the Company upon
exercise of Warrants would violate the securities laws of the United States,
certain states thereof or other jurisdictions. The Company has agreed to use all
commercially reasonable efforts to cause a registration statement to continue to
be effective during the term of the Warrants with respect to such sales under
the Securities Act of 1933, as amended, and to take such action under the laws
of various states as may be required to cause the sale of securities upon
exercise to be lawful. However, the Company will not be required to honor the
exercise of Warrants if, in the opinion of the Board of Directors, upon advice
of counsel, the sale of securities upon such exercise would be unlawful. In
certain cases, the Company may, but is not required to, purchase Warrants
submitted for exercise for a cash price equal to the difference between the
market price of the securities obtainable upon such exercise and the exercise
price of such Warrants.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender to the Warrant Agent, any successor warrant agent
or, in the absence of any successor warrant agent, at the corporate offices of
the Company, may be exchanged for another Warrant Certificate or Certificates
evidencing in the aggregate the same number of Warrants as the Warrant
Certificate or Certificates so surrendered. If the Warrants evidenced by this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or
Certificates evidencing the number of Warrants not so exercised.
No holder of this Warrant Certificate, as such, shall be
entitled to vote, receive dividends or be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose whatever, nor shall anything contained in the
Warrant Agreement or herein be construed to confer upon the holder of this
Warrant Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof or give or withhold consent to any
corporate action (whether upon any matter submitted to stockholders at any
meeting thereof, or give or withhold consent to any merger,

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 40
CRC: 19679
P64567A3.SUB, DocName: EX-4.3, Doc: 5, Page: 3
Description: ex-4.3

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.03.03.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040303/3*

<PAGE>
3
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, conveyance or
otherwise) or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Warrant Agreement) or to receive
dividends or subscription rights or otherwise until the Warrants evidenced by
this Warrant Certificate shall have been exercised and the Common Stock
purchasable upon the exercise thereof shall have become deliverable as provided
in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise
within any period during which the transfer books for the Company’s Common Stock
or other class of stock purchasable upon the exercise of the Warrants evidenced
by this Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.
Every holder of this Warrant Certificate by accepting the same
consents and agrees with the Company, the Warrant Agent, and with every other
holder of a Warrant Certificate that:
(a) This Warrant Certificate is transferable on the registry
books of the Warrant Agent only upon the terms and conditions set forth in the
Warrant Agreement; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name this Warrant Certificate is registered as the absolute
owner hereof (notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Company or the Warrant Agent) for all purposes
whatever and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
The Company shall not be required to issue or deliver any
certificate for shares of Common Stock or other securities upon the exercise of
Warrants evidenced by this Warrant Certificate until any tax which may be
payable in respect thereof by the holder of this Warrant Certificate pursuant to
the Warrant Agreement shall have been paid, such tax being payable by the holder
of this Warrant Certificate at the time of surrender.
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 22
CRC: 44025
P64567A3.SUB, DocName: EX-4.3, Doc: 5, Page: 4
Description: ex-4.3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.03.04.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

4

WITNESS the facsimile signatures of the proper officers of the
Company and its corporate seal.
Dated: _______________ , 2001

TASER International, Inc.

By: _____________________________
Patrick W. Smith,
Chief Executive Officer
Attest: _________________________
Secretary
Countersigned
U.S. Stock Transfer Corporation
By: ________________________________
Authorized Officer

Ed#: 3

*P64567/6040304/3*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 50
CRC: 47278
P64567A3.SUB, DocName: EX-4.3, Doc: 5, Page: 5
Description: ex-4.3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.03.05.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

5
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE THE
WARRANTS IN WHOLE OR IN PART)

To: TASER INTERNATIONAL, INC.
The undersigned Registered Holder

(

Ed#: 4

*P64567/6040305/4*

)

_______________________________________
(Please insert Social Security or other
identification number of Registered Holder)
hereby irrevocably elects to exercise the right of purchase represented by the
within this Warrant Certificate for, and to purchase thereunder, _______________
shares of Common Stock provided for therein and tenders payment herewith to the
order of TASER INTERNATIONAL, INC. in the amount of $________________. The
undersigned requests that certificates for such shares of Common Stock be issued
as follows:
Name:________________________________________________________________________
Address:______________________________________________________________________
Deliver to:___________________________________________________________________
Address:______________________________________________________________________
and if said number of Warrants being exercised shall not be all the Warrants
evidenced by this Warrant Certificate, that a new Certificate for the balance of
such Warrants as well as the shares of Common Stock represented by this Warrant
Certificate be registered in the name of, and delivered to, the Registered
Holder at the address stated below:
Address:_____________________________________________________________________
Dated:_____________, _______
Signature
_______________________________________
(Signature must conform in all respects to the name of Registered Holder as
specified in the case of this Warrant Certificate in every particular, without
alteration or any change whatever.)
Signature Guaranteed:
_______________________________________
The signature should be guaranteed by an eligible institution (Banks,
Stockbrokers, Savings and Loan Association and Credit Union with membership in
an approved signature Medallion Program), pursuant to S.E.C. Rule 17Ad-15.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 48
CRC: 40330
P64567A3.SUB, DocName: EX-4.3, Doc: 5, Page: 6
Description: ex-4.3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.03.06.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040306/3*

6
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY UPON ASSIGNMENT)

FOR VALUE RECEIVED, the undersigned Registered Holder (

)

_______________________________________
(Please insert
Social Security or other
identification number of
Registered Holder)
hereby sells, assigns and transfers unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print Name and Address including Zip Code)
Warrants evidenced by the within Warrant Certificate, and
irrevocably constitutes and appoints

______________________________________________________________________Attorney
to transfer this Warrant Certificate on the books of TASER International, Inc.
with the full power of substitution in the premises.
Dated:__________________, ________
Signature:
_________________________________
(Signature must conform in all respects to the name of Registered Holder as
specified on the face of this Unit Certificate in every particular, without
alteration or any change whatsoever, and the signature must be guaranteed in the
usual manner.)
Signature Guaranteed:
_________________________________
The signature should be guaranteed by an eligible institution (Banks,
Stockbrokers, Savings and Loan Association and Credit Union with membership in
an approved signature Medallion Program), pursuant to S.E.C. Rule 17Ad-15.
</TEXT>
</DOCUMENT>

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-4.5, Doc: 6

[B/E]

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

EX-4.5
p64567a3ex4-5.txt
EX-4.5

JB: *

Phone: (602) 223-4455

Operator: BPX31319

PN: DOCHDR 6

Date: 7-MAY-2001 15:05:10.86

SN: *

*DOCHDR/6*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 56
CRC: 63769
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 1
Description: ex-4.5

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.01.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040501/3*

1
Exhibit 4.5
WARRANT AND UNIT AGREEMENT

TASER International, Inc., 7860 E. McClain Drive, Suite 2, Scottsdale, Arizona
85260, a Delaware corporation ("Company"), and US Stock Transfer Corporation,
1745 Gardena Avenue, Glendale, California, a _________ corporation ("Transfer
Agent"), agree as follows:
1. PURPOSE. The Company proposes to publicly offer and issue in an initial
public offering (the "Offering") ____________ units ("Units"). Each Unit will
entitle the registered holder of a Unit ("Unit Holder") to (i) one and one-half
(1.5) shares of the Company’s $0.00001 par value common stock ("Share") and (ii)
one and one-half (1.5) warrants, each whole warrant permitting the purchase of
one (1) Share ("Warrant").
2. WARRANTS. Each Warrant will entitle the registered holder of a Warrant
("Warrant Holder") to purchase from the Company one (1) Share at one hundred ten
percent (110%) of: two-thirds of the Initial Public Offering price of the Units
(the "Exercise Price"). A Warrant Holder may exercise all or any number of
Warrants resulting in the purchase of a whole number of Shares.
3. EXERCISE PERIOD. The Warrants may be exercised at any time during the period
commencing thirty (30) days after the effective date ("Offering Date") of the
Offering ("Exercise Date") and ending at 3:00 p.m., Denver Colorado time on the
fifth (5th) anniversary date of the closing of the Offering ("Expiration Date"),
except as changed by Section 15 of this Agreement.
4. NON-DETACHABILITY. A Warrant Certificate (as defined below) may not be
detached from a Share certificate contained in a Unit for at least thirty (30)
days following the Offering Date. Until such time, a Warrant Certificate may be
split up, combined, exchanged or transferred on the books of the Transfer Agent
only together with a Share certificate. Paulson Investment Company, Inc. will
then determine when the Units separate, after which the Shares and Warrants will
trade separately.
5. CERTIFICATES. The Warrant certificates shall be in registered form only and
shall be substantially in the form set forth in Exhibit A attached to this
Agreement ("Warrant Certificate"). The Unit certificates shall be in registered
form only and shall be substantially in the form set forth in Exhibit B attached
to this Agreement ("Unit Certificate"). Warrant and Unit Certificates shall be
signed by, or shall bear the facsimile signature of, the Chief Executive
Officer, President or a Vice President of the Company and the Secretary or an
Assistant Secretary of the Company. If any person, whose facsimile signature has
been placed upon any Warrant or Unit Certificate or the signature of an officer
of the Company, shall have ceased to be such officer before such Warrant or Unit
Certificate is countersigned, issued and delivered, such Warrant or Unit
Certificate shall be countersigned, issued and delivered with the same effect as
if such person had not ceased to be such officer. Any Warrant or Unit
Certificate may be signed by, or made to bear the facsimile signature of, any
person who at the actual date of the preparation of such Warrant or Unit
Certificate shall be a proper officer of the Company to sign such Warrant or
Unit Certificate, even though such person was not such an officer upon the date
of this Agreement.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 55
CRC: 4803
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 2
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.02.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040502/3*

<PAGE>
2
6. ISSUANCE OF NEW CERTIFICATES. Notwithstanding any of the provisions of this
Agreement or the several Warrant or Unit Certificates to the contrary, the
Company may, at its option, issue new Warrant or Unit Certificates in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Exercise Price or the number or kind of shares purchasable under the
several Warrant or Unit Certificates made in accordance with the provisions of
this Agreement.
7. COUNTERSIGNING. Warrant and Unit Certificates shall be manually countersigned
by the Transfer Agent and shall not be valid for any purpose unless so
countersigned. The Transfer Agent hereby is authorized to countersign and
deliver to, or in accordance with the instructions of, any Warrant or Unit
Holder any Warrant or Unit Certificate, respectively, which is properly issued.
8. REGISTRATION OF TRANSFER AND EXCHANGES. The Transfer Agent will keep or cause
to be kept books for registration of ownership or transfer of Warrant and Unit
Certificates issued hereunder. Such registers shall show the names and addresses
of the respective holders of the Warrant and Unit Certificates and the number of
Warrants and Units evidenced by each such Warrant or Unit Certificate. Subject
to the provisions of Section 4, the Transfer Agent shall from time to time
register the transfer of any outstanding Warrant or Unit Certificate upon
records maintained by the Transfer Agent for such purpose upon surrender of such
Warrant or Unit Certificate to the Transfer Agent for transfer, accompanied by
appropriate instruments of transfer in form satisfactory to the Company and the
Transfer Agent and duly executed by the Warrant or Unit Holder or a duly
authorized attorney. Upon any such registration of transfer, a new Warrant or
Unit Certificate shall be issued in the name of and to the transferee and the
surrendered Warrant or Unit Certificate shall be cancelled.
9. EXERCISE OF WARRANTS.
a. Any one Warrant or any multiple of one Warrant evidenced by any
Warrant Certificate may be exercised on or after the Exercise Date and on or
before the Expiration Date. A Warrant shall be exercised by the Warrant Holder
by surrendering to the Transfer Agent the Warrant Certificate evidencing such
Warrant with the exercise form on the reverse of such Warrant Certificate duly
completed and executed and delivering to the Transfer Agent, by good check or
bank draft payable to the order of the Company, the Exercise Price for each
Share to be purchased. No fractional warrant may be exercised, but will be
redeemed for cash equal to the current market value of such fractional warrant,
as defined in Section 19 of this Warrant and Unit Agreement.
b. Upon receipt of a Warrant Certificate with the exercise form thereon
duly executed together with payment in full of the Exercise Price (and an amount
equal to any applicable taxes or government charges) for the Shares for which
Warrants are then being exercised, the Transfer Agent shall requisition from any
transfer agent for the Shares, and upon receipt shall make delivery of,
certificates evidencing the total number of whole Shares for which Warrants are
then being exercised in such names and denominations as are required for
delivery to, or in accordance with the instructions of, the Warrant Holder. Such
certificates for the Shares shall be deemed to be issued, and the person to whom
such Shares are issued of record shall be deemed to have become a holder of
record of such Shares, as of the date of the surrender of such Warrant
Certificate and payment of the Exercise Price (and an amount equal to any
applicable taxes or government

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 55
CRC: 36631
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 3
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.03.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040503/3*

<PAGE>
3
charges), whichever shall last occur, provided that if the books of the Company
with respect to the Shares shall be deemed to be closed, the person to whom such
Shares are issued of record shall be deemed to have become a record holder of
such Shares as of the date on which such books shall next be open (whether
before, on or after the Expiration Date). The Company covenants and agrees that
it shall not cause its stock transfer books to be closed for a period of more
than twenty (20) consecutive business days except upon consolidation, merger,
sale of all of its assets, dissolution or liquidation or as otherwise provided
by law.
c. In addition, if it is required by law and upon instruction by the
Company, the Transfer Agent will deliver to each Warrant Holder a prospectus
that complies with the provisions of Section 5 of the Securities Act, as
amended, and the Company agrees to supply the Transfer Agent with a sufficient
number of prospectuses to effectuate that purpose.
d. Any Warrant Certificate or Certificates may be exchanged at the
option of the holder thereof for another Warrant Certificate or Certificates of
different denominations, of like tenor and representing in the aggregate the
same number of Warrants, upon surrender of such Warrant Certificate or
Certificates, with the Form of Assignment duly filled in and executed, to the
Transfer Agent, at any time or from time-to-time after the close of business on
the date hereof and prior to the close of business on the Expiration Date. The
Transfer Agent shall promptly cancel the surrendered Warrant Certificate or
Certificates and deliver the new Warrant Certificate or Certificates pursuant to
the provisions of this Section.
e. If less than all the Warrants evidenced by a Warrant Certificate are
exercised upon a single occasion, a new Warrant Certificate for the balance of
the Warrants not so exercised shall be issued and delivered to, or in accordance
with, transfer instructions properly given by the Warrant Holder until the
Expiration Date.
f. All Warrant Certificates surrendered upon exercise of the Warrants
shall be cancelled.
g. Upon the exercise, or conversion of any Warrant, the Transfer Agent
shall account promptly to the Company with respect to Warrants exercised and
concurrently pay to the Company all moneys received by the Transfer Agent for
the purchase of securities or other property through the exercise of such
Warrants.
h. Expenses incurred by the Transfer Agent while acting in the capacity
as Transfer Agent, in accordance with this Agreement, will be paid by the
Company. A detailed accounting statement relating to the number of shares
exercised, names of registered Warrant Holder(s) and the net amount of exercise
funds remitted will be given to the Company with the payment of each exercise
amount.
10. REDEMPTION. The Warrants outstanding at the time of a redemption may be
redeemed at the option of the Company, in whole or in part on a pro-rata basis,
at any time if, at the time notice of such redemption is given by the Company as
provided in subsection a. below, the basic net income per share of Common Stock
as confirmed by an audit conducted in accordance with generally accepted
accounting principles applicable in the United States (which such audit may be

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 52
CRC: 24295
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 4
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.04.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040504/3*

<PAGE>
4
conducted with respect to any fiscal year of the Company or any other 12-month
period ending on the last day of a fiscal quarter of the Company, in the
Company’s sole discretion), for an audited 12-month period preceding the date of
such notice is equal to or greater than $1.00, at a price of $0.25 per Warrant
(the "Redemption Price"). On the redemption date (the "Redemption Date"), the
holders of record of redeemed Warrants shall be entitled to payment of the
Redemption Price upon surrender of such redeemed Warrants to the Company at the
principal office of the Transfer Agent in Glendale, California.
a. Notice of redemption of Warrants shall be given at least thirty (30)
days prior to the Redemption Date by mailing, by registered or certified mail,
return receipt requested, a copy of such notice to the Transfer Agent and by
first class mail to all of the holders of record of Warrants at their respective
addresses appearing on the books or transfer records of the Company or such
other address designated in writing by the holder of record to the Transfer
Agent not less than forty (40) days prior to the Redemption Date.
b. From and after the Redemption Date, all rights of the Warrant
Holders (except the right to receive the Redemption Price) shall terminate, but
only if (i) no later than one day prior to the Redemption Date the Company shall
have irrevocably deposited with the Transfer Agent as paying agent a sufficient
amount to pay on the Redemption Date the Redemption Price for all Warrants
called for redemption and (ii) the notice of redemption shall have stated the
name and address of the Transfer Agent and the intention of the Company to
deposit such amount with the Transfer Agent no later than one day prior to the
Redemption Date.
c. The Transfer Agent shall pay to the holders of record of redeemed
Warrants all monies received by the Transfer Agent for the redemption of
Warrants to which the holders of record of such redeemed Warrants who shall have
surrendered their Warrants are entitled.
d. Any amounts deposited with the Transfer Agent that shall be
unclaimed after six (6) months after the Redemption Date may be withdrawn by the
Company, and thereafter the holders of the Warrants called for redemption for
which such funds were deposited shall look solely to the Company for payment.
The Company shall be entitled to the interest, if any, on funds deposited with
the Transfer Agent and the holders of redeemed Warrants shall have no right to
any such interest.
e. If the Company fails to make a sufficient deposit with the Transfer
Agent as provided above, the holder of any Warrants called for redemption may at
the option of the holder (i) by notice to the Company declare the notice of
redemption a nullity as to such holder, or (ii) maintain an action against the
Company for the Redemption Price. If the holder brings such an action, the
Company will pay reasonable attorneys’ fees of the holder. If the holder fails
to bring an action against the Company for the Redemption Price within sixty
(60) days after the Redemption Date, the holder shall be deemed to have elected
to declare the notice of redemption to be a nullity as to such holder and such
notice shall be without any force or effect as to such holder. Except as
otherwise specifically provided in this subsection e., a notice of redemption,
once mailed by the Company, as provided in subsection a., shall be irrevocable.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 54
CRC: 14157
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 5
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.05.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040505/3*

<PAGE>
5
11. TAXES. The Company will pay all taxes attributable to the initial issuance
of Shares upon exercise of Warrants. The Company shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in any
issue of Warrant or Unit Certificates or in the issue of any certificates of
Shares in the name other than that of the Warrant or Unit Holder upon the
exercise of any Warrant or Unit, as the case may be.
12. MUTILATED OR MISSING CERTIFICATES. If any Warrant or Unit Certificate is
mutilated, lost, stolen or destroyed, the Company and the Transfer Agent may, on
such terms as to indemnity or otherwise as they may in their discretion impose
(which shall, in the case of a mutilated Warrant or Unit Certificate, include
the surrender thereof), and upon receipt of evidence satisfactory to the Company
and the Transfer Agent of such mutilation, loss, theft or destruction, issue a
substitute Warrant or Unit Certificate, respectively, of like denomination or
tenor as the Warrant or Unit Certificate so mutilated, lost, stolen or
destroyed. Applicants for substitute Warrant or Unit Certificates shall comply
with such other reasonable regulations and pay any reasonable charges as the
Company or the Transfer Agent may prescribe.
13. SUBSEQUENT ISSUE OF CERTIFICATES. Subsequent to their original issuance, no
Warrant or Unit Certificates shall be reissued except (i) such Certificates
issued upon transfer thereof in accordance with Section 8 hereof, (ii) such
Certificates issued upon any combination, split-up or exchange of Warrant or
Unit Certificates pursuant to Section 8 hereof, (iii) such Certificates issued
in replacement of mutilated, destroyed, lost or stolen Warrant or Unit
Certificates pursuant to Section 12 hereof, (iv) Warrant Certificates issued
upon the partial exercise of Warrant Certificates pursuant to Section 9 hereof,
and (v) Warrant Certificates issued to reflect any adjustment or change in the
Exercise Price or the number or kind of shares purchasable thereunder pursuant
to Section 6 hereof. The Transfer Agent is hereby irrevocably authorized to
countersign and deliver, in accordance with the provisions of said Sections 6,
8, 9 and 12, the new Warrant or Unit Certificates, as the case may be, required
for purposes thereof, and the Company, whenever required by the Transfer Agent,
will supply the Transfer Agent with Warrant and Unit Certificates duly executed
on behalf of the Company for such purposes.
14. RESERVATION OF SHARES. For the purpose of enabling the Company to satisfy
all obligations to issue Shares upon exercise of Warrants, the Company will at
all times reserve and keep available free from preemptive rights, out of the
aggregate of its authorized but unissued shares, the full number of Shares which
may be issued upon the exercise of the Warrants. The Company covenants all
shares which shall be so issuable, will upon issue be fully paid and
nonassessable by the Company and free from all taxes, liens, charges and
security interests with respect to the issue thereof. In the case of a Warrant
exercisable solely for securities listed on a securities exchange or for which
there are at least two (2) independent market makers, the Company may elect to
redeem Warrants submitted to the Transfer Agent for exercise for a price equal
to the difference between the aggregate low asked price, or closing price, as
the case may be, of the securities for which such Warrant is exercisable on the
date of such submission and the Exercise Price of such Warrants; in the event of
such redemption, the Company will pay to the holder of such Warrants the
above-described redemption price in cash within ten (10) business days after
receipt of notice from the Transfer Agent that such Warrants have been submitted
for exercise.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 56
CRC: 61188
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 6
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.06.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040506/3*

<PAGE>
6
15. GOVERNMENTAL RESTRICTIONS. If any Shares issuable upon the exercise of
Warrants require registration or approval of any governmental authority, the
Company will use commercially reasonable efforts to secure such registration or
approval and, to the extent practicable, take action in anticipation of and
prior to the exercise of the Warrants necessary to permit a public offering of
the securities underlying the Warrants during the term of this Agreement;
provided that in no event shall such Shares be issued, and the Company shall
have the authority to suspend the exercise of all Warrants, until such
registration or approval shall have been obtained; but all Warrants, the
exercise of which is requested during any such suspension, shall be exercisable
at the Exercise Price. If any such period of suspension continues past the
Expiration Date, all Warrants, the exercise of which have been requested on or
prior to the Expiration Date, shall be exercisable upon the removal of such
suspension until the close of business on the business day immediately following
the expiration of such suspension.
16. ADJUSTMENTS OF NUMBER AND KIND OF SHARES PURCHASABLE AND EXERCISE PRICE. The
number and kind of securities or other property purchasable upon exercise of a
Warrant shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of any of the following events:
a. In case the Company shall (i) pay a dividend in, or make a
distribution of, shares of capital stock on its outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of such
shares or (iii) combine its outstanding shares of Common Stock into a smaller
number of such shares, the total number of shares of Common Stock purchasable
upon the exercise of each Warrant outstanding immediately prior thereto shall be
adjusted so that the holder of any Warrant Certificate thereafter surrendered
for exercise shall be entitled to receive at the same aggregate Exercise Price
the number of shares of capital stock (of one or more classes) which such holder
would have owned or have been entitled to receive immediately following the
happening of any of the events described above had such Warrant been exercised
in full immediately prior to the record date with respect to such event. Any
adjustment made pursuant to this subsection shall, in the case of a stock
dividend or distribution, become effective as of the record date therefor and,
in the case of a subdivision or combination, be made as of the effective date
thereof. If, as a result of an adjustment made pursuant to this subsection, the
holder of any Warrant Certificate thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company, (whose determination shall be
conclusive and shall be evidenced by a Board resolution filed with the Transfer
Agent) shall determine the allocation of the adjusted Exercise Price between or
among shares of such classes of capital stock.
b. In the event of a capital reorganization or a reclassification of
the Common Stock (except as provided in subsection a. above or subsection e.
below), any Warrant Holder, upon exercise of Warrants, shall be entitled to
receive, in substitution for the Common Stock to which he would have become
entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of the Company (or cash) that he would have been entitled to receive at
the same aggregate Exercise Price upon such reorganization or reclassification
if such Warrants had been exercised immediately prior to the record date with
respect to such event; and in any such case, appropriate provision (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and shall be

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 56
CRC: 44699
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 7
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.07.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040507/3*

<PAGE>
7
evidenced by a certified Board resolution filed with the Transfer Agent) shall
be made for the application of this Section with respect to the rights and
interests thereafter of the Warrant Holders (including but not limited to the
allocation of the Exercise Price between or among shares of classes of capital
stock), to the end that this Section (including the adjustments of the number of
shares of Common Stock or other securities purchasable and the Exercise Price
thereof) shall thereafter be reflected, as nearly as reasonably practicable, in
all subsequent exercises of the Warrants for any shares or securities or other
property (or cash) thereafter deliverable upon the exercise of the Warrants.
c. Whenever the number of shares of Common Stock or other securities
purchasable upon exercise of a Warrant is adjusted as provided in this Section,
the Company will promptly file with the Transfer Agent a certificate signed by a
Chairman of the Board or the Chief Executive Officer, the President or a Vice
President of the Company and by the Secretary or an Assistant Secretary of the
Company setting forth the number and kind of securities or other property
purchasable upon exercise of a Warrant, as so adjusted, stating that such
adjustments in the number or kind of shares or other securities or property
conform to the requirements of this Section, and setting forth a brief statement
of the facts accounting for such adjustments. Promptly after receipt of such
certificate, the Company, or the Transfer Agent at the Company’s request, will
deliver, by first-class, postage prepaid mail, a brief summary thereof (to be
supplied by the Company) to the registered holders of the outstanding Warrant
Certificates; provided, however, that failure to file or to give any notice
required under this subsection, or any defect therein, shall not affect the
legality or validity of any such adjustments under this Section; and provided,
further, that, where appropriate, such notice may be given in advance and
included as part of the notice required to be given pursuant to Section 18
hereof.
d. In case of any consolidation of the Company with, or merger of the
Company into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
corporation formed by such consolidation or merger or the corporation which
shall have acquired such assets, as the case may be, shall execute and deliver
to the Transfer Agent a supplemental warrant agreement providing that the holder
of each Warrant then outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such Warrant, solely
the kind and amount of shares of stock and other securities and property (or
cash) receivable upon such consolidation, merger, sale or transfer by a holder
of the number of shares of Common Stock of the Company for which such Warrant
might have been exercised immediately prior to such consolidation, merger, sale
or transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided in this Section. The above provision of this subsection shall similarly
apply to successive consolidations, mergers, sales or transfers.
The Transfer Agent shall not have any responsibility to determine the
correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Warrant Certificates upon the
exercise of their Warrants after any such consolidation, merger, sale or
transfer or of any adjustment to be made with respect thereto, but subject to
the provisions of Section 23 hereof, may

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 54
CRC: 65423
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 8
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.08.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040508/3*

<PAGE>
8
accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, a certificate of a firm of independent
certified public accountants (who may be the accountants regularly employed by
the Company) with respect thereto.
e. Irrespective of any adjustments in the number or kind of shares
issuable upon exercise of Warrants, Warrant Certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the similar Warrant Certificates initially issuable
pursuant to this Agreement.
f. The Company may retain a firm of independent public accountants of
recognized standing, which may be the firm regularly retained by the Company,
selected by the Board of Directors of the Company or the Executive Committee of
said Board, and not disapproved by the Transfer Agent, to make any computation
required under this Section, and a certificate signed by such firm shall, in the
absence of fraud or gross negligence, be conclusive evidence of the correctness
of any computation made under this Section.
g. For the purpose of this Section, the term "Common Stock" shall mean
(i) the Common Stock or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time as a result of an adjustment made pursuant
to this Section, the holder of any Warrant thereafter surrendered for exercise
shall become entitled to receive any shares of capital stock of the Company
other than shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section, and all
other provisions of this Agreement, with respect to the Common Stock, shall
apply on like terms to any such other shares.
h. The Company may, from time to time and to the extent permitted by
law, reduce the exercise price of the Warrants by any amount for a period of not
less than twenty (20) days. If the Company so reduces the exercise price of the
Warrants, it will give not less than fifteen (15) days’ notice of such decrease,
which notice may be in the form of a press release, and shall take such other
steps as may be required under applicable law in connection with any offers or
sales of securities at the reduced price.
17. REDUCTION OF EXERCISE PRICE BELOW PAR VALUE. Before taking any action that
would cause an adjustment pursuant to Section 16 hereof reducing the portion of
the Exercise Price required to purchase one share of capital stock below the
then par value (if any) of a share of such capital stock, the Company will use
its best efforts to take any corporate action which, in the opinion of its
counsel, may be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of such capital stock.
18. NOTICE TO WARRANT HOLDERS. In case the Company after the date hereof shall
propose (i) to offer to the holders of Common Stock, generally, rights to
subscribe to or purchase any additional shares of any class of its capital
stock, any evidences of its indebtedness or assets, or any other rights or
options or (ii) to effect any reclassification of Common Stock (other than a

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 56
CRC: 21351
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 9
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.09.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040509/3*

<PAGE>
9
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization, or any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale, transfer or other
disposition of its property and assets substantially as an entirety, or the
liquidation, voluntary or involuntary dissolution or winding-up of the Company,
then, in each such case, the Company shall file with the Transfer Agent and the
Company, or the Transfer Agent on its behalf, shall mail (by first-class,
postage prepaid mail) to all registered holders of the Warrant Certificates
notice of such proposed action, which notice shall specify the date on which the
books of the Company shall close or a record be taken for such offer of rights
or options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up shall take place or commence, as the
case may be, and which shall also specify any record date for determination of
holders of Common Stock entitled to vote thereon or participate therein and
shall set forth such facts with respect thereto as shall be reasonably necessary
to indicate any adjustments in the Exercise Price and the number or kind of
shares or other securities purchasable upon exercise of Warrants which will be
required as a result of such action. Such notice shall be filed and mailed in
the case of any action covered by clause (i) above, at least ten (10) days prior
to the record date for determining holders of the Common Stock for purposes of
such action or, if a record is not to be taken, the date as of which the holders
of shares of Common Stock of record are to be entitled to such offering; and, in
the case of any action covered by clause (ii) above, at least twenty (20) days
prior to the earlier of the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up is expected to become effective and the
date on which it is expected that holders of shares of Common Stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up. Failure to give any such notice or any defect therein
shall not affect the legality or validity of any transaction listed in this
Section.
19. NO FRACTIONAL WARRANTS, UNITS OR SHARES. The Company shall not be required
to issue fractions of Warrants or Units upon the reissue of Warrants or Units,
any adjustments as described in Section 16 or otherwise; but the Company in lieu
of issuing any such fractional interest, shall adjust the fractional interest by
payment to the Warrant or Unit Holder an amount, in cash, equal to the current
market value of any such fraction or interest. If the total Warrants or Units
surrendered by exercise would result in the issuance of a fractional Share, the
Company shall not be required to issue a fractional Share but rather the
resulting fractional interest shall be adjusted by payment in an amount, in
cash, equal to the current market value of such fractional interest. The current
market value for such fractional interest will be the market value of one whole
interest multiplied by the fraction thereof.
20. RIGHTS OF WARRANT HOLDERS. No Warrant Holder, as such, shall have any rights
of a shareholder of the Company, either at law or equity, and the rights of the
Warrant Holders, as such, are limited to those rights expressly provided in this
Agreement or in the Warrant Certificates. The Company and the Transfer Agent may
treat the registered Warrant Holder in respect of any Warrant Certificates as
the absolute owner thereof for all purposes notwithstanding any notice to the
contrary.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 53
CRC: 52123
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 10
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.10.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040510/3*

<PAGE>
10
21. RIGHT OF ACTION. All rights of action in respect to this Agreement are
vested in the respective registered holders of the Warrant and Unit
Certificates; and any registered holder of any Warrant or Unit Certificate,
without the consent of the Transfer Agent or of any other holder of a Warrant or
Unit Certificate, may, in his own behalf for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, or otherwise in respect of, his right to exercise the
Warrants evidenced by such Warrant Certificate, for the purchase of shares of
the Common Stock in the manner provided in the Warrant Certificate and in this
Agreement.
22. AGREEMENT OF WARRANT AND UNIT HOLDERS. Every holder of a Warrant or Unit
Certificate by accepting the same consents and agrees with the Company, the
Transfer Agent and with every other holder of a Warrant or Unit Certificate,
respectively, that:
a. The Warrant and Unit Certificates are transferable on the registry
books of the Transfer Agent only upon the terms and conditions set forth in this
Agreement; and
b. The Company and the Transfer Agent may deem and treat the person in
whose name the Warrant or Unit Certificate is registered as the absolute owner
of the Warrant or Unit, as the case may be, (notwithstanding any notation of
ownership or other writing thereon made by anyone other than the Company or the
Transfer Agent) for all purposes whatever and neither the Company nor the
Transfer Agent shall be affected by any notice to the contrary.
23. TRANSFER AGENT. The Company hereby appoints the Transfer Agent to act as the
agent of the Company and the Transfer Agent hereby accepts such appointment upon
the following terms and conditions by all of which the Company and every Warrant
and Unit Holder, by acceptance of his Warrants or Units, shall be bound:
a. Statements contained in this Agreement and in the Warrant and Unit
Certificates shall be taken as statements of the Company. The Transfer Agent
assumes no responsibility for the correctness of any of the same except such as
describes the Transfer Agent or for action taken or to be taken by the Transfer
Agent.
b. The Transfer Agent shall not be responsible for any failure of the
Company to comply with any of the Company’s covenants contained in this
Agreement or in the Warrant or Unit Certificates.
c. The Transfer Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Transfer Agent shall incur no
liability or responsibility to the Company or to any Warrant or Unit Holder in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel, provided the
Transfer Agent shall have exercised reasonable care in the selection and
continued employment of such counsel.
d. The Transfer Agent shall incur no liability or responsibility to the
Company or to any Warrant or Unit Holder for any action taken in reliance upon
any notice, resolution, waiver,

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 57
CRC: 52369
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 11
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.11.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040511/3*

<PAGE>
11
consent, order, certificate or other paper, document or instrument believed by
it to be genuine and to have been signed, sent or presented by the proper party
or parties.
e. The Company agrees to pay to the Transfer Agent reasonable
compensation for all services rendered by the Transfer Agent in the execution of
this Agreement, to reimburse the Transfer Agent for all expenses, taxes and
governmental charges and all other charges of any kind or nature incurred by the
Transfer Agent in the execution of this Agreement and to indemnify the Transfer
Agent and save it harmless against any and all liabilities, including judgments,
costs and counsel fees, arising from the Transfer Agent’s engagement under this
Agreement except as a result of the Transfer Agent’s negligence, bad faith or
willful misconduct.
f. The Transfer Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more Warrant or Unit Holders shall furnish
the Transfer Agent with reasonable security and indemnity for any costs and
expenses which may be incurred in connection with such action, suit or legal
proceeding, but this provision shall not affect the power of the Transfer Agent
to take such action as the Transfer Agent may consider proper, whether with or
without any such security or indemnity. All rights of action under this
Agreement or under any of the Warrants or Units may be enforced by the Transfer
Agent without the possession of any of the Warrant or Unit Certificates or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Transfer Agent shall be
brought in its name as Transfer Agent, and any recovery of judgement shall be
for the ratable benefit of the Warrant or Unit Holders as their respective
rights or interest may appear.
g. The Transfer Agent and any shareholder, director, officer or
employee of the Transfer Agent may buy, sell or deal in any of the Warrants,
Units or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Transfer Agent under this Agreement. Nothing herein shall preclude the Transfer
Agent from acting in any other capacity for the Company or for any other legal
entity.
24. SUCCESSOR TRANSFER AGENT. Any legal entity into which the Transfer Agent may
be merged or converted or with which it may be consolidated, or any legal entity
resulting from any merger, conversion or consolidation to which the Transfer
Agent shall be a party, or any legal entity succeeding to the corporate trust
business of the Transfer Agent, shall be the successor to the Transfer Agent
hereunder without the execution or filing of any paper or any further act of a
party or the parties hereto provided such legal entity is eligible to be
appointed under Section 25 below. In any such event or if the name of the
Transfer Agent is changed, the Transfer Agent or such successor may adopt the
countersignature of the original Transfer Agent and may countersign such Warrant
or Unit Certificates either in the name of the predecessor Transfer Agent or in
the name of the successor Transfer Agent.
25. CHANGE OF TRANSFER AGENT. The Transfer Agent may resign or be discharged by
the Company from its duties under this Agreement by the Transfer Agent or the
Company, as the case may be, giving notice in writing to the other, and by
giving a date when such resignation or discharge shall take effect, which notice
shall be sent at least thirty (30) days prior to the date so

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 55
CRC: 64832
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 12
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.12.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040512/3*

<PAGE>
12
specified. If the Transfer Agent shall resign, be discharged or shall otherwise
become incapable of acting, the Company shall appoint a successor to the
Transfer Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Transfer Agent or by
any Warrant or Unit Holder or after discharging the Transfer Agent, then the
Company agrees to perform the duties of the Transfer Agent hereunder until a
successor Transfer Agent is appointed. Any successor Transfer Agent shall be a
bank or a trust company, in good standing, organized under the laws of any state
of the United States of America, having a combined capital and surplus of at
least $4,000,000 at the time of its appointment as Transfer Agent. After
appointment, the successor Transfer Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Transfer Agent without further act or deed, and the former Transfer Agent shall
deliver and transfer to the successor Transfer Agent any property at the time
held by it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for effecting the delivery or transfer. Failure to give
any notice provided for in this Section, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the
Transfer Agent or the appointment of the successor Transfer Agent, as the case
may be.
26. NOTICES. Any notice or demand authorized by this Agreement to be given or
made by the Transfer Agent or by any Warrant or Unit Holder to or on the Company
shall be sufficiently given or made if sent by mail, first class, certified or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Transfer Agent), as follows:
TASER International, Inc.
7860 E. McClain Drive, Suite 2
Scottsdale, Arizona 85260
Any notice or demand authorized by this Agreement to be given or made
by any Warrant or Unit Holder or by the Company to or on the Transfer Agent
shall be sufficiently given or made if sent by mail, first class, certified or
registered, postage prepaid, addressed (until another address is filed in
writing by the Transfer Agent with the Company), as follows:
US Stock Transfer Corporation
1745 Gardena Avenue
Glendale, California 91204
Any distribution, notice or demand required or authorized by this
Agreement to be given or made by the Company or the Transfer Agent to or on the
Warrant or Unit Holders shall be sufficiently given or made if sent by mail,
first class, certified or registered, postage prepaid, addressed to the Warrant
or Unit Holders at their last known addresses as they shall appear on the
registration books for the Warrant or Unit Certificates maintained by the
Transfer Agent.
27. SUPPLEMENTS AND AMENDMENTS. The Company and the Transfer Agent may from time
to time supplement or amend this Agreement without the approval of any Warrant
or Unit Holders in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 36
CRC: 49200
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 13
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.13.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
13
provisions in regard to matters or questions arising hereunder which the Company
and the Transfer Agent may deem necessary or desirable.
28. SUCCESSORS. All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Transfer Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
29. TERMINATION. This Agreement shall terminate at the close of business on the
Expiration Date or such earlier date upon which all Warrants have been
exercised; provided, however, that if exercise of the Warrants is suspended
pursuant to Section 15 and such suspension continues past the Expiration Date,
this Agreement shall terminate at the close of business on the business day
immediately following expiration of such suspension. The provisions of Section
23 shall survive such termination.
30. GOVERNING LAW. This Agreement and each Warrant and Unit Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
[California] and for all purposes shall be construed in accordance with the laws
of said State.
31. BENEFITS OF
give any person
the Warrant and
this Agreement,
of the Company,

Ed#: 3

*P64567/6040513/3*

THIS AGREEMENT. Nothing in this Agreement shall be construed to
or corporation other than the Company, the Transfer Agent and
Unit Holders any legal or equitable right, remedy or claim under
and this Agreement shall be for the sole and exclusive benefit
the Transfer Agent and the Warrant and Unit Holders.

32. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of such counterparts shall for all purposes be deemed to be an original and
all such counterparts shall together constitute but one and the same instrument.
33. INTEGRATION. As of the date hereof, this Agreement contains the entire and
only agreement, understanding, representation, condition, warranty or covenant
between the parties hereto with respect to the matters herein, supersedes any
and all other agreements between the parties hereto relating to such matters,
and may be modified or amended only by a written agreement signed by both
parties hereto pursuant to the authority granted by Section 27.

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 37
CRC: 61384
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 14
Description: ex-4.5

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.14.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
14
34. DESCRIPTIVE HEADINGS. The descriptive headings of the Sections of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
Date:

_______________, 2001
TASER International, Inc.,
a Delaware corporation
By:_________________________________
Its Chief Executive Officer

SEAL
ATTEST:
____________________________
Its Secretary
US Stock Transfer Corporation,
a ____________ corporation
By:_________________________________
Its Vice President
SEAL
ATTEST:
____________________________
Its Secretary

Ed#: 3

*P64567/6040514/3*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 2
CRC: 49605
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 15
Description: ex-4.5

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.15.00

15
EXHIBIT A
[WARRANT CERTIFICATE]

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 3

*P64567/6040515/3*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 6
CRC: 22031
P64567A3.SUB, DocName: EX-4.5, Doc: 6, Page: 16
Description: OLD EX-4.5

[E/O]

<PAGE>

16
EXHIBIT B
[UNIT CERTIFICATE]

</TEXT>
</DOCUMENT>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 604.05.16.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 5

*P64567/6040516/5*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-10.15, Doc: 7

[B/E]

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

EX-10.15
p64567a3ex10-15.txt
EX-10.15

JB: *

Phone: (602) 223-4455

Operator: BPX31319

PN: DOCHDR 7

Date: 7-MAY-2001 15:05:10.86

SN: *

*DOCHDR/7*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.15, Doc: 7, Page: 1

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.15.01.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 2

*P64567/6101501/2*

1
Exhibit 10.15
[TASER INTERNATIONAL LETTERHEAD]
PROMISSORY NOTE

Amount of Note ($): $75,000 Cash
City: Scottsdale, State: Arizona
Date: July 1, 1999
FOR VALUE RECEIVED the undersigned jointly and severally promise(s) to pay
to the order of:
Malcolm Sherman, currently residing in Scottsdale, Arizona
the principal sum of:
Seventy-Five thousand & no/100 ($75,000.00) dollars together with interest
thereon from date at the rate of:
9.18% Per Annum
until maturity, said principal and interest shall be paid in 24 equal monthly
payments of $3,757.37, beginning on August 15, 1999 with the last payment
submitted on July 15, 2001. (Please see attached Loan Amortization).
Each maker and endorser severally waives demand, protest and notice of
maturity, non-payment or protest and all requirements necessary to hold each of
them liable as makers and endorsers and, should litigation be necessary to
enforce this note, each maker and endorser waives trial by jury and consents to
the personal jurisdiction and venue of a court of subject matter jurisdiction
located in the State of Arizona, and County of Maricopa.
Each maker and endorser further agrees, jointly and severally, to pay all
costs of collection, including a reasonable attorney’s fee in case the principal
of this note or any payment on the principal or any interest thereon is not paid
at the respective maturity thereof, or in case it becomes necessary to protest
the security hereof, whether suit be brought or not.
This note is to be construed and enforced according to the laws of the
State of Arizona; upon default in the payment of principal and/or interest when
due, the whole sum of principal and interest remaining unpaid shall, at the
option of the holder, become immediately due and payable and it shall accrue
interest at the highest rate allowable by law, or, if no highest rate is
otherwise indicated, at ten (10%) percent, from the date of default.
Default shall include, but not be limited to non-payment within ten (10)
days from the due date set out herein.
Unless specifically disallowed by law, should litigation arise hereunder,
service of process therefore may be obtained through certified mail, return
receipt requested; the parties hereto waiving and all rights they may have to
object to the method by which service was perfected.
/s/MWS
/s/TPS

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.15, Doc: 7, Page: 2

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.15.02.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
2
Taser International, Inc. herein acknowledges and agrees to the following,
regarding the herein described Promissory Note.
A. The monies being borrowed are to secure tooling and equipment for that
product as described in the enclosed attachment, marked "A" and listed
as "Steman International Procurement, Quotation No: 98Q01-1-AT," Taser
International, Inc. purchase order numbers: 021025-00, 021026-00,
021027-00, 021028-00, 021024-00 additionally known as "The Advanced
Taser." Additional components as secured by Taser International, Inc. to
complete the production of this product are included in the UCC filing
and are described as electrical components, finished product or
packaging.
B. Taser International, Inc. agrees to the tooling and components as
purchased by the funds of this Promissory Note being subject to a UCC
filing in favor of Malcolm W. Sherman i.e., lender. Said UCC filing to
be valid for the full period of the listed payment schedule. Taser
International, Inc. agrees to the UCC filing of this lien and its
permission is granted for a "floating lien" to be issued to Malcolm W.
Sherman.
C. Taser International, Inc. agrees and acknowledges that they have no
right to sell, transfer, assign, sublease or encumber the equipment or
this agreement or material covered under this agreement.
D. All cost relative to the filing of the above listed UCC filings are to
be born by Taser International, Inc.
All matters pertinent to this Agreement (including its interpretation,
application, validity, performance and breech), shall be governed by, construed
and enforce in accordance with the laws of the State of Arizona. The parties
herein waive trial by jury and agree to submit to the personal jurisdiction and
venue of a court of subject matter jurisdiction located in Maricopa County,
State of Arizona. In the event that litigation results from or arises out of
this Agreement or the performance thereof, the parties agree to reimburse the
prevailing party’s reasonable attorney’s fees, court costs, and all other
expenses, whether or not taxable by the court as costs in addition to any other
relief to which the prevailing party may be entitled. In such event, no action
shall be entertained by said court or any court of competent jurisdiction if
filed more than one year subsequent to the date of the cause(s) of action
actually accrued regardless of whether damages were otherwise as of said time
calculable.
TASER INTERNATIONAL, INC.
------------------------Corporation
/s/ Malcolm W. Sherman
---------------------Payee - Signature
M. W. Sherman
--------------------Payee Name Printed
Attest: /s/ Thomas P. Smith
--------------------------Treasurer - Signature
Thomas P. Smith
--------------------------Treasurer
</TEXT>
</DOCUMENT>

Ed#: 2

*P64567/6101502/2*

By: /s/ Patrick Smith
--------------------President - Signature
Patrick Smith
--------------------President
Corporate Seal
[Corporate Seal]

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-10.16, Doc: 8

[B/E]

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

EX-10.16
p64567a3ex10-16.txt
EX-10.16

JB: *

Phone: (602) 223-4455

Operator: BPX31319

PN: DOCHDR 8

Date: 7-MAY-2001 15:05:10.86

SN: *

*DOCHDR/8*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.16, Doc: 8, Page: 1

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.16.01.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

1
Exhibit 10.16
[TASER INTERNATIONAL LETTERHEAD]

May 26, 2000
Malcolm Sherman
9068 E. Hillery Dr.
Scottsdale, AZ 85260
Dear Malcolm,
This letter is to confirm our previous discussions regarding your pending
retirement as a full time employee of TASER International.
-

As we discussed, we would like you to work directly with Tom Smith to train
him to maintain the current export customer base during the time between
now and your formal retirement on June 30, 2000.

-

The company will continue to pay your normal salary and car allowance up
through June 30, although your work schedule between now and that time will
be at your discretion in order to effectively train Tom and close any
pending deals.

-

After June 30, the company will pay your vacation time of 4 weeks in the
month of July. These payments will be made on a biweekly basis concurrent
with our normal payroll.

-

Your outstanding balance of non-reimbursed expenses
will be repaid in full on a biweekly basis starting
payments will be of the same amount as your current
allowance, paid on a biweekly basis concurrent with
disbursements.

-

You will be asked to continue to serve on the board of directors and as an
active significant shareholder. As you are aware, we do not remunerate our
board members with cash compensation. However, the company will extend your
current stock options (20,000 shares) for an additional 5 years after your
formal retirement (i.e. Expiration date of 7/1/2005). All of these options
shall be considered vested as of June 30, 2000 if they have not already
vested prior to that time.

-

Further, the company shall work with you as an independent contractor
(effective May 27th, 2000) in certain foreign countries. Specifically, you
shall be considered the exclusive foreign agent for the countries of:
-

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*P64567/6101601/2*

(approximately $30,000)
on August 15. These
salary plus car
our payroll

India
Nepal
Sri Lanka
PWS:/s/PWS
---

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---

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.16, Doc: 8, Page: 2

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.16.02.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

2
-

BANGLADESH
UKRAINE
JORDAN
ISRAEL

For a period of 12 months (i.e. Through June 30, 2001), these countries
shall be reserved for you, operating as an independent contractor, to
close an exclusive distribution deal. You will be paid a 10% commission
for all sales in these countries for the period of time that you remain
the exclusive agent. This 10% commission shall not include the $20,000
deposit already received from Jordan, but shall include any additional
sums received from the distributor in Jordan. Commissions will be paid
to Sherman as payments are received by TASER International regardless of
shipping dates as listed on purchase orders. Sales prices offered to
Sherman during the course of his appointment as "exclusive agent" shall
be equal to the best of prices offered to any other exclusive agreement
granted by the company. In those instances which requires overages in
billing, i.e. over the export selling price of TASER, these amount are
to be forwarded to third parties for "commissions". TASER International,
Inc, Agrees to forward via wire transfer or company check to such
accounts as directed upon instructions from Sherman after these funds
have been secured. Sherman’s 10% commission is based on the net product
prices as given to Sherman by TASER (less freight and miscellaneous
charges). Once payment of commissions or overages has been remitted as
instructed by Sherman, TASER shall be released of all liability
associated with the specific transactions.
In order to maintain your exclusive agency for these areas, the
following performance criteria must be met (the numbers in each column
represent the number of ADVANCED TASERs sold within the territory):
<Table>
<Caption>
---------------------------------------------------------------------------------------------------Country
3/30
3/30
3/30
3/30
3/30
3/30
2001
2002
2003
2004
2005
2006
---------------------------------------------------------------------------------------------------<S>
<C>
<C>
<C>
<C>
<C>
<C>
India
500
600
720
864
1036
1244
---------------------------------------------------------------------------------------------------Ukraine
300
360
432
518
622
748
--------------------------------------------------------------------------------------------------Sri Lanka
100
120
144
172
208
248
--------------------------------------------------------------------------------------------------Bangladesh
200
240
288
346
414
498
--------------------------------------------------------------------------------------------------Nepal
50
60
72
86
104
124
--------------------------------------------------------------------------------------------------Jordan
200
240
288
346
414
498
--------------------------------------------------------------------------------------------------Israel
200
240
288
346
414
498
---------------------------------------------------------------------------------------------------

</Table>
The sales in each column represent sales in the 12 calendar months
proceeding the date atop the column. Should sales not meet or exceed
this number, the exclusivity will expire without notice and the company
will have the option to pursue other sales opportunities in those
markets without further compensation due.
All inquiries from these territories will be forwarded to Sherman
directly, and no pricing information shall be given to inquiries without
Sherman’s prior consent.
-

Under the terms of this representation, you will be responsible for all
travel and other related expense for you to develop these markets. This
shall include telephone

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*P64567/6101602/2*

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---

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---

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.16, Doc: 8, Page: 3

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.16.03.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
3
charges, cellular air time and all other related incidental expenses. We
will, of course, support your efforts with reasonable collateral materials.
Although you will remain on the payroll for the month of June as an
employee, any sales in these territories (as listed above) beyond the
$20,000 deposit already received from Jordan shall be treated as
commissioned sales in your relationship as an independent contractor.
-

For purposes of supporting your role as a sales agent in the above listed
countries, you may continue to use the title of "Director of Sales and
Marketing." But this exception is FOR THOSE TERRITORIES ONLY. Accordingly,
you may use your existing business cards in conjunction with these
countries.

-

Any potential business outside the scope of countries listed in this
agreement, including any initiated by distributors in the countries listed
within this document (specifically: India, Nepal, Sri Lanka, Bangladesh,
Ukraine, Jordan and Israel), must be approved by TASER International in
advance. The company may accept or reject any offers for additional
countries at its sole discretion. The company has current prospects in
Egypt and other countries in the Middle East and shall pursue those
prospects directly.

-

Effective May 27th, you will be operating as an independent sales
representative and independent contractor in relation to these foreign
sales activities. You will also be responsible for ensuring that all
distribution agreements in those countries comply with US export law and
relevant laws concerning foreign commerce.

-

Although you will remain a member of our board of directors, any
commitments on behalf of the company subsequent to the date of this letter
must be approved, and joint signed by either Tom or Rick Smith as active
officers in the company.

-

All foreign orders shall be prepaid prior to shipment.

-

In the event the company is going to go public through an IPO, be acquired
by another entity, or raise a significant amount of capital to fund
operations, the company shall have the right to buy-out the exclusivity
provisions outlined above by a single payment equivalent to 6 months’
historical commissions.

-

I trust that the above accurately memorializes our discussion of yesterday.
Should a disagreement arise over any of the provisions relating to your
retirement, or the subsequent sales representation outlined above, we shall
first sit over a beer and work it out. If this is unsuccessful, both
parties (TASER International and Malcolm Sherman) hereby agree that any
disputes shall be settled in binding arbitration under the rules of the
American Arbitration Association. Specifically, this agreement sets forth
the entire understanding and agreement of the parties hereto with respect
to the subject matter hereof and supersedes all other representations and
understandings both written and oral. This agreement is drafted under the
laws of the state of Arizona, and the venue for any legal recourse shall
take place under laws as written in Arizona, and the venue for any legal
recourse shall take place under these laws and be adjudicated within its
jurisdiction. Further, the parties agree that any controversy or claim
arising out of, or relating to, this contract, or the breach thereof, shall
be settled by arbitration in accordance with the rules of the American
Arbitration

PAGE 3

Ed#: 2

*P64567/6101603/2*

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---

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---

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.16, Doc: 8, Page: 4

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.16.04.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
4
Association in the state of Arizona, USA under their auspices and the
parties agree to have any dispute heard and adjudicated under these rules
in the state of Arizona USA and both parties agree to be bound by the
decision of the arbitrator and to pay their proportionate fees as required
under the rules of the association and judgment upon the award rendered by
the arbitrator(s) may be entered into any court having jurisdiction
thereof.
-

This agreement may be amended or modified only in writing, signed in
advance by the parties hereto or their designated representatives. This
agreement shall inure to the benefit of and be binding upon the parties
hereto, and their respective successors and assigns.

-

This memorandum outlines all terms related to your pending retirement, and
the parties agree that any and all documents and or agreements entered into
or/of prior date to this agreement are herein cancelled and mutually
abrogated by the parties.

-

This memorandum outlines all terms related to your pending retirement, and
the parties hereby mutually release each other from any and all claims
and/or obligations related to your employment as Director of Sales and
Marketing for TASER International other than those obligations outlined
herein. Pre-existing financial obligations currently owed to you (such as
your salary, vacation pay, notes payable and accrued expenses) shall
survive this agreement in their current form.

-

TASER agrees to pay Sherman all outstanding balances owed as outlined above
regardless and excluded from the releases in the preceding paragraph. These
expenses will carry an effective interest rate of 10% per annum, accrued
monthly on the unpaid balance only, until the entire principal and accrued
interest is paid in full. Such interest shall be calculated from the
beginning date at which the expenses were outstanding (i.e. the average
monthly balance). However, any prior financing charges will be applied as
credits against the interest owed.

-

Regarding office space, TASER will make temporary office space available
through the end of July, 2000. After that time, the company will plan to
redistribute the use of space within our offices. Further, TASER will make
partial secretarial support available for preparation of formal letters and
contracts in conjunction with TASER sales for those territories assigned to
Sherman as a part of this contract only.

Malcolm, I’ve truly enjoyed the past 6 years together. I’ve grown tremendously
working with you. I wish you nothing but the best and hope you find more time
over the coming months and years to take some well-deserved personal time.
Sincerely,
/s/ Rick W. Smith
----------------Rick W. Smith
President, TASER
International
PAGE 4
</TEXT>
</DOCUMENT>

Understood and Agreed,
5/26/2000
--------date

Ed#: 2

*P64567/6101604/2*

/s/ Malcolm W. Sherman
---------------------Malcolm W. Sherman

PWS:/s/PWS
---

5/26/2000
--------date

MWS:/s/MWS
---

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-10.17, Doc: 9

[B/E]

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

EX-10.17
p64567a3ex10-17.txt
EX-10.17

JB: *

Phone: (602) 223-4455

Operator: BPX31319

PN: DOCHDR 9

Date: 7-MAY-2001 15:05:10.86

SN: *

*DOCHDR/9*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.17, Doc: 9, Page: 1

[E/O]

<PAGE>
<R>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.17.02.00

Ed#: 4

*P64567/6101702/4*

1
[SILICON VALLEY BANK LETTERHEAD]

IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB0IIS3615
DATE: APRIL 13, 2001
BENEFICIARY:
TASER INTERNATIONAL, INC.
7860 E. MCCLAIN DRIVE, SUITE 2
SCOTTSDALE, AZ 85260
ATTN: KATHY HANRAHAN, CONTROLLER
(480) 905-2012
APPLICANT:
BRUCE R. CULVER & DONNA T. CULVER
6592 E. OAK SPRING DRIVE
OAK PARK, CA 91377
(818) 991-9950
AMOUNT: US$500,000.00 (FIVE HUNDRED THOUSAND AND 00/100 U.S. DOLLARS)
EXPIRATION DATE: DECEMBER 31, 2001
LOCATION: AT OUR COUNTERS IN SANTA CLARA, CALIFORNIA
DEAR SIR/MADAM:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO.
SVB0IIS3615 IN YOUR FAVOR AVAILABLE BY YOUR DRAFTS DRAWN ON US AT SIGHT AND
ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
1. THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT(S), IF ANY.
PARTIAL DRAWS ARE ALLOWED. THIS LETTER OF CREDIT MUST ACCOMPANY ANY
DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING AMOUNT AND WILL BE
RETURNED TO THE BENEFICIARY UNLESS IT IS FULLY UTILIZED.
DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF
CREDIT.
DOCUMENTS MUST BE FORWARDED TO US BY OVERNIGHT DELIVERY SERVICE TO:
SILICON VALLEY BANK, 3003 TASMAN DRIVE, SANTA CLARA CA 95054, ATTN:
INTERNATIONAL DIVISION.
WE HEREBY AGREE WITH THE DRAWERS, ENDORSERS AND BONAFIDE HOLDERS THAT
THE DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS
OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO THE
DRAWEE, IF NEGOTIATED ON OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.
</R>
PAGE 1 OF 2

Date: 7-MAY-2001 15:05:10.86

SN: 0

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.17, Doc: 9, Page: 2

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.17.03.00

Ed#: 3

*P64567/6101703/3*

2
[SILICON VALLEY BANK LETTERHEAD]

IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB011S3615
DATE: APRIL 13, 2001
EXCEPT AS EXPRESSLY STATED HEREIN THIS LETTER OF CREDIT IS SUBJECT TO THE
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION),
INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500.

/s/ Danny J. Rowan
-------------------AUTHORIZED SIGNATURE

/s/ Dawn Y. Shinsato
-------------------AUTHORIZED SIGNATURE

DANNY J. ROWAN

DAWN Y. SHINSATO

PAGE 2 OF 2

Date: 7-MAY-2001 15:05:10.86

SN: 0

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.17, Doc: 9, Page: 3

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.17.04.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

3
March 30, 2001

Board of Directors
TASER, International, Inc.
7860 East McClain Drive, Suite 2
Scottsdale, Arizona 85260-1627
Letter of Support
Gentlemen:
<R>
The undersigned Phillips W. Smith and Bruce R. Culver are directors of
TASER International, Inc., a Delaware corporation (the "Company"). Through
loans, advances, provisions of guarantees, and other arrangements, we have from
time-to-time supported financially and otherwise the business of the Company.
</R>
We agree, by this letter, to continue to support the Company by
establishing an irrevocable, standby letter of credit issued by a bank of
recognized standing in an amount not less than $500,000. The letter of credit is
intended to provide additional financial resources on which the Company may rely
in the event of its suffering a working capital deficit or otherwise. Such
letter of credit may be drawn upon by the Company at any time prior to
December 31, 2001 upon presentation to the bank of a resolution validly
adopted by the Board of Directors of the Company confirming a determination by
the Board of Directors of the Company’s need for additional funds and electing
to draw upon such letter of credit.
In consideration of this letter of support and the provision of the letter
of credit, the Company shall pay each of us $10,000, and in the event of a draw
upon the letter of credit, enter into commercially reasonable arrangements for
the repayment to us of amounts so drawn.
If the foregoing accurately reflects our understanding, please so indicate
by signing the enclosed copy of this letter and returning it to us.
Very truly yours,
/s/ Phillips W. Smith
--------------------------------Phillips W. Smith

/s/ Bruce R. Culver
--------------------------------Bruce R. Culver
Agreed and accepted
this 30th day of March 2001.
TASER International, Inc.
/s/ Patrick W. Smith
--------------------------------Patrick W. Smith
Chief Executive Officer and Director
</TEXT>
</DOCUMENT>

Ed#: 5

*P64567/6101704/5*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-10.18, Doc: 10

[B/E]

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

EX-10.18
p64567a3ex10-18.txt
EX-10.18

JB: *

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

PN: DOCHDR 10 SN: *
*DOCHDR/10*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 0
CRC: 0
P64567A3.SUB, DocName: EX-10.18, Doc: 10, Page: 1

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.18.01.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

1
Exhibit 10.18
[TASER INTERNATIONAL(R) LOGO]

<R>
7339 East Evans Road - Scottsdale, AZ - 85280 - USA - (480) 991-0791 Fax (480) 991-0791
</R>
AMENDMENT TO PROMISSORY NOTE(S)
Note Balance: __________
City/State: Scottsdale, Arizona
Date of Amendment: 3/30/01
This Amendment No. __ to the Original Loans and Security Agreement
(this "Amendment") is made as of March 30, 2001 by and between TASER
International Inc. ("Borrower") and _____________ ("Lender").
Borrower and Lender are parties to, among other documents, a
Promissory Note agreement as of ______ (date of initial investment). Borrower
and Lender desire to amend the Promissory Notes in accordance with the following
terms.
NOW THEREFORE, Borrower and Lender agree as follows:
4.

The Maturity Dates are hereby amended to July 1, 2002. With an
additional provision that the company may at its discretion,
extend the maturity date 2 consecutive terms of 12 months each to
cover working capital shortfalls.

Unless otherwise defined, all other terms specified in the Promissory Notes
shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date
above written.
Borrower:

Lender:

TASER International Inc.

By: /s/ Patrick W. Smith
_____________________

____________________

Name: Patrick W. Smith

Name:

</TEXT>
</DOCUMENT>

Ed#: 6

*P64567/6101801/6*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-10.19, Doc: 11

[B/E]

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

EX-10.19
p64567a3ex10-19.txt
EX-10.19

JB: *

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

PN: DOCHDR 11 SN: *
*DOCHDR/11*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 8
CRC: 3547
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 1
Description: Exhibit 10.19

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.01.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

1
Exhibit 10.19
LOAN AND SECURITY AGREEMENT
TASER INTERNATIONAL, INC.
1

Ed#: 1

*P64567/6101901/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 62
CRC: 62733
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 2
Description: Exhibit 10.19

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.02.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 1

*P64567/6101902/1*

2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>
1

ACCOUNTING AND OTHER TERMS..............................................................................

Page
---<C>
4

2

LOAN AND TERMS OF PAYMENT...............................................................................
2.1
Promise to Pay.................................................................................
2.2
Interest Rate, Payments........................................................................
2.3
Fees...........................................................................................

4
4
4
5

3

CONDITIONS OF LOANS.....................................................................................
3.1
Conditions Precedent to Initial Advance........................................................
3.2
Conditions Precedent to all Advances...........................................................

5
5
5

4

CREATION OF SECURITY INTEREST...........................................................................
4.1
Grant of Security Interest.....................................................................

5
5

5

REPRESENTATIONS AND WARRANTIES..........................................................................
5.1
Due Organization and Authorization.............................................................
5.2
Collateral.....................................................................................
5.3
Litigation.....................................................................................
5.4
No Material Adverse Change in Financial Statements.............................................
5.5
Solvency.......................................................................................
5.6
Regulatory Compliance..........................................................................
5.7
Subsidiaries...................................................................................
5.8
Full Disclosure................................................................................

5
5
6
6
6
6
6
7
7

6

AFFIRMATIVE COVENANTS...................................................................................
6.1
Government Compliance..........................................................................
6.2
Financial Statements, Reports, Certificates....................................................
6.3
Inventory; Returns.............................................................................
6.4
Taxes..........................................................................................
6.5
Insurance......................................................................................
6.6
Primary Accounts...............................................................................
6.7
Further Assurances.............................................................................

7
7
7
7
8
8
8
8

7

NEGATIVE
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9

COVENANTS......................................................................................
Dispositions...................................................................................
Changes in Business, Ownership, Management or Business Locations...............................
Mergers or Acquisitions........................................................................
Indebtedness...................................................................................
Encumbrance....................................................................................
Distributions; Investments.....................................................................
Transactions with Affiliates...................................................................
Subordinated Debt..............................................................................
Compliance.....................................................................................

8
8
8
9
9
9
9
9
9
9

8

EVENTS OF DEFAULT.......................................................................................
8.1
Payment Default................................................................................
8.2
Covenant Default...............................................................................
8.3
Material Adverse Change........................................................................
8.4
Attachment.....................................................................................
8.5
Insolvency.....................................................................................
8.6
Other Agreements...............................................................................

9
10
10
10
10
10
10

</TABLE>
2

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 40
CRC: 920
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 3
Description: Exhibit 10.19

[E/O]

<PAGE>
<TABLE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.03.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 1

*P64567/6101903/1*

3

<S>
Judgments......................................................................................
Misrepresentations.............................................................................
Guaranty.......................................................................................

<C>
10
11
11

9

BANK’S RIGHTS AND REMEDIES..............................................................................
9.1
Rights and Remedies............................................................................
9.2
Power of Attorney..............................................................................
9.3
Accounts Collection............................................................................
9.4
Bank Expenses..................................................................................
9.5
Bank’s Liability for Collateral................................................................
9.6
Remedies Cumulative............................................................................
9.7
Demand Waiver..................................................................................

11
11
11
12
12
12
12
12

10

NOTICES.................................................................................................

12

11

CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER.............................................................

13

12

GENERAL PROVISIONS......................................................................................
12.1
Successors and Assigns.........................................................................
12.2
Indemnification................................................................................
12.3
Time of Essence................................................................................
12.4
Severability of Provision......................................................................
12.5
Amendments in Writing, Integration.............................................................
12.6
Counterparts...................................................................................
12.7
Survival.......................................................................................
12.8
Confidentiality................................................................................
12.9
Attorneys’ Fees, Costs and Expenses............................................................

13
13
13
13
13
13
13
14
14
14

13

DEFINITIONS.............................................................................................
13.1
Definitions....................................................................................

14
14

Bruce R. Culver and Donna T. Culver..............................................................................

5

Silicon Valley Bank..............................................................................................

5

8.7
8.8
8.9

</TABLE>
3

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 68
CRC: 51315
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 4
Description: Exhibit 10.19

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.04.00

[E/O]

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>

4
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated April 26,
2001, between SILICON VALLEY BANK ("Bank"), whose address is 3003
Tasman Drive, Santa Clara, California 95054 with a loan production
office located at 4455 E. Camelback Road, Suite E-290, Phoenix, Arizona
85018 and TASER INTERNATIONAL, INC. ("Borrower"), whose address is 7860
East McClain Drive, Suite 2, Scottsdale, AZ 85260 provides the terms on
which Bank will lend to Borrower and Borrower will repay Bank. The
parties agree as follows:

1

ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2

LOAN AND TERMS OF PAYMENT

2.1

PROMISE TO PAY.

Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1

REVOLVING ADVANCES.

(a) Bank will make Advances not exceeding the Committed Revolving Line.
Amounts borrowed under this Section may be repaid and reborrowed during the term
of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower’s deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
(d) Bank’s obligation to lend the undisbursed portion of the
Obligations will terminate if, in Bank’s sole discretion, there has been a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospect of repayment of
the Obligations, or there has been any material adverse deviation by Borrower
from the most recent business plan of Borrower presented to and accepted by Bank
prior to the execution of this Agreement.
2.2

INTEREST RATE, PAYMENTS.

(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of 1 percentage point above the Prime
Rate. After an Event of Default, Obligations accrue interest at 5 percent above
the rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable
on the last day of each month. Bank may debit any of Borrower’s deposit accounts
including Account Number ___________________ for principal and interest payments
owing or any amounts Borrower owes
4

Ed#: 1

*P64567/6101904/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 64
CRC: 64502
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 5
Description: Exhibit 10.19

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.05.00

[E/O]

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
5
Bank. Bank will promptly notify Borrower when it debits Borrower’s accounts.
These debits are not a set-off. Payments received after 12:00 noon Pacific time
are considered received at the opening of business on the next Business Day.
When a payment is due on a day that is not a Business Day, the payment is due
the next Business Day and additional fees or interest accrue.
2.3

FEES.
Borrower will pay:

(a) Facility Fee. A fully earned, non-refundable Facility Fee of
$45,000 due no later than May 15, 2001; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys’
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
3

CONDITIONS OF LOANS

3.1

CONDITIONS PRECEDENT TO INITIAL ADVANCE.

Bank’s obligation to make the initial Advance is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
3.2

CONDITIONS PRECEDENT TO ALL ADVANCES.

Bank’s obligations to make each Advance, including the initial Advance,
is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
<R>
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Advance and no Event of Default may have occurred and be continuing, or result
from the Advance. Each Advance is Borrower’s representation and warranty on that
date that the representations and warranties of Section 5 remain true.
</R>
4

CREATION OF SECURITY INTEREST

4.1

GRANT OF SECURITY INTEREST.

Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower’s duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank’s lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
5

REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:

5.1

DUE ORGANIZATION AND AUTHORIZATION.

Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which
5

Ed#: 2

*P64567/6101905/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 65
CRC: 63305
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 6
Description: Exhibit 10.19

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.06.00

[E/O]

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
6
the conduct of its business or its ownership of property requires that it be
qualified, except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower’s formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2

COLLATERAL.

Borrower has good title to the Collateral, free of Liens except
Permitted Liens. All Inventory is in all material respects of good and
marketable quality, free from material defects.
5.3

LITIGATION.

Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower’s Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
5.4

NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.

All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5

SOLVENCY.

The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6

REGULATORY COMPLIANCE.

Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.

6

Ed#: 1

*P64567/6101906/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 64
CRC: 29519
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 7
Description: Exhibit 10.19

[E/O]

<PAGE>
5.7

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.07.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

7
SUBSIDIARIES.

Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8

FULL DISCLOSURE.

No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. Bank
recognizes that the projections and forecasts provided by Borrower in good faith
and based upon reasonable assumptions are not viewed as facts and that actual
results during the period or periods covered by such projections and forecasts
may differ from the projected and forecasted results.
6

AFFIRMATIVE COVENANTS

Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:
6.1

GOVERNMENT COMPLIANCE.

Borrower will maintain its and all Subsidiaries’ legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower’s business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower’s business or operations
or would reasonably be expected to cause a Material Adverse Change.
6.2

FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower’s consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than 90 days after
the last day of Borrower’s fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) a prompt report of
any legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of $100,000 or
more; and (iv) budgets, sales projections, operating plans or other financial
information Bank reasonably requests.
(b) Allow Bank to audit Borrower’s Collateral at Borrower’s expense.
Such audits will be conducted no more often than every year unless an Event of
Default has occurred and is continuing.
6.3

INVENTORY; RETURNS.

Borrower will keep all Inventory in good and
from material defects. Returns and allowances between
debtors will follow Borrower’s customary practices as
this Agreement. Borrower must promptly notify Bank of
disputes and claims, that involve more than $50,000.

7

Ed#: 1

*P64567/6101907/1*

marketable condition, free
Borrower and its account
they exist at execution of
all returns, recoveries,

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 63
CRC: 42672
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 8
Description: Exhibit 10.19

[E/O]

<PAGE>
6.4

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.08.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

8
TAXES.

Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.
6.5

INSURANCE.

Borrower will keep its business and the Collateral insured for risks
and in amounts standard for Borrower’s industry, and as Bank may reasonably
request. Insurance policies will be in a form, with companies, and in amounts
that are satisfactory to Bank in Bank’s reasonable discretion. All property
policies will have a lender’s loss payable endorsement showing Bank as an
additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank’s request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy will, at Bank’s option, be payable to Bank on account
of the Obligations.
6.6

PRIMARY ACCOUNTS.

Borrower will maintain its primary depository and operating accounts
with Bank.
6.7

FURTHER ASSURANCES.

Borrower will execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank’s security interest in
the Collateral or to effect the purposes of this Agreement.
7

NEGATIVE COVENANTS

Borrower will not do any of the following without Bank’s prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:
7.1

DISPOSITIONS.

Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; or (iii) of worn-out or obsolete Equipment.
7.2

CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.

Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management of greater than
25% (other than by the sale of Borrower’s equity securities in a public offering
or to venture capital investors so long as Borrower identifies the venture
capital investors prior to the closing of the investment). Borrower will not,
without at least 30 days prior written notice, relocate its chief executive
office or add any new offices or business locations in which Borrower maintains
or stores over $5,000 in Borrower’s assets or property.

8

Ed#: 1

*P64567/6101908/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 64
CRC: 3460
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 9
Description: Exhibit 10.19

[E/O]

<PAGE>
7.3

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.09.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

9
MERGERS OR ACQUISITIONS.

Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4

INDEBTEDNESS.

Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5

ENCUMBRANCE.

Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6

DISTRIBUTIONS; INVESTMENTS.

Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock.
7.7

TRANSACTIONS WITH AFFILIATES.

Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower’s business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a nonaffiliated Person.
7.8

SUBORDINATED DEBT.

Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank’s prior written consent.
7.9

COMPLIANCE.

Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Advance for that purpose; fail to meet the
minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower’s
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8

EVENTS OF DEFAULT
Any one of the following is an Event of Default:
9

Ed#: 1

*P64567/6101909/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 64
CRC: 1242
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 10
Description: Exhibit 10.19

[E/O]

<PAGE>
8.1

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.10.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

10
PAYMENT DEFAULT.

If Borrower fails to pay any of the Obligations within 3 days after
their due date. During the additional period the failure to cure the default is
not an Event of Default (but no Advance will be made during the cure period);
8.2

COVENANT DEFAULT.

<R>
If Borrower violates any covenant in Section 7 or does not perform or
observe any other material term, condition or covenant in this Agreement, any
Loan Documents, or in any agreement between Borrower and Bank and as to any
default under a term, condition or covenant that can be cured, has not cured the
default within 10 days after it occurs, or if the default cannot be cured within
10 days or cannot be cured after Borrower’s attempts within 10 day period, and
the default may be cured within a reasonable time, then Borrower has an
additional period (of not more than 30 days) to attempt to cure the default.
During the additional time, the failure to cure the default is not an Event of
Default (but no Advances will be made during the cure period);
</R>
8.3

MATERIAL ADVERSE CHANGE.

If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower; or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations; or (iii) is a material impairment of the value or priority of
Bank’s security interests in the Collateral.
8.4

ATTACHMENT.

If any material portion of Borrower’s assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower’s assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower’s assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Advances will be made
during the cure period);
8.5

INSOLVENCY.

If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Advances will be made before any
Insolvency Proceeding is dismissed);
8.6

OTHER AGREEMENTS.

If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000 or that could cause a Material Adverse Change;
8.7

JUDGMENTS.

If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Advances
will be made before the judgment is stayed or satisfied);

10

Ed#: 2

*P64567/6101910/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 68
CRC: 51234
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 11
Description: Exhibit 10.19

[E/O]

<PAGE>
8.8

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.11.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

11
MISREPRESENTATIONS.

If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document; or
8.9

GUARANTY.

<R>
Any guaranty of any Obligations ceases for any reason to be in full
force or any Guarantor does not perform any obligation under any guaranty of the
Obligations, or any material misrepresentation or material misstatement exists
now or later in any warranty or representation in any guaranty of the
Obligations or in any certificate delivered to Bank in connection with the
guaranty, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to
any Guarantor, or any event of default under that certain Third Party Broker
Account Pledge Agreement, of even date, by and between Bruce R. Culver and Donna
T. Culver and Bank, securing the guaranty executed by Bruce R. Culver as a
Guarantor.
</R>
9

BANK’S RIGHTS AND REMEDIES

9.1

RIGHTS AND REMEDIES.

When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 0 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower’s benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2

POWER OF ATTORNEY.

Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower’s name
on any checks or other forms of payment or security; (ii) sign Borrower’s name
on any invoice or bill of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under
11

Ed#: 3

*P64567/6101911/3*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 68
CRC: 5258
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 12
Description: Exhibit 10.19

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.12.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>
12
Borrower’s insurance policies; (iv) settle and adjust disputes and claims about
the Accounts directly with account debtors, for amounts and on terms Bank
determines reasonable; and (v) transfer the Collateral into the name of Bank or
a third party as the Code permits. Bank may exercise the power of attorney to
sign Borrower’s name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of Default
has occurred. Bank’s appointment as Borrower’s attorney in fact, and all of
Bank’s rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank’s obligation to
provide Advances terminates.
9.3

ACCOUNTS COLLECTION.

When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank’s security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4

BANK EXPENSES.

<R>
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of Default.
</R>
9.5

BANK’S LIABILITY FOR COLLATERAL.

If Bank complies with reasonable banking practices and the Code, it is
not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to
the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, or other person. Borrower
bears all risk of loss, damage or destruction of the Collateral.
9.6

REMEDIES CUMULATIVE.

Bank’s rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank’s exercise of one right or
remedy is not an election, and Bank’s waiver of any Event of Default is not a
continuing waiver. Bank’s delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7

DEMAND WAIVER.

Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10

NOTICES

All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
12

Ed#: 2

*P64567/6101912/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 63
CRC: 47812
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 13
Description: Exhibit 10.19

[E/O]

<PAGE>
11

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.13.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

13
CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

Arizona law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the process, venue and
exclusive jurisdiction of the State and Federal courts in Maricopa County,
Arizona.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12

GENERAL PROVISIONS

12.1

SUCCESSORS AND ASSIGNS.

This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank’s prior written consent which may be granted or
withheld in Bank’s discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank’s obligations, rights and benefits
under this Agreement.
12.2

INDEMNIFICATION.

Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank’s gross negligence or willful misconduct.
12.3

TIME OF ESSENCE.

Time is of the essence for the performance of all obligations in this
Agreement.
12.4

SEVERABILITY OF PROVISION.

Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5

AMENDMENTS IN WRITING, INTEGRATION.

All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
12.6

COUNTERPARTS.

This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.

13

Ed#: 2

*P64567/6101913/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 67
CRC: 36439
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 14
Description: Exhibit 10.19

[E/O]

<PAGE>
12.7

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.14.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

14
SURVIVAL.

<R>
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
</R>
12.8

CONFIDENTIALITY.

In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank’s subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank’s
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank’s possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9

ATTORNEYS’ FEES, COSTS AND EXPENSES.

In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys’ fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.
13

DEFINITIONS

13.1

DEFINITIONS.
In this Agreement:

"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower’s Books relating to any of the
foregoing, as such definition may be amended from time to time.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER’S BOOKS" are all Borrower’s books and records including
ledgers, records regarding Borrower’s assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
14

Ed#: 2

*P64567/6101914/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 69
CRC: 46608
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 15
Description: Exhibit 10.19

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.15.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>

15
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is an Advance of up to $1,500,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest, as such definition may be amended from time to
time.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"GAAP" is generally accepted accounting principles.
"GUARANTOR" is any present or future guarantor of the Obligations,
including Bruce R. Culver.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
15

Ed#: 1

*P64567/6101915/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 67
CRC: 17825
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 16
Description: Exhibit 10.19

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.16.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>

16
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
<R>
"MATERIAL ADVERSE CHANGE" is described in Section 8.3.
</R>
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower’s indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor’s
Corporation or Moody’s Investors Service, Inc., and (iii) Bank’s certificates of
deposit issued maturing no more than 1 year after issue.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank’s security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower’s business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
16

Ed#: 2

*P64567/6101916/2*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 58
CRC: 3472
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 17
Description: Exhibit 10.19

[E/O]

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.17.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

<PAGE>

17
(e) Leases or subleases granted in the ordinary course of Borrower’s
business, including in connection with Borrower’s leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank’s most recently announced "prime rate," even if it
is not Bank’s lowest rate.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is April 30, 2002.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower’s indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
BORROWER:
TASER International, Inc.
By:

/s/ Kathleen Manrahan
--------------------------------------Title: Secretary & Chief Financial Officer
17

Ed#: 1

*P64567/6101917/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 12
CRC: 63043
P64567A3.SUB, DocName: EX-10.19, Doc: 11, Page: 18
Description: Exhibit 10.19

[E/O]

<PAGE>
BANK:

18

SILICON VALLEY BANK
By:

/s/ Amy Lou Blunt
--------------------------------------Title: Vice President, Relationship Manager
18
</TEXT>
</DOCUMENT>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 610.19.18.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

Ed#: 1

*P64567/6101918/1*

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: *
Validation: N * Lines: *
CRC: *
P64567A3.SUB, DocName: EX-23.2, Doc: 12

[B/E]

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

EX-23.2
p64567a3ex23-2.txt
EX-23.2

JB: *

Phone: (602) 223-4455

Operator: BPX31319

Date: 7-MAY-2001 15:05:10.86

PN: DOCHDR 12 SN: *
*DOCHDR/12*

Ed#: *

BOWNE INTEGRATED TYPESETTING SYSTEM Site: (BPX) BOWNE OF PHOENIX - NEW
Name: TASER
Validation: Y
Lines: 23
CRC: 1252
P64567A3.SUB, DocName: EX-23.2, Doc: 12, Page: 1

[E/O]

<PAGE>

Phone: (602) 223-4455

Operator: BPX31319

JB: P64567 PN: 723.02.01.00

Date: 7-MAY-2001 15:05:10.86

SN: 0

1
Exhibit 23.2

[AA LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<R>
As independent public accountants, we hereby consent to the use of our report
dated April 30, 2001 (and to all references to our firm) included in or made a
part of Amendment #3 of the Registration Statement on Form SB-2.
</R>

<R>
Phoenix, Arizona
April 30, 2001
</R>
</TEXT>
</DOCUMENT>

Ed#: 7

*P64567/7230201/7*