##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 Commission File Number 000-51822
 STINGER SYSTEMS, INC.
  Nevada
    
    30-0296398(State or other jurisdiction
    
    (I.R.S. employer identification number)of incorporation or organization)
 2701 North Rocky Point Drive, Suite 1130
Tampa, Florida 33607
 (813) 281-1061
  NONE
  Common stock, par value $0.001 per share
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  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a small reporting company)
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    DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 Item
    
    Description
    
    PagePART I1
    
    Business
    
    11A
    
    Risk Factors
    
    101B
    
    Unresolved Staff Comments
    
    142
    
    Properties
    
    143
    
    Legal Proceedings
    
    154
    
    Submission of Matters to a Vote of Security Holders
    
    15PART II5
    
    Market for the Registrant's Common Equity, Related Stockholders Matters and Issuer Repurchases of Equity Securities
    
    166
    
    Selected Financial Data
    
    177
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    187A
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    288
    
    Financial Statements and Supplementary Data
    
    289
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    289A
    
    Controls and Procedures
    
    299B
    
    Other InformationPART III10
    
    Directors, Executive Officers and Corporate Governance
    
    2911
    
    Executive Compensation
    
    3212
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    3513
    
    Certain Relationships and Related Transactions and Director Independence
    
    3714
    
    Principal Accountant Fees and Services
    
    37PART IV15
    
    Exhibits and Financial Statement Schedules
    
    38Signatures
    
    40Exhibit IndexEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO
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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 This Annual Report on Form 10-K contains forward-looking statements within the meaning of
the Securities Exchange Act of 1934 and the Securities Act of 1933 that involve risks and
uncertainties. In some cases, forward-looking statements are identified by words such as believe,
anticipate, expect, intend, plan, will, may and similar expressions. You should not
place undue reliance on these forward-looking statements, which speak only as of the date of this
report. All of these forward-looking statements are based on information available to us at this
time, and we assume no obligation to update any of these statements. Actual results could differ
from those projected in these forward-looking statements as a result of many factors, including
those identified in the section titled Risk Factors, Managements Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere. We urge you to review and consider
the various disclosures made by us in this report, and those detailed from time to time in our
filings with the Securities and Exchange Commission, that attempt to advise you of the risks and
factors that may affect our future results.
 Overview
   Our Business
  1/1/07- 12/31/07Sales %State Departments of Corrections
    
    
    33
    %Federal Bureau of Prisons
    
    
    3
    %US Marshals
    
    
    2
    %County Law Enforcement Agencies
    
    
    24
    %Various Police Departments and Misc
    
    
    38
    %
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##### Table of Contents



Our Products
 Stinger S-200 Two Dart Projectile Stun Guns
      - 2 -




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##### Table of Contents



Ice-Shield Electronic Immobilization Riot Shield
  1 4 ®
   Bandit / The R-E-A-C-T System, an Immobilizing Electronic Restraint
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##### Table of Contents



Patents and Patent Applications Owned by Stinger Systems
  Stun Gun Cartridge with Electrical Primer
 Title:
    
    Cartridge for a Projectile Stun GunSerial No.:
    
    11/690,072Filing Date:
    
    03-22-2007Status:
    
    Patent PendingSubject:
    
    The cartridge includes a housing defining an exterior surface; a dart assembly including a barb
adapted to temporarily attach to a target, a wire having a first end fastened to the barb and a second end
coupled to the exterior surface of the housing, and a propellant adapted to propel the barb; and an
electrical primer adapted to ignite the propellant. The removable cartridge has been specifically designed
for a projectile stun gun and, even more specifically, to be easily attached to and removed from a
projectile stun gun.
 Manual Trigger with Indicating and Disabling featuresTitle:
    
    Stun gun with low battery indicator and shutoff timerPatent No.:
    
    5,193,048Issue Date:
    
    March 9, 1993Serial No.:
    
    07/516,120Filing Date:
    
    April 27, 1990Status:
    
    Issued (12th year maintenance fee paid)Subject:
    
    In one embodiment, the electrical shock device includes a housing containing a power supply
and an electronic circuit, a trigger means on the housing for selectively connecting the
power supply to the electric circuit when in a first position, and a low power source
indicating means for indicating the trigger means operated in the first position for a first
predetermined time period. In another embodiment, the electrical shock device includes a
housing containing a power supply and an electronic circuit, a trigger means on the housing
for selectively connecting the power supply to the electronic circuit when in a first
position, a means for disabling the electronic circuit when the trigger means is continuously
operated in said first position for a first predetermined time period.
 - 4 -
    Table of Contents  QuadrashockTMdart arrangementTitle:
    
    Stun GunSerial No.:
    
    10/957,301Filing Date:
    
    30 September 2004Status:
    
    Patent Pending (Response to Non Final Office Action Mailed)Subject:
    
    The stun gun of one embodiment includes: a first dart coupled to a tether and positioned tobe propelled along a first trajectory, a second dart coupled to a tether and positioned to be
propelled along a second trajectory divergent to the first trajectory, and a third dart
coupled to a tether and positioned to be propelled along a third trajectory substantially
parallel to the first trajectory. The stun gun also includes a power source having opposing
charges and an activation circuit. The activation circuit is adapted to selectively connect
one of the opposing charges to the first dart and connect the other of the opposing charges
to the second and third darts.Ultron® II hand held contact stun deviceTitle:
    
    Electronic Restraint WeaponPatent No.:
    
    Design 323,870Issue Date:
    
    February 11, 1992Serial No.:
    
    07/367,500Filing Date:
    
    June 16, 1989Status:
    
    IssuedSubject:
    
    The ornamental design for the Ultron® II hand held stun device.
 - 5 -
    Table of Contents  Patents and Patent Applications Licensed by Stinger Systems
 QuadrashockTMdart arrangementTitle:
    
    Method and apparatus for implementing a two projectile electrical discharge weaponPatent No.:
    
    6,575,073Issue Date:
    
    June 10, 2003Serial No.:
    
    09/569,431Filing Date:
    
    May 12, 2000Status:
    
    Issued (4th year maintenance fee due by 06/11/2007)Subject:
    
    An electrical discharge weapon that selectively propels wire-tethered electrode darts toward a live target for
imparting an electrical shock. The weapon includes a receiver and two ammunition chambers spaced apart. Each
chamber has electrodes for activating propulsion of a tethered dart. The ammunition chambers being formed in a
portion detachable from the receiver.Band-ItTMrestraintTitle:
    
    Remotely activated electrical discharge restraint device using biceps flexion of the leg to restrainPatent No.:
    
    5,841,622Issue Date:
    
    November 24, 1998Serial No.:
    
    09/018,268Filing Date:
    
    February 4, 1998Status:
    
    Patent Expired Due to Non-payment of Maintenance Fees  Revival of the patent is being consideredSubject:
    
    A remotely activated electrical discharge restraint device configured for attachment to a human body. The
device includes: an electrical circuit for generating a selected high voltage signal; a housing for containing
the circuit and attaching the circuit to a human body; a first contact connected to the circuit and available
exterior of the housing for contacting a first location on a human body; and a second contact connected to the
circuit and available exterior of the housing for contacting a second location on a human body. The respective
positions of and spacing between the first and second locations being selected to induce involuntary flexing
contractions of the biceps of both legs upon transfer of the signal to the human body.
 - 6 -
    Table of Contents  Description of the Patent Process
     Marketing and Competition
     - 7 -
    Table of Contents  Government Regulation
   Research and Development
   - 8 -
    Table of Contents  History
    - 9 -
    Table of Contents  ITEM 1.A. RISK FACTORS
 Investing in our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described below in addition to the other information contained in this
annual report. If any of the following risks actually occur, our business, financial condition or
operating results could be harmed. In that case, the trading price of our common stock could
decline and investors may lose part or all of your investment. In the opinion of management, the
risks discussed below represent the material risks known to the company. Additional risks and
uncertainties not currently known to us or that we currently deem immaterial may also impair our
business operations and adversely affect the market price of our common stock.
 We have a history of operating losses and anticipate future operating losses until such time as we
can generate additional sales.
  If we do not obtain additional funding as needed, we may be unable to fund our engineering,
marketing and production activities and to adequately pursue our business plan.
  Our failure to properly design the Stinger projectile stun gun would have a material adverse effect
on our operations.
  If we fail to convince the market place that we have competitive products, we will not be
commercially successful.
  If third party manufacturers do not perform in a commercially reasonable manner, we may not be
successful.
  Our primary competitor, Taser International Inc., has an established name in the marketplace with
both distributors and the end-users of stun products.
  - 10 -
    Table of Contents  Negative publicity about less-lethal stun weapons may negatively impact sales of our products.
  The sale and use of our products may result in claims against us.
  We have been sued by Taser International, Inc. which could result in a judgment against us that
could negatively impact our operations.
  We have received a Wells Notice from the SEC.
  Claims by others that our products infringed their patents or other intellectual property rights
could adversely affect our financial condition.
  - 11 -
    Table of Contents  We may not be able to protect our patent rights, trademarks, and other proprietary rights.
  Law enforcement, correction and military operations are government agencies which are subject to
budgetary constraints, which may inhibit sales.
  There exist some state, local and international regulations and/or prohibitions on less-lethal
weapon systems which will make it more difficult or impossible to market our products in those
jurisdictions thereby limiting potential revenues.
  If we cannot retain or hire qualified personnel, our programs could be delayed.
  - 12 -
    Table of Contents  Because our common stock is quoted only on the OTC Bulletin Board and the Pink Sheets, your ability
to sell your shares in the secondary trading market may be limited.
  Our stock price has been volatile and your investment in our common stock could suffer a decline in
value.
  
    
    sales of the Stinger projectile stun gun;
    
    announcements of technological innovations or new products by us or our competitors;
    
    government regulatory action affecting our products or our competitors products;
    
    developments or disputes concerning patent or proprietary rights;
    
    actual or anticipated fluctuations in our operating results;
    
    changes in our financial estimates by securities analysts;
    
    broad market fluctuations; and
    
    economic conditions in the United States.
  Trading of our stock may be restricted by the SECs penny stock regulations, which may limit a
stockholders ability to buy and sell our stock.
  NASD sales practice requirements may also limit a stockholders ability to buy and sell our stock.
  - 13 -
    Table of Contents  Sales of a substantial number of shares of our common stock in the public market could lower our
stock price and impair our ability to raise funds in stock offerings and impair the ability of
stockholders to receive a return on their investment in Stinger Systems.
  Exercise of outstanding options, warrants and convertible securities will dilute existing
shareholders and could decrease the market price of our common stock.
  We likely will issue additional equity securities which will dilute your share ownership.
  Any short selling of our stock could depress the stocks price and have a negative impact on the
investments in us by our stockholders.
  We do not intend to pay any cash dividends on our common stock in the foreseeable future and,
therefore, any return on your investment in our common stock must come from increases in the fair
market value and trading price of our common stock.
  
 ITEM 1.B UNRESOLVED STAFF COMMENTS
 None
 
 ITEM 2. PROPERTIES
   - 14 -
    Table of Contents  ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  - 15 -
    Table of Contents  PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER REPURCHASES
OF EQUITY SECURITIES
  2006
    
    High
    
    LowFirst Quarter
    
    $
    5.75
    
    
    $
    1.00Second Quarter
    
    $
    2.95
    
    
    $
    1.20Third Quarter
    
    $
    2.00
    
    
    $
    1.06Fourth Quarter
    
    $
    1.10
    
    
    $
    0.55
 2007
    
    High
    
    LowFirst Quarter
    
    $
    3.20
    
    
    $
    0.57Second Quarter
    
    $
    3.25
    
    
    $
    0.75Third Quarter
    
    $
    1.10
    
    
    $
    0.53Fourth Quarter
    
    $
    1.19
    
    
    $
    0.14
  Stock Performance Graph
  
 - 16 -
    Table of Contents  ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 .
 Predecessor Operations
    
    The Company
    
    The CompanyJanuary 1,
    
    September 24,Years ended
    
    2004 to
    
    2004
    
    Pro FormaDecember 31,
    
    September 24,
    
    to December 31,
    
    Year Ended December 31,2003
    
    2004
    
    2004
    
    2004
    
    2005
    
    2006
    
    2007Statement of
Operations Data:Sales
    
    $
    264,471
    
    
    $
    198,981
    
    
    $
    63,306
    
    
    $
    262,287
    
    
    $
    469,997
    
    
    $
    454,454
    
    
    $
    372,211Gross Margin (Loss)
    
    
    108,647
    
    
    
    54,859
    
    
    
    11,620
    
    
    
    66,479
    
    
    
    (139,282
    )
    
    
    (207,338
    )
    
    
    (161,643
    )Loss from Operations
    
    
    (237,363
    )
    
    
    (192,470
    )
    
    
    (8,820,199
    )
    
    
    (9,012,669
    )
    
    
    (10,171,758
    )
    
    
    (6,300,966
    )
    
    
    (4,682,912
    )Net Loss
    
    
    (273,922
    )
    
    
    (230,932
    )
    
    
    (8,830,467
    )
    
    
    (9,061,399
    )
    
    
    (10,085,529
    )
    
    
    (6,306,345
    )
    
    
    (8,348,285
    )Net Loss Per Share
(Basic and Diluted)
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.70
    )
    
    $
    (0.70
    )
    
    $
    (0.67
    )
    
    $
    (0.42
    )
    
    $
    (0.50
    )Weighted Average
Number of Common
Shares Outstanding
(Basic and Diluted)
    
    
    10,750,000
    
    
    
    10,750,000
    
    
    
    12,640,900
    
    
    
    12,640,900
    
    
    
    14,997,346
    
    
    
    15,038,500
    
    
    
    16,658,390Balance Sheet Data:Current Assets
    
    $
    69,695
    
    
    $
    13,232
    
    
    $
    9,334,233
    
    
    $
    9,334,233
    
    
    $
    3,294,044
    
    
    $
    502,198
    
    
    $
    590,484Equipment and
Furnishings
    
    
    93,724
    
    
    
    73,204
    
    
    
    105,764
    
    
    
    105,764
    
    
    
    353,388
    
    
    
    303,295
    
    
    
    276,590Total Assets
    
    
    163,419
    
    
    
    86,436
    
    
    
    12,543,911
    
    
    
    12,543,911
    
    
    
    6,374,950
    
    
    
    3,155,993
    
    
    
    2,405,771Current Liabilities
    
    
    97,441
    
    
    
    43,746
    
    
    
    556,970
    
    
    
    556,970
    
    
    
    1,048,538
    
    
    
    2,417,435
    
    
    
    571,383Long Term Debt
    
    
    584,885
    
    
    
    792,529
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders Equity
(Deficit)
    
    
    (518,907
    )
    
    
    (749,839
    )
    
    
    10,599,441
    
    
    
    10,599,441
    
    
    
    5,326,412
    
    
    
    738,558
    
    
    
    (3,243,114
    )
 - 17 -
    Table of Contents  ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Executive Summary
       - 18 -
    Table of Contents  Background
  
    
    On September 24, 2004, the Company issued 9,750,000 shares of its
common stock for 100% of EDT. The Company received 10,000,000 of its
previously issued and outstanding shares for cancellation. The
9,750,000 shares were valued at $474,300, consisting of the cash and
note payable to the former owners of EDT for the initial purchase of
95% of EDT in the amount of $450,000 plus the value of 500,000 shares
of common stock issued for the remaining 5% of EDT valued at $24,300.
    
    Between September 24, 2004 and December 31, 2004, the Company sold
3,222,000 shares of common stock for $10,900,000, less expense of
$665,035. Specifically, the Company sold 1,122,000 shares of common
stock for net proceeds of $400,000 in September 2004, and sold
2,100,000 shares of common stock for net proceeds of $9,834,965 in
December 2004. As part of the sale in December 2004, the Company also
issued warrants to the investors to purchase 1,000,000 shares of the
Companys common stock at $7.50 per share. The warrants are
exercisable through September 24, 2009. The investors were also
granted registration rights. The Company also issued warrants to the
underwriters to acquire 200,000 shares at $7.50 per share.
    
    Between September 24, 2004 and December 31, 2004, the Company issued
921,500 shares of common stock for various services received by the
Company.
    
    In December 2004, the Company issued 10,000 shares of its common stock
as settlement of a note payable plus accrued interest in the amount of
$106,943.
    
    During November and December of 2004, the Company issued a total of
100,000 shares of its common stock for patents that were complimentary
to its product lines. The recipient of 75,000 of the 100,000 shares
issued had the right to rescind the transaction if a registration
statement was not effective by the Company as of a specific date. As a
result of this redeemable feature, these shares were classified as
Redeemable Common Stock with a liquidation value of $1,387,500 (the
value assigned to the stock on issuance at December 31, 2004). The
Company filed a registration statement that was declared effective by
the Securities and Exchange Commission on November 14, 2005 and the
individual no longer had the right to rescind the transaction, so the
75,000 shares were taken out of Redeemable Common stock and shown as
issued common stock.
    
    On January 25, 2007, the Company and certain existing warrant entered
into an amendment and exercise agreement pursuant to which (i) the
Company reduced the exercise price of the warrants then held by the
warrant holders to $0.60 per share; (ii) the warrant holders exercised
all of the existing warrants at an exercise price of $0.60 per share
and acquired 999,999 shares of the Companys common stock; and
(iii) the Company issued to the warrant holders new warrants to
purchase up to an aggregate of 1,500,000 shares of the Companys
common stock at an exercise price of $2.00 per share. The Company
granted the warrant holders certain registration rights with respect
to the resale of the shares issued upon exercise of the existing
warrants and the shares to be issued upon exercise of the new
warrants.
    
    On August 3, 2007, the Company closed a private placement transaction
with an institutional investor pursuant to which the Company issued
and sold a senior secured convertible note in the aggregate principal
amount of $3,000,000 and a warrant to purchase 5,912,961 shares of the
Companys common stock. The note is convertible into 4,730,270 shares
of the Companys common stock at a price of $0.6342 per share. Under
the terms of the note, the Company, at its option, may pay any portion
of the interest then due on the Note in cash or may elect to issue the
Investor shares of the Companys common stock. The Warrant is
exercisable immediately at a price of $0.6342 per share.
    
    On February 29, 2008, the Company closed a private placement
transaction with an institutional investor pursuant to which the
Company issued and sold a senior secured convertible note in an
aggregate principal amount of $2,150,000, a warrant to purchase
3,000,000 shares of the Companys common stock, and 1,250,000 shares
of the Companys Common Stock . The note is convertible into 1,720,000
shares of the Companys common stock at a price of $1.25 per share.
Under the terms of the note, the Company, at its option, may pay any
portion of the interest then due on the note in cash or may elect to
issue shares of the Companys common stock. The warrant is exercisable
immediately at a price of $0.7054 per share.
 - 19 -
    Table of Contents  Results of Operations
  Comparison of the Years Ended December 31, 2007 and 2006
       - 20 -
    Table of Contents  Comparison of the Years Ended December 31, 2006 and 2005
     - 21 -
    Table of Contents  Liquidity and Capital Resources
  - 22 -
    Table of Contents  - 23 -
    Table of Contents  Off-Balance Sheet Arrangements
  Contractual Obligations
     - 24 -
    Table of Contents  Intangible Assets
     - 25 -
    Table of Contents  Critical Accounting Policies
  Revenue Recognition.
 Warranty Costs.
 Intangible Assets.
 Common Stock Issued for Goods and Services.
 - 26 -
    Table of Contents  Embedded
Derivatives
 Purchase Accounting.
 Stock Options.
    Limited Trading Market.
 - 27 -
    Table of Contents  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting.
  
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of its assets;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of its financial statements in accordance with generally accepted accounting
principles, and that its receipts and expenditures are being made only in accordance with
authorizations of its management and directors; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on its financial statements.
  - 28 -
    Table of Contents  Changes in Internal Control
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    PositionRonald T. Bellistri
    
    61
    
    Chief Executive OfficerRobert F. Gruder
    
    49
    
    President and Chairman of the BoardBrian S. Gannon
    
    34
    
    Financial ControllerT. Yates Exley
    
    46
    
    DirectorAndrew P. Helene
    
    46
    
    DirectorWells Van Pelt
    
    60
    
    DirectorRichard Bo Dietl
    
    57
    
    Director
 Ronald T. Bellistri
 Robert F. Gruder
 Brian S. Gannon
 - 29 -
    Table of Contents  T. Yates Exley
 Andrew P. Helene
 Wells
Van Pelt
 Richard Bo Dietl
 - 30 -
    Table of Contents  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  - 31 -
    Table of Contents  ITEM 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
 Compensation
Committee
   Our NEO Compensation Reflects our Core Values
  
    
    Attract, motivate, and retain executives of outstanding ability and potential. We believe
that our success depends on our ability to attract and retain the management team that will
cultivate the highest levels of performance, service and integrity.
    
    Maintain an appropriate relationship between executive compensation and the creation of
stockholder value. We strive to provide compensation packages that will reward exceptional
service to our Company. We include components of both annual and long-term compensation to
reflect our determination to keep management invested in our short-term success and our
long-term growth.
 Annual Compensation
 Base Salary
  Incentive Bonus
   Benefits
  Long-Term Compensation
  Post-Termination Payments
  - 32 -
    Table of Contents  SUMMARY COMPENSATION TABLE
    Change inPension ValueandNon-Equity
    
    NonqualifiedName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    Option
    
    Incentive Plan
    
    Deferred
    
    All OtherPrincipal
    
    
    
    
    
    Salary
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    Compensation
    
    CompensationPosition
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($) (1)
    
    ($)
    
    Earnings ($)
    
    ($)
    
    Total ($)Robert F. Gruder
    
    
    2007
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Chief Executive
    
    
    2006
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Officer & ChairmanDavid J. Meador (2)
    
    
    2007
    
    
    
    110,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,721Chief Financial
    
    
    2006
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    667,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842,150Officer & Corporate
Secretary
 
 (1)
    
    The amounts in the Option Awards column reflects the dollar amount recognized for financial
statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with
FAS 123(R) of awards pursuant to the 2005 Stock Option/Stock Bonus Plan and thus include
amounts from awards granted in and prior to 2006. Assumptions used in the calculation of this
amount for fiscal years ended December 31, 2004, 2005 and 2006 are included in the footnotes to
the Companys audited financial statements for the fiscal year ended December 31, 2006,
included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission.(2)
    
    David Meadors employment with the Company and stock options were terminated on August 17, 2007. - 33 -
    Table of Contents  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
  Stock AwardsOption Awards
    
    
    
    
    
    
    
    
    
    Equity
    
    Equity IncentiveEquity Incentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive Plan
    
    Plan Awards:Plan Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    Market orNumber of
    
    Number of
    
    Number of
    
    
    
    
    
    
    
    
    
    Number of
    
    Market Value
    
    Number of
    
    Payout Value ofSecurities
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares or
    
    of Shares or
    
    Unearned
    
    UnearnedUnderlying
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    Units of
    
    Units of
    
    Shares, Units or
    
    Shares, Units orUnexercised
    
    Unexercised
    
    Unexercised
    
    Option
    
    Option
    
    Stock That
    
    Stock That
    
    Other Rights
    
    Other RightsOptions (#)
    
    Options (#)
    
    Unearned Options
    
    Exercise
    
    Expiration
    
    Have Not
    
    Have Not
    
    That Have Not
    
    That Have NotName
    
    Exercisable
    
    Unexercisable
    
    (#)
    
    Price ($)
    
    Date
    
    Vested (#)
    
    Vested ($)
    
    Vested (#)
    
    VestedRobert F. GruderDavid J.
Meador(1)
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    3.98
    
    
    
    01/25/1150,000
    
    
    
    
    
    
    
    
    
    
    
    0.55
    
    
    
    12/20/11
  - 34 -
    Table of Contents  DIRECTOR COMPENSATION
  Change in PensionValue andFees
    
    
    
    
    
    
    Option
    
    
    Non-Equity
    
    
    NonqualifiedEarned or
    
    
    Stock
    
    
    Awards
    
    
    Incentive Plan
    
    
    Deferred
    
    
    All OtherPaid in
    
    
    Awards
    
    
    ($)
    
    
    Compensation
    
    
    Compensation
    
    
    CompensationName
    
    Cash ($)
    
    
    ($)
    
    
    (1)(2)
    
    
    ($)
    
    
    Earnings ($)
    
    
    ($)
    
    
    Total ($)T. Yates Exley
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Michael Racaniello(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Andrew P. Helene
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Wells Van
Pelt(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    The amounts in the Option Awards column reflects the dollar amount
recognized for financial statement reporting purposes for the fiscal
year ended December 31, 2007, in accordance with FAS 123(R) of awards
pursuant to the 2005 Stock Option/Stock Bonus Plan and thus include
amounts from awards granted in and prior to 2007. Assumptions used in
the calculation of this amount for fiscal years ended December 31,
2005, 2006 and 2007 are included in the footnotes to the Companys
audited financial statements for the fiscal year ended December 31,
2007, included in the Companys Annual Report on Form 10-K filed with
the Securities and Exchange Commission.(2)(3)
    
    Michael Racaniello resigned from the Board of Directors in June 2007.(4)
    
    Wells Van Pelt was appointed to the Board of Directors on
November 16, 2007. 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
    
    each person (or group of affiliated persons) who is known by us to own beneficially more than 5% of our common stock;
    
    each of our executive officers;
    
    each of our current directors; and
 Amount and Nature ofBeneficial Owner
    
    Beneficial Ownership
    
    PercentageCastlerigg Master Investments Ltd.
c/o Citco Fund Services (Curacao) N.V.
Kaya Flamboyan 9, PO Box 812
    
    
    2,033,723
    (1)
    
    
    10.2
    %Curaco, Netherlands, AntillesRonald T. Bellistri
2701 N Rocky Point Drive, Suite 1130
    
    
    1,000,000
    
    
    
    5.0
    %Tampa, FL 33607Robert F. Gruder
2701 N Rocky Point Drive, Suite 1130
    
    
    5,327,949
    (4)
    
    
    26.8
    %Tampa, FL 33607T. Yates Exley
2239 Forrest Drive
    
    
    4,675,000
    (2)
    
    
    23.5
    %Charlotte, NC 28211Andrew Helene
307 Main Street
    
    
    130,000
    (3)
    
    
    *Hyannis, MA 02653
  - 35 -
    Table of Contents  Amount and Nature ofBeneficial Owner
    
    Beneficial Ownership
    
    PercentageWells Van Pelt
    
    
    62,650
    (5)
    
    
    *6100 Fairview Road, Suite 700
Charlotte, NC 28210Richard Bo Dietl
    
    
    1,000,000
    
    
    
    5.0
    %One
Pennsylvania Plaza, 50th Floor
New York, NY 10119All directors and executive officers as a group (5 persons)
    
    
    12,195,599
    
    
    
    61.3
    %
 
 *
    
    Less than one percent (1%).(1)
    
    As reported on a Schedule 13G filed on March 10, 2008 Castlerigg Master Investments Ltd.,
Sandell Asset Management Corp., Castlerigg International Limited, Castlerigg International Holdings
Limited and Thomas E. Sandell. Includes 468,365 shares of Common Stock into which the convertible
notes and/or the warrants held by Castlerigg Master Investments are convertible or exercisable, as
applicable. In addition, Castlerigg Master Investments holds (x) a senior secured convertible note
convertible into an aggregate of 1,720,000 shares of Common Stock, (y) a convertible note
convertible into an aggregate of 4,225,796 shares of Common Stock, and (z) warrants held by
Castlerigg Master Investments exercisable for an aggregate of 8,912,961 shares of Common Stock.
Such securities are not convertible or exercisable to the extent that their exercise would cause
the holder to be the beneficial owner of more than 9.99% of the Companys common stock.(2)
    
    Mr. Exley also has a potential minority beneficial interest in 536,000 shares held by Exley
Management Services LLC, a company principally owned and controlled by his father. Because Mr. T.
Yates Exley cannot control the disposition or the voting of the shares held in this company, they
have not been allocated to him as part of his beneficial holdings. Includes approximately 85,000
shares of common stock issuable upon conversion of a convertible promissory note held in trust for
the benefit of Mr. Exleys children.(3)
    
    Includes 120,000 shares of common stock that may be purchased upon the exercise of options.(4)
    
    Includes approximately 85,000 shares of common stock issuable upon conversion of a convertible
promissory note held by Mr. Gruders children.(5)
    
    Includes 60,000 shares of common stock that may be purchased upon the exercise of options. - 36 -
    Table of Contents  EQUITY COMPENSATION PLAN INFORMATION
  Number of securities
    
    
    Weighted
    
    
    Number of securitiesto be issued upon
    
    
    average
    
    
    remaining available forexercise of
    
    
    exercise price
    
    
    future issuance underoutstanding
    
    
    of outstanding
    
    
    equity compensation plansoptions, warrants
    
    
    options,
    
    
    (excluding securitiesand
    
    
    warrants and
    
    
    reflected in the firstPlan Category
    
    rights (1)
    
    rights
    
    column)Equity compensation plans approved by security holders
    
    
    827,500
    
    
    $
    1.94
    
    
    
    1,172,500Equity compensation plan not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    827,500
    
    
    
    1.94
    
    
    
    1,172,500
 
 (1)
    
    Represents shares of the Companys Common Stock issuable in connection with such equity
compensation plans. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 Audit Fees
  Audit-Related Fees
  Tax Fees
  All Other Fees
  - 37 -
    Table of Contents  Pre-Approval of Non-Audit Services
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   PageNumberReport of Independent Registered Public Accounting Firm Killman, Murrell & Company, P.C.
Financial Statements
    
    F-2Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    F-3Consolidated Statements of Operations for the year ended December 31, 2005 and for the
Period September 24, 2004 to December 31, 2004
    
    F-5Consolidated
Statements of Stockholders Equity (Deficit) for the year ended December 31, 2005
and for the Period September 24, 2004 to December 31, 2004
    
    F-6Consolidated Statements of Cash Flows for the year ended December 31, 2005 and for the
Period September 24, 2004 to December 31, 2004
    
    F-7Notes to Consolidated Financial Statements
    
    F-9Pro Forma Combined Statement of Operations
  Financial statement schedules are omitted because they are not required.
   Exhibit No.
    
    Description3.1
    
    Articles of Incorporation (1)3.2
    
    Amendment to Articles of Incorporation (1)3.3
    
    By-laws (1)4.1
    
    Specimen Common Stock Certificate of Registrant (1)10.1
    
    Form of Securities Purchase Agreement used in the December 2004 506 offering (1)10.2
    
    Form of warrant used in the December 2004 506 offering (1)10.3
    
    Form of Registration Rights Agreement used in the December 2004 506 offering (1)10.4
    
    Employment Agreement with Mr. Cuny (2)10.5
    
    Employment Agreement with Mr. Killoy (2)10.6
    
    Severance Agreement with Mr. Cuny (2)10.7
    
    Research Agreement  Wayne State University (2)10.8
    
    Independent Manufacturers Representative Agreement (2)10.9
    
    Stinger Systems Distributor Agreement (2)10.10
    
    Settlement Agreement, Release and Covenant Not to Sue with Mr. Killoy (3)10.11
    
    Purchase Agreement (3)10.12
    
    Cancellation Agreement (3)10.13
    
    Agreement between Mr. McNulty and CM Partners (3)10.14
    
    Assignment of Inventions (3)10.15
    
    Patent Assignment (3)10.16
    
    Modification Letter Agreement with Mr. McNulty (4)10.17
    
    Amendment and Exercise Agreement (5)
 - 38 -
    Table of Contents  Exhibit No.
    
    Description10.18
    
    Form of New Warrant (5)10.19
    
    Registration Rights Agreement used in the January 2007 offering (5)10.20
    
    Securities Purchase Agreement dated August 2, 2007 among Stinger Systems, Inc.
and the investor party thereto(6)10.21
    
    Senior Secured Convertible Note dated August 3, 2007(6)10.22
    
    Warrant dated August 3, 2007(6)10.23
    
    Registration Rights Agreement dated August 3, 2007 among Stinger Systems, Inc.
and the investor party thereto(6)10.24
    
    Security Agreement dated August 3, 2007(6)10.25
    
    Securities Purchase Agreement dated February 29, 2008 among Stinger Systems,
Inc. and the investor party thereto(7)10.26
    
    Senior Secured Convertible Note dated February 29, 2008(7)10.27
    
    Warrant(7)10.28
    
    Amended and Restated Security Agreement, dated February 29, 2008(7)10.29
    
    Amended and Restated Senior Secured Convertible Note dated February 29, 2008(7)21.1
    
    List of Subsidiaries (1)31.1
    
    Section 302 Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Section 302 Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.32.1
    
    Section 906 Certification of the Chief Executive Officer pursuant to U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Section 906 Certification of the Chief Financial Officer pursuant to U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 (1)
    
    Previously filed as an exhibit to Form S-1/A on February 8, 2005.(2)
    
    Previously filed as an exhibit to Form S-1/A on July 20, 2005.(3)
    
    Previously filed as an exhibit to Form S-1/A on September 20, 2005.(4)
    
    Previously filed as an exhibit to Form S-1/A on November 10, 2005.(5)
    
    Previously filed as an exhibit to Current Report on Form 8-K on January 26, 2007(6)
    
    Previously filed as an exhibit to Current Report on Form 8-K on August 3, 2007(7)
    
    Previously filed as an exhibit to Current Report on Form 8-K on March 3, 2008 - 39 -
    Table of Contents  SIGNATURES
  STINGER SYSTEMS, INC.By:
    /s/ Ronald T. BellistriRonald T. BellistriChief Executive OfficerDated March 31, 2008  Signature
    
    Title
    
    Date/s/ Ronald T. Bellistri 
Ronald T. Bellistri
    
    Chief Executive Officer(Principal Executive Officer)
    
    March 31, 2008/s/ Robert F. Gruder 
Robert F. Gruder
    
    President and Chairman of the Board
    
    March 31, 2008/s/ Brian S. Gannon 
Brian S. Gannon
    
    Financial Controller(Principal Financial and Accounting Officer)
    
    March 31, 2008/s/ T. Yates Exley 
T. Yates Exley
    
    Director
    
    March 31, 2008/s/ Andrew P. Helene 
Andrew P. Helene
    
    Director
    
    March 31, 2008/s/ Wells Van Pelt 
Wells Van Pelt
    
    Director
    
    March 31, 2008/s/ Richard Bo Dietl 
Richard Bo Dietl
    
    Director
    
    March 31, 2008
 - 40 -
    Table of Contents  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm Killman, Murrell & Company, P.C.
    
    
    F-2Financial StatementsConsolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    F-3Consolidated Statements of Operations for each of the years in the three year period ended
December 31, 2007
    
    
    F-5Consolidated
Statements of Stockholders Equity (Deficit) for each of the years in the three year period
ended December 31, 2007
    
    
    F-6Consolidated Statements of Cash Flows for each of the years in the three year period ended
December 31, 2007
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9
 F-1
    Table of Contents  Killman, Murrell & Company, P.C.
Certified Public Accountants
 3300 N. A Street, Bldg. 4, Suite 200
    
    1931 E. 37th Street, Suite 7
    
    2626 Royal CircleMidland, Texas 79705
    
    Odessa, Texas 79762
    
    Kingwood, Texas 77339(432) 686-9381
    
    (432) 363-0067
    
    (281) 359-7224Fax (432) 684-6722
    
    Fax (432) 363-0376
    
    Fax (281) 359-7112
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     /s/ Killman, Murrell & Company, P.C.KILLMAN, MURRELL & COMPANY, P.C.Odessa, TexasMarch 28, 2008
 F-2
    Table of Contents  STINGER
SYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
ASSETS
 December 31,2007
    
    
    2006CURRENT ASSETSCash
    
    $
    345,293
    
    
    $
    121,047Accounts Receivable, net of $1,800 Allowance for Uncollectible Accounts in 2007 and 2006
    
    
    81,201
    
    
    
    46,978Inventories, at cost
    
    
    128,841
    
    
    
    292,426Prepaid Expenses and Other Current Assets
    
    
    35,149
    
    
    
    41,747TOTAL CURRENT ASSETS
    
    
    590,484
    
    
    
    502,198EQUIPMENT AND FURNITUREEquipment and Furniture, net of accumulate depreciation of $126,414 and $52,982 in 2007 and 2006
    
    
    276,590
    
    
    
    303,295OTHER ASSETS, net of AccumulatedIntangible Assets, net of accumulated amortization of $1,145,419 and $763,616 in 2007 and 2006
    
    
    1,527,201
    
    
    
    2,339,004Other Assets
    
    
    11,496
    
    
    
    11,496TOTAL OTHER ASSETS
    
    
    1,538,697
    
    
    
    2,350,500TOTAL ASSETS
    
    $
    2,405,771
    
    
    $
    3,155,993
 
  F-3
    Table of Contents  STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
 December 31,
    
    
    December 31,2007
    
    
    2006CURRENT LIABILITIESAccounts Payable
    
    $
    393,842
    
    
    $
    1,375,594Accrued Liabilities
    
    
    124,846
    
    
    
    79,341Capital Lease Obligation, current portion
    
    
    21,445
    
    
    
    Note Payable-Related Parties
    
    
    31,250
    
    
    
    962,500TOTAL CURRENT LIABILITIES
    
    
    571,383
    
    
    
    2,417,435Capital Lease Obligation, long-term portion
    
    
    77,739
    
    
    
    Note
Payable-Convertible, net of debt discount of $1,660,237
    
    
    1,339,763
    
    
    
    Derivative Liability Associated with Convertible Note and Warrants
    
    
    3,660,000
    
    
    
    TOTAL LIABILITIES
    
    
    5,648,885
    
    
    
    2,417,435COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITY (DEFICIT)Common Stock, $0.001 Par Value, 50,000,000 Shares Authorized,
17,527,171 and 15,068,500 Shares Issued and Outstanding at
December 31, 2007 and December 31, 2006, respectively
    
    
    17,527
    
    
    
    15,069Additional Paid-In Capital
    
    
    30,309,985
    
    
    
    25,945,830Retained Deficit
    
    
    (33,570,626
    )
    
    
    (25,222,341
    )TOTAL STOCKHOLDERS EQUITY (DEFICIT)
    
    
    (3,243,114
    )
    
    
    738,558TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    2,405,771
    
    
    $
    3,155,993
  F-4
    Table of Contents  STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE THREE YEARS ENDED DECEMBER 31, 2007
 December 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005SALES
    
    $
    372,212
    
    
    $
    454,454
    
    
    $
    469,997COST OF PRODUCT SOLD
    
    
    533,855
    
    
    
    661,792
    
    
    
    609,279GROSS (LOSS) MARGIN
    
    
    (161,643
    )
    
    
    (207,338
    )
    
    
    (139,282
    )SELLING EXPENSES
    
    
    235,531
    
    
    
    243,585
    
    
    
    344,103GENERAL AND ADMINISTRATIVE EXPENSESEmployee Salaries
    
    
    1,102,479
    
    
    
    953,119
    
    
    
    782,605Employee Acquisition Cost
    
    
    5,881
    
    
    
    10,686
    
    
    
    3,475,000Employee Severance Cost
    
    
    18,697
    
    
    
    895
    
    
    
    719,346Other
    
    
    1,773,290
    
    
    
    3,563,230
    
    
    
    2,952,269Depreciation and Amortization
    
    
    511,239
    
    
    
    462,759
    
    
    
    396,094Impairment Loss
    
    
    523,342
    
    
    
    201,943Research and Development
    
    
    350,810
    
    
    
    657,411
    
    
    
    1,363,059LOSS FROM OPERATIONS
    
    
    (4,682,912
    )
    
    
    (6,300,966
    )
    
    
    (10,171,758
    )INTEREST INCOME
    
    
    21,517
    
    
    
    25,931
    
    
    
    98,605INTEREST EXPENSE
    
    
    (437,832
    )
    
    
    (31,310
    )
    
    
    (12,376
    )VENDOR LIABILITY SETTLEMENT
    
    
    410,942
    
    
    
    DERIVATIVE LIABILITY EXPENSE
    
    
    (3,660,000
    )
    
    
    
    
    
    
    LOSS BEFORE INCOME TAXES
    
    
    (8,348,285
    )
    
    
    (6,306,345
    )
    
    
    (10,085,529
    )PROVISIONS FOR INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (8,348,285
    )
    
    $
    (6,306,345
    )
    
    $
    (10,085,529
    )NET LOSS PER SHAREBasic
    
    $
    (0.50
    )
    
    $
    (0.42
    )
    
    $
    (0.67
    )Diluted
    
    $
    (0.50
    )
    
    $
    (0.42
    )
    
    $
    (0.67
    )WEIGHTED AVERAGE NUMBER OF COMMON
STOCK AND COMMON STOCK EQUIVALENT
SHARES OUTSTANDINGBasic
    
    
    16,658,390
    
    
    
    15,038,500
    
    
    
    14,997,346Diluted
    
    
    16,658,390
    
    
    
    15,038,500
    
    
    
    14,997,346
  F-5
    Table of Contents  STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 FOR THE THREE YEARS ENDED DECEMBER 31, 2007
 Common Stock
    
    
    AdditionalNumber of
    
    
    
    
    
    
    Paid-In
    
    
    RetainedShares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance, December 31, 2004
    
    
    14,928,500
    
    
    $
    14,929
    
    
    $
    19,414,979
    
    
    $
    (8,830,467
    )
    
    $
    10,599,441Compensation Recognized
for Stock Grant
    
    
    
    
    
    
    
    
    
    
    1,925,000
    
    
    
    
    
    
    
    1,925,000Common Stock Issued for
Patent
    
    
    75,000
    
    
    
    75
    
    
    
    1,387,425
    
    
    
    
    
    
    
    1,387,500Stock Options Issued To
Employees
    
    
    
    
    
    
    
    
    
    
    1,550,000
    
    
    
    
    
    
    
    1,550,000Repurchase of Common
Stock
    
    
    (10,000
    )
    
    
    (10
    )
    
    
    (49,990
    )
    
    
    
    
    
    
    (50,000
    )Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,085,529
    )
    
    
    (10,085,529
    )Balance, December 31, 2005
    
    
    14,993,500
    
    
    
    14,994
    
    
    
    24,227,414
    
    
    
    (18,915,996
    )
    
    
    5,326,412Common Stock Issued for
Services
    
    
    75,000
    
    
    
    75
    
    
    
    166,800
    
    
    
    
    
    
    
    166,875Stock Options Issued To
Employees
    
    
    
    
    
    
    
    
    
    
    1,551,616
    
    
    
    
    
    
    
    1,551,616Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,306,345
    )
    
    
    (6,306,345
    )Balance, December 31, 2006
    
    
    15,068,500
    
    
    
    15,069
    
    
    
    25,945,830
    
    
    
    (25,222,341
    )
    
    
    738,558Stock Options and
Warrants Issued To
Employees
    
    
    
    
    
    
    
    
    
    
    837,923
    
    
    
    
    
    
    
    837,923Stock Sold to Accredited
Investors
    
    
    1,483,644
    
    
    
    1,483
    
    
    
    950,616
    
    
    
    
    
    
    
    952,099Common Stock Issued for
Note Payable and Accrued
Interest
    
    
    972,027
    
    
    
    972
    
    
    
    971,055
    
    
    
    
    
    
    
    972,027Stock Issued To Employees
    
    
    3,000
    
    
    
    3
    
    
    
    1,707
    
    
    
    
    
    
    
    1,710Beneficial Conversion
Feature of Convertible
Debt
    
    
    
    
    
    
    
    
    
    
    1,602,854
    
    
    
    
    
    
    
    1,602,854Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,348,285
    )
    
    
    (8,348,285
    )Balance, December 31, 2007
    
    
    17,527,171
    
    
    $
    17,527
    
    
    $
    30,309,985
    
    
    $
    (33,570,626
    )
    
    $
    (3,243,114
    )
  F-6
    Table of Contents ] STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE THREE YEARS ENDED DECEMBER 31, 2007
 For the Year
    
    
    For the Year
    
    
    For the YearEnded
    
    
    Ended
    
    
    EndedDecember 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (8,348,285
    )
    
    $
    (6,306,345
    )
    
    $
    (10,085,529
    )Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:Depreciation and Amortization
    
    
    511,239
    
    
    
    462,759
    
    
    
    396,094Stock Option Warrant Expense
    
    
    837,923
    
    
    
    1,551,616
    
    
    
    Stock Issued for Services
    
    
    1,710
    
    
    
    166,875
    
    
    
    Employee Acquisition Cost
    
    
    
    
    
    
    
    
    
    
    3,475,000Loss on Sale of Assets
    
    
    
    
    
    
    3,381
    
    
    
    Asset Impairment
    
    
    523,342
    
    
    
    201,943
    
    
    
    Derivative Liability Associated with Convertible Notes and Warrants
    
    
    3,660,000
    
    
    
    
    
    
    
    Amortization of Discount on Notes Payable  Convertible
    
    
    268,617
    
    
    
    
    
    
    
    Changes in Operating Assets and LiabilitiesAccounts Receivable
    
    
    (34,223
    )
    
    
    (14,387
    )
    
    
    (11,818
    )Inventory
    
    
    163,585
    
    
    
    (92,661
    )
    
    
    (121,603
    )Inventory Deposits
    
    
    
    
    
    
    
    
    
    
    139,190Prepaid Expenses
    
    
    6,598
    
    
    
    748,677
    
    
    
    231,699Other Assets
    
    
    
    
    
    
    (4,785
    )
    
    
    (5,417
    )Accounts Payable
    
    
    (981,752
    )
    
    
    833,188
    
    
    
    539,854Accrued Liabilities
    
    
    117,532
    
    
    
    (96,656
    )
    
    
    (315,026
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (3,273,714
    )
    
    
    (2,546,395
    )
    
    
    (5,758,451
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment
    
    
    (89,167
    )
    
    
    (91,065
    )
    
    
    (261,905
    )Purchase of Patent
    
    
    
    
    
    
    
    
    
    
    Proceeds from Sale of Assets
    
    
    
    
    
    
    1,157
    
    
    
    NET CASH USED IN INVESTING ACTIVITIES
    
    
    (89,167
    )
    
    
    (89,908
    )
    
    
    (261,905
    )CASH FLOWS FROM FINANCING ACTIVITIESCommon Stock Sales
    
    
    952,099
    
    
    
    
    
    
    
    Proceeds from issuance of Notes Payable, net of issue costs
    
    
    2,878,000
    
    
    
    753,721
    
    
    
    Payment on Insurance Notes Payable
    
    
    (235,250
    )
    
    
    (404,927
    )
    
    
    (614,722
    )Payment on Capital Leases
    
    
    (7,722
    )
    
    
    
    
    
    
    Repurchase of Common Stock
    
    
    
    
    
    
    
    
    
    
    (50,000
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    3,587,127
    
    
    
    348,794
    
    
    
    (664,722
    )NET INCREASE (DECREASE) IN CASH
    
    
    224,246
    
    
    
    (2,287,509
    )
    
    
    (6,685,078
    )CASH BALANCE, BEGINNING OF PERIOD
    
    
    121,047
    
    
    
    2,408,556
    
    
    
    9,093,634CASH BALANCE, END OF PERIOD
    
    $
    345,293
    
    
    $
    121,047
    
    
    $
    2,408,556
 
  F-7
    Table of Contents  STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 2007
(Continued)
 For the Year Ended
    
    
    For the Year Ended
    
    
    For the Year EndedDecember 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005NON-CASH INVESTING AND FINANCING ACTIVITIESCommon Stock Issued From Conversion of Redeemable Common Stock
    
    
    
    
    
    
    
    
    
    
    75Additional Paid-In Capital From Conversion of Redeemable Common Stock
    
    
    
    
    
    
    
    
    
    
    1,387,425Conversion of Redeemable Common Stock to Common Stock
    
    
    
    
    
    
    
    
    
    
    (1,387,500
    )Prepaid Insurance
    
    
    
    
    
    
    (268,797
    )
    
    
    (882,357
    )Insurance Note Payable
    
    
    
    
    
    
    268,797
    
    
    
    882,357Purchase of Equipment
    
    
    
    
    
    
    (146,279
    )
    
    
    Notes Payable-Related Parties
    
    
    
    
    
    
    146,279
    
    
    
    Equipment
    
    
    (106,906
    )
    
    
    
    
    
    
    Capital Lease Obligations
    
    
    106,906
    
    
    
    
    
    
    
    Note Payable
    
    
    (900,000
    )
    
    
    
    
    
    
    Accrued Interest
    
    
    (72,027
    )
    
    
    
    
    
    
    Common Stock
    
    
    972
    
    
    
    
    
    
    
    Additional Paid in Capital
    
    
    971,055
    
    
    
    
    
    
    
    Debt Discount on Notes Payable
    
    
    (1,602,854
    )
    
    
    
    
    
    
    Additional Paid in Capital
    
    
    1,602,854
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    53,845
    
    
    $
    9,066
    
    
    $
    9,767Income Taxes
    
    $
    
    
    
    $
    
    
    
    $
    
  F-8
    Table of Contents  STINGER
SYSTEMS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 1: GENERAL
 Nature of Business
   NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Accounting
   Estimates
   F-9
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Cash and Cash Equivalents
  Inventories
  December 31,
    
    
    December 31,2007
    
    
    2006Raw Materials and Work-in Progress
    
    $
    99,853
    
    
    $
    216,865Finished Goods
    
    
    28,988
    
    
    
    75,561$
    128,841
    
    
    $
    292,426
 Furniture and Equipment
  December 31,
    
    
    December 31,Useful Life
    
    
    2007
    
    
    2006Furniture
    
    5 Years
    
    $
    21,825
    
    
    $
    21,825Machinery
    
    3 Years
    
    
    286,856
    
    
    
    143,495Mold For Stun Gun
    
    2.5 Years
    
    
    59,556
    
    
    
    160,841Computers and Equipment
    
    3 Years
    
    
    34,767
    
    
    
    30,116403,004
    
    
    
    356,277Accumulated Depreciation
    
    
    
    
    
    
    (126,414
    )
    
    
    (52,982
    )$
    276,590
    
    
    $
    303,295
  F-10
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Long-Lived Assets
  Deferred Compensation
    Revenue Recognition
  Cost of Goods Sold
   F-11
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Advertising
  Research and Development Costs
  Concentrations of Credit Risk and Fair Value of Financial Instruments
  Net (Loss) Per Share
  Income Taxes
   F-12
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Other Comprehensive Income
  Warranty Costs
  Recent Accounting Pronouncements
     F-13
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Stock Based Compensation
      Year EndedDecember 31, 2005Net income as reported
    
    $
    (10,085,529
    )Add: stock based compensation costs included in reported net income
    
    
    1,550,000Deduct: stock based compensation costs, under SFAS 123
    
    
    (2,028,100
    )Pro forma net income
    
    $
    (10,563,629
    )
  F-14
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Year EndedDecember 31, 2005Per share information Basic, as reported
    
    $
    (0.67
    )Basic, pro forma
    
    $
    (0.70
    )Diluted, as reported
    
    $
    (0.67
    )Diluted, pro forma
    
    $
    (0.70
    )
  Year Ended
    
    Year Ended
    
    Year EndedDecember 31
    
    December 31,
    
    December 31,2007,
    
    2006
    
    2005Estimated fair value
    
    $
    0.24
    
    
    $
    2.29
    
    
    $
    14.47Expected life (years)
    
    
    3.60
    
    
    
    5.00
    
    
    
    4.64Risk free interest rate
    
    
    3.37
    %
    
    
    4.57
    %
    
    
    4.21
    %Volatility
    
    
    176
    %
    
    
    135
    %
    
    
    139
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
 Fair Value of Financial Instruments
  Embedded Derivatives
  Reclassification
  F-15
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 3: INTANGIBLE ASSETS
  December 31, 2007
    
    
    December 31, 2006Patent for Stun Gun
    
    $
    2,672,620
    
    
    $
    2,672,620Patent for Camera
    
    
    
    
    
    
    430,0002,672,620
    
    
    
    3,102,620Accumulated Amortization
    
    
    (1,145,419
    )
    
    
    (763,616
    )$
    1,527,201
    
    
    $
    2,339,004
   Year
    
    Amount2008
    
    $
    381,8032009
    
    
    381,8032010
    
    
    381,8032011
    
    
    381,792$
    1,527,201
 F-16
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 4: OPERATING LEASES
     NOTE 5: COMMITMENTS
  NOTE 6: EMPLOYMENT AGREEMENTS
    F-17
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 7: CAPITAL STOCK TRANSACTIONS
        F-18
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 7: CAPITAL STOCK TRANSACTIONS (CONTINUED)
      F-19
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 8: INCOME TAXES
  For the year Ended
    
    
    For the year Ended
    
    
    For the year Ended
    
    
    For the year EndedDecember 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005
    
    
    December 31, 2004Benefit for Income Taxes
Computed Using the Statutory
Rate of 34%
    
    $
    (2,838,417
    )
    
    $
    (2,144,157
    )
    
    $
    (3,429,080
    )
    
    $
    (3,002,359
    )Difference Between Book
Expense and Tax Expense of
Charges for Stock Issued for
Services
    
    
    284,892
    
    
    
    527,549
    
    
    
    1,071,372
    
    
    
    2,650,747Other
    
    
    63,339
    
    
    
    23,683
    
    
    
    1,548
    
    
    
    275Derivative Expense
    
    
    1,244,400
    
    
    
    
    
    
    
    
    
    
    
    Change in Valuation Allowance
    
    
    1,245,786
    
    
    
    1,592,925
    
    
    
    2,356,160
    
    
    
    351,337Income Tax Benefit
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  December 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005Deferred Tax AssetsNet Operating Loss Carryforward
    
    $
    5,447,332
    
    
    
    4,214,528
    
    
    
    2,707,497Depreciation and Amortization
    
    
    199,632
    
    
    
    85,894
    
    
    
    Loan Fee
    
    
    (100,756
    )
    
    
    
    
    
    
    Valuation Allowance
    
    
    (5,546,208
    )
    
    
    (4,300,422
    )
    
    
    (2,707,497
    )Net Deferred Tax Asset
    
    $
    
    
    
    $
    
    
    
    $
    
  F-20
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 9: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  For the Year Ended
    
    
    For the Year Ended
    
    
    For the Year EndedDecember 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005Legal and Professional Fees
    
    $
    467,788
    
    
    $
    825,251
    
    
    $
    594,356Stock Option Expense
    
    
    284,382
    
    
    
    1,551,616
    
    
    
    Value of Warrants Issued for Services
    
    
    553,542
    
    
    
    
    
    
    
    Liquidated Damages to Investors
    
    
    
    
    
    
    
    
    
    
    964,343Insurance Expense
    
    
    14,265
    
    
    
    765,824
    
    
    
    573,117Other
    
    
    453,313
    
    
    
    420,539
    
    
    
    820,453$
    1,773,290
    
    
    $
    3,563,230
    
    
    $
    2,952,269
 NOTE 10: NOTE PAYABLECONVERTIBLE
    Beneficial conversion
    
    $
    1,257,332Cash Fees Paid:Midtown
    
    
    270,000Investor
    
    
    56,000Fair Value of Midtown Warrants
    
    
    243,5221,826,854Less: Amortization recognized
As interest expense
    
    
    (166,617
    )$
    1,660,237
  F-21
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 10: NOTE PAYABLECONVERTIBLE (CONTINUED)
  NOTE 11: NOTES PAYABLE TO RELATED PARTIES
  NOTE 12: ACCRUED LIABILITIES
  2007
    
    
    2006Accrued Payroll Liabilities
    
    $
    14,434
    
    
    $
    12,578Accrued Interest
    
    
    68,827
    
    
    
    25,494Other Accruals
    
    
    41,585
    
    
    
    41,269$
    124,846
    
    
    $
    79,341
 NOTE 13: STOCK OPTION/STOCK BONUS PLAN
     F-22
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 13: STOCK OPTION/STOCK BONUS PLAN (CONTINUED)
  Weighted AverageShares
    
    Exercise PriceOutstanding beginning of year
    
    
    807,000
    
    
    
    3.33Granted
    
    
    462,500
    
    
    
    0.46Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (442,000
    )
    
    
    2.93Outstanding end of year
    
    
    827,500
    
    
    
    1.94Exercisable end of year
    
    
    505,000
    
    
    
    2.98
  Weighted AverageShares
    
    Exercise PriceOutstanding beginning of year
    
    
    75,000
    
    
    
    5.65Granted
    
    
    737,000
    
    
    
    3.10Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (5,000
    )
    
    
    3.92Outstanding end of year
    
    
    807,000
    
    
    
    3.33Exercisable end of year
    
    
    58,000
    
    
    
    3.95
 NOTE 14: LITIGATION
 Taser International, Inc. v. Stinger Systems,
Inc. and Robert F. Gruder
  F-23
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 14: LITIGATION (CONTINUED)
    F-24
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 15: SUMMARIZED QUARTERLY DATA (UNAUDITED)
   Three months endedMarch 31
    
    June 30
    
    September 30
    
    December 31Revenues
    
    $
    96,169
    
    
    $
    102,170
    
    
    $
    47,556
    
    
    $
    126,317Loss from operations
    
    
    (899,892
    )
    
    
    (771,877
    )
    
    
    (1,305,623
    )
    
    
    (1,705,520
    )Net Loss
    
    
    (921,633
    )
    
    
    (803,233
    )
    
    
    (4,547,695
    )
    
    
    (2,075,724
    )Basic net loss per share
    
    
    (0.06
    )
    
    
    (0.05
    )
    
    
    (0.27
    )
    
    
    (0.12
    )Diluted loss per share
    
    $
    (0.06
    )
    
    $
    (0.05
    )
    
    $
    (0.27
    )
    
    $
    (0.12
    )
  Three months endedMarch 31
    
    June 30
    
    September 30
    
    December 31Revenues
    
    $
    118,138
    
    
    $
    110,751
    
    
    $
    109,843
    
    
    $
    115,722Loss from operations
    
    
    (2,375,726
    )
    
    
    (1,832,115
    )
    
    
    (1,074,170
    )
    
    
    (1,018,955
    )Net Loss
    
    
    (2,366,203
    )
    
    
    (1,828,648
    )
    
    
    (1,075,679
    )
    
    
    (1,035,815
    )Basic net loss per share
    
    
    (0.16
    )
    
    
    (0.12
    )
    
    
    (0.07
    )
    
    
    (0.10
    )Diluted loss per share
    
    $
    (0.16
    )
    
    $
    (0.12
    )
    
    $
    (0.07
    )
    
    $
    (0.10
    )
 NOTE 16: SUBSEQUENT EVENTS
      F-25
    Table of Contents  STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
 NOTE 16: SUBSEQUENT EVENTS (CONTINUED)
  NOTE 17: LIQUIDITY AND CAPITAL RESOURCES
  F-26