<SUBMISSION>
<ACCESSION-NUMBER>0000950153-07-001739
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20070630
<FILING-DATE>20070809
<DATE-OF-FILING-DATE-CHANGE>20070809
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>TASER INTERNATIONAL INC
<CIK>0001069183
<ASSIGNED-SIC>3480
<IRS-NUMBER>860741227
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-16391
<FILM-NUMBER>071040484
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>17800 N. 85TH ST.
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85255
<PHONE>480-991-0797
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>17800 N. 85TH ST.
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85255
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>p74175e10vq.htm
<DESCRIPTION>10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>United States Securities and Exchange Commission</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>Form&nbsp;10-Q</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the quarterly period ended June&nbsp;30, 2007</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>or</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission File Number 001-16391</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>TASER INTERNATIONAL, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>DELAWARE</B><BR>
(State or other jurisdiction <BR>
of incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>86-0741227</B><BR>
(I.R.S. Employer<BR>
Identification Number)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>17800 N. 85</B><SUP style="font-size: 85%; vertical-align: text-top"><B>th</B></SUP> <B>St., SCOTTSDALE, ARIZONA</B><BR>
(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>85255</B><BR>
(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>(480)&nbsp;991-0797</B></DIV>

<DIV align="center" style="font-size: 10pt">(Registrant&#146;s telephone number, including area code)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;
No&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Large Accelerated Filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accelerated Filer&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-accelerated Filer&nbsp;<FONT face="Wingdings">&#111;</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act). Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There
were&nbsp;62,934,697&nbsp;shares of the issuer&#146;s common stock, par value $0.00001 per share,
outstanding as of August&nbsp;6, 2007.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">







<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
QUARTERLY REPORT ON FORM 10-Q<BR>
FOR THE THREE MONTHS ENDED JUNE 30, 2007<BR>
TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">PART I &#151; FINANCIAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Item&nbsp;1. Financial Statements (unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#302">Balance sheets as of June&nbsp;30, 2007 and December&nbsp;31, 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#303">Statements of operations for the three and six months ended June&nbsp;30, 2007 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#304">Statements of cash flows for the six months ended June&nbsp;30, 2007 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#305">Notes to financial statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#306">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">19</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#307">Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">26</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#308">Item&nbsp;4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">26</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#309">PART II &#151; OTHER INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#310">Item&nbsp;1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">27</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#311">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">27</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#311">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">27</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#312">Item&nbsp;2. Recent Sales of Unregistered Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">33</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Item&nbsp;4.
Submission of Matters to a Vote of Security Holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">33</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#313">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">33</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#314">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">34</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#315">INDEX TO EXHIBITS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">35</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p74175exv10w18.htm">EX-10.18</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p74175exv31w1.htm">EX-31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p74175exv31w2.htm">EX-31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p74175exv32w1.htm">EX-32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p74175exv32w2.htm">EX-32.2</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="300"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I &#151; FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
BALANCE SHEETS<BR>
(UNAUDITED)</B>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><B>ASSETS</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,533,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,773,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,980,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,557,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable, net of allowance of $109,000 and $110,000 in 2007 and 2006, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,896,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,068,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,947,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,257,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaids and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,885,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,164,002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,667,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,295,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,910,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,116,264</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,988,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,477,574</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,287,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,842,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,385,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,868,719</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,735,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,532,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">119,308,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">119,837,689</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,959,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,789,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,293,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,037,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred insurance settlement proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509,067</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Litigation settlement liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,750,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,492</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,334,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,302,688</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations, net of current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred revenue, net of current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,637,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,975,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,999</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,986,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,509,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and Contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock, $0.00001 par value per share; 25&nbsp;million shares authorized; 0 shares
issued and outstanding at June&nbsp;30, 2007 and December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock, $0.00001 par value per share; 200&nbsp;million shares authorized; 62,835,894 and
61,939,974 shares issued and outstanding at June&nbsp;30, 2007 and December&nbsp;31, 2006,
respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">622</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,429,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,629,659</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock, 300,000 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,208,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,208,957</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,100,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,907,215</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total stockholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,322,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,328,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total liabilities and stockholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">119,308,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">119,837,689</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these financial statements.
</DIV>






<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="303"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
STATEMENTS OF OPERATIONS<BR>
(UNAUDITED)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>For the Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>For the Six Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,863,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,225,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41,165,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,118,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of Products Sold:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct manufacturing expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,338,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,229,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,947,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,758,785</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indirect manufacturing expense (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,993,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,605,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,797,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,014,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Cost of Products Sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,332,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,834,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,744,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,773,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross Margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,531,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,390,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,420,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,345,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales, general and administrative expenses (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,344,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,603,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,926,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,857,347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,262,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">562,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,233,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,226,801</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholder litigation settlement expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,650,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,650,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,923,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,425,403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,259,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,388,831</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest and other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">427,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">793,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,350,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,996,809</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,193,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,594,921</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,651,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,390,225</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,999,458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,794,316</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,699,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(9,606,584</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,193,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8,800,605</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;per common and common equivalent shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of common and common equivalent
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,374,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,035,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,192,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,990,714</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,214,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,035,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,928,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,990,714</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>For the Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>For the Six Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(1)&nbsp;Stock-based compensation was allocated as follows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Indirect manufacturing expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">75,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,545</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,380</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,723</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">329,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">311,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">591,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">673,648</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
STATEMENTS OF CASH FLOWS<BR>
(UNAUDITED)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>For the Six Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash Flows from Operating Activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,193,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8,800,605</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net income (loss)&nbsp;to net cash provided by (used for) operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,171,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,043,069</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for excess and obsolete inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for warranty</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">591,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,648</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred insurance settlement proceeds recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(953</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,289</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,110,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,939,517</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,828,753</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,385,813</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(746,021</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaids and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,566,973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Insurance settlement proceeds receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,925,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(577,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,238</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">486,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued securities settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,000,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,750,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,977</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used for) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,917,875</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,093,267</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash Flows from Investing Activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,647,257</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(63,087,942</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,713,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,913,001</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,592,988</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(995,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(231,658</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101,058</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided (used)&nbsp;by investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,241,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,271,204</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash Flows from Financing Activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,332</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,306</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,458,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,436,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase (decrease)&nbsp;in Cash and Cash Equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,759,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(932,077</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and Cash Equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,773,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,351,909</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and Cash Equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,533,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,419,832</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental Disclosure:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid for interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid for income taxes &#151; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">281,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="8"><DIV style="margin-left:15px; text-indent:-15px">Non Cash Transactions&#151;</div></TD>
</TR>

<TR valign="bottom"><TD>
<DIV style="margin-left:15px; text-indent:-15px">Common stock issued for shareholder derivative lawsuit settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. Company background</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TASER International, Inc. (&#147;TASER&#148; or the &#147;Company&#148;) is a global leader in the development and
manufacture of advanced electronic control devices designed for use in law enforcement,
corrections, private security and personal defense. The Company&#146;s core expertise includes
proprietary, patented technology which is capable of incapacitating highly focused and
aggressive subjects. The Company&#146;s proprietary Neuro-Muscular Incapacitation (NMI)&nbsp;technology uses
electrical impulses to interfere with a subject&#146;s neuron-muscular system, causing substantial
incapacitation regardless of whether the subject feels or responds to pain. The Company&#146;s current
flagship products are the TASER X26 and TASER M26 models. Both the X26 and the M26 are hand-held
devices which launch two wire-tethered probes at a remote target up to a maximum distance of 35
feet. These wire tethered probes serve to form an electrical connection from the TASER device to
the subject, thereby eliminating the need for the user to make close contact with the potentially
dangerous target. In addition to the hand-held devices, the Company also sells disposable
cartridges which contain the probes, wires, and proprietary nitrogen propulsion system. These
cartridges are disposable and provide a recurring revenue stream from the Company&#146;s installed
customer base. There are several models of cartridges with ranges from 15 feet to 35 feet and
include both electrically active cartridges and inert simulation cartridges used only in training.
The Company also sells batteries, chargers, holsters and other accessories including the TASERCam.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s products are often used in aggressive confrontations that may result in serious,
permanent bodily injury or death to those involved. A person injured in a confrontation or
otherwise in connection with the use of the Company&#146;s products may bring legal action against the
Company to recover damages on the basis of theories including personal injury, wrongful death,
negligent design, dangerous product or inadequate warning. The Company is currently subject to a
number of such lawsuits. The Company may also be subject to lawsuits involving allegations of
misuse of its products. The Company has seen and expects to continue
to see additional lawsuits
filed against it alleging injuries resulting from the use of a TASER device. If successful,
personal injury, misuse and other claims could have a material adverse effect on the operating
results and financial condition of the Company. Although the Company carries product liability
insurance, significant litigation could also result in a diversion of management&#146;s attention and
resources, negative publicity and an award of monetary damages in excess of its insurance coverage.
The outcome of any litigation is inherently uncertain and there can be no assurance that existing
or any future litigation will not have a material adverse effect on the Company&#146;s revenues,
financial condition or financial results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s deferred tax asset includes approximately $54.6&nbsp;million in net operating loss
carryforwards. The amount of the deferred tax asset is considered realizable; however, it could be
reduced in the near term if estimates of future taxable income during the carry forward period are
reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of significant accounting policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>a. Basis of presentation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying unaudited financial statements of TASER International, Inc. include all
adjustments (consisting only of normal recurring accruals) which management considers necessary for
the fair presentation of the Company&#146;s operating results, financial position and cash flows as of
June&nbsp;30, 2007 and 2006 and for the periods then ended. Certain information and note disclosures
normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (&#147;GAAP&#148;) have been omitted from these unaudited
financial statements in accordance with applicable rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The results of operations for the three and six month periods ended June&nbsp;30, 2007 are not
necessarily indicative of the results to be expected for the full year (or any other period) and
should be read in conjunction with the financial
statements and notes thereto included in the Company&#146;s Annual Report on Form 10-K as filed on March
15, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>b. Segment information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management has determined that its operations are comprised of one reportable segment. For the
three and six months ended June&nbsp;30, 2007 and 2006, sales by geographic area were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>For the Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>For the Six Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,<BR>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,<BR>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,<BR>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,<BR>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">79</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">88</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">82</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">90</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">12</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales to customers outside the United States are denominated in U.S. dollars. Substantially
all assets of the Company are located in the United States.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>c. Stock-Based compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2006, the Company adopted the fair value recognition provisions of
Statement of Financial Accounting Standards No.&nbsp;123(R), &#147;Share Based Payment&#148; (&#147;SFAS No.&nbsp;123(R)&#148;)
using the modified prospective transition method. Under that transition method, compensation cost
recognized in the three and six months ended June&nbsp;30, 2007 and 2006 includes: (a)&nbsp;compensation cost
for all stock-based payments granted prior to, but not yet vested as of January&nbsp;1, 2006, based on
the grant date fair value estimated in accordance with the original provisions of SFAS No.&nbsp;123, and
(b)&nbsp;compensation cost for all stock-based payments granted subsequent to January&nbsp;1, 2006, based on
the grant date fair value estimated in accordance with the provisions of SFAS No.&nbsp;123(R). Results
for prior periods have not been restated, as provided for under the modified-prospective method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stock-based compensation expense recognized in the income statement for the three and
six months ended June&nbsp;30, 2007 was $329,144 and $591,307 before income taxes, respectively,
$256,447 and $480,468 of which was related to Incentive Stock Options (&#147;ISOs&#148;) for which no tax
benefit is recognized. The total deferred tax benefits related to non-qualified stock options were
approximately $41,209 and $52,403 for the three and six months ended June&nbsp;30, 2007, respectively.
Total stock-based compensation expense recognized in the income statement for the three and six
months ended June&nbsp;30, 2006 was $311,648, and $673,648 before income taxes, respectively, $236,134
and $486,621 of which was related to ISOs for which no tax benefit is
recognized. The total deferred tax benefits related to non-qualified stock options were
approximately $106,000 and $221,000 for the three and six months ended June&nbsp;30, 2006, respectively.
As a result of the adoptions of SFAS No.&nbsp;123(R) the Company did not tax effect the stock based
compensation expenses for tax purposes related to options exercised. The benefit will be recorded
when the Company is in a position to realize it with an offset to taxes payable in future periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS No.&nbsp;123(R) requires the use of a valuation model to calculate the fair value of
stock-based awards. The Company has elected to use the Black-Scholes-Merton (&#147;BSM&#148;) option
valuation model, which incorporates various assumptions including volatility, expected life, and
interest rates. The assumptions used for the three and six month periods ended June&nbsp;30, 2007 and
2006 and the resulting estimates of weighted-average fair value per share of options granted during
those periods are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life of options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="center">4.00 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">3.49 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">4.00 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">3.49 years</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">58.52</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">69.36</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">58.63</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">69.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.75</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.02</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.74</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.89</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average fair value of options granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.58</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The expected life of the options represents the estimated period of time until exercise and is
based on the Company&#146;s historical experience of similar awards, giving consideration to the
contractual terms, vesting schedules and expectations of future employee behavior. Expected stock
price volatility is based on a combination of historical volatility of the Company&#146;s stock and the
one-year implied volatility of its traded options for the related vesting periods. The risk-free
interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an
equivalent remaining term. The Company has not paid dividends in the past and does not plan to pay
any dividends in the near future. As stock-based compensation expense is recognized on awards
ultimately expected to vest, it should be reduced for estimated forfeitures. SFAS No.&nbsp;123(R)
requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. The Company forfeiture rate was
calculated based on its historical experience of awards which ultimately vested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>d. Income per Common Share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for earnings per share in accordance with SFAS No.&nbsp;128, &#147;Earnings per
Share.&#148; Basic income per share is computed by dividing net income by the weighted average number of
common shares outstanding
during the periods presented. Diluted income per share reflects the potential dilution that could
occur if outstanding stock options were exercised. The calculation of the weighted average number
of shares outstanding and earnings per share are as follows:
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Earnings Per Share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Earnings Per Share</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>For the Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>For the Six Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Numerator for basic and diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,699,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(9,606,584</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,193,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8,800,605</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for basic earnings per share &#151; weighted average
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,374,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,035,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,192,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,990,714</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of shares issuable under stock options outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,839,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,735,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for diluted earnings per share &#151; adjusted weighted
average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,214,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,035,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,928,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,990,714</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic net income per share is based upon the weighted average number of common
shares outstanding during the period. For the three and six months ended June&nbsp;30, 2007, the effects
of 666,423 and 639,267 stock options, respectively, were excluded from the calculation of diluted
net income per share as their effect would have been antidilutive and increased the net income per
share. As a result of the net loss for the three and six months ended June&nbsp;30, 2006, 2,760,707 and
2,704,115, respectively, of potential dilutive shares were considered anti-dilutive and excluded
from the calculation as their effect would have been to reduce the net loss per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>e. Warranty Costs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company warrants its products from manufacturing defects on a limited basis for a period
of one year after purchase, and thereafter will replace any defective TASER unit for a fee. The
Company also sells extended warranties for periods of up to four years after the expiration of the
limited one year warranty. The Company tracks historical data related to returns and related
warranty costs on a quarterly basis, and estimates future warranty claims by applying the estimated
average return rate to the product sales for the period. Historically, the reserve amount is
increased if the Company becomes aware of a component failure that could result in larger than
anticipated returns from its customers. After the one year warranty expires, if the device fails to
operate properly for any reason, the Company will replace the ADVANCED TASER device for a fee and
the TASER X26 for a prorated discounted price depending on when the product was placed into
service. These fees are intended to cover the handling and repair costs and include a profit. A
summary of changes in the warranty accrual for the six months ended June&nbsp;30, 2007 and 2006 is as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at Beginning of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">713,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">851,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilization of Accrual</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(376,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(273,221</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warranty Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at End of the Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">885,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">747,824</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>f. Recent Accounting Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, &#147;The Fair Value Option for Financial Assets
and Financial Liabilities&#148; (&#147;SFAS No.&nbsp;159&#148;). SFAS No.&nbsp;159 allows entities the option to measure
eligible financial instruments at fair value as of specified dates. Such election, which may be
applied on an instrument by instrument basis, is typically irrevocable once elected. Statement 159
is effective for fiscal years beginning after November&nbsp;15, 2007, and early application is allowed
under certain circumstances. Management has not yet determined the impact, if any, the adoption of
SFAS No.&nbsp;159 will have on our financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, Fair Value Measurements <I>(&#147;SFAS No.&nbsp;157&#148;.)</I>
SFAS No.&nbsp;157 defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosures about fair value measurements. This
Statement applies under other accounting pronouncements that require or permit fair value
measurements, the FASB having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, this Statement does not require any new
fair value measurements. SFAS No.&nbsp;157 is effective for fiscal years beginning after December&nbsp;15,
2007. We plan to adopt SFAS No.&nbsp;157 beginning in the first quarter of fiscal 2008. Management has
not yet determined the impact, if any, the adoption of SFAS No.&nbsp;157 will have on our financial
position.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Cash, cash equivalents and investments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents include funds on hand and short-term investments with original
maturities of three months or less. Short-term investments include securities generally having
original maturities of 90&nbsp;days to one year. Long-term investments include securities having
original maturities of more than one year. The Company&#146;s long-term investments are invested in
federal agency mortgage-backed securities, and are classified as held to maturity. These
investments are recorded at amortized cost. The Company intends to hold these securities until
maturity. The Company intends to reinvest the proceeds from maturing long term investments into
securities with similar original maturities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of cash, cash equivalents and held-to-maturity investments by type
at June&nbsp;30, 2007 and December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,414,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,414,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,130,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,130,112</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government sponsored entity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,087,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143,019</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,946,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,678,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(221,849</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,460,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total cash, cash equivalents and
investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,502,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(143,019</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,361,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47,808,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(221,849</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47,590,455</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30,</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government sponsored entity securities reported as:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,118,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,643,573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash equivalents expected to be reinvested into long term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,980,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,557,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,988,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,477,574</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,087,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,678,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the contractual maturities of government sponsored
entity securities at June&nbsp;30, 2007 and December&nbsp;31, 2006:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than 1&nbsp;year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,087,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,694,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1-3&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,984,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,087,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,678,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information about held-to-maturity investments with gross
unrealized losses and the length of time that individual investments have been in a continuous
unrealized loss position at June&nbsp;30, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Less than 12 months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">12 months or more</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Total</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross Unrealized</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description of Securities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Losses</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government sponsored entity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,049,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(48,885</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,899,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(94,134</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,949,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(143,019</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unrealized losses on the Company&#146;s investment in government sponsored entity
securities were caused by interest rate increases. The contractual cash flows of these investments
are guaranteed by an agency of the U.S. Government and, accordingly it is expected that the
securities would not be settled for a price less than the amortized cost of the investment. Since
the decline in fair value was attributable to interest rates and not credit quality, and because
the Company has the ability and intent to hold these investments to maturity, the Company does not
consider these investments to be other than temporarily impaired at June&nbsp;30, 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Inventory</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory
is stated at the lower of cost or market. Cost is determined using the weighted
average cost of raw materials which approximates the first-in, first-out (FIFO)&nbsp;method and
manufacturing labor and overhead. Provisions are made to reduce potentially excess, obsolete or
slow-moving inventories to their net realizable value. Inventories as of June&nbsp;30, 2007 and December
31, 2006 consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials and work-in-process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,785,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,990,238</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,332,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,490,709</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve for excess and obsolete inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(170,910</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(223,201</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,947,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,257,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Intangible assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets consist of the following at June&nbsp;30, 2007 and December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gross Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Net Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gross Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Net Carrying</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Useful Life</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amortization</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amortization</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortized intangible assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">TASER.com domain name</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5 Years</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issued patents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">4 to 15 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issued trademarks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">9 to 11 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non compete agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">5 to 7 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unamortized intangible assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">TASER Trademark</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Patents and trademarks pending</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">429,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">429,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,432,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,432,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,329,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,329,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,935,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">199,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,735,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,703,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">171,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,532,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
expense for the three and six months ended June&nbsp;30, 2007 was $14,465 and
$28,392, respectively. Amortization expense for the three and six
months ended June&nbsp;30, 2006 was
$9,129 and $20,145, respectively. Estimated amortization expense of intangible assets for the
balance of 2007, the next four years and thereafter is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,247</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,773</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">302,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Accounts payable and accrued liabilities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities consist of the following at June&nbsp;30, 2007 and
December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,788,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,554,203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,465,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">832,576</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">820,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">689,560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued warranty expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">885,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">713,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,959,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,789,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Income taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The deferred income tax assets at June&nbsp;30, 2007 is comprised primarily of a net operating loss
carryforward, which resulted from the compensation expense the Company recorded for income tax
purposes when employees exercised stock options in 2004. For the
three and six months ended June&nbsp;30,
2007, the Company did not recognize additional tax benefits related to stock options exercised.
Additionally, warranty and inventory reserves, accrued vacation and other items have contributed to
the deferred income tax assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s total current and long term deferred tax assets at June&nbsp;30, 2007 is $25.1
million. In preparing the Company&#146;s financial statements, the Company has assessed the likelihood
that its deferred tax assets will be realized from future taxable income.
In evaluating the ability to recover its deferred income tax assets, the Company considers all
available positive and negative evidence, including its operating results, ongoing tax planning and
forecasts of future taxable income on a jurisdiction by jurisdiction basis. A valuation allowance
is established if it is determined that it is more likely than not that some portion or all of the
net deferred tax
assets will not be realized. The Company exercises significant judgment in determining its
provisions for income taxes, its deferred tax assets and liabilities and its future taxable income
for purposes of assessing its ability to utilize any future tax benefit from its deferred tax
assets. Although the Company believes that its tax estimates are reasonable, the ultimate tax
determination involves significant judgments that could become subject to audit by tax authorities
in the ordinary course of business. As a result of the shareholder litigation settlement expense
recorded in the second quarter of 2006, the Company has determined that it is more likely than not
that its net operating loss carryforwards for the state of Arizona, which expire in 2009, will not
be fully realized. Accordingly, the Company has a valuation allowance of $250,000, against its
deferred tax assets as of June&nbsp;30, 2007. Management believes that, other than as previously
described, as of June&nbsp;30, 2007, based on an evaluation and projections of future sales and
profitability, no other valuation allowance was deemed necessary as the Company concluded that it
is more likely than not that the Company&#146;s net deferred tax assets will be realized. However, the
deferred tax asset could be reduced in the near-term if estimates of future taxable income during
the carryforward period are reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2006, the FASB issued Interpretation 48, &#147;Accounting for Uncertainty in Income Taxes&#148;
(&#147;FIN 48&#148;), which became effective for the Company beginning in 2007. FIN 48 addresses the
determination of how tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, the Company recognizes the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are measured based on the
largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
resolution. Under FIN 48, management must also assess whether uncertain tax positions as filed
could result in the recognition of a liability for possible interest and penalties. The Company
adopted the provisions of FIN 48 effective January&nbsp;1, 2007. The impact on the Company&#146;s
reassessment of its tax positions in accordance with FIN 48 did not have a material impact on the
results of operations, financial condition or liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is currently under audit by the United States Internal Revenue Service for 2004.
The Company is unable to determine the outcome of the audit process at this time. There can be no
assurance the outcome of this audit will not have an adverse effect on the Company&#146;s future
operating results. See note&nbsp;10.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8.&nbsp;Stockholders equity</B><BR>
<B><I>Stock Award Activity</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
June&nbsp;30, 2007, the Company had three stock-based compensation plans, which are described
more fully in Note 11 to the financial statements included in the Company&#146;s Annual Report on Form
10-K as filed on March&nbsp;15, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the stock options available and outstanding as of June&nbsp;30, 2007
as well as activity during the six months then ended:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Outstanding Options</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Available</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>for Grant</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number of options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,340,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,902,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(490,538</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(679,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expired/terminated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(64,731</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at June&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,914,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,648,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The options outstanding as of June&nbsp;30, 2007 have been segregated into five ranges for additional
disclosure as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Options Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Options Exercisable</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Range of Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual Life</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$0.28 &#151; $0.99
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,258,201</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.36</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,258,201</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.36</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$1.03 &#151; $2.41
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,134,730</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,134,730</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$5.89 &#151; $9.93
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,326,130</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">8.07</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,146,250</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">8.07</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$10.10 &#151; $19.76
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">865,963</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">12.25</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">391,495</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">14.38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$20.12 &#151; $29.98
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">63,400</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">23.96</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">60,369</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">23.81</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$0.28 &#151; $29.98
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5,648,424</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">5.87</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,991,045</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">5.33</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
June&nbsp;30, 2007, the Company had 657,379 unvested options outstanding with a
weighted average exercise price of $9.92&nbsp;per share and weighted average remaining contractual life of 9.5
years. Of the unvested options outstanding, the Company expects that 643,705 options will
ultimately vest based on its historical experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aggregate intrinsic value of options outstanding and options exercisable at June&nbsp;30, 2007 was
$47.1&nbsp;million and $44.4&nbsp;million, respectively. Aggregate intrinsic value represents the difference
between the Company&#146;s closing stock price on the last trading day of the fiscal period, which was
$13.96, and the exercise price multiplied by the number of options outstanding. Total intrinsic
value of options exercised was $4.8&nbsp;million and
$0.9&nbsp;million for the six month periods ended June
30, 2007 and 2006, respectively. As of June&nbsp;30, 2007, total unrecognized stock-based compensation
expense related to non-vested stock options was approximately $3.3&nbsp;million, which is expected to be
recognized over a weighted average period of approximately 16.5&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
total fair value of options exercisable at June&nbsp;30, 2007 and
June&nbsp;30, 2006 was $13.8&nbsp;million and
$14.3&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Line of credit</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a line of credit agreement with a bank which provides for a total availability
of $10&nbsp;million. The line is secured primarily by the Company&#146;s accounts receivable and inventory
and bears interest at varying rates of interest, ranging from LIBOR plus 1.5% to prime. The
availability under this line is computed on a monthly borrowing base, which is based on the
Company&#146;s eligible accounts receivable and inventory. The line of credit matures on June&nbsp;30, 2008
and requires monthly payments of interest only. At June&nbsp;30, 2007 the available borrowing was $10.0
million and there was no amount outstanding under the line of credit. There have been no borrowings
under the line of credit to date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;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
ratios. At June&nbsp;30, 2007, the Company was in compliance with all such covenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Commitments and Contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Equipment purchase commitment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;2, 2007, the Company entered into a contract with ATS Automation Tooling Systems Inc.
(&#147;ATS&#148;) for the purchase of equipment at a cost of approximately $7.8&nbsp;million. The equipment is
expected to be delivered to and installed at the Company&#146;s facility in 2008. Payments will be made
in installments, with an initial $3.1&nbsp;million to be paid in 2007 and the balance in 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Proposed assessment for failure to timely deposit payroll taxes related to option exercises</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the audit by the United States Internal Revenue Service (&#147;IRS&#148;) for the Company&#146;s 2004
fiscal year, the IRS has notified the Company that it intends to propose an assessment for failure
to timely deposit employment taxes with respect to stock option exercises. At this time the Company
has yet to receive the proposed assessment and is unable to reasonably estimate its amount due to
uncertainty related to which stock options the assessment will apply.
Management believes that it has meritorious defenses against a
proposed assessment and intends to vigorously appeal and, if necessary, litigate the matter to obtain a
favorable outcome. Accordingly, the Company has not recorded any potential liability with respect to this matter as of June&nbsp;30, 2007. However, there can be no assurance that an unfavorable outcome of a proposed
assessment will not have a material adverse effect on the Company&#146;s future operating results and cash flow.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Legal proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Securities Litigation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Securities Class&nbsp;Action Litigation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning on or about January&nbsp;10, 2005, numerous securities class action lawsuits were filed
against the Company and certain of its officers and directors. These actions were filed on behalf
of the purchasers of the Company&#146;s stock in various class periods, beginning as early as May&nbsp;29,
2003 and ending as late as January&nbsp;14, 2005. The majority of these lawsuits were filed in the
District of Arizona. Four actions were filed in the United States District Court for the Southern
District of New York and one in the Eastern District of Michigan. The New York and Michigan actions
were transferred to the District of Arizona. The class actions were consolidated by Judge Susan
Bolton and Lead Plaintiff and Lead Counsel were selected. The Lead Plaintiff filed a consolidated
complaint (which became the operative complaint for all of the class actions) on August&nbsp;29, 2005.
The operative class period is May&nbsp;29, 2003 to January&nbsp;11, 2005. The defendants filed a motion to
dismiss the consolidated complaint, which was fully briefed for the Court but was not decided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated complaint alleges, among other things, violations of the Securities Exchange
Act of 1934, as amended, and Rule&nbsp;10B-5, promulgated thereunder, and seeks unspecified monetary
damages and other relief against all defendants. The consolidated amended complaint generally
alleges that the Company and the individual defendants made false or misleading public statements
regarding, among other things, the safety of the Company&#146;s products and the Company&#146;s ability to
meet its sales goals, including the validity of a $1.5&nbsp;million sales order with the Company&#146;s
distributor, Davidson&#146;s, in the fourth quarter of 2004. The consolidated complaint also alleges
that product defects were leading to excessive product returns by customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;11, 2006, the parties filed a joint Stipulation of Settlement and related
documents, setting forth terms of settlement including, among other things, full releases of any
and all related known or unknown claims among the plaintiff, plaintiff class and the defendants,
and payment of $20&nbsp;million from TASER for the benefit of the plaintiff class to be comprised of $12
million in cash (approximately $4.1&nbsp;million to be provided from the Directors&#146; and Officers&#146;
Liability Insurance policy), and $8&nbsp;million in Company common stock valued as set forth in the
Stipulation. At the Company&#146;s election, the stock portion of the settlement may be funded with
cash. On December&nbsp;14, 2006, the Court entered an order, which among other things, approved
preliminarily the Stipulation of Settlement, provided for notice of the Settlement, set forth for
the submissions of objections to and exclusions from the Settlement, and set a final Settlement
Hearing. On March&nbsp;19, 2007, the Court entered the Final Judgment and Order of Dismissal with
Prejudice, which, among other things, approved the settlement terms as set forth in the Stipulation
of Settlement and dismissed with prejudice the consolidated securities class actions. The Company
made the final payment of $8&nbsp;million in cash in settlement of the shareholder class action
litigation in March&nbsp;2007. On April&nbsp;17, 2007, the Court entered an additional order which, among
other things, awarded plaintiff&#146;s attorneys&#146; fees and costs to be paid out of the settlement amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Shareholder Derivative Litigation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning on or about January&nbsp;11, 2005, numerous shareholder derivative actions were also
filed against the Company&#146;s officers and directors. Such actions have been filed in the United
States District Court for the District of Arizona, the Arizona Superior Court in Maricopa County,
and the Delaware Chancery Court in New Castle County. The derivative actions pending in the Arizona
Superior Court and the Delaware Chancery Court have been stayed pending resolution of the
consolidated Arizona District Court action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The plaintiffs in the Arizona District Court action filed a consolidated complaint on May&nbsp;13,
2005. The Company and the individual defendants filed motions to dismiss the consolidated complaint
on August&nbsp;19, 2005. On March&nbsp;17, 2006, the Court denied the motions to dismiss. Defendants answered
the consolidated complaint on April&nbsp;21, 2006. Discovery commenced but no trial date was set.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The derivative complaints are based on similar facts and events as those alleged in the
securities class action complaints. The complaints generally allege that the individual defendants
breached the fiduciary duties that they owe to the Company and its shareholders by reason of their
positions as officers and/or directors of the Company. The complaints claim that such duties were
breached by defendants&#146; disclosure of allegedly false or misleading statements about the safety and
effectiveness of Company products and the Company&#146;s financial results. The complaints also claim
that fiduciary duties were breached by defendants&#146; alleged use of non-public information regarding
the safety of Company products and the Company&#146;s financial condition and future business prospects
to commit insider trading of the Company&#146;s stock. The derivative plaintiffs seek damages and
restitutionary, equitable, injunctive and other relief.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;8, 2006, the parties filed with the Arizona District Court a joint Stipulation of
Settlement and related documents, which set forth the terms of settlement of the Arizona District
Court action, the Arizona Superior Court action and the Delaware Chancery Court action. Settlement
terms include, among other things, the Company&#146;s adoption of certain corporate governance
provisions, settlement between the defendants and the Company&#146;s insurance carrier, and the
Company&#146;s payment of plaintiffs&#146; attorneys&#146; fees in the amount of $1.75&nbsp;million in Company common
stock valued as set forth in the Stipulation. On December&nbsp;13, 2006, the Arizona District Court
entered an order, which among other things, approved preliminarily the Stipulation of Settlement,
provided for notice of the Settlement, set forth for the submissions of objections to the
Settlement, and set a final Settlement Hearing. On March&nbsp;14, 2007, the Arizona District Court
entered the Final Judgment and Order of Dismissal with Prejudice, which, among other things,
approved the settlement terms as set forth in the Stipulation of Settlement and dismissed with
prejudice the Arizona District Court action. On March&nbsp;20, 2007, the Delaware Chancery Court entered
an order granting the parties&#146; stipulation of dismissal, which, among other things, dismissed with
prejudice the Delaware Chancery Court action. On March&nbsp;23, 2007, the Arizona Superior Court entered
an order granting the parties&#146; stipulation of dismissal, which, among other things, dismissed with
prejudice the Arizona Superior Court action. The remaining liability of $1.75&nbsp;million for
settlement of the derivative litigation was paid in stock in the second quarter of 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Product Liability Litigation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is currently named as a defendant in 42 lawsuits in which the plaintiffs allege
either wrongful death or personal injury in situations in which the TASER device was used (or
present) by law enforcement officers or during training exercises. Companion cases arising from the
same incident have been combined into one for reporting purposes. In addition, 54 other lawsuits
have been dismissed and are not included in this number. Three of the lawsuits that have been
dismissed or judgment entered in favor of TASER, are on appeal. With respect to each of these
pending 42 lawsuits, the following table lists the name of plaintiff, the date the Company was
served with process, the jurisdiction in which the case is pending, the type of claim and the
status of the matter. This table also lists those cases that were dismissed during the most recent
fiscal quarter. Cases that were dismissed in prior fiscal quarters are not included in this table.
In each of the pending lawsuits, the plaintiff is seeking monetary damages from the Company. The
defense of each of these lawsuits has been submitted to our insurance carriers that maintained
insurance coverage during these applicable periods and we continue to maintain product liability
insurance coverage with varying limits and deductibles. Our product liability insurance coverage
during these periods ranged from $5,000,000 to $10,000,000 in coverage limits and from $10,000 to
$500,000 in per incident deductibles. We are defending each of these lawsuits vigorously.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Plaintiff</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Served</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Jurisdiction</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Claim Type</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Status</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Alvarado
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4/2003
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CA Superior Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful
Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jury Verdict for TASER,<BR>
Appeal Pending</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">City of Madera
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6/2003
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CA Superior Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed by Summary<BR>
Judgment, Appeal Pending</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Glowczenski
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10/2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ED NY
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">LeBlanc
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12/2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CA Superior Court,<BR>
Los Angeles County
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">M. Elsholtz
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12/2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">TX District Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Washington
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ED CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sanders
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court ED<BR>
CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Graff
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court, AZ
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tucker
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court, NV
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Heston
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">11/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rosa
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">11/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yeagley
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">11/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hillsborough County<BR>
Circuit Court, FL
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Neal-Lomax
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court, NV
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yanga Williams
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gwinnett County<BR>
State Court, GA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mann
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND GA, Rome Div
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert Williams
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court, TX
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Davidson County, TN<BR>
Circuit Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase, Trial
Scheduled for June
2008.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Zaragoza
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CA Superior Court,<BR>
Sacramento County
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bagnell
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supreme Court for<BR>
British Columbia,<BR>
Canada
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Salazar
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maricopa County<BR>
Superior Court, AZ
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gillson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court, NV
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hollman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ED NY
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Oliver
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
MD FL, Orlando
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Teran/LiSaola
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CA District Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Short, Rhonda
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND TX, Forth Worth
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fernandez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">11/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Brown
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
Judicial<BR>
District Court,<BR>
Lafayette Parish, LA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Moreno
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CA Superior Court, Los
Angeles County<br>
(Companion to LeBlanc
Litigation)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Augustine
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1/2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">11<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Judicial<BR>
Circuit Court,<br>
Miami-Dade
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nunez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1/2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">County, FL<BR>
US District Court,<BR>
ND TX, Amarilllo
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Smith
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2/2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Civil District<BR>
Court, Orleans<BR>
Parish, LA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Plaintiff</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Served</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Jurisdiction</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Claim Type</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Status</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pierson, <BR>
Preston
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2/2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Superior Court of
CA, <BR>San Bernardino
County <BR>
US District Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Toloskdo-Parker
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">5/2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N D, CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Complaint Served</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">McCargo
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">5/2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Circuit Court<BR>
Bradley County, TN
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wrongful Death
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Powers
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">11/2003
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AZ Superior Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Verdict for TASER, Appeal Pending</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cook
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">8/2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NV District Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gerdon
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">8/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AZ Superior Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Herring
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">8/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Circuit Court of
City of St. Louis,
MO
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stewart
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">10/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Circuit Court for<BR>
Broward County, FL
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lewandowski
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">1/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court, NV
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Partial Motion to Dismiss
Granted, Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Peterson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">1/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court, NV
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Husband
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">3/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">British Columbia<BR>
Supreme Court,<BR>
Canada
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richthofen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">7/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">22<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP>
Judicial
District Court, St.
Tammany Parish, LA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wilson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">8/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND GA
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Diamond
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">8/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Circuit Court,<BR>
Douglas County,<BR>
Oregon
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training Injury
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dismissed</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bynum
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">10/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court SD<BR>
NY
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During Arrest
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lopez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">11/2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND IL Eastern Div
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During<BR>
Police Call
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bellemore
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AZ Superior Court
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During Arrest
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wieffenbach
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">6/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Circuit Court of
12<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
Judicial
District, Will
County, Il
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During Arrest
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cruz
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">7/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CA Superior Court,<BR>
Los Angeles County
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During Arrest
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Molina
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">9/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND West Virginia
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During<BR>
Detention
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Short, Harvey
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">10/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
SD West Virginia
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During Arrest
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Complaint Served</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Payne
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">10/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Circuit Court of
Cook County,
Illinois
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During Arrest
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Discovery Phase</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Powell
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">12/2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">US District Court,<BR>
ND IL, Eastern<BR>
Division
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During
Arrest<BR>
(3<SUP style="font-size: 85%; vertical-align: text-top">rd</sup>
Party
Complaint <BR>against
TASER)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Complaint Served</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gomez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">5/2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Circuit Court
11<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
Judicial Dist. FL
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Injury During Arrest
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Complaint Served</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2005, the Company received a defense verdict in the Samuel Powers v. TASER
International personal injury case. As part of its legal strategy to aggressively defend these
cases, the Company entered into a settlement agreement with its own insurance provider in order to
prevent its insurance provider from settling the case with the plaintiff. Under the terms of the
settlement, the Company received $575,000 from its liability insurance provider associated with a
settlement and release agreement and the Company assumed all future potential liability and costs
from and after the date the settlement and release agreement was signed. After offsetting
approximately $146,000 through June&nbsp;30, 2007 in legal expenses to defend and win the trial and
cover the subsequent costs of appeal, the Company has a remaining balance of approximately $429,000
which is recorded as deferred proceeds on its balance sheet. This deferred income will be used to
cover any costs through all appeals and the remaining balance if any will be recorded as &#147;other
income&#148; when final resolution is completed. During the three months ended June&nbsp;30, 2007, the
Company was credited approximately $36,000 for a refund check received for recovery of certain
costs from Powers, resulting in a net credit to deferred income of $33,000 and $3,000 for the three
and six months ended June&nbsp;30, 2007, respectively. During the three and six months ended June&nbsp;30,
2006, the Company expended approximately $3,000 and $37,000, respectively, in connection with the
appeal and reduced the deferred insurance settlement amount by these costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2006, the Company received a defense verdict in the Alvarado v. Taser
International in-custody death case. In September&nbsp;2006, as part of its legal strategy to
aggressively defend these cases, the Company entered into a settlement agreement with its own
insurance provider in order to prevent its insurance provider from settling the case with the
plaintiff. Under the terms of the settlement, the Company received $225,000 from its liability
insurance provider associated with a settlement and release agreement and the Company assumed all
future potential liability and costs from and after the date the settlement and release agreement
was signed. The Company has recorded the $225,000 as deferred insurance settlement proceeds on its
balance sheet. This deferred income will be used to cover any costs through all appeals and the
remaining balance if any will be recorded as &#147;other income&#148; when final resolution is completed.
After offsetting approximately $146,000 through June&nbsp;30, 2007 in legal expenses for the trial and appeal, the Company has a remaining balance of $79,000 recorded as deferred insurance settlement proceeds on its balance sheet.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Other Litigation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2005, we filed a complaint in Superior Court for Maricopa County against Thomas G.
Watkins III, our former patent attorney, for declaratory judgment, breach of fiduciary duty,
constructive fraud, and breach of contract. Mr.&nbsp;Watkins originally filed patent applications on our
behalf as our patent attorney for inventions utilized in the TASER X26 device in February and May
2003. In each patent application he filed a declaration stating that Magne Nerheim, our employee,
was the sole inventor. These patent applications have been granted and patents have been issued for
both applications as U.S. Patent No.&nbsp;US 7,145,762 and U.S. Patent No.&nbsp;US 7,102,870. Mr.&nbsp;Nerheim
assigned his interest in these patents to us. In December&nbsp;2004, Mr.&nbsp;Watkins informed us that he now
felt that he was the inventor of a portion of this invention. We vigorously dispute his claim and
we believe that we are the sole owner of this invention. On February&nbsp;14, 2006, U.S. Patent No.&nbsp;US
6,999,295 entitled &#147;Dual Operating Mode Electronic Disabling Device For Generating A
Time-Sequenced, Shaped Voltage Output Waveform&#148; was issued to named inventors Thomas G. Watkins,
III and Mr.&nbsp;Nerheim. Mr.&nbsp;Nerheim assigned his interest in this patent to us. This patent covers a
portion of the technology utilized in the TASER X26 device. This patent was applied for by Mr.
Watkins without our knowledge or consent. Since we are a joint owner of this patent, this patent
will not restrict us from manufacturing and selling the TASER X26 device. We have other patent
applications pending that cover inventions contained in this patent. In March&nbsp;2006, the Court
issued a temporary restraining order and a preliminary injunction preventing Mr.&nbsp;Watkins from
selling, assigning, transferring or licensing this patent to a third party during the duration of
this litigation. On August&nbsp;2, 2006, the Court issued an order granting our motion for partial
summary judgment on liability, leaving open the matter of remedies and other residual issues for
resolution in subsequent proceedings. We filed a motion for summary judgment in January&nbsp;2007
requesting an equitable assignment or constructive trust of Mr.&nbsp;Watkins interest in U.S. Patent No.
US 6,999,295, which motion was granted by the Court in March&nbsp;2007. On February&nbsp;5, 2007, the
Disciplinary Commission of the Supreme Court of Arizona recommended that Mr.&nbsp;Watkins be disbarred
as a result of his conduct in this matter. On May&nbsp;21, 2007, the Court entered an order and final
judgment granting TASER International judgment against Mr.&nbsp;Watkins of all right, title and interest
that Watkins have, claim to have or may have in certain United States patents and patent
applications and related electrical stun technology, electronic weapon technology, or any component
or process thereof, whether or not patented or patentable. The court order further requires Mr.
Watkins to execute a written assignment to TASER International assigning all right, title and
interest that Mr.&nbsp;Watkins have, claim to have, or may have in these patents as well as related
electrical stun technology, electronic weapon technology, or any component or process thereof,
whether or not patented or patentable. In addition, the court order permanently enjoins Mr.
Watkins from claiming or seeking to obtain ownership rights in any of the above described
intellectual property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2005, we filed a lawsuit in Vigo County, Indiana, Superior Court against Roland M.
Kohr for defamation, product disparagement, Lanham Act violations, tortuously affecting the
fairness and integrity of litigation as an adverse third-party witness, and intentional
interference with a business relationship. Dr.&nbsp;Kohr was the medical examiner and expert witness in
the James Borden wrongful death litigation, which litigation was dismissed with prejudice. This
case is in the discovery phase and no trial date has been set.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2006, we filed a lawsuit in U.S. District Court for the Central District of California
against Bestex Company, Inc. for patent infringement, false patent marking, unfair competition and
breach of written contract. Bestex filed a counterclaim for unfair competition and false
advertising. Both parties filed motions for summary judgment to
dismiss the other parties claims, which motions were granted and the
matter was resolved on those motions before the Court in
January&nbsp;2007. Bestex has filed a notice of appeal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2006, we filed a lawsuit against the Chief Medical Examiner of Summit County, OH,
in the Court of Common Pleas of Summit County Ohio, to correct erroneous cause of death
determinations relating to the autopsy reports prepared by medical examiner, Dr.&nbsp;Lisa Kohler, which
associate the TASER device as being a contributing factor in the deaths of Richard Holcomb and
Dennis Hyde. We asked the Court to order a hearing on the appropriate causes of death of Mr.&nbsp;Hyde
and Mr.&nbsp;Holcomb, and to order changes in the medical examiner&#146;s cause of death determinations for
both Mr.&nbsp;Hyde and Mr.&nbsp;Holcomb removing all references to any TASER device causing or contributing
to the causes of death for Mr.&nbsp;Hyde or Mr.&nbsp;Holcomb. Defendant filed a motion to dismiss for lack of
standing and that motion was denied by the Court in January&nbsp;2007. The City of Akron has joined this lawsuit as a co-plaintiff. This case is in the discovery
phase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2007, we filed a lawsuit in the U.S. District Court for Arizona against Stinger
Systems, Inc. alleging patent infringement, patent false marking, and false advertising. Defendant
filed an answer and counterclaim for false advertising and punitive
damages. Discovery has not yet begun and no trial date has been set.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>General</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time,
the Company is notified that it may be a party to a lawsuit or that a claim
is being made against it. It is the Company&#146;s policy to not disclose the specifics of any claim or
threatened lawsuit until the summons and complaint are actually
served on the Company. The Company intends to
pursue and defend any lawsuit filed against or by the Company
vigorously. Although the Company does not expect
the outcome in any individual case to be material, the outcome of any litigation is inherently
uncertain and there can be no assurance that any expense, liability or damages that may ultimately
result from the resolution of these matters will be covered by the
Company&#146;s insurance or will not be in
excess of amounts provided by insurance coverage and will not have a
material adverse effect on the Company&#146;s
business, operating results or financial condition. The Company may settle a lawsuit in situations
where a settlement can be obtained for nuisance value and for an amount that is expected to be less
than the cost of defending a lawsuit. One of the training injury
lawsuits brought by a law enforcement officer was settled by our
insurance company in June
2007 for an amount in excess of nuisance value. The Company did not object to
this settlement since its
insurance coverage at that time did not cover the cost of defense if
the Company won at trial. However, the Company&#146;s insurance coverage
at that time provided for a prorata reimbursement of the
Company&#146;s costs of
defense if the lawsuit was settled. Upon final settlement of this
case, the insurance company is expected to pay the Company in excess of
$200,000 as reimbursement of the Company&#146;s costs of defense. The Company recognized a reduction in legal expense and an insurance receivable in the amount of $139,000 during the quarter ended
 March&nbsp;&nbsp;31, 2007. This receivable has not been collected as of June&nbsp;20, 2007, and the Company will record a gain for any amount received in excess of the receivable. Due
to the confidentiality of the Company&#146;s litigation strategy and the
confidentiality agreements that are executed in the event of a settlement, the Company does not
identify or comment on which lawsuits have been settled or the amount of any settlement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Aircraft charter</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company reimburses Thomas P. Smith, Chairman of the Company&#146;s Board of Directors and Patrick W.
Smith, Chief Executive Officer, for business use of their personal aircraft. For the three and six
months ended June&nbsp;30, 2007, the Company incurred expenses of
approximately $123,000 and $217,000,
respectively, to Thomas P. Smith. For the three and six months ended June&nbsp;30, 2006, the Company
incurred expenses of approximately $119,000 and $202,000, respectively, to Thomas P. Smith. For the
three and six months ended June&nbsp;30, 2007, the Company incurred expenses of approximately $4,000 and
$17,000, respectively, to Patrick W. Smith. No amounts were reimbursed to Patrick W. Smith for the
three and six months ended June&nbsp;30, 2006. At June&nbsp;30, 2007 and December&nbsp;31, 2006, the Company had
outstanding payables of approximately $26,000 and $36,000,
respectively, to Thomas P. Smith. At June
30, 2007, the Company had no outstanding payables due to Patrick W. Smith. The Company believes
that the rates charged by Thomas P. Smith and Patrick W. Smith are equal to or below commercial
rates the Company would pay to charter similar aircraft from independent charter companies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the first quarter of 2007, Thomas P. Smith also chartered an aircraft from Thundervolt,
LLC, which is 50% owned by Patrick W. Smith, Chief Executive Officer of the Company, for the
purposes of business related travel. For the three and six months ended June&nbsp;30, 2007, the Company
incurred expenses of $0 and $30,000, respectively, to reimburse Mr.&nbsp;Thomas P. Smith. The Company
believes that the rates charged by Thundervolt, LLC to Mr.&nbsp;Thomas P. Smith are equal to or below
commercial rates the Company would pay to charter similar aircraft from independent charter
companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2007, the Company also entered into a charter agreement for future use
of an aircraft for business travel from Thundervolt, LLC, should the need arise. For the three and
six months ended June&nbsp;30, 2007, the Company did not incur any direct charter expenses from
Thundervolt, LLC. The Company believes that the rates charged by Thundervolt, LLC are equal to or
below commercial rates the Company would pay to charter similar aircraft from independent charter
companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company performed a review of the above relationships with Thundervolt, LLC, in accordance
with the provisions of Financial Accounting Standards Board Interpretation No.&nbsp;46, &#147;Consolidation
of Variable Interest Entities, an Interpretation of ARB No.&nbsp;51&#148; (FIN 46R). Neither of the
relationships were determined to meet the definition of a variable interest entity (VIE)&nbsp;as defined
by FIN 46R as Thundervolt, LLC is adequately capitalized, their owners possess all of the essential
characteristics of a controlling financial interest, and the Company does not have any voting
rights in the entity. Therefore, the entity is not required to be consolidated into the Company&#146;s
results.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TASER INTERNATIONAL, INC.<BR>
NOTES TO FINANCIAL STATEMENTS (unaudited) &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>TASER Foundation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the Company established the TASER Foundation. The TASER Foundation is a
501(c)(3) non-profit corporation and has been granted tax exempt status by the IRS. The TASER
Foundation&#146;s mission is to honor the service and sacrifice of local and federal law enforcement
officers in the United States and Canada lost in the line of duty by providing financial support to
their families. Daniel M. Behrendt, an officer of the Company, serves on the Board of Directors of
the TASER Foundation. Patrick W. Smith and Thomas P. Smith resigned from the Board of Directors of
the TASER Foundation in January&nbsp;2006. Over half of the initial $1&nbsp;million endowment was contributed
directly by TASER International, Inc. employees. The Company bears all administrative costs of the
TASER Foundation in order to ensure 100% of all donations are distributed to the families of fallen
officers. For the three months and six months ended June&nbsp;30, 2007, the Company incurred
approximately $43,000 and $91,000, respectively, in such administrative costs. For the three months
and six months ended June&nbsp;30, 2006, the Company incurred approximately $44,000 and $120,000,
respectively, in such administrative costs. For the three and six months ended June&nbsp;30, 2007, the
Company contributed $0 and $125,000, respectively, to the TASER Foundation. For the three and six months ended June&nbsp;30,
2006, the Company contributed $0 and $75,000, respectively, to the TASER Foundation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Consulting services</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning in August&nbsp;2005, the Company agreed to pay Mark Kroll, a member of the Board of
Directors, to provide consultancy services. The cumulative expenses for the three and months ended
June&nbsp;30, 2007 were approximately $76,000 and $124,000, respectively. The cumulative expenses for
the three and six months ended June&nbsp;30, 2006 were approximately $65,000 and $109,000, respectively. At
June&nbsp;30, 2007, the Company had accounts payable of approximately $32,000 related to these services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. Employee Benefit Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2006, the Company established a defined contribution profit sharing 401(k) plan
(the &#147;Plan&#148;) for eligible employees, which is qualified under Sections 401(a) and 401(k) of the
Internal Revenue Code of 1986, as amended. Employees are entitled to make tax-deferred
contributions of up to the maximum allowed by law of their eligible compensation, but not exceeding
$15,000. The Company matches 50% of the first 6% of eligible compensation contributed to the Plan
by each participant. The Company&#146;s matching contributions cliff vest at 20% per annum and are fully
vested after five years of service, at age 59 1/2 regardless of service, upon the death or
permanent disability of the employee, or upon termination of the Plan. The Company&#146;s matching
contributions to the Plan for the three and six months ended June&nbsp;30, 2007 were $61,000 and
$121,000, respectively. Matching contributions to the Plan for the three and six months ended June
30, 2006 were $48,000 and $92,000, respectively. Future matching or profit sharing contributions to
the Plan are at the Company&#146;s sole discretion.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 2.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a discussion of the Company&#146;s financial condition and results of operations
for the three and six months ended June&nbsp;30, 2007 and June&nbsp;30, 2006. The following discussion may be
understood more fully by reference to the financial statements, notes to the financial statements,
and the Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations
section contained in the Company&#146;s Annual Report on Form 10-K filed on March&nbsp;15, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain statements contained in this report may be deemed to be forward-looking statements as
defined by the Private Securities Litigation Reform Act of 1995, and the Company intends that such
forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking
statements may relate to, among other things: expected revenue and earnings growth; estimates
regarding the size of our target markets; successful penetration of the law enforcement market;
expansion of product sales to the private security, military and consumer self-defense markets;
growth expectations for new and existing accounts; expansion of production capability; new product
introductions; and our business model. We caution that these statements are qualified by important
factors that could cause actual results to differ materially from those reflected by the
forward-looking statements herein. Such factors include, but are not limited to: market acceptance
of our products; establishment and expansion of our direct and indirect distribution channels;
attracting and retaining the endorsement of key opinion-leaders in the law enforcement community;
the level of product technology and price competition for our products; the degree and rate of
growth of the markets in which we compete and the accompanying demand for our products; potential
delays in international and domestic orders; implementation risks of manufacturing automation;
risks associated with rapid technological change; execution and implementation risks of new
technology; new product introduction risks; ramping manufacturing production to meet demand;
litigation resulting from alleged product- related injuries; risks related to government inquiries
and pending class action and derivative litigation; media publicity concerning allegations of
deaths occurring after use of the TASER device and the negative impact this publicity could have on
sales; product quality risks; potential fluctuations in quarterly operating results; competition;
financial and budgetary constraints of prospects and customers; dependence upon sole and limited
source suppliers; fluctuations in component pricing; risks of governmental regulations; dependence
on a single product; dependence upon key employees; employee retention risks; and other factors
detailed in the Company&#146;s filings with the Securities and Exchange Commission including in &#147;Part&nbsp;II
&#151; Item&nbsp;1A. Risk Factors&#148; in this report on Form 10-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a global leader in the development and manufacture of advanced electronic control
devices designed for use in law enforcement, corrections, private security and personal defense. We
have focused our efforts on the continuous development of our technology for both new and existing
products as well as industry leading training services while building distribution channels for
marketing our products and services to law enforcement agencies, primarily in North America with
increasing efforts on expanding these programs with a view toward international markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our core expertise includes proprietary, patented technology which is capable of
incapacitating highly focused and aggressive subjects. Competing non-lethal weapons rely primarily
on pain to dissuade subjects from continuing unwanted behavior. Our proprietary Neuro-Muscular
Incapacitation (NMI)&nbsp;technology uses electrical impulses to interfere with a subject&#146;s
neuron-muscular system, causing substantial incapacitation regardless of whether the subject feels
or responds to pain. Our NMI technology stimulates the motor nerves which control muscular
movement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Law enforcement, military and corrections agencies represent our primary target markets. In
each of these markets, the decision to purchase TASER devices is normally made by a group of people
including the agency head, his or her training staff, and weapons experts. Depending on the size
and cost of the device deployment, the decision may involve political decision-makers such as city
council members and the federal government. The decision making process can take as little as a few
weeks or as long as several years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our devices are not considered to be a &#147;firearm&#148; by the U.S. Bureau of Alcohol, Tobacco,
Firearms and Explosives. Therefore, no firearms-related regulations apply to the sale and
distribution of our devices within the United States. However, many states have regulations
restricting the sale and use of stun guns, which we believe apply to our devices as well. Our
products are often used in aggressive confrontations that may result in serious, permanent bodily
injury or death 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 are currently subject
to a number of such lawsuits. 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&#146;s attention and
resources, negative publicity and an award of monetary damages in excess of our insurance coverage.
The outcome of any litigation is inherently uncertain and there can be no assurance that our
existing or any future litigation will not have a material adverse effect on our revenues, our
financial condition or financial results.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operations</B><BR>
<B>Three and Six Months Ended June&nbsp;30, 2007 Compared to the Three and Six Months Ended June&nbsp;30, 2006</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth, for the periods indicated, our statements of operations as well as
the percentage relationship to total net revenues of items included in our statements of operations
(<I>dollars in thousands</I>):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Six Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net sales</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of products sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">36</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">41</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">36</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gross margin</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">59</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">32</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">39</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">49</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholder litigation settlement expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">109</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">59</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (loss)&nbsp;from operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">23</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,425</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-95</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,389</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-48</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest and other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (loss)&nbsp;before income taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,997</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-92</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,595</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-45</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-33</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,794</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-16</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(9,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-59</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8,801</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-29</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Net Sales</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the three and six months ended June&nbsp;30, 2007 and 2006, sales by product line and by
geography were as follows (<I>dollars in thousands</I>):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #ffffff"><B>Three Months Ended June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #ffffff"><B>Six Months Ended June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sales by Product Line</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TASER X26</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">72.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">63.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">69.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TASER Cam</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ADVANCED TASER</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AIR TASER</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Single Cartridges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">26.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">26.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">22.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research Funding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="12" style="border-bottom: 1px solid #ffffff"><B>Three Months Ended June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="12" style="border-bottom: 1px solid #ffffff"><B>Six Months Ended June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">79</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">88</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">82</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">90</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">21</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="1" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="1" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="1" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="1" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales increased $9.6&nbsp;million, or 59%, to $25.9&nbsp;million for the second quarter of
2007 compared to $16.2&nbsp;million for the second quarter of 2006. For the first six months of 2007,
net sales were $41.1&nbsp;million, an increase of $11.0&nbsp;million,
or 37%, over the same period in 2006. The
growth in both the second quarter of 2007 and the first six months of 2007 was primarily the result
of increased sales to our core law enforcement market with new agencies deploying TASER technology
following extensive test and evaluation periods and from agencies continuing to expand the use of
TASER devices to their first responders. This resulted in higher sales of the TASER X26 product
line which increased $4.9&nbsp;million to $16.7&nbsp;million for the second quarter of 2007 compared to $11.8
million for the second quarter of 2006. For the first six months of 2007, sales of the TASER X26
product line were $25.9&nbsp;million, an increase of
$5.0&nbsp;million, or 24%, over the same period in 2006.
Single cartridge sales increased $3.6&nbsp;million, or 110%, to $6.9&nbsp;million for the second quarter of
2007 compared to $3.3million for the second quarter of 2006. For the six month period ended June
30, 2007 single cartridge sales were $10.9&nbsp;million, an increase
of $4.1&nbsp;million, or 60.2%, over the
same period in 2006. Also contributing to the growth in net sales for both the three and six months
ended June&nbsp;30, 2007 was the introduction of the TASERCam product which did not go on sale until the
end of the second quarter of 2006. Sales of the TASERCam were $1.1&nbsp;million for the second quarter
of 2007, an increase of $0.7&nbsp;million over the second quarter of 2006 and for the six months of
2007, were $1.8&nbsp;million an increase of $1.4&nbsp;million over the same period in 2006. Other sales
include warranty, research funding, training and shipping revenues net of cash and distributor
discounts. International sales for the second quarter and first six months of 2007 represented
approximately $5.5&nbsp;million, or 21%, and $7.4&nbsp;million or 18% of total net sales, respectively. This
compares to international sales for the second quarter and first six
months of 2006 of $1.9&nbsp;million, or 12%, and $3.0&nbsp;million, or 10%, of total net sales, respectively.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Cost of Products Sold</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of products sold increased by $4.5&nbsp;million, or 77%, to $10.3&nbsp;million for the second
quarter of 2007 compared to $5.8&nbsp;million for the second quarter of 2006. For the first six months
of 2007, cost of products sold were $16.7&nbsp;million, an increase
of $5.9&nbsp;million, or 55%, over the
same period in 2006. As a percentage of net sales, cost of products sold increased to 39.9% in the
second quarter of 2007 compared to 36.0% in the second quarter of
2006 and to 40.7% for the first six
months of 2007 from 35.8% for the same period in 2006. The increase in cost of products sold as a
percentage of net sales for both the second quarter and first six months of 2007 was driven by a
combination of factors. We experienced a change in sales mix with the growth in lower margin
cartridge sales as a percentage of total sales and the introduction of the lower margin TASERCam
product. We also experienced a rise in raw material costs due to higher price of plastics and
printed circuit board assemblies. These factors led to a 1.8%
and 2.6% increase in the cost of products sold as a percentage of net sales for the second quarter
and first six months of 2007, respectively, compared to the same periods in 2006. During the first
six months of 2007, we invested in our manufacturing infrastructure
for the production of our new C2
product by hiring new production operators and transferring existing
employees to our C2 production
lines. As a result, temporary labor and overtime costs increased to backfill forecasted production
requirements which, in turn, drove up the average labor rate and contributed a 0.9% and 1.0%
increase in the cost of products sold as a percentage of net sales for the second quarter and first
six months of 2007, respectively, compared to the same periods in 2006. Finally, due to increased
production throughput, supplier quality and operator related
inefficiencies on our assembly lines,
production scrap increased, leading to a 1.0% and 1.1% increases in the cost of products sold as a
percentage of net sales for the second quarter and first six months of 2007, respectively, compared
to the same periods in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Gross Margin</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross margin increased $5.1&nbsp;million, or 49%, to $15.5&nbsp;million for the second quarter of 2007
compared to $10.4&nbsp;million for the second quarter of 2006. As a percentage of net sales, gross
margins decreased to 60% for the second quarter of 2007 compared to 64% for the second quarter of
2006. Gross margin increased $5.1&nbsp;million, or 26%, to $24.4&nbsp;million for the first six months of
2007 compared to $19.3&nbsp;million for the same period in 2006. The decrease in gross margin as a
percentage of net sales for both the second quarter of 2007 and the first six months of 2007 was
attributable to the increased percentage of direct and indirect costs as a percentage of net sales
for the reasons noted above under the discussion of cost of products
sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Sales, General and Administrative Expenses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the three and six months ended June&nbsp;30, 2007 and 2006, sales, general and administrative
expenses were comprised as follows (amounts in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Three Months Ended June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Six Months Ended June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">28.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">26.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal, professional and accounting fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(268</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-7.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Travel and meals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(192</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-20.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D&#038;O and liability insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-9.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-10.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(75</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-15.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">22.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales, general and administrative as&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">32</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">39</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">49</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales, general and administrative expenses were $8.3&nbsp;million and $7.6&nbsp;million in the
second quarter of 2007 and 2006, respectively, an increase of $742,000, or 10%. As a percentage of
total net sales, sales, general and administrative expenses decreased to 32% for the second quarter
of 2007 compared to 47% for the second quarter of 2006. The dollar increase for the second quarter
of 2007 over the same period in 2006 is substantially attributable to growth in salaries and
benefits related to an increase in personnel (our headcount was 70 at June&nbsp;30 2007 compared to 63
at June&nbsp;30, 2006) to support the expansion of our business infrastructure combined
with annual salary increase effective January&nbsp;1, 2007. There was also a $286,000 and $142,000
increase in quarterly bonus expense and commissions, respectively, due to the improved operating
results in the second quarter of 2007. These increases were partially offset by a $192,000 decrease
in travel and meals expense due to the timing of our annual tactical conference which occurred in
the second quarter of 2006 but not until the third quarter in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales, general and administrative expenses were $15.9&nbsp;million and $14.9&nbsp;million in the first
six months of 2007 and 2006, respectively, an increase of $1.0&nbsp;million, or 7%. As a percentage of
total net sales, sales, general and administrative expenses decreased to 39% for the first six
months of 2007 compared to 49% for the first six months of 2006. The dollar increase for the first
six months of 2007 over the same period in 2006 is substantially attributable to growth in
salaries and benefits related to an increase in support personnel as noted above. The $777,000
increase in other expense includes a $251,000 increase in year to date bonus expense due to the
improved operating results in the second quarter of 2007 and a $294,000 increase in consulting
costs primarily due to higher expert witness fees. Offsetting these increases was a $268,000
decrease in legal, professional and accounting costs primarily due to a reduction in legal fees.
D&#038;O and liability insurance costs also decreased by $107,000 as a result of lower premiums for the 2007
period.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Research and Development Expenses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses increased $700,000, or 124%, to $1.3&nbsp;million for the second
quarter of 2007 compared to $563,000 for the second quarter of 2006. Research and development
expenses increased $1.0&nbsp;million, or 82%, to $2.2&nbsp;million for the first six months of 2007 compared
to $1.2&nbsp;million for the first six months of 2006. The increase on both a quarterly and six month
basis is predominantly related to growth in salary with headcount increasing from 18 at June&nbsp;30,
2006 to 25 at June&nbsp;30, 2007, supplies, tooling and consulting costs to support our continuing
efforts to develop for manufacture new products such as the TASER C2 and the XREP (Extended Range
Electro-Muscular Projectile).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Litigation Settlement Expense</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Litigation settlement expense of $17.65&nbsp;million was recorded in the second quarter of 2006 as
a result of the settlement of shareholder class action litigation and derivative lawsuits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Interest and Other Income, Net</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income remained flat at $433,000 for the second quarter of 2007 compared to $431,000
for the second quarter of 2006. The minor increase is primarily attributable to higher average
yields on our investments partially offset by a lower average investment balance held. Our cash and
investment accounts earned interest at an approximate average rate of 4.75% during the second
quarter of 2007 compared to 3.64% during the second quarter of 2006. Offsetting interest income for
the second quarter of 2007 and 2006 was interest expense related to capital lease obligations of
$1,000 and $2,000, respectively. Additionally, in the second quarter of 2007 we recorded a loss on
the disposal of fixed assets of $5,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income increased $143,000, or 18%, to $941,000 for the first six months of 2007
compared to $798,000 for the same period in 2006. The increase in interest income is mainly
attributable to the higher average yields on our investments, 4.65% for the first six months of
2007 compared to 3.47% for the first six months of 2006. This was partially offset by lower
average investment balances held. Offsetting interest income for the first six months of 2007 and
2006 was interest expense related to capital lease obligations of $3,000 and $4,000, respectively.
Additionally, in the second quarter of 2007 we recorded a loss on the disposal of fixed assets of
$5,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Income Taxes</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The provision for income taxes increased by $8.0&nbsp;million to a provision of $2.7&nbsp;million for
the second quarter of 2007 compared to a benefit for income taxes of $5.4&nbsp;million for the second
quarter of 2006. Similarly, for the first six months of 2007, the provision for income taxes
increased to $3.0&nbsp;million from a benefit for income taxes of $4.8&nbsp;million for the same period in
the prior year. The change in position is due to the net loss for income taxes of $15.0&nbsp;million and
$13.6&nbsp;million for the second quarter and first six months of 2006, respectively, which were
substantially generated by the shareholder litigation expense of $17.65&nbsp;million recorded in the
second quarter of 2006. The effective income tax rate for the second
quarter and first six months of 2007 was 41.7% compared to 35.9% and 35.3% for the second quarter
and first six months of 2006, respectively. The effective rate declined in 2006 primarily due to
the recording of an impairment of the Arizona State NOL carrryforward of $250,000 in the second
quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Net Income</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income increased by $13.3&nbsp;million to $3.7&nbsp;million for the second quarter of 2007 compared
to a net loss of $9.6&nbsp;million for the second quarter of 2006. Net income increased by $13.0&nbsp;million
to $4.2&nbsp;million for the first six months of 2007 compared to a net loss of $8.8&nbsp;million for the
same period in 2006. Income per basic share was $0.06 and $0.07 for the second quarter and first
six months of 2007, respectively. Income per diluted share was $0.06 for both the second quarter
and first six months of 2007. This compares to the loss per basic and diluted share of $0.15 and
$0.14 for the second quarter and first six months of 2006, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B><BR>
<B><I>Liquidity</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>As of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In thousands)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash, cash equivalents and short term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,068</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,258</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working Capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">49,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,814</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of June&nbsp;30, 2007, we had $23.5&nbsp;million in cash, cash equivalents and short
term investments, an increase of $1.2&nbsp;million from December&nbsp;31, 2006 which is primarily
attributable to cash generated from operations offset by the final $8&nbsp;million cash payment in the
settlement of our shareholder litigation as discussed in note 11 to the financial statements
included in this report. The final payment was made in cash rather than stock at our discretion.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Six Months Ended June 30,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In thousands)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,918</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,093</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used for) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,271</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by operating activities for the first six months of 2007 of $2.9&nbsp;million was
mainly attributable to the $8.0&nbsp;million payment for the shareholder litigation settlement and a
$4.8&nbsp;million increase in accounts receivable due to the higher sales levels in the second quarter
of 2007 compared to the fourth quarter of 2006 and a $746,000 increase in inventory related to some
build to satisfy order backlog existing at June&nbsp;30, 2007. These uses of cash were partially offset
by our net income for the first six months of 2007 of $4.2&nbsp;million, the $3.1&nbsp;million utilization of
deferred tax assets and total other non cash adjustments to net income of $2.4&nbsp;million including
depreciation and amortization expense of $1.2&nbsp;million, stock-based compensation expense of $591,000
and provision for warranty expense of $548,000. In addition, deferred revenue related to the growth
in sales of extended warranties increased by $918,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generated $3.2&nbsp;million from investing activities during the six months ended June&nbsp;30, 2007
which was comprised of a $5.1&nbsp;million net decrease in our investments partially offset by $1.6
million in acquisitions of property and equipment, which mainly related to production equipment for
the TASER C2 manufacturing line and capitalized website development costs. In addition, we purchased
$231,000 of intangible assets, primarily consisting of patent applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first six months of 2007, we generated $1.4&nbsp;million from financing activities
attributable to stock options exercised in the period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Capital Resources.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;30, 2007, we had total cash and investments of $44.5&nbsp;million and $0.1&nbsp;million of
capital lease obligations outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a $10&nbsp;million line of credit facility with a domestic bank. The line is secured by
substantially all of our assets, other than intellectual property, and bears interest at varying
rates, ranging from LIBOR plus 1.5% to prime. The line of credit matures on June&nbsp;30, 2008 and
requires monthly payments of interest only. At June&nbsp;30, 2007, there was a calculated availability
of the maximum available $10.0&nbsp;million based on the defined borrowing base, which is based on our
eligible accounts receivable and inventory. However, there was no outstanding balance under the
line of credit at June&nbsp;30, 2007, and no borrowings under the line as of the date of the filing of
this Form 10-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our existing balance of cash and investments of $44.5&nbsp;million as of June&nbsp;30,
2007, together with cash expected to be generated from operations and availability under the line
of credit will be adequate to fund our operations for at least the next 12&nbsp;months. However, we may
require additional resources to expedite manufacturing of new and existing technologies in order to
meet possible demand for our products. 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, or on terms acceptable to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Commitments and Contingencies.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no material changes in future contractual financial obligations as of June&nbsp;30,
2007 compared to the information at December&nbsp;31, 2006 set forth in our Annual Report on Form 10-K
except as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;2, 2007 we entered into a contract with ATS Automation Tooling Systems Inc. (&#147;ATS&#148;)
for the purchase of equipment at a cost of approximately $7.8&nbsp;million. The equipment is expected to
be delivered to and installed at the Company&#146;s facility in 2008. Payments will be made in
installments, with an initial $3.1&nbsp;million to be paid in 2007 and the balance in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Off Balance Sheet Arrangements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have no off balance sheet arrangements as of June&nbsp;30, 2007.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Estimates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have identified the following accounting estimates as critical to our business operations
and the understanding of our results of operations. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenue and expenses during the reporting period. There can
be no assurance that actual results will not differ from those estimates. The effect of these
estimates on our business operations is discussed below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Standard Warranty Costs</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We warrant our products from manufacturing defects on a limited basis for a period of one year
after purchase, and thereafter will replace any defective TASER unit for a fee. We track historical
data related to returns and related warranty costs on a quarterly basis, and estimate future
warranty claims by applying our four quarter average return rate to our product sales for the
period. We have also historically increased our reserve amount if we become aware of a component
failure that could result in larger than anticipated returns from our customers. As of June&nbsp;30,
2007, our reserve for warranty returns was $885,000 compared to a $713,000 reserve at December&nbsp;31,
2006. In the event that product returns under warranty differ from our estimates, changes to
warranty reserves might become necessary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Inventory</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market, with cost determined using the weighted
average cost, which approximates the first-in, first-out (FIFO)&nbsp;method. Provisions are made to
reduce potentially excess, obsolete or slow-moving inventories to their net realizable value. These
provisions are based on our best estimates after considering historical demand, projected future
demand, inventory purchase commitments, industry and market trends and conditions and other
factors. Our reserve for excess and obsolete inventory was $171,000 at June&nbsp;30, 2007 compared to
$223,000 at December&nbsp;31, 2006. In the event that actual excess, obsolete or slow-moving inventories
differ from these estimates, changes to inventory reserves might become necessary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Accounts Receivable</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales are typically made on credit and we generally do not require collateral. We perform
ongoing credit evaluations of our customers&#146; financial condition and maintain an allowance for
estimated potential losses. Uncollectible accounts are written off when deemed uncollectible, and
accounts receivable are presented net of an allowance for doubtful accounts. These allowances
represent our best estimates and are based on our judgment after considering a number of factors
including third-party credit reports, actual payment history, customer-specific financial
information and broader market and economic trends and conditions. In the event that actual
uncollectible amounts differ from these estimates, changes in allowances for doubtful accounts
might become necessary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Valuation of Long-lived Assets</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We review long-lived assets, such as property and equipment and intangible assets subject to
amortization, whenever events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. We utilize a two-step approach to testing long-lived assets for
impairment. The first step tests for possible impairment indicators. If an impairment indicator is
present, the second step measures whether the asset is recoverable based on a comparison of the
carrying amount of the asset to the estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows,
an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds
the fair value of the asset. Our review requires the use of judgment and estimates. Management
believes that no such impairments have occurred to date. However, future events or circumstances
may result in a charge to earnings if we determine that the carrying value of a long-lived asset is
not recoverable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Income Taxes</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statement of Financial Accounting Standards No.&nbsp;109, or SFAS No.&nbsp;109, <I>Accounting for Income
Taxes</I>, establishes financial accounting and reporting standards for the effect of income taxes. In
accordance with SFAS No.&nbsp;109, we recognize federal, state and foreign current tax liabilities or
assets based on our estimate of taxes payable or refundable in the current fiscal year by tax
jurisdiction. We also recognize federal, state and foreign deferred tax assets or liabilities, as
appropriate, for our estimate of future tax effects attributable to temporary differences and
carryforwards. We are currently under audit by the United States Internal Revenue Service for our
2004 fiscal year. We are unable to determine the outcome of the process at this time. There can be
no assurance that the final outcome of this audit will not have an adverse effect on our future
operating results.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2006, the FASB issued Interpretation 48, &#147;Accounting for Uncertainty in Income Taxes&#148;
(&#147;FIN 48&#148;), which became effective for us beginning in 2007. FIN 48 addresses the determination of
how tax benefits claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under FIN 48, we recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax benefits recognized in
the financial statements from such a position are measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate resolution. Under FIN 48,
management must also assess whether uncertain tax positions as filed could result in the
recognition of a liability for possible interest and penalties. We adopted the provisions of FIN 48
effective January&nbsp;1, 2007. The impact on our reassessment of our tax positions in accordance with
FIN 48 did not have a material impact on the results of operations, financial condition or
liquidity. Our estimates are based on the information available to us at the time we prepare the
income tax provisions. We generally file our annual income tax returns several months after our
fiscal year end. Income tax returns are subject to audit by federal, state, and local governments,
generally years after the returns are filed. These returns could be subject to material adjustments
or differing interpretations of the tax laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our calculation of current and deferred tax assets and liabilities is based on certain
estimates and judgments and involves dealing with uncertainties in the application of complex tax
laws. Our estimates of current and deferred tax assets and liabilities may change based, in part,
on added certainty or finality to an anticipated outcome, changes in accounting or tax laws in the
United States, or changes in other facts or circumstances. In addition, we recognize liabilities
for potential United States tax contingencies based on our estimate of whether, and the extent to
which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or
if the recorded tax liability is less than our current assessment, we may be required to recognize
an income tax benefit or additional income tax expense in our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In preparing our financial statements, we assess the likelihood that our deferred tax assets
will be realized from future taxable income. In evaluating our ability to recover our deferred
income tax assets we consider all available positive and negative evidence, including our operating
results, ongoing tax planning and forecasts of future taxable income. We establish a valuation
allowance if we determine that it is more likely than not that some portion or all of the net
deferred tax assets will not be realized. We exercise significant judgment in determining our
provisions for income taxes, our deferred tax assets and liabilities and our future taxable income
for purposes of assessing our ability to utilize any future tax benefit from our deferred tax
assets. Although we believe that our tax estimates are reasonable, the ultimate tax determination
involves significant judgments that could become subject to audit by tax authorities in the
ordinary course of business. As a result of the shareholder litigation settlement expense recorded
in the second quarter of 2006, we recorded a valuation allowance of $250,000 in 2006 against our
deferred tax assets for Arizona NOL&#146;s. We believe that, other than as previously described, as of
June&nbsp;30, 2007, based on our evaluation, no additional valuation allowance was deemed necessary as
it is more likely than not that our net deferred tax assets will be realized. However, the deferred
tax asset could be reduced in the near term if estimates of taxable income during the carryforward
period are reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Stock-Based Compensation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for stock-based compensation in accordance with the fair value recognition
provisions of SFAS No.&nbsp;123R. We use the Black-Scholes-Merton option pricing model which requires
the input of highly subjective assumptions. These assumptions include estimating the length of time
employees will retain their stock options before exercising them (&#147;expected term&#148;), the estimated
volatility of our common stock price over the expected term and the number of options that will
ultimately not complete their vesting requirements (&#147;forfeitures&#148;). Changes in the subjective
assumptions can materially affect the estimate of fair value of stock-based compensation and
consequently, the related amount recognized on our statements of operations. Refer to Note 2c to
our financial statements for further discussion of how we determined our valuation assumptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Contingencies</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the possibility of various loss contingencies, including product related
litigation, arising in the ordinary course of business. We consider the likelihood of loss or
impairment of an asset or the incurrence of a liability, as well as our ability to reasonably
estimate the amount of loss in determining loss contingencies. An estimated loss contingency is
accrued when it is probable that an asset has been impaired or a liability has been incurred and
the amount of loss can be reasonably estimated. We regularly evaluate current information available
to us to determine whether such accruals should be adjusted and whether new accruals are required.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="307"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 3.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest Rate Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We invest in a limited number of financial instruments, consisting principally of investments
in high credit quality government sponsored entity securities, denominated in United States
dollars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for our investment instruments in accordance with Statement of Financial Accounting
Standards No.&nbsp;115, <I>&#147;Accounting for Certain Investments in Debt and Equity Securities,&#148; </I>(SFAS No.
115)<I>. </I>All of our cash equivalents and marketable securities are treated as &#147;held-to-maturity&#148; under
SFAS No.&nbsp;115. Investments in fixed rate interest earning instruments carry a degree of interest
rate risk as their market value may be adversely impacted due to a rise in interest rates. As a
result, we may suffer losses in principal if forced to sell securities that decline in market value
due to changes in interest rates. However, because we classify our debt securities as
&#147;held-to-maturity,&#148; no gains or losses are recognized due to changes in interest rates and, as
such, a 10% change in interest rates would not have a material adverse affect on our results of
operations. These securities are reported at amortized cost, which approximates fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Exchange Rate Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consider our direct exposure to foreign exchange rate fluctuations to be minimal.
Currently, sales to customers provide for pricing and payment in United States dollars, and
therefore are not subject to exchange rate fluctuations. To date, we have not engaged in any
currency hedging activities, although we may do so in the future. Fluctuations in currency exchange
rates could harm our business in the future.
</DIV>
<DIV align="left">
<A name="308"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 4.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>CONTROLS AND PROCEDURES</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Evaluation of disclosure controls and procedures</I></B>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules&nbsp;13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures were effective as of June&nbsp;30,
2007 to ensure that information we are required to disclose in reports that we file or submit under
the Securities Exchange Act of 1934 (i)&nbsp;is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and forms and (ii)&nbsp;is
accumulated and communicated to our management, including our Chief Executive Officer and our Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our
disclosure controls and procedures are designed to provide reasonable assurance that such
information is accumulated and communicated to our management. Our disclosure controls and
procedures include components of our internal control over financial reporting. Management&#146;s
assessment of the effectiveness of our internal control over financial reporting is expressed at
the level of reasonable assurance because a control system, no matter how well designed and
operated, can provide only reasonable, but not absolute, assurance that the control system&#146;s
objectives will be met.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Changes in internal control over financial reporting.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no changes in internal control over financial reporting during the fiscal quarter ended
June&nbsp;30, 2007, that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="309"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II&#151;OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="310"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. LEGAL PROCEEDINGS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See discussion of legal proceedings in Note 10 to the financial statements included in PART I,
ITEM 1 of this Form 10-Q.
</DIV>
<DIV align="left">
<A name="311"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1A. RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of the following factors, as well as other variables affecting our operating results, past
financial performance may not be a reliable indicator of future performance and historical trends
should not be used to anticipate results or trends in future periods.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A substantial number of law enforcement and corrections agencies may not purchase our
conducted energy, non-lethal devices. 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 such as the military market. 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 devices may have been perceived as
ineffective. Sales of our products to these agencies may also be delayed or limited by these claims
or perceptions.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We substantially depend on sales of our TASER X26 products, and if these products are not widely
accepted, our growth prospects will be diminished.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the three and six months ended June&nbsp;30, 2007 and 2006, we derived our revenues
predominantly from sales of the TASER X26 brand devices and related cartridges, and expect to
depend on sales of these products for the foreseeable future. A decrease in the prices of or demand
for these products, or their failure to achieve broad market acceptance, would significantly harm
our growth prospects, operating results and financial condition.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to manage any growth in our business, our prospects may be limited and our future
profitability may be adversely affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to expand our sales and marketing programs and our manufacturing capacity as needed
to meet future demand. Any significant 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. We will need to continually improve our operations,
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.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may face personal injury, wrongful death and other liability claims that harm our reputation and
adversely affect our sales and financial condition.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products are often used in aggressive confrontations that may result in serious, permanent
bodily injury or death to those involved. Our products may 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, defective product or inadequate warning. We are currently subject
to a number of such lawsuits. 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, we do incur large legal expenses within our self insured retention in defending these
lawsuits and significant litigation could also result in a diversion of management&#146;s attention and
resources, negative publicity and a potential award of monetary damages in excess of our insurance
coverage. The outcome of any litigation is inherently uncertain and there can be no assurance that
our existing or any future litigation will not have a material adverse effect on our revenues, our
financial condition or financial results.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Pending litigation may subject us to significant litigation costs, judgments, fines and penalties
in excess of insurance coverage, and divert management attention from our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are involved in numerous litigation matters relating to our products or the use of such
products, litigation against persons who we believe have defamed our products, litigation against
medical examiners who we believe made errors in their autopsy reports,
litigation against a competitor, and litigation against our former patent attorney. Such matters have resulted and are expected to continue to result in
substantial costs to us and a likely diversion of our management&#146;s attention, which could adversely
affect our business, financial condition or operating results. In particular, we reached an
agreement to settle our shareholder class action lawsuits and derivative lawsuits for approximately
$21.75&nbsp;million, of which approximately $4.1&nbsp;million was covered by insurance.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to design, introduce and sell new products or new product features successfully,
our business and financial results could be adversely affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success will depend on our ability to develop new products or new product features
that achieve market acceptance in a timely and cost-effective manner. The development of new
products and new product features is complex, and we may experience delays in completing the
development and introduction of new products. We cannot provide any assurance that products that we
may develop in the future will achieve market acceptance. If we fail to develop new products or new
product features on a timely basis that achieve market acceptance, our business, financial results
and competitive position could be adversely affected.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We expend significant resources in anticipation of a sale due to our lengthy sales cycle and may
receive no revenue in return.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 products, budget constraints and
product reliability, safety and efficacy. The length of our sales cycle may range from a few weeks
to as long as several years. Adverse publicity surrounding our products or the safety of such
products has in the past and could in the future lengthen our sales cycle with customers. In
particular, we believe our revenue decrease for the year ended December&nbsp;31, 2005 compared to the
year ended December&nbsp;31, 2004 was impacted in part by the adverse effect on customers and potential
customers of the negative publicity surrounding our products or use of our products. 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.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Most of our end-users are subject to budgetary and political constraints that may delay or prevent
sales.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 delayed due to budgetary, political or other scheduling delays which frequently occur
in connection with the acquisition of products by such agencies.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Government regulation of our products may adversely affect sales.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Federal regulation of sales in the United States: </I>Our devices are not firearms regulated by
the Bureau of Alcohol, Tobacco, Firearms and Explosives, but are consumer products regulated by the
United States Consumer Product Safety Commission. Although there are currently no federal laws
restricting sales of our devices in the United States, future federal regulation could adversely
affect sales of our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Federal regulation of international sales: </I>Our devices are controlled as a &#147;crime control&#148;
product 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 devices
from the United States other than to Canada. Our inability to obtain DOC export licenses on a
timely basis for sales of our devices to our international customers could significantly and
adversely affect our international sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>State and local regulation: </I>Our devices are controlled, restricted or their use prohibited by
a number of state and local governments. Our devices are banned from private citizen 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 prohibited in New Jersey. Some municipalities,
including Omaha, Nebraska and Washington, D.C., also prohibit private citizen 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Foreign regulation: </I>Certain foreign jurisdictions, including Japan, Australia, Italy and Hong
Kong, prohibit the sale of conducted energy devices such as our products, limiting our
international sales opportunities.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Environmental laws and regulations subject us to a number of risks and could result in significant
liabilities and costs.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may be subject to various state, federal and international laws and regulations governing
the environment, including restricting the presence of certain substances in electronic products
and making producers of those products financially responsible for the collection, treatment,
recycling and disposal of those products. Recent environmental legislation within the European
Union (EU)&nbsp;may increase our cost of doing business internationally and impact our revenues from EU
countries as we comply with and implement these new requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The EU has published Directives on the restriction of certain hazardous substances in
electronic and electrical equipment (the RoHS Directive) which became effective in July&nbsp;2006, and
on electronic and electrical waste management (the WEEE Directive). The RoHS Directive restricts
the use of a number of substances, including lead. The Waste Electrical and Electronic Equipment
Directive, or WEEE directs members of the European Union to enact laws, regulations, and
administrative provisions to ensure that producers of electric and electronic equipment are
financially responsible for the collection, recycling, treatment and environmentally responsible
disposal of certain products sold into the market after August&nbsp;15, 2005 and from products in use
prior to that date that are being replaced. In addition, similar environmental legislation has been
or may be enacted in other jurisdictions, including the U.S. (under federal and state laws) and
other countries, the cumulative impact of which could be significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We continue to evaluate the impact of specific registration and compliance activities required
by the RoHS and WEEE Directives. We endeavor to comply with these environmental laws, yet
compliance with such laws could increase our operations and product costs; increase the
complexities of product design, procurement, and manufacturing; limit our ability to manage excess
and obsolete non-compliant inventory; limit our sales activities; and impact our future financial
results. Any violation of these laws can subject us to significant liability, including fines,
penalties, and prohibiting sales of our products into one or more states or countries, and result
in a material adverse effect on our financial condition.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to protect our intellectual property, we may lose a competitive advantage or incur
substantial litigation costs to protect our rights.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success depends upon our proprietary technology. Our protective measures, including
patents, trademarks and trade secret protection, may prove inadequate to protect our proprietary
rights. Our earliest expiring United States patent generally covers projectile propellant devices
having a container of compressed gas in place of gunpowder as a propellant. We use this technology
in our cartridges. This patent expires in 2010. 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, or others may claim rights in or ownership of our
patents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;14, 2006, U.S. Patent No.&nbsp;US 6,999,295 entitled &#147;Dual Operating Mode Electronic
Disabling Device For Generating A Time-Sequenced, Shaped Voltage Output Waveform&#148; was issued to
named inventors Thomas G. Watkins, III and Magne Nerheim. Mr.&nbsp;Nerheim assigned his interest in this
patent to us. This patent covers a portion of the technology utilized in the TASER X26 device. This
patent was applied for by Mr.&nbsp;Watkins, who was our former patent attorney, without our knowledge or
consent. Mr.&nbsp;Watkins originally filed patent applications on our behalf as our patent attorney for
the same inventions in February and May&nbsp;2003 with the U.S. Patent and Trademark Office. In each
application he filed a declaration stating that Mr.&nbsp;Nerheim was the sole inventor. These patent
applications are now issued as granted patents. In December&nbsp;2004, he informed us that he now felt
that he was the inventor of a portion of this invention. We vigorously dispute his claim and we
have filed litigation against Mr.&nbsp;Watkins for declaratory judgment, breach of fiduciary duty,
constructive fraud, and breach of contract. We believe that we are the sole owner of this
invention. Since we are a joint owner of this patent, this patent will not restrict us from
manufacturing and selling the TASER X26 device. We have other patent applications pending that
cover inventions contained in this patent. In March&nbsp;2006, the court issued a temporary restraining
order and a preliminary injunction preventing Mr.&nbsp;Watkins from selling, assigning, transferring, or
licensing this patent to a third party during the duration of this litigation. We filed a motion
for summary judgment in January&nbsp;2007 requesting an equitable assignment or constructive trust of
Mr.&nbsp;Watkins interest in U.S. Patent No.&nbsp;US 6,999,295, which motion was granted by the Court in
March&nbsp;2007. On February&nbsp;5, 2007, the Disciplinary Commission of the Supreme Court of Arizona
recommended that Mr.&nbsp;Watkins be disbarred as a result of his conduct in this matter. On May&nbsp;18,
2007 the Court entered an order and final judgment granting TASER International judgment against
Mr.&nbsp;Watkins of all right, title and interest that Watkins have, claim to have or may have in
certain United States patents and patent applications and related electrical stun technology,
electronic weapon technology, or any component or process thereof, whether or not patented or
patentable. The court order further requires Mr.&nbsp;Watkins to execute a written assignment to TASER
International assigning all right, title and interest that Mr.&nbsp;Watkins have, claim to have, or may
have in these patents as well as related electrical stun technology, electronic weapon technology,
or any component or process thereof, whether or not patented or patentable. In addition, the court
order permanently enjoins Mr.&nbsp;Watkins from claiming or seeking to obtain ownership rights in any of
the above described intellectual property.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be subject to intellectual property infringement claims, which could cause us to incur
litigation costs and divert management attention from our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any intellectual property infringement claims against us, with or without merit, could be
costly and time-consuming to defend and divert our management&#146;s attention from our business. If our
products were found to infringe a third party&#146;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.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we face competition in foreign countries, we can enforce patent rights only in the jurisdictions
in which our patent applications have been granted.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our US patents only protect us from imported infringing products coming into the US from
abroad. Applications for patents in a few foreign countries have been
made by us; however, these may be
inadequate to protect markets for our products in other foreign countries. Each foreign patent is
examined and granted according to the law of the country where it was filed independent of whether
a US patent on similar technology was granted.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Government regulations applied to our products may affect our markets for these products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on the opinions of The Bureau of Alcohol Tobacco and Firearms, including that a device
that has projectiles propelled by the release of compressed gas, in place of the expanding gases
from ignited gunpowder, are not classified as firearms. Changes in statutes, regulations, and
interpretation outside of our control may result in our products being classified or reclassified
as firearms. Our market to civilians could be substantially reduced if consumers are required to
obtain registration to own a firearm prior to purchasing our products.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Competition in the law enforcement and corrections market could reduce our sales and prevent us
from achieving profitability.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 similar devices and products. Increased competition may result in greater pricing pressure, lower gross
margins and reduced sales. In this regard, two different competitors announced plans to introduce
new products in 2005. During 2006, one of those companies introduced a new device to compete with
the TASER X26. We are unable to predict the impact such products will have on our sales or our
sales cycle, but existing or potential customers may choose to evaluate such products which could
lengthen our sales cycle and potentially reduce our future sales.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. Defects in our products may result
in a loss of sales, delay in market acceptance and injury to our reputation and increased warranty
costs.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our dependence on third party suppliers for key components of our devices could delay shipment of
our products and reduce our sales.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 sub-assemblies. Specifically, we depend on
suppliers of sub-assemblies, machined parts, injection molded plastic parts, printed circuit
boards, custom wire fabrications and other miscellaneous customer parts for our products. We also
do not have long-term agreements with any of our suppliers. We believe that there are readily
available alternative suppliers in most cases, however, there can be no guarantee that supply will not
be interrupted. 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.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Component
shortages could result in our inability to produce adequate volume to meet customer
demand. This could result in a loss of sales, delay in deliveries and injury to our reputation.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single source components used in the manufacture of our products may become unavailable or
discontinued. Delays caused by industry allocations, or obsolescence may take weeks or months to
resolve. In some cases, part obsolescence may require a product re-design to ensure quality
replacement circuits. These delays could cause significant delays in manufacturing and loss of
sales, leading to adverse effects significantly impacting our financial condition or results of
operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our dependence on foreign suppliers for key components of our products could delay shipment of our
finished products and reduce our sales.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depend on foreign suppliers for the delivery of certain components used in the assembly of
our products. Due to changes imposed for imports of foreign products into the United States, as
well as potential port closures and delays created by terrorist threats, public health issues or
national disasters, we are exposed to risk of delays caused by freight carriers or customs
clearance issues for our imported parts. Delays caused by our inability to obtain components for
assembly could have a material adverse effect on our revenues, profitability and financial
condition.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may experience a decline in gross margins due to rising raw material and transportation costs
associated with an increase in petroleum prices.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant number of our raw materials are comprised of petroleum based products, or incur
some form of landed cost associated with transporting the raw materials or components to our
facility. Any significant and sustained rise in oil prices could adversely
impact our ability to sustain our current gross margins, by reducing our ability to control component
pricing.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our revenues and operating results may fluctuate unexpectedly from quarter to quarter, which may
cause our stock price to decline.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenues and operating results have varied significantly in the past and may vary
significantly in the future due to various factors, including, but not limited to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market acceptance of our products and services</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outcome of any existing or future litigation</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse publicity surrounding our products, the safety of our products, or the use of our products</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in our sales mix</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>new product introduction costs</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased raw material expenses</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in our operating expenses</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory changes that may affect the marketability of our products</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>budgetary cycles of municipal, state and federal law enforcement and corrections agencies</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outcome of any current or future tax audits.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of these and other factors, we believe that period- to-period comparisons of our
operating results may not be meaningful in the short term, and our performance in a particular
period may not be indicative of our performance in any future period
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may experience difficulties in the future in complying with Sarbanes-Oxley Section&nbsp;404.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to evaluate our internal controls under Section&nbsp;404 of the Sarbanes-Oxley Act
of 2002. Beginning with our annual report on Form 10-K for the fiscal year ending December&nbsp;31,
2005, we have been required to furnish a report by our management on our internal control over
financial reporting. Such report contains among other matters, an assessment of the effectiveness
of our internal control over financial reporting as of the end of our fiscal year, including a
statement as to whether or not our internal control over financial reporting is effective. Such
report also contains a statement that our independent registered public accounting firm has issued
an attestation report on management&#146;s assessment of such internal controls. In our Form 10-K for
our 2005 fiscal year, because of our previously reported material weaknesses related to not having
controls in place to record appropriate accruals related to professional fees in the appropriate
accounting period and inadequate resources related to accounting and financial statement
preparation particularly with respect to financial statement footnote preparation were not fully
remediated and tested at December&nbsp;31, 2005, our management assessment and the report of our
Independent Registered Public Accounting Firm concluded that our internal controls were not
effective at December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
of our prior material weaknesses, there is heightened risk that a material misstatement of
our annual or quarterly financial statements will not be prevented or detected. While we have
completed our remediation efforts to address these material weaknesses and while we did not
identify any materials weaknesses at December&nbsp;31, 2006, we cannot assure you that material
weaknesses will not occur in future periods. If we fail to maintain proper and effective internal
controls in future periods, it could adversely affect our operating results, financial condition
and our ability to run our business effectively and could cause investors to lose confidence in our
financial reporting. We have incurred, and expect to continue to incur increased expense and to
devote additional management resources to Section&nbsp;404 compliance. In the event that our chief
executive officer, chief financial officer or our independent registered public accounting firm
determine that our internal control over financial reporting is not effective as defined under
Section&nbsp;404, investor confidence in us may be adversely affected and could cause a decline in the
market price of our stock.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Foreign currency fluctuations may affect our competitiveness and sales in foreign markets.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 existing or potential foreign customers and
reduce or eliminate their future orders of our products.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Use of estimates may cause our financial results to differ from expectations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We face risks associated with rapid technological change and new competing products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
technology associated with our devices is receiving significant attention and is
rapidly evolving. While we have patent protection in key areas of electro-muscular disruption
technology, it is possible that new technology may result in competing products that
operate outside our patents and could present significant competition for our products.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>To
the extent demand for our products continues to increase, our future success will be dependent upon our
ability to ramp manufacturing production capacity which will be accomplished by the implementation
of customized manufacturing automation equipment.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
experienced significant revenue growth in 2006 compared to 2005 and
in the second quarter of 2007 compared to the second quarter of 2006. To the extent demand for
our products continues to increase significantly in future periods, one of our key challenges will be to ramp
our production capacity to meet sales demand, while maintaining product quality. Our primary
strategies to accomplish this include increasing the physical size of our assembly facilities, the
hiring of additional production staff, and the implementation of customized automation equipment.
We have limited previous experience in implementing automation equipment, and the investments made
on this equipment may not yield the anticipated labor and material efficiencies. Our inability to
meet any future increase in sales demand or effectively manage our expansion could have a material
adverse affect on our revenues, financial results and financial condition.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We depend on our ability to attract and retain our key management and technical personnel.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends upon the continued service of our key management personnel. Our success
also depends on our ability to continue to attract, retain and motivate qualified technical
personnel. Although we have employment agreements with certain of our officers, the employment of
such persons is &#147;at-will&#148; and either we or the employee can terminate the employment relationship
at any time, subject to the applicable terms of the employment agreements. The competition for our
key employees is intense. The loss of the service of one or more of our key personnel could harm
our business.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="316"></A>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM
2. RECENT SALES OF UNREGISTERED SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;10, 2007, the Company issued to Counsel for the derivative
plaintiffs in the federal derivative action an aggregate of
216,355&nbsp;shares of the Company&#146;s Common Stock pursuant to
the Final Judgement and Order of Dismissal with Prejudice issued by
the U.S.&nbsp;District Court of Arizona on March&nbsp;13, 2007
approving the Stipulation of Settlement dated December&nbsp;4, 2006
in exchange for certain releases of claims by the plaintiffs. Such
shares were issued pursuant to Section&nbsp;3(a)(10) of the
Securities Act and have not been registered under the Securities Act.
</DIV>

<DIV align="left">
<A name="312"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following matters were submitted to a vote of our security holders at our annual
shareholders meeting held on May&nbsp;25, 2007:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Election of John S. Caldwell, Bruce R. Culver and Michael Garnreiter to serve a three
year term on the Board of Directors</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ratification of the appointment of Grant Thornton LLP as our independent auditors for
the year ended December&nbsp;31, 2007</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Stockholder proposal concerning animal testing</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Election of Directors</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The allocation of votes for the election of John S. Caldwell, Bruce R. Culver and Michael
Garnreiter to the Board of Directors was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">FOR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">WITHELD</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John S. Caldwell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,829,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.89</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,186,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.11</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bruce R. Culver</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,801,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.84</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.16</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael Garnreiter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,829,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.89</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,186,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.11</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Ratification of Auditors</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The allocation of votes for the ratification of the appointment of Grant Thornton LLP as our
independent auditors for the year ended December&nbsp;31, 2007 was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">FOR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">AGAINST</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">ABSTAIN</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">52,852,580</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.64</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.28</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Stockholder Proposal</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The allocation of votes for a stockholder proposal to eliminate testing TASER products on live animals was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">FOR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">AGAINST</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">ABSTAIN</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">BNV</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1,468,912</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.08</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,522,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">89.30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">749,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.61</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,275,262</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="313"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 6. EXHIBITS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement with Automation Tooling
Systems Inc. for purchase of equipment.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer Certification pursuant to Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer Certification pursuant to Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer Certification pursuant to U.S.C. Section&nbsp;1350 as adopted pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer Certification pursuant to U.S.C. Section&nbsp;1350 as adopted pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="314"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">TASER INTERNATIONAL, INC.<BR>
(Registrant)<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: August 9, 2007&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Patrick W. Smith
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Patrick W. Smith,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer<BR>
(Principal Executive Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: August 9, 2007&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Daniel M. Behrendt
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Daniel M. Behrendt&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Financial Officer<BR>
(Principal Financial and Accounting Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<DIV align="left">
<A name="315"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Index to Exhibits</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000">Exhibits:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement with Automation Tooling Systems Inc. for purchase of equipment.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer Certification pursuant to Rule&nbsp;13a-14(a) under the Securities exchange Act of 1934.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer Certification pursuant to Rule&nbsp;13a-14(a) under the Securities exchange Act of 1934.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer Certification pursuant to U.S.C. Section&nbsp;1350 as adopted pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer Certification pursuant to U.S.C. Section&nbsp;1350 as adopted pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>2
<FILENAME>p74175exv10w18.htm
<DESCRIPTION>EX-10.18
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w18</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 10.18</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">TASER International
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Cartridge Assembly Line</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left" style="font-size: 14pt; margin-top: 12pt"><B>ATS Conditions of Sale</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">1. ENTIRE AGREEMENT
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">. The Agreement or Contract between ATS and TASER International (Buyer) shall consist of (in the
following order of priority) Buyer&#146;s Purchase Order to ATS, TASER International Machine Performance
Specification and Requirements &#091;Final Rev A clean 6.29.2007&#093;, ATS Quotation &#091;SWT 02-07-132333 Rev 1
dated May&nbsp;10, 2007&#093; as amended by Buyer&#146;s Purchase Order and ATS Conditions of Sale &#091;Taser (Final
Rev A redlined &#151; 6.29.2007)&#093;. This Agreement or Contract shall constitute and create the entire
agreement between ATS and Buyer and shall supersede all prior discussions, correspondence and
proposals (such agreement, as may be amended, modified or supplemented from time to time in
writing, the &#147;Contract&#148;) with respect to the purchase of the AAM and/or Deliverables.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2. DESIGN CHANGES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS shall provide Buyer with ATS&#146;s documented ISO procedures regarding the processing of design
changes prior to any design change. BUYER AGREES TO FOLLOW ATS&#146; DOCUMENTED ISO PROCEDURES
REGARDING THE PROCESSING OF DESIGN CHANGES AND SHALL ENSURE THAT ALL CHANGES ARE PROPERLY APPROVED
BY BUYER&#146;S AUTHORIZED PERSONNEL WITHOUT DELAY. The Buyer is responsible and shall pay ATS all
increased costs, including overheads and profit thereon due to Buyer&#146;s changes in design or
specifications. ATS overhead and profit for any design changes shall not exceed the burdened rates
provided by ATS to Buyer. Any design study requested by Buyer to estimate the cost of a proposed
change in design or specifications shall be made by the ATS personnel assigned to the original
design. If the Buyer authorizes the proposed change, the Contract price shall be increased or
decreased by the amount quoted by ATS for the proposed change, unless otherwise agreed between
Buyer and ATS, and the contract schedule shall be extended or compressed as mutually agreed by the
parties based on the amount of time stated in the ATS design study, or equal to the time lost or
gained by reason of the change. The schedule for all materials or components affected by any
design study shall be extended by a period of time equal to the hold time, if any, associated with
such study, whether or not the Buyer authorizes or approves the proposed change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">3. EQUIPMENT SAFETY
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS shall build the ATS Product to comply with ATS&#146; interpretation of applicable (OSHA or CSA)
safety standards. ATS shall review equipment safety including guarding designs with the Buyer at a
design review meeting with the intent to maximize operator safety, particularly with respect to all
pinch points and moving parts. Buyer shall advise ATS of any required equipment safety or guarding
changes no later than five (5)&nbsp;business days following the date of such design review meeting.
Unless provided for in the specifications, if Buyer requests deviation from ATS&#146; interpretation of
the applicable safety standards, this shall be considered a Design Change (See Article&nbsp;2).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">4. EXCUSABLE DELAYS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS shall not be liable for delays in delivery or performance, or for failure to manufacture,
deliver or perform, due to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a cause beyond ATS&#146; reasonable control; provided such delay could not have been
prevented by sufficient advance logistical planning;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an act of God, act of a public enemy, compliance with laws, governmental acts or regulations,
fire, accident, unusually severe weather, act of civil or military authority, Governmental
priority, strike or other labour disturbance, flood, epidemic, war, riot, delay in
transportation or car shortage; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acts of the Buyer including, failure of Buyer to supply to ATS within five (5)&nbsp;business days
with all necessary information, required sample parts or other specified items required by ATS
to design, manufacture, test and install the ATS Product, failure or delay by Buyer to approve
or reject proposed design changes, changes of scope, design or specification made by Buyer
which result in additional time being required to design, manufacture, test and install the
ATS Product; failure or delay by Buyer to release to ATS those portions of Buyer&#146;s plant
required by ATS for installation of the ATS Product; interference by Buyer or Buyer&#146;s trades
during installation; failure or delay of Buyer to advise ATS of required equipment safety or
guarding changes within five (5)&nbsp;business days of design review meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS will notify the Buyer promptly of any material delay excused by (i)&nbsp;and (ii)&nbsp;above and will
specify the revised delivery date as soon as practicable. In the event of any such delay, there
will be no termination arising from the delay (except for Buyer&#146;s right to terminate for
convenience under Article&nbsp;11) and the date of delivery or of performance shall be extended for a
period equal to the time lost by reason of delay.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ATS Confidential &#151; Do not copy or distribute
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.29.2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Page 1</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->
&nbsp;
<!-- /Folio -->
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">TASER International
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Cartridge Assembly Line</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the event of any delay arising as contemplated in (iii)&nbsp;above, the Buyer shall pay ATS
compensation for its documented costs actually incurred resulting directly from such delay,
including carrying charges, transportation charges, storage charges, travel charges, and personnel
charges. ATS will, at Buyer&#146;s request, provide Buyer with documentation supporting such costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">5. DELIVERY, TITLE AND RISK OF LOSS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Delivery dates specified are best expected dates and are subject to events as described in Section
4 above. Unless otherwise specified in the ATS Quotation, delivery will be made to the FOB Buyer
facility, skidded for domestic truck shipment. ATS shall be responsible for freight transportation,
insurance, shipping, storage, import duty, brokerage, handling, demurrage, or similar charges to
deliver to Buyer&#146;s facility. If such charges are by the terms of sale included in the Contract
price, any increase in rates becoming effective after the date of Contract shall be for the account
of and responsibility of the Buyer. Risks of loss or damage shall pass to the Buyer on delivery at
Buyer&#146;s facility, however, title to the ATS Product will not pass to the Buyer until payment has
been received in full. ATS shall not be responsible for unloading the ATS Product at Buyer&#146;s
facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">6. FACTORY ACCEPTANCE AND SITE ACCEPTANCE
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following provisions apply with respect to the acceptance of any products forming part of the
ATS Product:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ATS and Buyer have agreed on a test plan (&#147;Test Plan&#148;) for the FAT (as defined below)
and the SAT (as defined below).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A factory acceptance test (&#147;FAT&#148;) shall be performed at ATS&#146;s facility and shall
commence within five (5)&nbsp;business days of notice from ATS confirming completion of the ATS
Product or at such other time as may be agreed upon in writing by the parties. Such testing
shall be carried out in accordance with the Test Plan. The FAT shall be deemed successful
when the results of the testing are in compliance with the Test Plan&#146;s criteria.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A Buyer site acceptance test (&#147;SAT&#148;) shall be performed at Buyer&#146;s facility within five
(5)&nbsp;business days of the completion of installation of the ATS Product at Buyer&#146;s site.
Such testing shall be carried out in accordance with the Test Plan. The SAT shall be
deemed successful when the results of the testing are in compliance with the Test Plan&#146;s
criteria and approved by Buyer.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ATS shall carry out such remedial work as is necessary to achieve a successful FAT and
SAT at no additional charge to Buyer, provided that any changes requested by Buyer beyond
those set forth in the Specifications may require additional charges which shall be
determined by mutual agreement by both parties and reflected in a change order executed by
the parties in accordance with Section&nbsp;2. Once remedial work is complete, the ATS Product
will be re-tested and this process shall continue for a reasonable time until a successful
FAT and SAT is achieved.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notwithstanding anything to the contrary, FAT and/or SAT will be deemed successfully
completed in the event that Buyer fails to allow ATS to conduct the tests within the
prescribed timeframe referred to above or in the event Buyer does not provide the
production quality sample parts or other inputs required by the Test Plan within such
timeframes.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ATS Confidential &#151; Do not copy or distribute
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.29.2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Page 2</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->
&nbsp;
<!-- /Folio -->
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">TASER International
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Cartridge Assembly Line</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">7. INSTALLATION SERVICES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Installation services are included in the quoted price, except that Buyer is responsible for
unloading the AAM from the truck and moving it to its location within Buyer&#146;s facility. ATS agrees
to be responsible for any damage caused to the AAM from normal rigging procedures. When installing
the equipment at Buyer&#146;s site, ATS confirms that it will not complete final electrical or
compressed air hook-ups to Buyer&#146;s power supply and Buyer is responsible for having its own
electricians complete such connections. In the event that local by-laws, ordinances or regulations
in effect at Buyer&#146;s site require certain inspections, approvals or supervision of such hook-ups,
Buyer is responsible for arranging these as required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">8. LIMITED WARRANTY
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Except as otherwise provided herein, ATS warrants that the ATS Product will be free from defects in
design, manufacture, workmanship, material and installation and shall conform to the TASER Machine
Performance Specifications and Requirements EN-SPEC-AAM-001 Rev A and ATS Quotation SWT02-07-132333
Rev 1, dated May&nbsp;9, 2007 for a period of thirty-six (36)&nbsp;months from SAT or thirty-eight (38)
months from the date of shipment from ATS&#146; facilities, whichever occurs first. Upon prompt
notification from the Buyer of any failure of the ATS Product to conform to this warranty during
the warranty period, and provided the ATS Product has been properly installed, maintained and
operated in accordance with ATS recommended procedures, ATS will make repairs, adjustments, or
replacements to the defective part(s) at ATS&#146; option. ATS shall have no responsibility for, and
does not warrant against, any problems that occur as a result of improper use of the ATS Product or
failure to properly install, maintain and operate it in accordance with ATS&#146;s recommended
procedures, or alteration to it by any party other than ATS or those authorized by ATS to do
so. Buyer shall maintain accurate and complete records regarding equipment operation and
maintenance and service procedures performed on the ATS Product. The Buyer agrees to return the
defective part to ATS at the Buyer&#146;s expense. ATS will return corrected or replacement parts to
the Buyer CPT Buyer&#146;s plant. ATS&#146;s warranty includes ATS manufactured components, industrial
Rockwell components, conveyors, including Supertrak, bowl feeders, hoppers, pick and place units,
grippers for pick and place units, winders, gear boxes, indexers and pneumatic presses. ATS&#146;
warranty excludes consumable items and wear parts, such as but not limited to belts, bulbs, lamps,
fuses, o-rings, filters, fiber guides, printer ribbons or cartridges, lubricants, solvents or
chemicals, sensors, motors, all pneumatic devices, drills, dispensing equipment, punch die, pad
printer and sensor cables which by their nature require periodic replacement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">With respect to third party equipment integrated into the ATS Product, warranties for such items
are limited to the warranty extended to ATS by the supplier; however ATS will use its best efforts
to obtain extended warranties when available. These third party equipment includes: o-ring feeders,
Branson welders, lasers, weigh scales, test instruments, gas filling equipment, robots, oven and
arc weld. ATS hereby assigns to the Buyer all warranties received from its suppliers to the extent
ATS is able to and agrees to assist the Buyer in making any claim pursuant to the said warranties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ATS MAKES NO OTHER WARRANTY, EXPRESSED OR IMPLIED, AND HEREBY EXPRESSLY DISCLAIMS ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">9. SPARE PARTS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS agrees that it will, for a period of seven (7)&nbsp;years after the warranty period, make
available the necessary resources to service the ATS Products and sell to Buyer all necessary spare
parts, at prevailing price, delivery and payment terms, required for maintenance and repair of the
Products. The parties acknowledge that in the event that spare parts consisting of or including
components manufactured by a third party supplier and not manufactured by ATS cease to be available
from such third party supplier, ATS shall be entitled to identify a suitable replacement or
work-around solution for such spare parts. After such seven(7) year period has expired, Buyer may
request that ATS continue to support the ATS Products or supply spare parts and, if ATS does not
choose to continue to support such Products or supply such spare parts, ATS agrees to provide
Buyer, upon receipt of a written request from Buyer therefore, with an opportunity for Buyer to
make final purchases of any spare parts then in the possession of ATS and supply Buyer with copies
of all manufacturing drawings of spare parts that are manufactured by ATS so that Buyer can
maintain the Products, provided that Buyer shall only be able to use such drawings to make or have
made spare parts for ATS Products supplied by ATS and for no other purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">10. PATENTS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS warrants that the ATS Product shall be delivered free of any rightful claim of a third party
for infringement of any valid Canadian or United States patent. Upon prompt notification from
Buyer in writing and given all the reasonably necessary authority, information and assistance for
the defence of same, ATS shall defend or settle in its sole judgement, at ATS&#146; expense, any suit or
proceeding brought against the Buyer based upon a claim that the ATS Product constitutes an
infringement of such a patent. ATS shall pay all damages and costs awarded against the Buyer due
to such infringement.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ATS Confidential &#151; Do not copy or distribute
</DIV>
<DIV align="center">
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</TR>
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    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.29.2007
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</TR>
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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In case the ATS Product is held in such suit to constitute an infringement and its use is enjoined,
ATS shall, at its expense and option, either procure for the Buyer the right to continue to use the
ATS Product, or replace same with a non-infringing product or part having the same functionality,
or modify same so it becomes non-infringing, without diminution in functionality or remove the ATS
Product and refund the purchase price of the infringing part of the ATS Product (less
depreciation for any period of use on a straight line basis over a period of ten (10)&nbsp;years from
the date of the applicable Purchase Order) and any transportation costs separately paid by the
Buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The patent warranty shall not apply to: (i)&nbsp;any product or part which is modified or manufactured
to the Buyer&#146;s design to the extent infringement results from Buyer&#146;s design; (ii)&nbsp;any product of a
third party as specified by the Buyer incorporated in the ATS Product; (iii)&nbsp;the use of any ATS
Product furnished to Buyer in combination with other products not furnished by ATS, unless the ATS
Product, per se, infringes the asserted patent; or (iv)&nbsp;any infringement relating to Buyer&#146;s
prescribed manufacturing processes. As to any such excluded product or part thereof, ATS assumes
no liability whatsoever for patent infringement and the Buyer shall hold ATS harmless against any
infringement claim arising therefrom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>THE FOREGOING STATES THE ENTIRE LIABILITY OF ATS FOR PATENT INFRINGEMENT BY THE ATS PRODUCT OR ANY
PART THEREOF</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">11.&nbsp;CONFIDENTIALITY, PROPERTY RIGHTS &#038; SOFTWARE LICENSES
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Each party (the &#147;Recipient&#148;) agrees to keep and maintain the confidentiality of the confidential
information of the other party hereto (the &#147;Owner&#148;). This Contract imposes no obligation on the
Recipient where such information (i)&nbsp;was known to the Recipient prior to receipt of the information
on a non-confidential basis, (ii)&nbsp;is or becomes a matter of public knowledge or publicly available
through no fault of the Recipient, (iii)&nbsp;is rightfully received by Recipient on a non-confidential
basis from a third party, (iv)&nbsp;is independently developed by Recipient without use of or reference
to the information from Owner as established by the written records of Recipient; or (v)&nbsp;is
publicly disclosed by Recipient with Owner&#146;s prior written approval. Recipient agrees to protect
the information in strictest confidence by using the same degree of care to prevent the
unauthorized use, dissemination or publication of the information as Recipient uses to protect its
own confidential information, provided that in no case shall such standard of care be less than a
reasonable degree of care. Recipient may disclose such information only to those of Recipient&#146;s
employees, advisors, consultants, and vendors who have a need to know such information provided
that such employees, advisors, consultants, agents and vendors are under obligations of
confidentiality to maintain the confidentiality of such confidential information. Recipient shall
not use the confidential information of the Owner for any purpose other than as necessary to carry
out the purposes of this Contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS shall and does irrevocably grant and assign to Buyer the proprietary rights in and to any and
all of the deliverables first developed or conceived during performance of and otherwise resulting
from the Contract other than those that constitute ATS Proprietary Technology (as defined below).
Notwithstanding any provision, express or implied, to the contrary, and for the purposes of
clarity, the parties confirm that ATS shall retain all proprietary rights to any ATS Proprietary
Technology forming part of the Services and other Deliverables provided under the Contract. &#147;ATS
Proprietary Technology&#148; means any and all technology, know-how, trade secrets, inventions, and
software and other intellectual property that: (i)&nbsp;is or was developed, conceived or acquired by
ATS prior to or outside the scope of this Contract, or (ii)&nbsp;is owned by a third party and that ATS
has obtained rights to independently of this Contract, or (iii)&nbsp;is an improvement and/or
modification to ATS Proprietary Technology, or (iv)&nbsp;is developed or conceived during the course of
performance under this Contract (&#147;New Developments&#148;), to the extent such New Developments relate to
mechanical and electronic devices used to automatically convey, grip, locate, orient, manipulate,
alter, inspect, test or sense materials or products as part of an automated process. Buyer shall
have and ATS hereby grants to Buyer, an irrevocable, non-exclusive, world-wide, royalty-free,
perpetual right and license to use such ATS Proprietary Technology as has been incorporated into
the Services and/or Deliverables solely to operate, modify, and maintain the Deliverables provided
under the Contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The ATS Product may use computer software. Computer software that is custom developed by ATS
specifically for the Buyer under the terms of the Contract (&#147;Custom Software&#148;) shall be delivered
to the Buyer with the ATS Product, including source code. All title, right and interest in such
Custom Software shall vest in Buyer upon full payment for the ATS Product. Computer software of
third party suppliers (Third Party Software) may also be integrated into the ATS Product. ATS
shall assign all rights afforded under the licenses for such Third Party Software to the Buyer and
Buyer shall assume all obligations under any such software licenses, except for the payment of any
royalties. The ATS Product may also include software that has been developed by ATS, at ATS
expense, for general use in the products ATS manufactures (&#147;ATS Software&#148;). ATS Software is
proprietary to ATS. Upon full payment for the ATS Product, such ATS Software shall be licensed to
the Buyer on a non-exclusive basis for use solely to operate and maintain the ATS Product by the
Buyer. All software, whether ATS software of third party software, shall be provided to Buyer on a
royalty free basis.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ATS Confidential &#151; Do not copy or distribute
</DIV>
<DIV align="center">
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    <TD align="left" valign="top">&nbsp;
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    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.29.2007
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</TR>
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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">12. LIMITATIONS OF LIABILITY AND REMEDIES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE) OR
OTHERWISE, SHALL EITHER PARTY OR ITS SUPPLIERS OR SUBCONTRACTORS BE LIABLE FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFIT OR
REVENUES, LOSS OF USE OF THE ATS PRODUCT OR ANY ASSOCIATED EQUIPMENT, DAMAGE TO ASSOCIATED
EQUIPMENT, COST OF CAPITAL, COST OF SUBSTITUTE PRODUCTS, FACILITIES, SERVICES OR REPLACEMENT
EQUIPMENT, DOWN TIME COSTS, OR CLAIMS OF BUYER&#146;S CUSTOMERS FOR SUCH DAMAGES. IF THE BUYER
TRANSFERS TITLE TO OR LEASES THE ATS PRODUCT TO ANY THIRD PARTY, THE BUYER SHALL OBTAIN FROM SUCH
THIRD PARTY A PROVISION AFFORDING ATS AND ITS SUPPLIERS AND SUBCONTRACTORS THE PROTECTION OF THE
PRECEDING SENTENCE.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>EXCEPT FOR LIABILITY ARISING FROM (I)&nbsp;ATS&#146;S WILLFUL MISCONDUCT, OR (II)&nbsp;ATS&#146;S INDEMNIFICATION
OBLIGATIONS UNDER ARTICLE 10, IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY,
TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL EITHER PARTY&#146;S LIABILITY TO THE OTHER PARTY FOR ANY
LOSS OR DAMAGE ARISING OUT OF, OR RESULTING FROM THIS CONTRACT, OR FROM ITS PERFORMANCE OR BREACH,
OR FROM THE PRODUCTS OR SERVICES FURNISHED HEREUNDER, EXCEED THE PRICE OF THE SPECIFIC PRODUCT OR
SERVICE WHICH GIVES RISE TO THE CLAIM. EXCEPT AS TO TITLE, ANY SUCH LIABILITY SHALL TERMINATE UPON
THE EXPIRATION OF THE WARRANTY PERIOD SPECIFIED IN &#147;LIMITED WARRANTY&#148; (ARTICLE 9).</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If ATS furnishes the Buyer with advice or other assistance which concerns the ATS Product or any
system or equipment in which the ATS Product may be installed and which is not required pursuant to
this Contract, the furnishing of such advice or assistance will not subject ATS to any liability,
whether in contract, warranty, tort (including negligence), or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>THE REMEDIES PROVIDED EITHER PARTY IN THE CONTRACT ARE SUCH PARTY&#146;S SOLE AND EXCLUSIVE REMEDIES</B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">13. TERMINATION BY BUYER FOR CONVENIENCE
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Buyer may terminate the Contract in whole or in part for Buyer&#146;s convenience. In the event of such
termination, Buyer shall pay ATS upon demand for all costs and expenses already incurred or
commitments made by ATS for materials and labour, including, without limitation, design,
processing, handling, fabrication, packing, shipping, travel, supplier termination, and restocking
charges, plus reasonable amounts for overhead and profit. ATS shall not be entitled to anticipated
profit or anticipated overhead charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">14. TERMINATION BY ATS FOR CAUSE
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If Buyer becomes insolvent or bankrupt or breaches a provision of the Contract and does not remedy
such breach within twenty (20)&nbsp;calendar days of written notice by ATS, ATS may terminate the
Contract in whole or in part effective twenty (20)&nbsp;calendar days after said notice was given. In
the event of such termination, ATS shall have the right to take possession of all materials and
components related to the ATS Product in whatever stage of design, manufacture, or installation it
is at such time, except such ATS Product which has already been delivered and paid in full by
Buyer. ATS shall be under no obligation to finish the work, provide further support or
information, or provide further ATS Product. In the event of such termination, Buyer shall pay ATS
for all work performed prior to the termination, including costs and expenses already incurred and
commitments made by ATS plus reasonable expenses incurred after termination to recover or protect
the ATS Product and related materials and components, plus reasonable amounts for overhead and
profit on the foregoing. ATS shall not be entitled to compensation for anticipated profit or
anticipated overhead charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">15. TERMINATION BY BUYER FOR CAUSE
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If ATS becomes bankrupt or insolvent or breaches a provision hereof and does not remedy such breach
within twenty (20)&nbsp;calendar days of being given written notice by Buyer, Buyer may terminate the
Contract in whole or in part, at its option in its sole discretion, effective twenty (20)&nbsp;calendar
days after such notice was given. In the event of such termination, Buyer shall have the right, at
its option and in its sole discretion, to take possession of the ATS Product (in whatever state of
design or manufacture it is at such time) immediately and shall have a right to receive a refund of
all amounts paid to ATS hereunder, less an amount representing payment for all work performed and
deliverables provided by ATS to the date of such termination and Buyer shall be relieved of any
obligation to make any future payments to ATS; or, in the alternative, in the event the termination
occurs due to ATS&#146;s bankruptcy or insolvency or if the breach occurs prior to acceptance of the MAT
by Buyer and is not cured within within 20&nbsp;days after written notice of such breach, reject the
AAM, cancel the Purchase Order and receive a full refund of all moneys paid to ATS. ATS shall not
be entitled to anticipated profit or anticipated overhead charges. Upon election to take
possession of the AAM and make such payment, Buyer shall have the right to the continued use of the
ATS Product, including
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ATS Confidential &#151; Do not copy or distribute
</DIV>
<DIV align="center">
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    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.29.2007
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</TR>
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</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the related materials and components, and Buyer may then finish the work by any reasonable means
Buyer deems appropriate. THE REMEDY PROVIDED TO BUYER IN THIS ARTICLE SHALL BE BUYER&#146;S SOLE AND
EXCLUSIVE REMEDY IN RESPECT OF ANY BANKRUPTCY OR INSOLVENCY OF ATS AND IN RESPECT OF ANY BREACH OF
THIS CONTRACT BY ATS, OTHER THAN IN RESPECT OF EVENTS DESCRIBED IN LIMITED WARRANTY (ARTICLE 9) OR
PATENTS (ARTICLE 10).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16. TAXES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The prices quoted by ATS are exclusive of all applicable federal, state/ provincial or local taxes,
unless otherwise stated. The Buyer shall pay the gross amount of any present or future sales, use,
excise, value added, or other similar tax applicable to the price, sale or delivery of any ATS
Product or services furnished hereunder or to their use by the Buyer or ATS. The Buyer shall
furnish ATS with evidence of exemption from any such taxes acceptable to the taxing authorities.
The Buyer shall assess and remit any applicable tax to taxing authorities not otherwise invoiced by
ATS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">17. ASSIGNMENT
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Neither party shall assign the Contract without the prior written consent of the other party;
provided, however, that Buyer may assign this Contract to any affiliate of Buyer. Buyer shall in
such circumstances remain liable for all obligations under this Contract. For purposes of this
provision, an &#147;affiliate&#148; of buyer shall be any business entity that controls, is controlled by or
is under common control with Buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">18. AGENCY
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ATS and the Buyer are independent contractors. No agency relationship or partnership exists
between them, and neither of them has the right to enter into a contract on behalf of or as an
agent or representative of the other.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">19. NOTICES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All notices required or permitted under this Contract shall be in writing and personally delivered
or mailed, by registered mail, return receipt requested. Facsimile transmission to the address or
facsimile number set out on the ATS Quotation will not be considered a legal notice and must be
confirmed with the delivered or mailed original. ATS or Buyer may change their respective
addresses by written notice to the other.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">20. SURVIVAL BEYOND COMPLETION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The rights and obligations of each party with respect to confidentiality, indemnification,
limitations of liability, disclaimers, representations, warranties, and other terms and conditions
set forth herein shall survive termination of the Contract or Final Acceptance of the Work.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">21. GOVERNING LAW
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The validity, interpretation and performance of the Contract shall be governed by and construed in
accordance with the laws of the State of Arizona, USA. Buyer and ATS hereby submit to the
non-exclusive jurisdiction of the Courts situated in the State of Arizona for resolution of
disputes arising with respect to this Contract.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ATS Confidential &#151; Do not copy or distribute
</DIV>
<DIV align="center">
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</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.29.2007
</TD>
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    <TD align="right" valign="top">Page 6</TD>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">


<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><B>TASER Material and Supply Purchase Requisition Form</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Date:</B>&nbsp;&nbsp;&nbsp;<B>July&nbsp;2, 2007</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Date Needed:</B>&nbsp;&nbsp;&nbsp;<B>July&nbsp;2, 2007</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Requested by:</B>&nbsp;&nbsp;&nbsp;<B>Dan Behrendt</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Department:</B>&nbsp;&nbsp;&nbsp;<B>Production</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Approved by:</B>&nbsp;&nbsp;&nbsp;<B>Board of Directors (see attached resolution)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>PO#:</B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Vendor:</B></TD>
    <TD>&nbsp;</TD>
    <TD>ATS Automation Tooling Systems, Inc., Automation Systems Devision, 250 Roayal Oak Road,
Cambridge, ON, Canada N3H 4R6</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Vendor Local Address:</B>&nbsp;&nbsp;&nbsp;ATS Southwest, Inc., 10900 N. Stgallard Place, Tucson, AZ 85737

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Vendor Contact &#038;Phone:</B>&nbsp;&nbsp;&nbsp;Daniel Alcombright, General Manager, Phone: 520-575-9446, ext. 251

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Vendor Fax:</B>&nbsp;&nbsp;&nbsp;520-575-9562

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Project Description:</B>&nbsp;&nbsp;&nbsp;TASER Cartridge Automated Assembly Machine

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Ship Via:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vendor Select</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="white-space: nowrap"><B>Ship Terms:</B></FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FOB TASER Facility</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Terms:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">See Payment Terms below</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Item #</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Rev</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Size</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Color</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Delivery</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Quantity</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">UOM</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Unit Price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">TASER Cartridge
Automated Assembly
Machines (AAM)&nbsp;or
(ATS Product)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">*
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">**
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ship to TASER
on 5/25/2008***
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 Zones plus<BR>
other Deliverables*
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$7,767,600.00
inclusive of all
taxes, freight
and all items included in Investment Summary*
All System Options
Are Rejected</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt"><DIV align="left"><DIV style="font-size: 3pt; margin-top: 13pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV></DIV>





<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>See ATS Quotation SWT02-07-132333Rev 1 Dated May&nbsp;9, 2007 as revised and amended pursuant to
this Purchase Order.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>All exposed machinery, parts and surfaces (except anodized aluminum, stainless steel and safety
related surfaces) to be finished in a uniform manner with TASER colors of grey, silver and black
with </TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">


<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>TASER logos (artwork provided by TASER, ATS shall provide the necessary tags based on TASER
artwork) to cover all manufacturer advertising tags containing
letters taller than 1<FONT face="symbol">&#178;</FONT> to appear as
though it is a TASER specific machine. Markings related to component identification (for
maintenance purposes) and human safety will be allowed. TASER to approve exceptions, painting
scheme and colors as part of the design review</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">***</TD>
    <TD>&nbsp;</TD>
    <TD>AAM will be fully installed at TASER&#146;s facility, and be functional, operational and ready for
start of SAT on June&nbsp;10, 2008. ATS shall not ship or deliver the AAM to TASER until such time as it
successfully completes the FAT to TASER&#146;s reasonable approval.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Payment Terms:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20% of total purchase price with delivery of TASER purchase order</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20% of total purchase price net 30&nbsp;days after TASER approval of AAM design</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10% of total purchase price net 30&nbsp;days after start of AAM assembly</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10% of total purchase price net 30&nbsp;days after TASER acceptance of Modular Acceptance Test
(MAT)&nbsp;for each AAM zone. MAT shall equal an eight hour production of 6,150 assemblies to
TASER specification with no faults on an equivalent basis per a two hour burst test.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10% of total purchase price net 30&nbsp;days after TASER approval of ATS plan to achieve 100% of
FAT</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>15% of total purchase price net 30&nbsp;days after delivery of AAM at TASER facility. In the
event that the AAM is not shipped to TASER facility by May&nbsp;25, 2008, then the terms of this
payment shall be net 60&nbsp;days.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>15% of total purchase price net 60&nbsp;days after TASER approval of Site Installation and Site
Acceptance Testing (SAT). In the event that the AAM is not shipped to TASER facility by May
25, 2008, then the terms of this payment shall be net 90&nbsp;days.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the purpose of this Purchase Order, ATS shall refer to ATS Automation Tooling Systems Inc. and
TASER or Buyer shall refer to TASER International, Inc. This Purchase Order incorporates the
following documents by reference as modified or amended, which documents are made a part hereof as
though fully set forth herein, in the following order of priority:<BR>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TASER Purchase Order</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TASER Machine Performance Specifications and Requirements EN-SPEC-AAM-001 Rev A Final dated
June&nbsp;29, 2007,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ATS Investment Summary dated June&nbsp;1, 2007 (All System Options are rejected)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ATS Quotation SWT02-07-132333Rev 1 Dated May&nbsp;9, 2007, subject to the following revisions:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Zone #1 Technical Review, Design for Assembly-1 Revised Design of Gas Capsule, DFA Steps,
page 15, substitute 304L stainless steel for the gas capsule for laser weld.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Zone #1 Process Validation, ATS shall perform all Process Validation steps for Zone #1,
Stations 14 &#038; 22 on page 16, Stations 16 &#038; 18 on page 17, and Station 20 on page 17.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Zone #2, Process Validation, Station 18, ATS shall perform the second Process Validation Step
on page 15.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Zone #3, Process Validation, Station 34, ATS shall perform all Process Validation Steps on
page 21.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Zone #4, Process Validation, Station 16, ATS shall perform all Process Validation Steps on
page 18.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Zone #5, Process Validation, Station 12, ATS shall perform all Process Validation Steps on
page 14.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#091;ATS Comments: Please see revised ATS Conditions of Sale for details on software licenses.&#093;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">h)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General Clarifications &#038; Deliverables, the cosmetic guarding proposed on page 1 is rejected.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General Clarifications &#038; Deliverables, all machinery, guarding, shields and parts shall meet
all required federal and state regulations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">j)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General Clarifications &#038; Deliverables, all as built documentation shall be provided in
electronic format for the AAM including , but not limited to all parts and components and in
hardcopy format for all but software source code, detailed mechanical, electrical and
hydraulic drawings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">k)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Project Management, the testing and acceptance criteria for both Factory Acceptance Testing
(FAT)&nbsp;and Site Installation Testing (SAT)&nbsp;shall be inclusive of Sections&nbsp;4.7.2, 4.7.3, 4.7.4,
4.7.5 and 4.7.6 of TASER&#146;s Automated Assembly Machine Performance Specifications and
Requirements.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ATS Conditions of Sale, TASER version, as revised dated June&nbsp;29, 2007</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Requestor:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Dan Behrendt</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Date:</B>&nbsp;&nbsp;&nbsp;<B>July&nbsp;2, 2007</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>p74175exv31w1.htm
<DESCRIPTION>EX-31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
RULE 13a-14(a) UNDER THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Patrick W. Smith, principal executive officer, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report on Form 10-Q of TASER International, Inc. for the period ended June&nbsp;30, 2007;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s
internal control over financial reporting that occurred
during the registrant&#146;s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the registrant&#146;s internal control over financial
reporting.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s board of directors (or persons performing the equivalent
functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material
weaknesses in the design or operation of
internal control over financial reporting that
are reasonably likely to adversely affect the
registrant&#146;s ability to record, process,
summarize and report financial information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that
involves management or other employees who have
a significant role in the registrant&#146;s internal
control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: August 9, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Patrick W. Smith
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Patrick W. Smith&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>p74175exv31w2.htm
<DESCRIPTION>EX-31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
RULE 13a-14(a) UNDER THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Daniel M. Behrendt, principal financial officer, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report on Form 10-Q of TASER International, Inc. for the period ended June&nbsp;30, 2007;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s
internal control over financial reporting that occurred
during the registrant&#146;s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the registrant&#146;s internal control over financial
reporting.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s board of directors (or persons performing the equivalent
functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material
weaknesses in the design or operation of
internal control over financial reporting that
are reasonably likely to adversely affect the
registrant&#146;s ability to record, process,
summarize and report financial information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that
involves management or other employees who have
a significant role in the registrant&#146;s internal
control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: August 9, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Daniel M. Behrendt
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Daniel M. Behrendt&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>p74175exv32w1.htm
<DESCRIPTION>EX-32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Quarterly Report of TASER International, Inc. (the &#147;Company&#148;) on Form
10-Q for the period ending June&nbsp;30, 2007 as filed with the Securities and Exchange Commission on
the date hereof (the &#147;Report&#148;), I, Patrick W. Smith, Chief Executive Officer of the Company,
certify pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Patrick W. Smith
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Patrick W. Smith<BR>
Chief Executive Officer<BR>
August&nbsp;9, 2007

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>p74175exv32w2.htm
<DESCRIPTION>EX-32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 32.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Quarterly Report of TASER International, Inc. (the &#147;Company&#148;) on Form
10-Q for the period ending June&nbsp;30, 2007 as filed with the Securities and Exchange Commission on
the date hereof (the &#147;Report&#148;), I, Daniel M. Behrendt, Chief Financial Officer of the Company,
certify pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Daniel M. Behrendt
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Daniel M. Behrendt<BR>
Chief Financial Officer<BR>
August&nbsp;9, 2007

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


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</TEXT>
</DOCUMENT>
</SUBMISSION>
