Taser International Inc. develops assembles and markets less-lethal conducted energy weapons primarily for use in the law enforcement and corrections market. Its advanced Taser weapon offers improved performance over other less-lethal force options used by law enforcement agencies. It can temporarily incapacitate virtually any individual regardless of pain tolerance drug use or body size - factors that cause other less-lethal options to have decreased effectiveness. The advanced Taser also has a comparable or lower injury rate than other less-lethal weapons. TASER International Inc. has a market cap of $284.48 million; its shares were traded at around $4.6 with and P/S ratio of 3.06.
Highlight of Business Operations:Net sales increased $2.1 million, or 9%, to $24.6 million for the first quarter of 2009 compared to $22.5 million for the first quarter of 2008. The increase in sales versus the prior year was primarily driven by significant international shipments during the quarter including follow-on orders for single cartridges and TASER X26 ECDs to the UK government and 3,000 TASER ECDs to the Brazilian National Guard. The growth in international business offset a decline in domestic sales, which we believe reflects lower municipal spending in the U.S. as agencies reassigned budget dollars due to economic constraints. As a result, sales of single cartridges increased $2.5 million, or 44%, compared to the prior year, offsetting a $336,000, or 3%, decline in X26 sales and a $460,000, or 48%, decrease in TASER Cam sales. Sales of the TASER C2 consumer product also declined by $335,000, or 19%, attributable to the impacts of the economic downturn on consumer spending. The increase in other sales is primarily driven by growth in extended warranty revenues, out of warranty repairs and the elimination of distributor discounts in 2008. Other sales also include government grant, training and shipping revenues.
The dollar increase for the first quarter of 2009 over the same period in 2008 is attributable to a $719,000 growth in salaries and benefits related to an increase in personnel to support the expansion of our business infrastructure as we introduce new products and enter new markets. Stock based-compensation expense increased $602,000 related to a full quarters expense for options granted during the third and fourth quarters of 2008 as stock options. Legal, professional and accounting fees increased $628,000 driven by the timing of outstanding ligation in progress as well as year-end audit and Sarbanes-Oxley reviews. Consulting and lobbying services increased $505,000 primarily related to strategic selling and marketing, advertising and process improvement related efforts. The $363,000 increase in other costs was primarily driven by increased trade show and market research costs. These increases were partially offset by a $609,000 decrease in advertising primarily due to $550,000 of infomercial production costs expensed in the first quarter of 2008.
Research and development expenses increased $2.1 million, or 99%, to $4.2 million for the first quarter of 2009 compared to $2.1 million for the first quarter of 2008. The increase is driven by a $781,000 increase in salary and benefits as we have expanded our R&D headcount to support new product development including an Internet service and software development team. Stock-based compensation expenses increased $412,000 for options granted in 2008 and the first quarter of 2009. Consulting costs and indirect supplies increased $580,000 primarily associated with the development of AXON (Autonomous eXtended on-Officer Network) and EVIDENCE.com. We expect to maintain this level of research and development spending in 2009 as we accelerate development of new products.
Net income decreased by $1.7 million to a net loss of $(468,000) for the first quarter of 2009 compared to net income of $1.2 million for the first quarter of 2008. Net loss per basic and diluted share was $(0.01) for the first quarter of 2009. This compares to income per basic and diluted share of $0.02 for the first quarter of 2008.
As of March 31, 2009, we had $58.3 million in cash and cash equivalents, an increase of $8.9 million from the end of 2008, which is primarily attributable to net cash provided by operations of $10.5 million in the first quarter of 2009 and proceeds from the maturities of investment holdings, partially offset by investments in property and equipment and intangible assets. We expect that cash used / generated from accounts receivable, inventory and accounts payable in 2009 will remain relatively consistent with 2008; however, we intend to manage our working capital closely to align with forecasted and actual sales and production levels. Accounts receivable at March 31, 2009 decreased by $4.5 million compared to December 31, 2008, primarily as the result of a large individual sale made to the UK government in December 2008, which was paid in full in February 2009. Our inventory balance also decreased $3.1 million at March 31, 2009 compared to December 31, 2008, mainly attributable to several significant cartridge and ECD orders from the UK and Brazil. Additionally, we expect to invest a further $10.0 to $15.0 million in capital expenditures in 2009, including $3.9 million in manufacturing automation equipment in the first half of 2009. We also anticipate continuing to invest in research and development in excess of 2008 levels as we accelerate development of new products in the pipeline.
Net cash provided by operating activities for the first three months of 2009 of $10.5 million was driven by non-cash adjustments to the net loss including stock-based compensation expense of $1.4 million, depreciation and amortization expense of $715,000 and provision for warranty expense of $142,000. Changes in working capital include a $4.5 million decrease in accounts receivable and a $3.1 million reduction in inventory as discussed above. In addition, prepaid and other assets decreased $590,000 due to amortization of prepaid liability and D&O insurance premiums and deferred revenue also increased $519,000 driven by extended warranty sales in the first nine months of 2008.
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