TASER INC [U.S.]
SIMPLIFIED
NOTES RE: -ANNUAL REPORT AND ACCOUNTS 2003
NB
On April 11, 2003, Esequiel Alvarado and Judith Medina sued the City of Los Angeles, Los Angeles Police Department and Officers Roca and Platzer, and the Company in the Superior Court of the State of California, County of Los Angeles, Central District, claiming that their son, Eduardo Alvarado, died as a result of being shot with the TASER conducted energy weapon. The plaintiff's seek unspecified monetary damages.
……………………………………………………………
“The year 2003 was exceptional for TASER International.
Today in over 4,300 law enforcement agencies where our non-lethal weapons are being used to safely end dangerous confrontations .”
TASER found police officer injuries were down 67% in Phoenix, down 85% in Denver, down 66% in South Bend, down 80% in Orange County .
TASER International provided an exceptional return on investment in 2003. Over the course of the year, we saw our pre-split share price grow from $4.21 on January 2 to $82.37 at year end, an increase of 1,857%.

Our annual net revenues increased 148% to $24.5 million, exceeding our original guidance of $15 million by 64%. Each quarter of the year saw record revenues, tripling from $3.4 million in revenue in Q1 to $10.8 million in Q4. Earnings grew even faster, increasing over 2000% from $209,000 in 2002 to over $4.4 million in 2003.
“. In June, we purchased our only direct competitor, Tasertron!”. This acquisition ended costly litigation and gave TASER International clear, uncontested ownership of the well-known TASER» trademark and brand. This purchase, together with our own research programs, also increased our intellectual property portfolio to a total of 12 patents, including a bedrock patent on the ADVANCED TASER M26 waveform that issued in October. At year end, we had an additional five patent applications in varying stages of the application process as we continue to build on our technology base for the future.
We also entered into a key strategic relationship in 2003 with General Dynamics for the development of the TASER Anti-Personnel Munition, or TAPM. (It can shoot from a helicopter.)
We successfully introduced the revolutionary TASER X26 with our newly developed Shaped PulseTM Technology at our tactical conference in May 2003. The new TASER X26 is 60% smaller and 60% lighter. The X26 brings the promise of a practical, convenient TASER system that can be fitted on every officer's police belt. The market has embraced this possibility, with leading departments such as Phoenix, Cincinnati and Charlotte-Mecklenburg deploying the X26 to every patrol officer within months of its introduction. In fact, by Q4, the X26 had surpassed the M26 in sales, accounting for roughly 80% of our TASER system sales during the fourth quarter.
With the knowledge that we have only penetrated 6% of the U.S. law

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-16391
TASER International, Inc.
(Name of small business issuer in its charter)
Delaware 86-0741227
(State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
7860 E. McClain Drive, Suite 2, 85260
(Zip Code) Scottsdale, Arizona
(Address of principal executive offices)
(480) 991-0797

We own the following registered trademarks: TASER» and AIR TASER». We also have the following unregistered trademarks: TASER-Wave TM, T-WAVETM, AUTO TASERTM, ADVANCED TASERTM, Shaped Pulse Technology TM and AFIDTM. Each other trademark, trade name or service mark appearing in this report belongs to its respective holder.
Business
TASER International, Inc. (the ""Company'' or ""we'' or ""us'') began operations in Arizona in 1993 for the purpose of developing and manufacturing less-lethal self-defense devices. From inception until the introduction in 1994 of our first product, the AIR TASER, we were in the developmental stage and focused our efforts on product development, raising capital, hiring key employees and developing marketing materials to promote our product line.

The first full year of ADVANCED TASER product line sales in 1996 it was 2000. In 2003 it was 235,000 Advanced Taser stun guns if the profit we make on each stun gun is $100 then we must have sold 235,000 guns in 2003 and 80% of these in the US, therefore you only sold
47, 000 stun guns for Canada, UK, Australia in one year.

commercial aircraft.
In September 2002, our grant funding was augmented with an additional $349,000 to pursue the concepts developed in Phase I of the award, bringing the total award under this grant to $479,000. At the close of 2002, three years following our initial introduction of the ADVANCED TASER weapon system, we had more than 2000 law enforcement agencies worldwide testing and deploying our M26 weapon system. This number of agencies includes 134 departments who have either purchased, or are in the process of purchasing one unit for each patrol or line level officer.


Military Market
In the military markets, both the United States and abroad, a wide variety of weapon systems are utilized to accomplish the mission at hand. Conducted energy weapons have gained increased acceptance during the last 12 months as a result of the increase in military personnel undertaking a greater policing roll in the conflicts in both Iraq and Afghanistan.

On September 30, 2003, President Bush signed into law the 2004 Fiscal Year Defense Appropriations Bill providing a $1.0 million line item toward the purchase of TASER. TASER International, Inc. is the sole manufacturer of these weapon systems as of the date of this filing.


Consumer Market
These weapons compete with other less-lethal weapons such as stun guns, batons and clubs, and chemical sprays,
In the consumer market, the AIR TASER formerly competed with a conducted energy weapon introduced by Bestex, Inc. in 1996, called the Dual Defense, and indirectly with other less-lethal alternatives.
In July 2002, the Company purchased U.S. Patent No. 5,078,117, from Mr. John Cover. This patent covers the manufacturing design incorporated in our air cartridge, as well as the process used by Bestex in the production of its Dual Defense product. Prior to our purchase, Mr. Cover had granted licenses to both Bestex and TASER International for its use. However, at the time we purchased the patent, Bestex had not renewed its license, and subsequently lost its right to continue utilizing the covered technology. Therefore, we believe our products will only compete with remaining inventories of the Dual Defense system produced prior July 2002, as the continued manufacture by Bestex of the existing Dual Defense system beyond such date would be an infringement of our patent rights.Currently, our best selling weapon in the consumer market is the ADVANCED TASER M18L.
Regulation
United States Regulation
The AIR TASER, ADVANCED TASER, and TASER X26, as well as the cartridges used by these weapons, are subject to identical regulations. None of our weapons are considered to be a ""firearm'' by the Bureau of Alcohol, Tobacco, Firearms and Explosives. Therefore, no firearms-related regulations apply to the sale and distribution of our weapons within the United States. In the 1980's 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.


State Law Enforcement Use Consumer Use
Connecticut Legal Legal, subject to restrictions
Florida Legal Legal, subject to restrictions
Hawaii Legal Prohibited
Illinois Legal Legal, subject to restrictions
Indiana Legal Legal, subject to restrictions
Massachusetts Prohibited Prohibited
Michigan` Legal Prohibited
New Jersey Prohibited Prohibited
New York Legal Prohibited
North Carolina Legal Legal, subject to restrictions
North Dakota Legal Legal, subject to restrictions
Rhode Island Legal Prohibited
Washington Legal Legal, subject to restrictions
Wisconsin Legal Prohibited
The following cities and counties also regulate our weapon systems:


City or County Law Enforcement Use Consumer Use
Annapolis Legal Prohibited
Baltimore Legal Prohibited
Chicago Legal Prohibited
Howard County, MD Legal Prohibited
Lynn County, OH Legal Legal, subject to restrictions
New York City Legal Prohibited
Philadelphia Legal Prohibited
Washington, D.C. Legal Prohibited
United States Export Regulation
Our weapon systems are considered a crime control product by the UK,Denmark, Hong Kong, Italy, Japan, New Zealand, Norway, Sweden, and Switzerland. Additionally, Australia, Canada and India permit our products to be sold only to law enforcement and corrections agencies.
Previously, the United Kingdom was among the countries where TASER technologies were prohibited.





In January 2003, the British Police announced that the national government would be backing a TASER pilot program for five police forces within the UK. The agencies participating in the trial program of the ADVANCED TASER M26 include: the Northamptonshire Police, Lincolnshire Police, Thames Valley Police, North Wales Police and Metropolitan Police.
To date, there have been several successful uses of the TASER reported by these police forces deploying the weapons system.










MONOPOLY STUN GUN MANUFACTURER
We protect our intellectual property with a variety of patents and trademarks. In addition, we use confidentiality agreements with employees, consultants and key suppliers to ensure the confidentiality of our trade secrets.

We hold United States Patent No. 5,771,663, on the construction of the gas cylinder used to store the compressed nitrogen in our cartridges. This patent expires in 2015.

On July 2, 2002, we purchased U.S. Patent
No. 5,078,117 from Mr. John Cover. This patent covers the process by which compressed gases launch the probes in our cartridges and expires in 2009.



THE STUN GUN MONOPOLY
or “(out of the mouth of babes)” by
Sally Ramage
“Using this compressed gas technology instead of gunpowder prevents our products from being classified as firearms by the Bureau of Alcohol, Tobacco and Firearms.”
As part of our acquisition of Taser Technologies, Inc. and Electronic Medical Laboratory Inc., d.b.a. Tasertron, we acquired clear title to seven additional patents to compliment our core technology. The first, U.S. Patent No. 5,654,867, covering weapons for immobilization, expires March 28, 2016. The second, U.S. Patent No. 5,936,183 for non-lethal area denial devices, expires on December 16, 2017. The third, U.S. Patent No. EPO#989483332.6, also for non-lethal area denial devices, expires on September 17, 2018. The fourth, U.S. Patent No. 5,955,695, automatic aiming non-lethal area denial, expires April 13, 2018. The fifth, U.S. Patent No. EOP#98996112.4, automatic aiming non-lethal area denial device. The sixth, U.S. Patent No. 6,256,916, covering stun gun technology, expires January 25, 2019. And, the seventh, U.S. Patent No. 6,269,726, multi-shot, non-lethal taser cartridge remote firing system for protection of facilities and vehicles against personnel. The Company purchased one additional patent during 2003 from a private individual. This patent is related to future projects, and expires in 2015. During 2002 and 2003, to protect core technologies developed in house, the Company applied for several broad-based patents. These patent applications were submitted to cover the ADVANCED TASER and TASER X26, as well as to protect new technologies currently under development. On October 21, 2003, we were issued the first of these patents, U.S. Patent No. 6,636,412. This patent covers the energy wave form developed for the ADVANCED TASER by making claim to all hand held weapons which use the defined range of electrical impulses to incapacitate a human target.
We own the AIR TASER and TASER registered trademarks as well as several unregistered trademarks. In addition, in 2001, we purchased the internet domain name ""TASER.com''.
There is a marvelous new 21' cartridge .The new cartridge, called the XP, was developed to pass through heavy clothing penetration .

AND WE HAD RESEARCH MONEY TO HELP US MAKE THIS WONDERFUL CARTRIDGE.
As of December 31, 2003, we had 130 full-time employees and 21 temporary manufacturing employees. The breakdown by department is follows: 112 direct manufacturing employees and 39 administrative and manufacturing support employees. Of the 39 administrative and manufacturing support employees; fifteen were involved in sales, marketing, communication and training; six were employed in research, development and engineering; seven were employed in administrative functions inclusive of executive management, legal, finance, accounting and investor relations; two were employed in the information systems technologies; and nine were employed in manufacturing support functions.





Corporate Informatio
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. We know who to turn to.
Description of Property, corporate headquarters and manufacturing facilities
Principal Location
A modern 11,800 square-foot leased facility in Scottsdale, Arizona. The monthly rent for this facility is approximately $13,000. Our lease expires on December 31, 2005.
. Our current space is not adequate to facilitate our growth beyond 2005. As a result, we have purchased 4.5 acres of land in North Scottsdale, and are in the process of constructing a new 100,000 square foot facility to house our operations .



Management's Discussion and Analysis or Plan of Operation
We achieved 148% growth in net sales, earned $4.5 million in net income, and generated more than $12.3 million of cash through operating and financing, net of investing activities. We also doubled our law enforcement customer base, growing to more than 4,300 agencies now deploying one of our TASER brand weapons; transacted sales in 40 countries outside of the United States; and, we saw our first United States Military deployments in Iraq.


In May of 2003, we introduced our newest TASER weapon, the TASER X26.
This product was met with significant customer approval, contributing more than $8.1 million of net sales, and another $2.5 million of orders which will ship in the first quarter of 2004. We also introduced our new 21' XP Cartridge, a law enforcement cartridge designed to overcome the heavy clothing penetration issues previously encountered in cold weather climates.


This cartridge is still too new to provide performance statistics from deploying agencies to entry for any new competitor developing similar projects.
We also added new engineering resources to help us expand our technologies into new areas of deployment that includes long-range weapon systems.
At the present time, we are adding on average 500 new departments each quarter, with 15% of those agencies committing to a full deployment, or one TASER for each line level patrol officer.

Heightened interest from
our international customers.

We have a new consumer version of our TASER X26
bringing in 100% extra sales of stun guns for
ordinary people to stun each other with.
$23,000,000 extra sales come from stun guns for the public (even though it is illegal for the public to possess stun guns).
What’s more we got back $4,000,000 tax rebate from the United States government , lucky us,
compared this to the $835,000 in total profit we made
in selling stun guns in 2002.
This means that we sold 17,000 stun guns in 2002 ,
This means we sold 88,000 stun guns in 2003.
That’s a lot of stun guns guys
But wait a minute !
Forgot to tell you, we got $625,000 from the government for research in 2002 and 2003. So we’re flushed !!!!
Any people over there , out there, want some stun guns? We don’t discriminate; we will sell to any colour of cash, anybody….who pays !!
Hey, and guys, guess what,
you’ll never guess guys….

WE SELL LAND MINES TOO !
WONDERFUL, ISN’T IT?
AND GUESS WHO PAID FOR THE RESEARCH ?????

WHY, YOU OF COURSE.. WISH US LUCK, WISH US STUNNING TIMES AHEAD, STUN GUNS, WEAPONS OF MASS DESTRUCTION, LAND MINES, NUKES, SILENT GUNS, STUN PROJECTILES,
THE SKY’S OUR LIMIT, and hey guys,

COME AND INVEST IN US, WHY DON’T YOU? In no time , we’ll be able to make stun guns that will stun all the workers at their desks
THIS IS THE NEW AGE, THE NEW DAWN ,
OF POWER TO THOSE WITH RESEARCH MONEY.
From Wall Street Journal 7.1.05.
“SEC probes safety claims of Taser”.
The Sec is also looking into a $1.5 million, END-OF-YEAR sale of stun guns by Taser to Dabidson’s Ltd, a Prescott, Arizona firearms distributor. This was an informal inquiry, which is a step below a formal enquiry.
-------------------------------------------












The increase in cash provided by operations was due to two key factors: the $4.5 million ofnet income generated and the $4.0 million of tax benefits derived from the exercise of stock options. These
increases were partially off-set by the use of cash from an increase in accounts receivables of $4.5 million
during the year. The Company also increased our inventory balance during the fourth quarter of 2003 to help
prepare for the significant increase in production expected in the first quarter of 2004.
We used $4.2 million of cash in investing activities during 2003, compared to $387,000 of cash used in
investing activities in 2002. Of the funds invested in 2003, $3.0 million was used to purchase land and to
initiate building designs for a new 100,000 square foot manufacturing and administrative facility in Scottsdale,
Arizona. $500,000 was also used to purchase patents and the intellectual property previously owned by the
Company's single largest competitor in the law enforcement market. This asset acquisition was paid using
$500,000 of cash and a note payable for $500,000 paid in 2 equal installments. The purchase resulted in the
acquisition of clear title for the TASER trademark, valued at $900,000 as of December 31, 2003 as well as
other intangible assets valued at $100,000. The remaining $600,000 was used to purchase production
equipment to support the launch of the new TASER X26, and to purchase office equipment and computers for
new employees hired during 2003.

During 2003, we generated $12.2 million of cash from financing activities, as compared to the $838,000
used for financing activities in 2002. $11.0 million of the funds generated resulted from the exercise of both
public and underwriter warrants during the third and fourth quarter of 2003. Option exercises added another
$1.8 million for the year. The funds used in 2002 were applied to the payment of notes payable and our
revolving line of credit.
Capital Resources. On December 31, 2003 we had cash of $15.9 million and less than $5,000 of long
term debt outstanding. Additionally, we generated net income of $4.5 million in 2003, and $209,000 in 2002,
with an expectation of being profitable in 2004. The Company believes after payment of debt and accounts
payable outstanding as of December 31, 2003, its monthly cash flow from operations will be adequate to cover
monthly obligations.
23
We renewed our revolving line of credit through a domestic bank with a total availability of $2.5 million.
The line is secured by substantially all of our assets, other than intellectual property, and bears interest at
varying rates, ranging from LIBOR plus 2.5% to prime. The line of credit matures on May 31, 2004 and
requires monthly payments of interest only. There was no outstanding balance under the line of credit at
December 31, 2003, and no borrowings under the line as of the date of this filing. The Company expects to
renew its line of credit on similar terms at maturity.
We believe that our projected operating income in 2004, when added to the pending cash from the
redemption of our public warrants, and our cash reserves of $15.9 million as of December 31, 2003, will be
adequate to fund our operations in 2004. However, should our marketing efforts abroad result in a large full
scale deployment, or should the military market deployments accelerate due to recent activity overseas, we
may require additional resources to expedite manufacturing of new and existing technologies in order to meet
possible demand for our weapons. Although we believe financing will be available at terms favorable to us,
both through our existing credit lines and possible additional equity financing, there is no assurance that such
funding will be available.
In 2004, we intend to complete the construction of our new manufacturing facility and corporate
headquarters. The anticipated cost to complete this project is approximately $10.0 million. We intend to
finance the completion of this project through a combination of cash, and debt financing which may include
the use of industrial revenue bonds.
Commitment and Contingencies
The following table outlines our future contractual financial obligations, in thousands, as of December 31,
2003:
Less than 1-3 4-5 After 5
Total 1 year years years years
Note payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $250 $250 $ Ì $Ì $Ì
Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 404 251 153 Ì Ì
Capital leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19 15 4 Ì Ì
Total contractual cash obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $673 $516 $157 $Ì $Ì
Item 7. Financial Statements
The information required by this Item is incorporated herein by reference to the financial statements
beginning on page F-1.
Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 8A. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have reviewed the disclosure
controls and procedures relating to the Company at December 31, 2003 and concluded that such controls and
procedures were effective to provide reasonable assurance that all material information about the financial and
operational activities of the Company was made known to them. There were not changes in the Company's
internal control over financial reporting during the quarter ended December 31, 2003 that materially affected,
or are reasonably likely to materially affect, the Company's internal control over financial reporting.
24
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of
the Exchange Act
The information concerning the identification and business experience of directors is incorporated herein by
reference to the information set forth in our definitive proxy statement for the 2004 Annual Meeting of
Stockholders under the heading ""Election of Directors,'' which proxy statement we expect to file with the
Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2003.
The information concerning the identification and business experience of our executive officers is
incorporated herein by reference to the information set forth in our definitive proxy statement for the 2004
Annual Meeting of Stockholders under the heading ""Executive Officers,'' which proxy statement we expect to
file with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended
December 31, 2003.
The information concerning compliance with Section 16(a) of the Exchange Act is incorporated herein
by reference to the information set forth in our definitive proxy statement for 2004 Annual Meeting of
Stockholders under the heading ""Security Ownership of Certain Beneficial Owners and Management Ì
Section 16(a) Beneficial Ownership Reporting Compliance,'' which proxy statement we expect to file with the
Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31,
2003.
The information concerning significant employees and family relationships is incorporated herein by
reference to the information set forth in our definitive proxy statement for the 2004 Annual Meeting of
Stockholders under the heading ""Significant Employees and Family Relationships,'' which proxy statement
we expect to file with the Securities and Exchange Commission within 120 days after the end of our fiscal year
ended December 31, 2003.
The information concerning the Company's code of ethics is incorporated herein by reference to the
information set forth in our definitive proxy statement for the 2004 Annual Meeting of Stockholders under the
heading ""Code of Ethics,'' which proxy statement we expect to file with the Securities and Exchange
Commission within 120 days after the end of our fiscal year ended December 31, 2003.
Item 10. Executive Compensation
The information concerning executive compensation is incorporated herein by reference to the information
set forth in our definitive proxy statement for the 2004 Annual Meeting of Stockholders under the heading
""Executive Compensation,'' which proxy statement we expect to file with the Securities and Exchange
Commission within 120 days after the end of our fiscal year ended December 31, 2003.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The information concerning security ownership of certain beneficial owners and management is
incorporated herein by reference to the information set forth in our definitive proxy statement for the 2004
Annual Meeting of Stockholders under the heading ""Security Ownership of Certain Beneficial Owners and
Management,'' which proxy statement we expect to file with the Securities and Exchange Commission within
120 days after the end of our fiscal year ended December 31, 2003.
Item 12. Certain Relationships and Related Transactions
The information concerning certain relationships and related transactions is incorporated herein by
reference to the information set forth in our definitive proxy statement for the 2004 Annual Meeting of
Stockholders under the heading ""Certain Transactions,'' which proxy statement we expect to file with the
Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31,
2003.
25
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits to Form 10-KSB
Exhibit
Number Description
3.1 Company's Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to
Registration Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as
amended)
3.2 Company's Bylaws, as amended (incorporated by reference to Exhibit 3.2 to Registration Statement
on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.1 Reference is made to pages 1 Ó 4 of Exhibit 3.1 and pages 1 Ó 5 and 12 Ó 14 of Exhibit 3.2
4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to Registration
Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.3 Form of Public Warrant (incorporated by reference to Exhibit 4.3 to Registration Statement on
Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.4 Form of Unit Certificate (incorporated by reference to Exhibit 4.4 to Registration Statement on
Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.5 Form of Warrant and Unit Agreement (incorporated by reference to Exhibit 4.5 to Registration
Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
10.1 Employment Agreement with Patrick W. Smith, dated July 1, 1998 (incorporated by reference to
Exhibit 10.1 to Registration Statement on Form SB-2 effective May 11, 2001 (Registration No.
333-55658), as amended)(1)
10.2 Employment Agreement with Thomas P. Smith, dated November 15, 2000 (incorporated by
reference to Exhibit 10.2 to Registration Statement on Form SB-2 effective May 11, 2001
(Registration No. 333-55658), as amended)(1)
10.3 Employment Agreement with Kathleen C. Hanrahan, dated November 15, 2000 (incorporated by
reference to Exhibit 10.3 to Registration Statement on Form SB-2 effective May 11, 2001
(Registration No. 333-55658), as amended)(1)
10.4 Form of Indemnification Agreement between the Company and its directors (incorporated by
reference to Exhibit 10.4 to Registration Statement on Form SB-2 effective May 11, 2001
(Registration No. 333-55658), as amended)
10.5 Form of Indemnification Agreement between the Company and its officers (incorporated by
reference to Exhibit 10.5 to Registration Statement on Form SB-2 effective May 11, 2001
(Registration No. 333-55658), as amended)
10.6 1999 Employee Stock Option Plan (incorporated by reference to Exhibit 10.6 to Registration
Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)(1)
10.7 2001 Stock Option Plan (incorporated by reference to Exhibit 10.7 to Registration Statement on
Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)(1)
10.8 Form of Warrant issued to Bruce Culver and Phil Smith (incorporated by reference to Exhibit 10.8
to Registration Statement on Form SB-2 effective May 11, 2001 (Registration No. 333-55658), as
amended)
10.9 Promissory Note, dated October 24, 2000, payable to Bank of America in the amount of $60,000
and related guarantee and security documents (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as
amended)
Lease between the Company and Norton P. Remes and Joan A. Remes Revocable Trust, dated
In 2003
the Company began offering customers the right to purchase extended warranties on the ADVANCED
TASER and TASER X26 products. .
. 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.

.
k. Warranty Costs
The Company warrants its product from manufacturing defects, and will replace any defective TASER
. The Company tracks historical data related to returns and related warranty costs on a quarterly basis !!!! and estimate future warranty claims by applying the four quarter average return rate to the product sales
for the period.
2003 2002
Balance at beginning of period Ï$ 59,875 $ 43,250
Utilization of Accrual $ 49,106 62,575
Warranty Expense $302,165 79,200
Balance at end of period $312,934 59,875
.
The Company sells primarily through a network of unaffiliated distributors. ??? The Company also sells directly to the end user. As such, the number of customers for the Company is less than the number of end-users.
Sales to one U.S. customer represented 14.9% of total product
revenue for 2003. In 2002, this same U.S. customer represented 13.6% of sales. No other customer exceeded
10% of total product sales in either 2003 or 2002.


TASER INTERNATIONAL, INC.

The largest of these customers was one of the ten
largest U.S. police forces.
Management has determined that its operations are comprised of one reportable segment. Therefore, no
separate segment disclosures have been included in the accompanying notes to the financial statements.
For the years ended December 31, 2003 and 2002, sales by product were as follows:
2003 2002
(In thousands)
Sales by product line:
ADVANCED TASER ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $15,4000,000
TASER X26 (No cartridges have been included to provide reporting
consistency for prior periods) $ 8,066 ,000
AIR TASERÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 411 966,000
Geographic:
United Other countries 85% ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.6 10
all other countries 15%.
2006ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,127
2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,563
Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $403,957
F-13
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
b. Litigation
On April 11, 2003, Esequiel Alvarado and Judith Medina sued the City of Los Angeles, Los Angeles
Police Department and Officers Roca and Platzer, and the Company in the Superior Court of the State of
California, County of Los Angeles, Central District, claiming that their son, Eduardo Alvarado, died as a
result of being shot with the TASER conducted energy weapon. The plaintiff's seek unspecified monetary
damages. The autopsy report indicates that the probable cause of Mr. Alvarado's death was
""...methamphetamine intoxication and cocaine use...''. The Plaintiff's changed attorneys in January 2004 and
discovery is proceeding. Mr. Alvarado's minor child has filed a motion to file a complaint as an additional
F-14
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
plaintiff. A trial date has not yet been set. The defense of this litigation has been submitted to our insurance
carrier. We believe the plaintiff's claims are without merit and that this litigation will have no material adverse
affect on our business, operating results or financial condition.
In May 2003, we commenced litigation in Superior Court of the State of California, County of Santa
Clara, against Does 1 through 100 a.k.a. ubswarbird and other pseudonyms, for defamation, intentional and
negligent interference with prospective business advantage, and unfair competition arising from a series of
false and defaming statements about the Company and its officers posted by ubswarbird on the Yahoo
message board. An ex parte court order and subpoena duces tecum was served on Yahoo to learn the identities
of ubswarbird and the other pseudonyms and on July 15, 2003 we obtained documents in response to this
subpoena from Yahoo. The IP address information obtained from Yahoo could not be traced due to the
unavailability of records from the ISP. We are continuing our efforts to verify of ubswarbird's and
pseudonym's identities and upon receipt of this information we will file an amended complaint naming these
individuals as defendants and proceed with this litigation. We believe that this litigation will have no material
adverse affect on our business, operating results or financial condition.
In June 2003, the City of Madera filed a complaint against the Company in Superior Court of the State
of California, County of Madera. The City of Madera is a defendant in litigation brought by the estate of
Everardo Torres who was killed by a Madera Police Officer who shot him with her police service pistol. The
City of Madera claims that the police officer mistakenly used her police service firearm when she thought she
was using her TASER M26 conducted energy weapon and that the Company is responsible for this shooting
death. This case is in the discovery phase and a trial date has not been set. We believe the plaintiff's claims are
without merit and that this litigation will have no material adverse affect on our business, operating results or
financial condition. The defense of this litigation has been submitted to our insurance carrier.
In November 2003, Samuel Powers served a complaint against the Company in Superior Court for the
State of Arizona alleging that he injured his shoulder during a TASER training session. This case is in the
discovery phase and a trial date has not been set. We believe the plaintiff's claims are without merit and that
this litigation will have no material adverse affect on our business, operating results or financial condition. The
defense of this litigation has been submitted to our insurance carrier.
c. Employment Agreements
The Company has employment agreements with its President, Chief Executive Officer, Chief Financial
Officer, Vice President of Research and Development and Vice President and General Counsel. The Company
may terminate the agreements with or without cause. Should the Company terminate the agreements without
cause, upon a change of control of the Company or death of the employee, the President, CEO, CFO and Vice
Presidents are entitled to additional compensation. Under these circumstances, these officers may receive the
amounts remaining under their contracts upon termination, which would total $934,000 in the aggregate at
December 31, 2003.
F-15
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
6. Income Taxes
Significant components of the Company's deferred tax assets and liabilities are as follows:
December 31, December 31,
2003 2002
Current deferred tax assets:
Net operating loss carryforwardÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 693,756 $ 91,610
Reserves and accruals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 217,501 61,069
Inventory cost capitalizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 225,939 0
Total deferred tax asset ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,137,196 $152,679
Long-term deferred tax (assets) liabilities:
DepreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 45,102 $ 77,315
Amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,981) (7,494)
Net deferred tax liability ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 40,121 $ 69,821
At December 31, 2003, the Company has net operating loss carry forwards (""NOL'') for federal and
state income tax purposes of approximately $1,800,000. The Company's federal NOL carryforward expires
primarily in 2023. The Company's state NOL carryforward expires in various years beginning in 2007.
SFAS 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of
all available evidence, it is more likely than not that some or all of the deferred tax asset may not be realized.
The Company has determined that no such valuation allowance is necessary.
Significant components of the federal and state income tax expense are as follows:
Year Ended Year Ended
December 31, December 31,
2003 2002
Current:
Federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,899,474 $110,072
State ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 383,754 20,442
Total current ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,283,228 130,514
Deferred:
Federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (339,350) 37,460
State ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (30,277) 3,869
Total deferred ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (369,627) 41,329
Provision for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,913,601 $171,843
A reconciliation of the Company's effective income tax rate to the federal statutory rate follows:
Federal statutory rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34% 34%
State tax, net of federal benefitÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 5
Nondeductible lobbying expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 6
Change in method of accounting for income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40% 45%
F-16
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
7. Line of Credit
On May 31, 2003 the Company renewed its revolving line of credit with a total commitment of up to
$2,500,000. The line is secured by substantially all of the Company's assets, other than intellectual property,
and bears interest at varying rates, ranging from LIBOR plus 2.5% to prime. The availability under this loan is
computed on a monthly borrowing base. The Company's intellectual property has been excluded from the
bank pledges. The line of credit matures on May 31, 2004 and requires monthly payments of interest only. At
December 31, 2003, the available borrowing under the line of credit was $2.5 million, and there was no
outstanding balance owed.
The Company's agreement with the bank requires the Company to comply with certain financial and
other covenants including maintenance of minimum tangible net worth and fixed charge coverage. For the
year ended December 31, 2003, the Company was in compliance with all requirements.
8. Notes Payable and Lease Commitments
At December 31, 2003 and 2002 debt obligations were as follows:
2003 2002
Note Payable, 2003 asset acquisition, 0% interest, balance due on
January 2, 2004ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $250,000 $ Ì
Capital leases, interest at varying rates of 7% to 23%, due in monthly
installments through December 2005, secured by equipment ÏÏÏÏÏÏÏÏ 18,878 52,904
268,878 52,904
Less: current portionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (265,223) (37,418)
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3,655 $ 15,486
At December 31, 2002, aggregate annual maturities of long-term debt and capital leases were as follows:
2004ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 265,223
2005ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,655
$268,878
In 2001, the Company leased an aircraft from its President and was obligated under an operating lease to
pay a negotiated rate of $1,560 per month for rent. Rent expense for this aircraft for the twelve months ended
December 31, 2002 was $4,650. On March 25, 2002 this lease was terminated, as the aircraft was sold by the
President.
In June 2003, the Company acquired the assets of a competitor who held the TASER trademark. The
purchase price for this transaction was $1.0 million. The first $500,000 was paid in cash, and the remaining
$500,000 was secured by a note payable backed by an irrevocable letter of credit in the amount of $500,000.
The note was to be paid in two equal payments of $250,000. The first was paid on October 1, 2003, the
remaining balance was paid on January 2, 2004, subsequent to year end.
Certain officers and a director of the Company have personally guaranteed the Company's capital leases.
9. Stockholders' Equity
a. Common Stock
Concurrent with the re-incorporation in Delaware in February 2001, the Company adopted a certificate of
incorporation and authorized the issuance of two classes of stock to be designated ""common stock'' and
F-17
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
""preferred stock,'' provided that both common and preferred stock shall have a par value of $0.00001 per share
and authorized the Company to issue 50 million shares of common stock and 25 million shares of preferred
stock.
On January 26, 2004, the Company announced a stock dividend in the form of a three-for-one stock split.
The effective date of the split was February 11, 2004, at which time all holders of the Company's common
stock received a 200% stock dividend, or two additional shares for each share held on this date. The number of
shares, per share amounts, conversion amounts and stock option and warrant data of the Company's common
stock have been retroactively restated for all periods presented.
b. Preferred Stock
The Company is authorized to issue up to 25 million shares of preferred stock, $0.00001 par value. The
Board of Directors may authorize the issuance of shares of preferred stock of any class or any series of any
class and establish designations, voting powers, preferences, and relative participating, optional or other rights,
if any, or the qualifications, limitations, or restrictions applicable to such shares.
c. Warrants
At December 31, 2003, the Company had warrants outstanding to purchase 855,972 shares of common
stock at prices ranging from $1.10 to $7.00 per share with an average exercise price of $3.06 per share and a
weighted average remaining life of 2.2 years. A summary of warrants outstanding and exercisable at
December 31, 2003 is presented in the table below:
Outstanding
Weighted
Average Shares Underlying
Exercise Exercise of Expiration
Price Warrants Date
$ 7.00 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,999 7/31/05
1.10 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 68,181 7/31/05
3.18 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 777,792 5/8/06
$ 3.06 855,972
In May 2001, in connection with the Company's initial public offering, the Company issued 1,199,997
warrants to the public. These warrants are exercisable at $9.53 per warrant and expire May 8, 2006. The
Company has the right to redeem the public warrants issued in the 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
notice, the basic net income per share of the Company's common stock for a 12-month period preceding the
date of the notice is equal to or greater than $1.00 (pre stock split).
On February 2, 2004, the Company announced that it had achieved the basic net income per share
requirements to redeem the remaining public warrants, and gave formal written notice to all remaining public
warrant holders that it would call the warrants at the redemption price of $0.25 per warrant if not redeemed
prior to March 31, 2004.
In May 2001, pursuant to the underwriting agreement associated with the Company's initial public
offering, the Company issued 80,000 units consisting of 120,000 shares of common stock issuable upon
exercise of the underwriter's warrants and 120,000 shares of common stock issuable upon exercise of the
public warrants underlying the underwriter's warrants. The gross proceeds were $10,400,000. Offering expense
totaled approximately $2.0 million for underwriting discount, fees and expenses. The underwriter warrants
may be exercised at any time during the four-year period commencing May 8, 2002. The exercise price for
each initial unit is $15.60. The exercise price for the underlying warrant of each unit is $9.53. As of
December 31, 2003 all of these warrants were exercised.
F-18
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
d. Stock Option Plan
The Company has historically issued stock options to various equity owners and key employees as a
means of attracting and retaining quality personnel. The option holders have the right to purchase a stated
amount of shares at the estimated market value on the grant date. The options issued under the Company's
1999 Stock Option Plan (the ""1999 Plan'') generally vest over a three-year period. The options issued under
the Company's 2001 Stock Option Plan (the ""2001 Plan'') generally vest over a four-year period. Both plans
were registered on Form S-8 with the United States Securities and Exchange Commission. The total number
of shares registered under these plans were 2,488,125 under the Company's 1999 Plan, and 1,650,000 under
the 2001 Plan. These plans provide for officers, key employees and consultants to receive nontransferable stock
options to purchase an aggregate of 4,138,125 shares of the Company's common stock. As of December 31,
2003, 3,561,537 options had been granted at prices equal to or greater than the fair market value of the stock,
990,585 of the options granted had been exercised, and 576,588 options are remaining for future grants.
During 2002 and 2003, the Company granted options to consultants at an exercise price equal or greater than
the value of the common stock on the date of grant. The options vest over a three-year period. The total
compensation cost associated with the options granted to consultants was approximately $177,142 in 2003 and
approximately $6,305 in 2002.
A summary of the Company's stock options at December 31, 2003 and 2002 and for the years then ended
is presented in the table below:
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
Options outstanding, beginning of year ÏÏÏÏÏÏÏÏÏÏ 2,366,775 $3.09 1,563,972 $1.96
Granted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 939,600 3.38 1,225,800 4.62
ExercisedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (735,423) 2.47 (183,996) .20
Expired/terminated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (239,001) Ì
Options outstanding, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,570,952 $3.65 2,366,775 $3.09
Exercisable at end of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,006,848 $3.86 904,731 $2.79
Options available for grant at end of yearÏÏÏÏÏÏÏÏ 576,588 $ Ì 1,528,062 $ Ì
Weighted average fair value of options granted
during the year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.13 $2.76
F-19
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
Stock options outstanding and exercisable at December 31, 2003 are as follows:
Options
Options Outstanding Exercisable
Range of Average Number
Exercise Price Options Life(a) Exercisable
$0.20 174 5.0 174
1.10 7,752 6.62 2,751
1.13 50,832 6.9 12,498
1.16 12,900 8.8 2,067
1.25 120,000 8.7 17,499
1.29 436,617 9.2 92,334
1.32 15,000 9.1 3,333
1.42 63,000 4.2 14,001
1.50 60,000 10 15,000
1.52 106,017 9.3 18,534
1.62 3,000 8.4 333
2.03 7,251 8.4 1,500
2.18 224,574 6.3 84,480
2.40 11,874 6.9 11,874
2.40 324,000 2 226,500
2.75 2,436 7.8 375
2.94 687 7.7 63
3.60 22,500 7.9 22,500
3.72 3,000 9.5 Ì
3.74 3,000 9.4 Ì
3.96 45,000 2.9 45,000
4.08 3,000 4.5 3,000
4.13 1,500 9.6 42
4.74 37,500 8.4 2,082
5.33 400,962 8.4 178,971
5.39 75,000 8.2 32,814
5.93 319,200 8.2 168,468
7.47 4,500 9.7 Ì
7.57 8,751 9.6 Ì
8.25 7,500 9.6 Ì
8.74 1,500 9.8 Ì
9.62 191,925 9.8 50,655
$3.65 2,570,952 8.5 1,006,848
(a) Weighted average remaining contractual life in years.
The Company measures the compensation cost of its stock option plan, using the intrinsic value based
method of accounting prescribed in Accounting Principles Board Opinion 25, Accounting for Stock Issued to
Employees. Accordingly, no compensation cost has been recognized for its stock option plans.
F-20
TASER INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
10. Subsequent Events
Warrant Redemption
On February 2, 2004, the Company announced that its Board of Directors had called for redemption of all
of its Public Warrants to Purchase Common Stock (Nasdaq: TASRW). The terms of the warrant redemption
required earnings of over $1.00 per pre-split basic share, or $0.34 per post-split basic share over the course of
four consecutive quarters. The Company achieved $1.41 pre-split per basic share or $0.47 post-split per share
earnings for the year ended December 31, 2003. Therefore the Company achieved the required earnings for
redemption. Any of the remaining 259,264 warrants unexercised after March 30, 2004, will be redeemed by
the Company at $0.25 per warrant.
F-21
EXHIBIT INDEX
Exhibit
Number Description
3.1 Company's Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to
Registration Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as
amended)
3.2 Company's Bylaws, as amended (incorporated by reference to Exhibit 3.2 to Registration
Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.1 Reference is made to pages 1 Ì 4 of Exhibit 3.1 and pages 1 Ì 5 and 12 Ì 14 of Exhibit 3.2
4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to Registration
Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.3 Form of Public Warrant (incorporated by reference to Exhibit 4.3 to Registration Statement on
Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.4 Form of Unit Certificate (incorporated by reference to Exhibit 4.4 to Registration Statement on
Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
4.5 Form of Warrant and Unit Agreement (incorporated by reference to Exhibit 4.5 to Registration
Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)
10.1 Employment Agreement with Patrick W. Smith, dated July 1, 1998 (incorporated by reference
to Exhibit 10.1 to Registration Statement on Form SB-2, effective May 11, 2001 (Registration
No. 333-55658), as amended)(1)
10.2 Employment Agreement with Thomas P. Smith, dated November 15, 2000 (incorporated by
reference to Exhibit 10.2 to Registration Statement on Form SB-2 effective May 11, 2001
(Registration No. 333-55658), as amended)(1)
10.3 Employment Agreement with Kathleen C. Hanrahan, dated November 15, 2000 (incorporated
by reference to Exhibit 10.3 to Registration Statement on Form SB-2 effective May 11, 2001
(Registration No. 333-55658), as amended)(1)
10.4 Form of Indemnification Agreement between the Company and its directors (incorporated by
reference to Exhibit 10.4 to Registration Statement on Form SB-2 effective May 11, 2001
(Registration No. 333-55658), as amended)
10.5 Form of Indemnification Agreement between the Company and its officers (incorporated by
reference to Exhibit 10.5 to Registration Statement on Form SB-2, effective May 11, 2001
(Registration No. 333-55658), as amended)
10.6 1999 Employee Stock Option Plan (incorporated by reference to Exhibit 10.6 to Registration
Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as
amended)(1)
10.7 2001 Stock Option Plan (incorporated by reference to Exhibit 10.7 to Registration Statement on
Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as amended)(1)
10.8 Form of Warrant issued to Bruce Culver and Phil Smith (incorporated by reference to Exhibit
10.8 to Registration Statement on Form SB-2 effective May 11, 2001 (Registration No. 333-
55658), as amended)
10.9 Promissory Note, dated October 24, 2000, payable to Bank of America in the amount of $60,000
and related guarantee and security documents (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658), as
amended)
10.10 Lease between the Company and Norton P. Remes and Joan A. Remes Revocable Trust, dated
November 17, 2000 (incorporated by reference to Exhibit 10.14 to Registration Statement on
Form SB-2 effective May 11, 2001 (Registration No. 333-55658), as amended)
10.11 Credit Agreement, dated May 31, 2003, between the Company and Bank One,
10.12 Form of Sales Representative Agreement with respect to services by and between the Company
and Sales Representatives (incorporated by reference to Exhibit 10.15 to the Annual Report on
Form 10-KSB, filed March 15, 2002), as amended
F-22
Exhibit
Number Description
10.13 Lease Agreement, dated April 17, 2001, payable to GE Capital Corporation in the amount of
$37,945 (incorporated by referenced to Exhibit 10.13 to the Annual Report on Form 10-KSB,
filed March 15, 2002), as amended
10.14 Employment Agreement with Douglas E. Klint, dated December 15, 2002 (incorporated by
referenced to Exhibit 10.14 to the Annual Report on Form 10-KSB, filed March 15, 2002), as
amended
10.15 Code of Ethics, as adopted by the Board of Directors
23.1 Consent of Deloitte & Touche, LLP, independent auditors
31.1 Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 Certain Factors to Consider in Connection with Forward-Looking Statements
(1) Management contract or compensatory plan or arrangement
F-23
Pictured: Thomas P. Smith, President and Director; Patrick (Rick) W. Smith, Chief Executive Officer
and Director; Kathy Hanrahan, Chief Financial Officer and Chief Operating Officer join
NASDAQ’s Janet Lewis, Vice President, Business Development, to preside over the Market Open.