Segment Data

The Company’s operations are comprised of two reportable segments: the manufacture and sale of CEWs, accessories and other products and services (the “TASER Weapons” segment); and the software and sensors business, which includes the TASER Cam, Axon cameras and related accessories, Evidence.com, and the Axon Artificial Intelligence team ("Axon AI") (collectively, the “Software and Sensors” segment). The Company includes only revenues and costs attributable to the Software and Sensors products in that segment. Included in Software and Sensors segment costs are: costs of sales for both products and services, overhead allocation based on direct labor, selling expense for the Software and Sensors sales team, product management expenses, trade shows and related expenses, and research and development for products included in the Software and Sensors segment. All other costs are included in the TASER Weapons segment. The CODM does not review assets by segment as part of the financial information provided; therefore, only limited asset information is provided in the following tables.

Information relative to the Company’s reportable segments is as follows (in thousands):



	Three Months Ended June 30, 2017							Three Months Ended June 30, 2016
	TASER Weapons		Software and Sensors			Total		TASER Weapons		Software and Sensors			Total
Product sales	$	53,016	$	13,859		$	66,875	$	45,536	$	8,331		$	53,867
Service revenue	—		12,768			12,768		—		4,889			4,889
Net sales	53,016		26,627			79,643		45,536		13,220			58,756
Cost of products sold	16,078		14,094			30,172		14,489		5,565			20,054
Cost of services delivered	—		3,834			3,834		—		1,403			1,403
Gross margin	36,938		8,699			45,637		31,047		6,252			37,299
Sales, general and administrative	17,492		14,332			31,824		14,684		9,695			24,379
Research and development	1,863		11,126			12,989		1,245		5,465			6,710
Income (loss) from operations	$	17,583	$	(16,759	)	$	824	$	15,118	$	(8,908	)	$	6,210
Purchase of property and equipment	$	2,641	$	757		$	3,398	$	594	$	90		$	684
Purchase of intangible assets	56		19			75		51		36			87
Depreciation and amortization	716		1,080			1,796		560		382			942



	Six Months Ended June 30, 2017							Six Months Ended June 30, 2016
	TASER Weapons		Software and Sensors			Total		TASER Weapons		Software and Sensors			Total
Product sales	$	110,687	$	23,679		$	134,366	$	91,370	$	13,172		$	104,542
Service revenue	—		24,519			24,519		—		9,744			9,744
Net sales	110,687		48,198			158,885		91,370		22,916			114,286
Cost of products sold	34,104		23,140			57,244		28,566		8,943			37,509
Cost of services delivered	—		7,334			7,334		—		2,576			2,576
Gross margin	76,583		17,724			94,307		62,804		11,397			74,201
Sales, general and administrative	34,708		27,973			62,681		29,956		19,256			49,212
Research and development	4,075		21,377			25,452		2,365		11,272			13,637
Income (loss) from operations	$	37,800	$	(31,626	)	$	6,174	$	30,483	$	(19,131	)	$	11,352
Purchase of property and equipment	$	3,574	$	2,167		$	5,741	$	1,665	$	299		$	1,964
Purchase of intangible assets	120		50			170		113		72			185
Purchase of property and equipment and intangible assets in connection with business acquisition	—		8,526			8,526		—		—			—
Depreciation and amortization	1,557		1,843			3,400		1,132		711			1,843