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 September 30, 2017								Three Months Ended September 30, 2016
	TASER Weapons		Software and Sensors			Total			TASER Weapons		Software and Sensors			Total
Net sales from products	$	59,416	$	14,569		$	73,985		$	52,938	$	10,266		$	63,204
Net sales from services	—		16,277			16,277			—		8,678			8,678
Net sales	59,416		30,846			90,262			52,938		18,944			71,882
Cost of product sales	19,237		15,336			34,573			14,973		8,691			23,664
Cost of service sales	—		5,924			5,924			—		1,653			1,653
Cost of sales	19,237		21,260			40,497			14,973		10,344			25,317
Gross margin	40,179		9,586			49,765			37,965		8,600			46,565
Sales, general and administrative	20,575		15,823			36,398			16,439		11,682			28,121
Research and development	1,856		12,310			14,166			1,408		5,950			7,358
Income (loss) from operations	$	17,748	$	(18,547	)	$	(799	)	$	20,118	$	(9,032	)	$	11,086
Purchase of property and equipment	$	1,666	$	1,665		$	3,331		$	1,064	$	307		$	1,371
Purchase of intangible assets	66		195			261			77		77			154
Purchase of intangible assets, including goodwill, in connection with business acquisition	2,075		2,075			4,150			—		—			—
Depreciation and amortization	542		1,735			2,277			537		364			901



	Nine Months Ended September 30, 2017							Nine Months Ended September 30, 2016
	TASER Weapons		Software and Sensors			Total		TASER Weapons		Software and Sensors			Total
Net sales from products	$	170,103	$	38,248		$	208,351	$	144,307	$	23,438		$	167,745
Net sales from services	—		40,796			40,796		—		18,423			18,423
Net sales	170,103		79,044			249,147		144,307		41,861			186,168
Cost of product sales	53,341		38,476			91,817		43,998		17,174			61,172
Cost of service sales	—		13,258			13,258		—		4,230			4,230
Cost of sales	53,341		51,734			105,075		43,998		21,404			65,402
Gross margin	116,762		27,310			144,072		100,309		20,457			120,766
Sales, general and administrative	55,283		43,796			99,079		46,395		30,938			77,333
Research and development	5,931		33,687			39,618		3,773		17,222			20,995
Income (loss) from operations	$	55,548	$	(50,173	)	$	5,375	$	50,141	$	(27,703	)	$	22,438
Purchase of property and equipment	$	5,240	$	3,832		$	9,072	$	2,729	$	606		$	3,335
Purchase of intangible assets	186		245			431		190		149			339
Purchase of property and equipment and intangible assets, including goodwill, in connection with business acquisitions	2,075		8,554			10,629		—		—			—
Depreciation and amortization	2,099		3,578			5,677		1,669		1,075			2,744