8-KFinancial Events

AXON ENTERPRISE, INC. 8-K Report, Financial Restatement (May 16, 2006)

Filed May 16, 2006For Securities:AXON

Summary

Axon Enterprise, Inc. (formerly TASER International, Inc.) is filing this Form 8-K to disclose that its previously issued financial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005, should no longer be relied upon. This non-reliance is due to errors in the calculation of manufacturing overhead costs applied to inventory, which also led to a material weakness in internal controls identified as of March 31, 2006. The company will restate its financial results for these periods. While the year-end 2005 financial statements are not being restated due to immateriality, the impact of the errors on quarterly results for 2005 will be reflected in amended filings. Investors should note that the company has implemented corrective actions and plans to enhance internal controls to prevent future occurrences.

Key Highlights

  • 1Previously issued financial statements for Q1, Q2, and Q3 2005 are unreliable and will be restated.
  • 2The errors relate to the incorrect calculation of manufacturing overhead costs applied to inventory and a clerical error.
  • 3A material weakness in internal controls over financial reporting has been identified as of March 31, 2006.
  • 4The company is implementing corrective actions and enhancing procedures to improve overhead calculation and review processes.
  • 5The financial statements for the full year ended December 31, 2005, and December 31, 2004, are not being restated as the impact was deemed immaterial.
  • 6The restatements will impact reported gross margins, cost of goods sold, and sales, general, and administrative expenses for the affected periods.
  • 7The company's Audit Committee has been consulted, and independent accountants have reviewed the matters.

Frequently Asked Questions

The financial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005, should no longer be relied upon. The company will also amend its Form 10-Q filings for these periods to reflect the restated results. Additionally, the impact on the quarter ended December 31, 2005, will be disclosed.

The primary cause was an error in the historical methodology for calculating indirect manufacturing overhead costs applied to inventory. Additionally, a clerical error in the calculation of overhead for the three months ended December 31, 2005, and previously unrecorded cut-off errors primarily for legal and professional fees contributed to the issues.

No, the company has determined that the impact on the financial statements for the years ended December 31, 2005, and December 31, 2004, is not material. Therefore, a restatement for these full-year periods is not required.

The company has corrected its methodology for calculating indirect manufacturing expense in the first quarter of 2006. It plans to implement additional procedures and controls surrounding the preparation and review of overhead calculations, including verification of spreadsheet accuracy, to address the identified material weakness.