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Irate driver causes officer to draw Phazzer

On September 18, Hawkins County Deputy Kyle Shively observed a red Doge Challenger traveling at a high rate of speed. When radar locked and confirmed that the car was going 67 MPH in a 45 MPH speed zone, the stop was initiated at Summers Trailer Park. Deputy Shively reports that the door to the vehicle flew open, he drew his department issued Glock 21 and a male jumped out, later identified as Donovan Sharp.

Reportedly, Sharp was irate, and stated that law enforcement had no right to stop him, and continued screaming. Deputy Shively states that he drew his department issued Phazzer and commanded Sharp to put his hands behind his back. Sharp complied, and was detained for the investigation. Additionally, Sharp’s drivers license was confirmed suspended via NCIC.

Link to Article:
The Rogersville Review

Richard Clark, Editor and Publisher

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PhaZZer® Announces US Patent Trial and Appeal Board Affirms Invalidity Rejections of all 47 Claims of US Patent No. 7.234.262 in Taser’s Appeal

Phazzer Announces US Patent Trial and Appeal Board Affirms Invalidity Rejections of All 47 Claims of US Patent No. 7,234,262 in Taser’s Appeal


On Sept. 27th, 2019, the Patent Trial and Appeal Board (“PTAB”) of the USPTO affirmed the Examiner’s invalidity rejections of all claims of US Patent No. 7,234,262 (“262 Patent”) . The PTAB decision clearly announces that all patent claims of the ‘262 Patent does not now, nor ever had, any validity.

PhaZZer Electronics, Inc. had previously requested that the District Court of Florida stay Case No. 6:16-cv-00366-PGB-KRS (“the ‘262 Taser Case”) because the ’262 Patent claims were under reexamination by the USPTO. Despite staying other similar patent matters, the Court allowed this one to proceed, resulting in an injunction and damage Orders that are now based on the ‘262 Patent which three Judges of the PTAB affirmed as having no patentable claims. Indeed, the Examiner and the three Judges of the PTAB expressly found claim 13, the one on which the Court entered its order against PhaZZer Electronic’s Inc., along with all of TASER’s other claims under the ‘262 Patent, invalid. “Although this decision came just 17 days before the Oct 14, 2019 expiration date of the ‘262 Patent, I feel this is a major victory for PhaZZer Electronics, Inc.” stated Kirk French, owner of PhaZZer Electronics, Inc.

As of October 15, 2019, the injunction Order, with regard to the ‘262 Patent expiring states “The effects of this injunction shall continue through Oct 14, 2019, the expiration of the ‘262 Patent.” Thus, the rejection of all ‘262 Patent claims by the Examiner and the three Judges of the PTAB, coupled with the expiration of the ‘262 Patent on October 14, 2019, allows the Phazzer Enforcer CEW to be made, used, offered for sale, sold, imported or distributed in any manner in the United States to the Law Enforcement Agencies and civilian markets.

These two actions officially end TASER’s monopoly regarding the Phazzer Enforcer CEW and allows for a competitive CEW market environment giving Law Enforcement Agencies greater options, safety and competitive pricing.

Media Contact: Kirk French

Ph: 855-742-9937


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OCTOBER 15th 2019 BY ORDER OF THE FEDERAL DISTRICT COURT IS THE LAST DAY OF THE TASER MONOPOLY AND THE RELAUNCH DATE OF THE PHAZZER ENFORCER CONDUCTED ENERGY WEAPON AND CARTRIDGES BACK INTO THE UNITED STATES MARKET. ON THIS DATE ACCORDING TO THE COURT ORDER “Phazzer and its officers, agents, servants, employees, and attorneys; and any other persons who are in active concert or participation with Phazzer or its officers, agents, servants, employees, or attorneys, are NO LONGER enjoined from: 1. Making or causing to be made, 2. Using or causing to be used, 3. Offering for sale, or causing to be offered for sale, 4. Selling or causing to be sold, 5. Donating or causing to be donated, 6. distributing or causing to be distributed, 7. Importing or causing to be imported, 8. Exporting or causing to be exported THE PHAZZER ENFORCER CEW”

The TASER monopoly officially comes to an end allowing for a competitive market environment and options for US Law Enforcement Agencies, greater safety to the public and competitive pricing.

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Phazzer Announces AXON/TASER Withdraws Unsupported Lawsuit

OMAHA, Neb., Oct. 15, 2019 (GLOBE NEWSWIRE) — PhaZZer announces that TASER/AXON (AAXN) filed a (now withdrawn) unsupported lawsuit in what appeared to be a last-ditch attempt to stop the PhaZZer Enforcer CEW and cartridges’ entry as the only viable and accepted competitor by US Law Enforcement. It appears that all other competitors have been silenced through litigation using the TASER ‘262 patent; which the USPTO Examiner declared invalid on all claims in its FINAL OFFICE ACTION on April 27th 2018 and AFFIRMED on appeal by Patent Trial And Appeal Board (“PTAB”) on September 27, 2019.

On September 9, 2019, PhaZZer IP LLC (“PhaZZer IP”) and several licensees of PhaZZer IP, received notice of a lawsuit, Case No. 6:19-cv-1721-Orl-37DCI, filed by AXON claiming, among other things, that the new dart cartridge infringed upon US Patent No. 7,444,939 (the “ ‘939 Patent”) ammunition patent. This patent was partially assigned to AXON on June 27th, 2019, and would appear to be in response to Spruce Point Capital’s analyst report that was published on June 21st, “Why The Market Is Missing A Renewed Competitive Threat To Taser’s Core CEW”

Axon incorrectly claimed that it owned all rights in the ‘939 Patent in order to bring the lawsuit  which was coupled with cease and desist letters demanding that PhaZZer IP “immediately withdraw and terminate all [purported] PhaZZer intellectual property licensing agreements with Less Lethal Safety Supply, Inc., PhaZZer Holdings, Inc., PhaZZer-USA, LLC, PhaZZer Federal Supply, and any other entity or individual authorized to advertise and sell PhaZZer dart cartridges in the United States, including, but not limited to, PhaZZer cartridges 1-DC15……1-NDC25, and any other dart cartridge not colorably different from these cartridges (the “Infringing Products”).” PhaZZer’s Dart Cartridges, 1-NDC15, 1-NDC21 and 1-NDC25 are new and nonobvious according to a patent application filed with the USPTO.  Indeed, Axon claimed, in another filing, that it did not perform its due diligence in the acquisition or assertion of the ‘939 patent, it supposedly relied upon Safariland, LLC, from whom it acquired Vievu, LLC in 2018, not Vievu, LLC whom it acquired the ‘939 Patent from.

Indeed, AXON claimed that it is “the owner by assignment of all right, title and interest in and to U.S. Patent No. 7,444,939 (the “‘939 patent”).”  Upon further investigation, PhaZZer IP discovered that the “939” patent was not fully assigned at any time by the second inventor of the Patent, James McNulty Jr., since the filing date of the ‘939 Patent.   Indeed, a simple check of the USPTO assignment records clearly showed James McNulty Jr.’s ownership of the ‘939 Patent.  Based on the public USPTO records, Axon should have reasonably known that its ownership claims were incorrect and it could not bring an action without all of the owners of the ‘939 patent.  It appears that the filing of this unsupported lawsuit was an attempt to thwart the relaunch of the PhaZZer Enforcer and new cartridges on October 15, 2019, as Spruce Point previously mentioned.

To bolster PhaZZer IP’s intellectual property and licensing rights, Phazzer IP  purchased James McNulty Jr.’s rights in the ‘939 Patent, and PhaZZer IP is now a joint owner of the ‘939” patent with AXON. On Sept. 26th, 2019, AXON received a demand that it immediately withdraw the unsupported lawsuit, and AXON voluntarily withdrew the lawsuit against all defendants in response that day.   Case 6:19-cv-01721-PGB-DCI Document 23 Filed 09/26/19.


Diana Robinson


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AXON ENTERPRISE MARKET CAP: $4.0B (MID CAP) EXCHANGE: NASDAQ TICKER: AAXN HQ: SCOTTSDALE, AZ SECTOR: INDUSTRIAL GOODS 17 ACTIVIST INSIGHT MONTHLY AUGUST 2019 | WWW.ACTIVISTINSIGHT.COM position itself as a software as a service (SaaS) provider to law enforcement agencies. “Our biggest long-term concern is how will Axon deliver on its ambitious goals and grow into the ever-expanding total addressable market (TAM) it is promoting as it tries to position itself more as a software company,” Ben Axler told Activist Insight Monthly. The short seller said Axon’s reported TAM is largely unproven and is being exaggerated with unrealistic pricing assumptions. In addition, its software and sensors unit (including Axon Cloud) is experiencing a slowdown, while the segment’s margins are contracting. “We believe these trends will continue as costs escalate from offering unlimited video storage, and competition increases,” Spruce Point said in its report. Axler told Activist Insight Monthly that he would be “impressed” if Axon won a major records or dispatch management software deal with a top-10 city. Axon, however, said in a presentation at the Baird 2019 Global Consumer, Technology & Services Conference that it is driving TAM through “value-added features” as it expands into international markets and captures adjacent markets like military and federal, fire and EMS, and commercial enterprise. STUNNINGLY STAGNANT As for the taser business, Anson learned that Axon has been pulling forward sales using aggressive accounting. Specifically, the firm reports disproportionate revenue upfront instead of over the life of its five-year contracts with police departments. “Because of the aggressive sales methods, including financing plans,… growth of Axon’s taser business is likely to be incrementally difficult going forward and the inflection point may already be behind us.” In addition, Anson predicted that Axon will face fierce competition later this year when peer PhaZZer releases tasers, thereby challenging Axon’s margins and potentially threatening its top line in its taser business. Spruce Point echoed Anson’s sentiment, stating that Axon’s core stun gun product is mature with limited domestic unit growth opportunities. The short seller said Axon’s newest model will only provide a short-term benefit. “Now five years into the taser 60 program introduced in 2014, and with the Taser having a five-year expected life, we believe its early mover advantage is being eroded by competitors pricing and solutions on the software and sensor side,” Spruce Point wrote in its report. “Axon’s best gains are now behind it” JUSTICE WILL PREVAIL Other red flags listed by Spruce Point include an increase in operating cash burn, a selloff of insider stock, and a failure to disclose accounting errors tied to compensation expenses. Moreover, the short seller noted Axon’s reliance on imports from China, predicting that costs associated with ongoing tariffs will weigh on margins. Anson, meanwhile, pointed to Axon’s history of giving perks to police department officials. Axon, however, denied the accusations and noted the short sellers’ motives of trying to decrease the firm’s stock price. “While short sellers seek to spread fear, uncertainty, and doubt in hopes of knocking our stock down to make a short-term profit, Axon is focused on long-term solutions such as making the bullet obsolete, improving police community relations, and enabling a fairer justice system,” a spokesperson told Activist Insight Monthly. The firm said it is actively mitigating its China exposure, adding that it is not concealing the fact that it has suppliers in China. Moreover, the firm said it “feels great” about its ability to disrupt the police Records Management Systems and Computer Aided Dispatch markets. “We feel great about our market position


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Spruce Point Capital tweets strong PhaZZer future indications based on previous market traction

PhaZZer had strong market traction before the  injunction, with over 300 US domestic police agencies and a presence in 27 countries. Reuters recently investigated 1,005  involving . PhaZZer believes its device is a safer and cheaper solution.


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Spruce Point Capital Tweets bearish on Axon market performance

Spruce Point Capital Tweets on Axon vs PhaZZer market performance Q4 2019

All it takes are very modest market penetration assumptions by PhaZZer and/or modest price concessions by Taser, and  will wildly miss street estimates that are calling for 10% Taser revenue growth


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Why The Market Is Missing A Renewed Competitive Threat To Taser’s Core CEW

Spruce Point has recently learned of a looming competitive threat to Axon AAXN of which the Street is not yet aware. Our full slide update is available exclusively on Twitter @sprucepointcap

PhaZZer Global, one of Axon’s few competitors in the CEW space through the mid-2010s, is poised to launch a new CEW in October of this year, and plans to price it at a significant discount to Axon CEWs.

Since Axon (then Taser) defeated PhaZZer in a patent and trademark infringement case in 2017, it has effectively had monopoly-like control of the U.S. law enforcement market for CEWs, and has increased prices significantly with its renewed dominance over the space.

However, after being forced to sit on the sidelines since being issued an injunction in 2017, PhaZZer will reenter the market with a discounted product this year and, we believe, seriously threaten Axon’s electronic weapon dominance. PhaZZer had 300 customers domestically before the injunction and was experiencing significant growth. It is currently in 27 countries internationally.

We believe that public agencies will have to evaluate the efficacy and relative cost of the PhaZZer as part of their fiduciary obligation to seek best price and quality, and that natural budget pressures will drive many departments to opt for the cheaper PhaZZer CEW.

Axon’s contract terms allow cancellation with limited restrictions should customers decide to switch.

Analysts expect 10% Taser growth in 2020. But just modest assumptions for market share loss, and price concessions, will cause a big miss.

With Axon now trading at the average analyst consensus target of $73, the risk/reward is highly unfavorable.



This research note and our presentation expresses our research opinions. You should assume that as of the publication date of any presentation, report or letter, Spruce Point Capital Management LLC (possibly along with or through our members, partners, affiliates, employees, and/or consultants) along with our subscribers and clients has a short position in all stocks (and are long/short combinations of puts and calls on the stock) covered herein, including without limitation Axon Enterprises, Inc. (“Axon”), and therefore stand to realize significant gains in the event that the price of its stock declines. Following publication of any presentation, report or letter, we intend to continue transacting in the securities covered therein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. All expressions of opinion are subject to change without notice, and Spruce Point Capital Management does not undertake to update this report or any information contained herein. Spruce Point Capital Management, subscribers and/or consultants shall have no obligation to inform any investor or viewer of this report about their historical, current, and future trading activities.

This research note and our presentation expresses our research opinions, which we have based upon interpretation of certain facts and observations, all of which are based upon publicly available information, and all of which are set out in this research presentation. Any investment involves substantial risks, including complete loss of capital. Any forecasts or estimates are for illustrative purpose only and should not be taken as limitations of the maximum possible loss or gain. Any information contained in this report may include forward looking statements, expectations, pro forma analyses, estimates, and projections. You should assume these types of statements, expectations, pro forma analyses, estimates, and projections may turn out to be incorrect for reasons beyond Spruce Point Capital Management LLC’s control. This is not investment or accounting advice nor should it be construed as such. Use of Spruce Point Capital Management LLC’s research is at your own risk. You should do your own research and due diligence, with assistance from professional financial, legal and tax experts, before making any investment decision with respect to securities covered herein. All figures assumed to be in US Dollars, unless specified otherwise.

To the best of our ability and belief, as of the date hereof, all information contained herein is accurate and reliable and does not omit to state material facts necessary to make the statements herein not misleading, and all information has been obtained from public sources we believe to be accurate and reliable, and who are not insiders or connected persons of the stock covered herein or who may otherwise owe any fiduciary duty or duty of confidentiality to the issuer, or to any other person or entity that was breached by the transmission of information to Spruce Point Capital Management LLC. However, Spruce Point Capital Management LLC recognizes that there may be non-public information in the possession of Axon or other insiders of Axon that has not been publicly disclosed by Axon. Therefore, such information contained herein is presented “as is,” without warranty of any kind –whether express or implied. Spruce Point Capital Management LLC makes no other representations, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. You should assume all statements made are our opinions, unless sourced as facts where practical.

This report’s estimated fundamental value only represents a best efforts estimate of the potential fundamental valuation of a specific security, and is not expressed as, or implied as, assessments of the quality of a security, a summary of past performance, or an actionable investment strategy for an investor. This is not an offer to sell or a solicitation of an offer to Buy any security, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction. Spruce Point Capital Management LLC is not registered as an investment advisor, broker/dealer, or accounting firm.


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Spruce Point Capital Releases A Strong Sell Research Opinion On Axon Enterprise, Inc. (Nasdaq: AAXN)

  • Management’s SaaS-Driven Growth Story Is Highly Unrealistic And Likely To Disappoint: Axon successfully took significant share of the Taser and body-worn camera (BWC) spaces by entering both markets as a first-mover just as demand in each exploded.  Management is now effectively claiming that, by pairing artificial intelligence (AI) with control of BWC video storage for client police departments, it can achieve similarly rapid growth by displacing deeply-entrenched players in the records management system (RMS) and computer-assisted dispatch (CAD) spaces. However, police departments are generally heavily entrenched with existing CAD and RMS providers, many of which already provide end-to-end solutions including CAD, RMS, case management, etc., and which are extremely sticky.We believe that management’s plan to offer an end-to-end CAD / RMS solution by next year is extremely aggressive given the complexity of developing viable CAD / RMS solutions from scratch, particularly for a hardware company with no real software experience.  Few attractive M&A targets remain for Axon in CAD and RMS, as competitors have spent billions of dollars acquiring the highest-quality players in each space through the past ~5 years. As management’s aggressive RMS / CAD rollout timeline underpins its near-term growth forecast, we believe that Axon is set up to disappoint investors as it fails to capture significant (or any) RMS / CAD business through the coming years.In addition to its unrealistic software and AI aspirations, Axon has repeatedly promised significant international growth, but management has failed to deliver on these claims and offers limited transparency into its international business. It recently pivoted to distributor acquisitions to accelerate international growth, but at the same time slashed its TAM from $2.7bn (2016) to $2.4bn (2019). Our field research suggests that Axon is many years away from scaling its business abroad.
  • Aggressive Revenue Recognition And Undisclosed Dependence On China: Axon released its Taser 60 plan in 2014, allowing customers to save by bundling and paying for product and services over 5 years. Axon increasingly recognizes revenue under “multiple performance obligation” accounting tests which give it discretion over revenue allocation and timing. It claims its hardware/software bundles have “stand-alone” value, and books revenue for hardware up-front, but allocates no stated value to certain hardware on its public contracts, obscuring the quantity of revenue which may be subject to accelerated recognition. Furthermore, our research reveals that Axon’s hardware must operate with its software, which calls into question its “stand-alone” value. We estimate aggressive revenue polices have front-loaded revenues by 6% – 9% over the past several years.Furthermore, we believe that Axon has concealed its dependence on Chinese components just as Chinese imports have grown increasingly subject to tariffs. Management removed the word “China” from its recent 10-K, but in Q1’19 said that “tariff and customs expenses” weighed on margins without quantifying the amount or country source.  Based on import records, we believe that Axon has grown increasingly dependent on Chinese imports for its body cam business through the past several years, and through the troubled acquisition of VIEVU. We believe associated tariffs will weigh on margins and could easily cause Axon to miss 2019E EBITDA by 10%. Based on our field research, we find some evidence that Axon has attempted to implement undisclosed price increases upwards of 5% in Q1’19. Yet, despite this increase, gross margins were still pressured and missed company estimates by 250bps.
  • Valuation Predicated On Transformation Into A Steady-Growing SaaS Company:  Analysts have bought into management’s narrative that Axon is on its way to becoming an AI-powered end-to-end safety platform, complete with recurring SaaS revenue from a healthy cloud business.  However, we believe that its ongoing move to a subscription-based model represents a one-time boost for its existing hardware products, and that future software-oriented opportunities will strongly disappoint.  Axon’s Q1’19 cash burn was its worst since coming public, and it increased its line of credit capacity from $10m to $100m despite having $350m of cash and no debt.Analysts’ average price target for Axon is $72.30, just 9.5% above current levels, and conveniently overlook its past SEC investigations, material weaknesses, and legal spats. Unlike most of the Street, we believe it is important to evaluate Axon’s two distinct businesses when valuing the Company.  We view Taser as a mature business and value it at a 7x-9x multiple of 2020 EBITDA – a premium to peers in the weapon space, acknowledging its above-average margins and market dominance. Alternatively, we value the Software and Sensors segment at a discount to SaaS peer multiples at 3.5x – 5.5x 2020 sales, based on evidence of revenue accounting issues, slowing sales growth, compressing margins, a smaller TAM than advertised, and its lack of a clear path to material RMS and CAD sales. In addition, while Axon is promising improved profitability, we believe that tariffs and rising storage costs leave the company with no material upside to margins.  Factoring in the excess cash, we estimate a price target of $27.50 – $40.00.


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