Taser set to change marketing, state says

Robert Anglen
The Arizona Republic
Sept. 28, 2005 12:00 AM

On the same day Taser International confirmed federal regulators are investigating the company, Arizona's attorney general said the stun gun manufacturer has agreed to change the way it markets its gun.

Attorney General Terry Goddard's office said Tuesday that Taser has offered to increase product warnings, change some of its broad claims of safety and limit the use of the word "non-lethal."

"Our primary concern has been Taser's safety claims that we felt may have understated the risks of serious harm," Goddard said in a statement to The Arizona Republic. "We are encouraged that the company has agreed to make many changes that reduce or qualify these claims. We are now reviewing these proposed changes."

Scottsdale-based Taser has armed nearly a fifth of America's law enforcement agencies with the electric stun guns. Company officials contacted Tuesday said they did not wish to comment on the marketing changes or on any meetings with Goddard's office.

His office has been looking into Taser's safety claims since January, when the U.S. Securities and Exchange Commission said it was launching an informal inquiry into Taser's safety claims and into a sale last year that bolstered company earnings at the end of the quarter.

On Tuesday, Taser disclosed that the SEC had turned its informal inquiry into an investigation that will give federal regulators subpoena powers.

Taser has known about the investigation for a least a week. It disclosed the probe in a news release after being questioned Monday by The Republic. Taser's disclosure had an immediate impact on Taser stocks, sending the price of shares to their lowest level since November 2003.

Taser Chief Executive Officer Rick Smith said Tuesday that the company will cooperate with federal regulators.

"We recognize that this has been a difficult process for our employees and shareholders," Smith said in a prepared statement. "We continue to make all efforts to assist the SEC in completing their investigation as expeditiously as possible."

Smith also said the SEC is expanding its investigation, examining the possibility that internal documents have been leaked to unspecified parties in an attempt to manipulate Taser's stock price.

"We are hopeful that the expanded SEC investigation will address all pertinent issues," Smith said.

For months, Taser officials have maintained that they did nothing wrong. In January, Smith predicted the federal inquiry would come out in the company's favor.

The SEC's action is the latest challenge for the company, which has seen sales of its popular stun gun slow this year after a number of deaths that left police agencies across the country rethinking Taser purchases and, in some cases, taking the gun off the street.

Goddard's office said Taser's proposed marketing changes include an 18-point "product warning" that stresses the Taser should be used only by trained individuals and acknowledges the gun's potential danger.

In a memo to Goddard's office, Taser agreed to change the ways it promotes its gun in both training materials and on its Web site. Among those changes:

• Minimizing the use of the term "non-lethal" to describe the weapon. As part of its proposal, Taser also has agreed to include a disclaimer that the company is taking the term "non-lethal" from the Department of Defense and does not mean the weapon can't be fatal.

• Acknowledging much more prominently that the stun gun can be dangerous.

• Changing the way it uses the term "safe." A description that describes the stun gun as a "safer, effective device" will be changed to "safer use-of-force alternative."

• Limiting medical claims. Materials that say "medical experts confirm Taser is safe" will be changed to "medical experts confirming the lifesaving value of Taser technology."

• Changing descriptions that suggest Taser is harmless. Materials that say Tasers "leave no lasting after-affects" will be changed to "are more effective and safer than other use-of-force options."

One of Taser's chief critics, Amnesty International, said the changes suggest more scrutiny is being given to the firm.

"Amnesty has long held that there have been a number of very serious questions about the safety of this product that remain unanswered," Amnesty spokesman Edward Jackson said. "Now, it seems like the tide is turning and more and more credible bodies are weighing in on the issue."

Jackson said he is concerned that changes to Taser's marketing should have been made long before the weapon was put into the hands of police officers.

A Taser, which resembles a plastic gun, uses electricity to override the nervous system and incapacitate a suspect.

It normally works by firing two darts from distances of up to 21 feet.

Although the company has repeatedly said its stun guns have never caused a death or serious injury, The Republic has linked them to 18 deaths and to the injuries of several police officers. The officers say the injuries occurred when they were shocked during mandatory training exercises.

Since 1999, there have been at least 144 deaths following police Taser strikes in the United States and Canada.

Of those, medical examiners cited Tasers as a cause of death in four cases and a contributing factor in 10 others. In four other cases, medical examiners said Taser could not be ruled out as a cause of death.

Taser has gone from a family business to the nation's largest supplier of stun guns. It has armed nearly 8,000 U.S. police agencies with Tasers and has made millions for investors.

But news of the initial SEC inquiry caused stock prices to drop in January and resulted in a flurry of shareholder lawsuits.

Last year, Taser stock rose 361 percent and split three times, peaking in November at more than $30 a share.

On Tuesday, stock prices fell to $6.35.

When the SEC inquiry was first announced, Taser President Tom Smith said regulators questioned the release of a statement in 2004 touting an independent Defense Department study that purportedly found Tasers were safe.

Taser's statement seemed to increase stock prices just before executives and directors sold $68 million in shares in November.

When the full Defense Department study was released this year, it was revealed that Taser was involved in nearly every aspect of the study, raising questions about its independence. In addition, government researchers involved in the study said they never looked at safety.

Smith said the SEC was also looking into the sale of 1,000 consumer model stun guns to a Prescott firearms company. Taser announced the sale on Dec. 20, just 11 days before the end of Taser's quarter. The sale appeared to help the company meet its projected earnings.

Taser defends giving stock options to police

September 24, 2005
Robert Anglen, The Arizona Republic

Taser International gave potentially lucrative stock options to six police officers from 2001 to 2003, most of whom promoted Taser's stun guns and, in some cases, urged their cities to buy them.

Court documents released this week show that officers in Arizona, California, Washington, Texas, and Canada received thousands of company stock options, some only weeks after urging police commanders or city officials to purchase Tasers.

Four of the six officers are now employed by Scottsdale-based Taser International, which is facing state and federal inquiries over the safety of its stun gun and the weapon's involvement in deaths across the country. advertisement

The stock options, as well as payments to other officers for Taser training, have sparked concerns about potential conflicts of interest. Critics say Taser paid officers to influence cities to get them to purchase the stun guns.

"We've raised concerns about Taser's options-granting practices since this past January," stock analyst John Gavin of SEC Insight wrote in a report to investors this week.

Other critics, including the American Civil Liberties Union, say payments to police officers have created a conflict of interest, with officers promoting the stun gun and repeating Taser's assurances of safety while minimizing risks.

Taser officials issued a news release Thursday defending the police officers and denying any conflict.

"The officers on our (training) board were involved in training operations at their respective departments - not the purchasing departments," Taser Chief Executive Officer Rick Smith said in the news release. "They followed all relevant conflict-of-interest regulations at their departments, and the grant of stock options did not violate Taser's code of ethics nor industry norms."

The information concerning the stock options was released this week after Taser lost a legal challenge to seal documents from a lawsuit against Taser filed in Maricopa County Superior Court.

Taser asked the court to keep confidential the deposition of company President Tom Smith, arguing that his answers about who received stock options was proprietary. The Arizona Republic and SEC Insight both filed motions to keep the records open, arguing that information about Taser is vital to the public's interest.

The court agreed, and Taser did not appeal.

According to Republic research, medical examiners in 18 cases have said Tasers were a cause, a contributing factor or could not be ruled out in someone's death.

The newly released documents for the first time reveal who outside the company received stock options.

The six active-duty officers who received options were from police departments in Chandler and Glendale, Seattle, Sacramento, Austin and Victoria, British Columbia. Records show all but the Austin officer promoted the effectiveness of the weapons and some urged their cities to purchase them.

Five other individuals also were issued stock options: a retired New York police officer; a former United Airlines employee; Taser's current medical director; a lawyer who did patent work for Taser, and his assistant. New York, Austin and United Airlines purchased Tasers, but it's unclear if the employees played a role in the decision.

The options could be worth hundreds of thousands of dollars, depending on when they were exercised and sold.

The 11 individuals received a total of 27,671 options. It is not known when each person exercised and sold his options.

In its news release, Taser defends giving options to officers. Rick Smith says the officers were not being rewarded but being compensated for serving on Taser's Master Instructor Training Board, which advises Taser on law enforcement training programs.

"It should be noted that none of the board members were in a position to approve product purchases," Smith said. "Every one of their agencies had already purchased and deployed Taser devices prior to their joining our advisory training board."

Public records show that one of the officers, former Chandler police Officer Jim Halsted, received 500 stock options a year before he urged the City Council to spend $193,000 on Tasers. Halsted, now a regional sales manager for Taser, was later investigated by the city for conflict-of-interest violations and cleared of any wrongdoing.

On March 27, 2003, Halsted made a presentation to the Chandler City Council in which he stressed the importance of buying Tasers and encouraged officials to act that night. Contacted at his office Friday, Halsted declined to comment.

Former Seattle police Officer Steve Ward, who now works for Taser, was issued stock options on Jan. 1, 2001, almost a year before Taser created its training board. In September 2000, Ward co-authored a report that advocated arming officers with Tasers.

Another officer who received Taser stock options is Darren Laur of the Victoria, British Columbia, Police Department. Laur has been a staunch advocate for Taser for years and helped write a report in 1999 that helped usher Tasers into Canada.

According to court documents, Laur was given 750 stock options in 2001 for helping to design a holster for the Taser. Taser said he sold the options in 2003.

"In my view there is an appearance of a conflict of interest, or at least the perception of a conflict," Canadian lawyer Cameron Ward said. Ward represents the family of Robert Bagnell, who died in June 2004 after officers shocked him with a Taser.

In his deposition, Taser President Tom Smith said he did not believe any of the options granted to police officers represented a conflict.

Edmonton Police Chief dismisses most complaints about Taser use

September 22, 2005
CBC News

Taser International discusses role of Master Instructor Training Board

September 22, 2005
Taser International via PRNewswire

SCOTTSDALE, Ariz., Sept 22, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- TASER International, Inc. (Nasdaq: TASR), a market leader in advanced electronic control devices released the following statement relating to the compensation of consultants to the Company including its Master Instructor Training Board:

The company was advised that the Arizona Republic, a Gannet Newspaper, intends to run a negative story regarding the fact that during the period from 2000 through 2003, the Company granted stock options to 11 persons who were not employees or directors of TASER International. The 11 persons included our medical director, a non-employee salesperson, two individuals who provided legal services to the Company, a police officer who designed a holster for the Company's product, and six members of our Master Instructor Training Board. In total, the 11 individuals received stock options on 27,671 shares of TASER International stock. The stock options had a strike price equal to the Company's share price on the date of issue and as such did not have any "in the money value" at the time of grant.

The Master Instructor Training Board was created to oversee and advise the Company in relation to law enforcement training programs and included four active duty police officers, one retired police officer and a representative from the aviation industry.

The participants were chosen as respected experts in police and security training. It should be noted that none of the board members were in a position to approve product purchases AND every one of their agencies had already purchased and deployed TASER devices prior to their joining our advisory training board.

The company addressed the issue of these stock options on CNBC's Kudlow and Cramer and released generic information to the New York Times and other media in the first quarter of 2005. The company did not release individual names at that time out of respect for the privacy of the consultants involved. However, the Arizona Republic was able to gain access to previously private court records and intends to release the information regardless of individuals' privacy rights. Accordingly, TASER International has elected to issue this clarifying information to help ensure a more accurate representation of the facts.

According to an industry survey from advisory consulting experts at BoardSeat.com -- a consulting group in the area of creating and compensating advisory boards, TASER International followed an industry standard that over 70% of start up ventures use to compensate advisors -- stock options. Stock options have been and continue to be important compensation tools for start up ventures that have limited cash resources -- a description that certainly fit TASER International during the time period in question. The following information is from BoardSeat.com:

Regarding the purpose of advisory boards: "An advisory board is a group
of industry executives and professionals that is appointed by a company
for the purpose of offering advice and support on a wide range of issues
that are relevant to the organization."

Regarding Compensation: "Advisors should be paid for their time. The
optimum method of payment in many cases is with stock options or
warrants."

Regarding Amount of Compensation: "As companies mature and become larger
they tend to pay a smaller percentage of equity to their advisory board
members. Companies that had raised less than $10 million pay their
advisors, on average, 0.043% per annum... Companies that had raised more
than $50 million pay their advisors, on average, 0.013% per annum."

Regarding the compensation of the TASER Training Board, the members received stock options on an aggregate total of 5,500 shares. This equates to an average of options on 917 shares of TASER stock per member of the training board. The fully diluted share count of TASER International at the end of 2002 was over 4.7 million shares. Hence, the average total of 306 shares per year represented 0.0065% of company equity. This is far below the per annum averages reported for similar venture capital backed companies in the boardSeat.com report.

As you can see from above, we strongly believe our Training Board is consistent with industry standards for similar advisory boards created by the majority of surveyed venture backed companies, albeit our compensation was far lower.

Regarding the officer who received stock options in lieu of cash for the purchase of a holster design, an officer in Victoria Canada received options on 775 shares of stock in May, 2001. Because the options were granted at the market price, the options had no value to the officer at the time of grant. He sold his options in 2003.

"I am personally incensed that the Arizona Republic plans to target TASER International with yet another biased report, alleging misconduct where none exists," said Rick Smith, CEO of TASER International. "Advisory boards are a prevalent and valuable resource in the business world, and their compensation predominantly includes stock options as is well documented in the area of startup ventures. The officers on our board were involved in training operations at their respective departments -- not the purchasing departments. They followed all relevant conflict-of-interest regulations at their departments and the grant of stock options did not violate TASER's Code of Ethics nor industry norms. The advisory board was established specifically to provide un-biased industry guidance in developing our training programs. It is an insult to these individuals and the law enforcement sector in general to insinuate these officers sold-out their ethics by helping us to develop better training and better equipment. It is especially insulting when the amounts in question amount to options on average of a few hundred shares of stock per year."

"I look forward with great interest to the Arizona Republic's story on this topic, especially in light of the history of biased and misleading reporting that have become the topic of litigation between TASER International and Gannet," concluded Mr. Smith.

About TASER International, Inc.

TASER International, Inc. provides advanced electronic control devices for use in the law enforcement, military, private security and personal defense markets. TASER devices use proprietary technology to safely incapacitate dangerous, combative or high-risk subjects who pose a risk to law enforcement officers, innocent citizens or themselves. TASER technology saves lives every day, and the use of TASER devices dramatically reduces injury rates for officers and suspects. For more information on TASER life-saving technology, please call TASER International at (800) 978-2737 or visit our website at www.TASER.com.

Note to Investors

This press release contains forward-looking information within the meaning of Section 27A of the Securities Act of the 1933 and Section 21E of the Securities Exchange Act of 1934, and is subject to the safe harbor created by those sections. The forward-looking information is based upon current information and expectations regarding TASER International. These estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results could materially differ from what is expressed, implied, or forecasted in such forward-looking statements.

TASER International assumes no obligation to update the information contained in this press release. TASER International's future results may be impacted by risks associated with rapid technological change, new product introductions, new technological developments and implementations, execution issues associated with new technology, ramping manufacturing production to meet demand, litigation including lawsuits resulting from alleged product related injuries, media publicity concerning allegations of deaths occurring after use of the TASER device and the negative impact this could have on sales, product quality, implementation of manufacturing automation, potential fluctuations in quarterly operating results, adjustments to these amounts which may be reflected in our 10Q filing, competition, financial and budgetary constraints of prospects and customers, international order delays, dependence upon sole and limited source suppliers, negative reports concerning TASER device uses, governmental inquiries and investigations, medical and safety studies, fluctuations in component pricing, government regulations, variation among law enforcement agencies with their TASER product experience, TASER device tests and reports, dependence upon key employees, and our ability to retain employees. TASER International's future results may also be impacted by other risk factors listed from time to time in its SEC filings, including, but not limited to, the Company's Form 10-QSBs and its Annual Report on Form 10-KSB.

The statements made herein are independent statements of TASER International. The inclusion of any third parties does not represent an endorsement of any TASER International products or services by any such third parties.

Visit the company's web-site at www.TASER.com for facts and video.

SOURCE TASER International, Inc.

Steve Tuttle, Vice President of Communications of TASER International, Inc.,
Media ONLY Hotline, +1-480-444-4000

Taser saga continues as Chicago teenager suffers near-fatal ventricular fibrillation after being shocked with stun gun

September 4, 2005
www.Newsinferno.com

Doctors blame taser stun gun for fibrillation

September 2, 2005
ALEX BERENSON, New York Times

A shock from a Taser stun gun caused a teenager in Chicago to go into ventricular fibrillation, a usually fatal heart disturbance, according to a letter published yesterday in The New England Journal of Medicine.

The letter, written by two doctors at Children's Memorial Hospital in Chicago, appears to be the first medically documented case of ventricular fibrillation caused by a Taser gun. Tasers are pistol-like weapons that fire electrified barbs up to 25 feet, immobilizing people with painful shocks.

Taser International, which makes the guns, has said that Tasers cannot cause fibrillation, a condition in which the heart loses the ability to pump blood. If not immediately reversed, fibrillation causes death within minutes. In the Chicago case, which occurred last February, the teenage crime suspect received immediate medical attention and survived after the police shot him with the Taser.

Dr. Wayne H. Franklin, a pediatric electrophysiologist at Children's Memorial and one of the letter's authors, said the teenager would have died if he had not been received immediate care. An electrocardiogram or heart rhythm test, administered to the teenager, proved that he suffered fibrillation, Dr. Franklin said.

The case illustrates the risks of Tasers as well as the need for police officers to carry automated defibrillators, which put out a large electric shock that restores the heart's rhythm, Dr. Franklin said. Police officers should be aware that Tasers can cause fibrillation, even though the risks may be small, he said.

"I don't know why it happens to one person and why it doesn't happen to another," he said. "Not everyone who gets hit by lightning dies, either."

In response to the letter, Taser forwarded an e-mail message from Dr. Richard M. Luceri, director of the Arrhythmia Center at Holy Cross Hospital in Fort Lauderdale, Fla., in which he said: "The conclusion implied by the authors is purely speculative and not backed by scientific evidence."

About 130 people have died after being shocked by a Taser, including nearly 70 in the last 12 months, according to Amnesty International, which has called for a moratorium on the use of the guns. In most cases, autopsy reports have not found the Taser to be the cause of death.

In 2003 and 2004, use of Tasers spread rapidly among American police departments as officers sought ways to control suspects without fighting with them or using firearms.

But sales of the guns have plunged this year amid safety questions. Tasers cause the muscles to contract uncontrollably. Repeated Taser shocks may cause the blood to become highly acidic and the body to overheat, both potentially fatal conditions, scientists say.

Stun gun sends teen's heart into ventricular vibrillation

September 2, 2005
By Neil Osterweil, Senior Associate Editor, MedPage Today
Reviewed by Zalman S. Agus, MD; Emeritus Professor at the University of Pennsylvania School of Medicine.

CHICAGO, Sept. 2-A Chicago teenager's heart went into ventricular fibrillation after the youth was subdued by police with a Taser electric stun gun, reported physicians.

"An adolescent was subdued with a Taser stun gun and subsequently collapsed," wrote Paul J. Kim, M.D., and Wayne H. Franklin, M.D., of Children's Memorial Hospital here in a letter to the New England Journal of Medicine.

"Paramedics found the adolescent to be in ventricular fibrillation and began performing cardiopulmonary resuscitation within two minutes after the collapse," the physicians wrote. "After four shocks and the administration of epinephrine, atropine, and lidocaine, a perfusing rhythm was restored. The adolescent made a nearly complete recovery and was discharged from the hospital several days later."

The letter was accompanied by electrocardiogram tracings showing the boy's heart rhythm before and after defibrillation.

Tasers fire wired-barbs delivering an estimated 50,000 volts of pulsed electrical energy to the target.

At a meeting of the Academy of Forensic Sciences in February, electrical engineer James Ruggieri made a presentation in which he said that the electrical output of Taser's M26 model succeeds the fibrillation threshold for half the U.S. population.

In response, Taser International issued a press statement calling the report erroneous, asserting that the Taser's pulsed current is well below the safety guidelines published by the International Electrotechnical Commission.

In April, the human rights group Amnesty International USA reported that Tasers had caused more than 100 deaths in the United States and Canada.

The devices are designed to incapacitate subjects by causing rapid muscle contractions and intense but transient pain.

"TASER strongly supports independent review of its devices," says a statement on the company's web site. "A number of independent reviews have affirmed the life-saving value of TASER as a safer, effective non-lethal use of force."

In their letter to NEJM, Drs. Kim and Franklin suggest that in light of their findings, police who are equipped with stun guns should also be equipped with portable automated external defibrillators.

Primary source: New England Journal of Medicine
Source reference:
NEJM Volume 353:958-959

Special Report: stun gun fallacy - how the lack of taser regulation endangers lives

September 2005
ACLU of Northern California