(Reuters) - The U.S. Securities and Exchange Commission is reviewing the financial filings of Axon Enterprise Inc (AAXN.O), the manufacturer of Taser stun guns, requesting detailed information on the company’s returns, the company disclosed on its website on Thursday.
Axon said that officials only just became aware of three letters from the SEC asking for information about the company’s financial disclosures. The letters, which began on Aug. 10, said the SEC wanted to review Axon’s 2016 financial report and its quarterly report for the period ending March 31, 2017.
Such letters are routine but it is unusual for a company to not respond. The letters can be seen on the SEC website.
An SEC spokesman, Ryan White, declined to comment. Axon spokesman Steve Tuttle did not respond to emails seeking comment.
In its third letter to Axon’s chief financial officer, Jawad A. Ahsan, dated Sept. 20, the SEC told Axon that its inquiries were “outstanding and unresolved, and absent a substantive response, we would act consistent with our obligations under the federal securities laws.”
That most recent SEC letter added: “As you have not provided a substantive response, we are terminating our review and will take further steps as we deem appropriate.”
It did not elaborate on what steps it would take.
Axon, which changed its name in April from Taser International Inc, said it was “in the process of providing the SEC with information responsive to their comments and intends to respond to the SEC within the next seven days.”
“The company is actively working with the SEC to resolve these matters as expeditiously as possible,” it said.
The SEC’s Aug. 10 letter asked questions related to the company’s revenue recognition practice and an increase in its backlog.
It noted that the company’s “backlog increased substantially during 2016,” and asked for clarification on how the backlog was calculated. The letter also asked Axon to disclose “the amount of backlog attributable to each reportable segment, and disclose the amount of total backlog expected to be realized in the next year.”
The SEC also took note of the Taser 60 program the company introduced in 2016. Taser 60 allows police customers to buy electroshock weapons over five years for $22 to $36 a month, including a range of accessories and training. The company sells the plan to police, saying it allows them to avoid large capital outlays and it includes a warranty.
The SEC’s Aug. 10 letter asked Axon to disclose “the amount of revenue related to this program that you recognized during the periods presented.”
It also asked the company to “explain how the extended payment terms under this program impact your ability to estimate the provision for doubtful accounts, your determination that collectability is reasonably assured, and your liquidity.”
The company has dominated the police electroshock weapons business since it launched the first Taser designed to lock up the muscles of suspects in 1999.
More recently, the company has expanded into police body and in-car video cameras, as well as mobile evidence collection applications. It also has moved into sales to police agencies of secure, cloud-based digital evidence management services.
In August, a Reuters investigation reported that, over two decades, U.S. medical examiners have attributed more than 150 deaths to Taser weapons used by police. Reuters documented 1,005 deaths involving Tasers, often in combination with other force and nearly all since the early 2000s.
In September, Reuters reported the company had stopped selling its most popular and most powerful Taser, the X26, amid a raft of wrongful death lawsuits. Today, the company sells Tasers that deliver half the maximum electrical charge of its former flagship weapon.
The company acknowledges that its weapons carry some cardiac risk. But it has denied that its weapons caused any of the cardiac arrest deaths attributed to them by medical examiners or in lawsuits.
Additional reporting by Sarah Lynch; Editing by Jason Szep