Jennifer Lee

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The Lowdown on Non-Lethal: Taser International Inc. & MDM Group, Inc.

By Jennifer Lee
June 2004

Electric bullets, stun guns and laser-directed plasma channels - no we’re not talking about Bill Gibson’s latest novel. This is not the Matrix re-loaded, unloaded or offloaded, it’s the year 2004 and non-lethal weaponry is stepping up to the plate, to take a hit at potentially changing the face of conflict management, perhaps around the globe.

MDM Group, Inc. (OTCBB: MDDM) just announced its new prototype of non-lethal piezoelectric bullets will be making their way to the demonstration phase, “targeted for November (2004) and even a month earlier if possible,” comments Peter Boonen, MDM Group President and CEO. He furthers, “realistically, market entry is projected at around 18 months, but again this is aggressive and we would need to have everything go smoothly.”

MDM Group’s ShockRounds™, “an advanced non-lethal ballistic weapon technology that disables targets through electrical discharge,” have been in the works now with MDM Group for over a year, and the company is now moving solidly into final testing, validation and commercialization.

The bullets themselves, when fired, “generate an extremely high voltage charge that is released upon impact, causing immediate target incapacitation.” The company reports that its ShockRounds technology, once deployed, “generate a high voltage charge in the order of 50,000 volts, with some 175 joules of usable charge. (As a point of comparison, electric fences typically operate at approximately 10 - 25 joules per second.) The major ShockRounds advantage is that when incorporated in rubber bullets they can incapacitate a target at up to 100 meters, whereas traditional rubber bullets are largely ineffective at their maximum range of about 35 meters.” In other words, when your target is at a distance, for example in riot situations or in planes, this could well be what you are looking for as rubber bullets do not have the same diversity of application.

Colonel John B. Alexander, “consultant and advisor to the Company's non-lethal weapons, ShockRounds, commercialization initiative” suggests there’s “a difference between doing too little and doing too much.” When it comes to assessing a situation and deciding how to take the next step in sorting the good guys from the bad guys (both on a national and international level), Alexander furthers that the product “gives you some leeway.”

Taser International Inc., (TASR) a company that manufactures guns that produce an electric shock, deploying two separate electrodes that “shoot up to 21 feet, shocking the person with a five-second burst of 50,000 volts,” has recently received a lot of market attention, in its attraction of contracts with various policing bodies, both in Canada and the U.S.

The company’s shares rose from the $20s last month and it now rests at about $42.- $44 and we wonder just what’s in store for the weeks and months ahead for companies such as Taser and MDM Group. With all the latest industry buzz surrounding non-lethal prospects these days, investors could benefit from taking a look at what’s out there and what’s on the horizon as more and more policing forces gather hot on the trail, over alternative and safer conflict resolution measures.

To gain some perspective on how things have been shaping up in the non-lethal market, Investor Ideas recently carried out an interview with Taser International’s Chief Executive Officer Rick Smith, who answers some of our pressing questions on the industry:

Question When did Taser first become interested in non-lethal the technology market? Where did they see non-lethal on the horizon then?

We were founded in 1993 specifically to address the non-lethal technology market. Our interest was sparked by a personal tragedy. Two friends with whom I played high school football were shot and killed in a road rage incident. I came to believe that non-lethal weapons could provide a valuable alternative to lethal firearms for self-defence. If effective non-lethal weapons were available, we could prevent many of the 35,000 firearm fatalities that occur in the United States every year. If you think about it, the fundamental technology of a firearm hasn’t changed in centuries. We’re still defending ourselves the way we fought the revolutionary war 200 years ago — with firing small lead projectiles blowing holes in each other. We believe non-lethal technology will surpass the effectiveness of crude kinetic trauma weapons in the future, without the negative consequences inherent in lethal force.

Question From some of the company's news releases, it shows there have been considerable sales to police forces in both Las Vegas and Tampa . Who have some of the biggest clients been so far and are there any big deals you can comment on, on the horizon?

Our largest customers include the Royal Canadian Mounted Police, the Phoenix Police Department, the Ohio State Patrol, the Cincinnati Police Department, and a foreign military which purchased 3,500 TASER devices last year. In the future, the largest singular opportunities are overseas police forces. In the United States , the market is very fragmented, with 18,000 agencies each making independent purchase decisions. In the United Kingdom , a national study is underway. Pending a successful outcome, a single purchase decision from the Home Office of the United Kingdom could affect over 100,000 officers.

Question How long have Taser's products been available on the market? How do you forsee the market changing over the next 2 years or so?

The original TASER® TE-76 was launched in 1974. Our company was formed in 1993, and we competed with the original company, Tasertron. In 1999 we launched the ADVANCED TASER M26, the most widely used TASER non-lethal weapon available today. In 2003, we acquired Tasertron and discontinued production of the outdated older technology. In late 2003, we introduced the newest TASER X26 — which accounts for the majority of our current sales. (Sales of the X26C far surpassed our prior flagship M26 in the X26’s first full quarter of production.) The X26C’s main advantage is its small size — 60% smaller and lighter than the M26.

The primary shift we see in the market is that non-lethal weapons are transitioning from “specialist” weapons to “standard issue” weapons. In the 1970’s through the 1990’s, non-lethal weapons like the TASER TE-76 were usually issued only to specialized units or supervisors. Today, the thinking is vastly different. Non-lethal weapons are now being issued to front line responders, so the devices are on-scene immediately. Police agencies have learned that these non-lethal weapons are not effective if they are not immediately available to the front line officers who need them. In sum, agencies are now finding that every officer who is capable of handling a lethal weapon should have access to the most effective non-lethal weapons, so they only resort to lethal force when absolutely necessary.

The other change we see is technological. We are in development of a wireless, self contained projectile under the project name XREP (Extended Range Electronic Projectile). This technology will enable TASER brand systems to reach extended ranges in the 30 to 100 meter range without wires. Needless to say, this technology has the potential to revolutionize the industry. We have already proven the core technology of the XREP and have hit human volunteers to verify efficacy. We are now in the ballistic engineering phase and look to complete development within 24 months.

Question Can you comment on any International sales so far or interest in the company's lines? Or comment on how this might be an emerging market? Do you view it as one of the key emerging markets?

We have significant international interest, with field tests ongoing from Australia to France to the United Kingdom and other European countries. We see significant opportunities in the international markets. However, because international police agencies tend to organize in large, nationally organized forces, the sales process takes much longer and the time to procure orders can be measured in years rather than weeks or months. Once these orders materials, we do expect them to be significant in scale due to the sheer size of the agencies involved, many of which employ well over 100,000 officers.

Question Are there any new product lines in the works?

In addition to the XREP outlined above, we are developing the TASER Anti-Personnel Munition, or TAPM. This program is a team development with General Dynamics. The TAPM is a non-lethal landmine alternative for area denial. We believe there is a significant need for non-lethal area denial in the military market space.