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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, 2006
 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
 o þ
 o þ
 þ o
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  o o þ
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    DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 Item
    
    Description
    
    PagePART I1
    
    Business.
    
    
    11A
    
    Risk Factors.
    
    
    121B
    
    Unresolved Staff Comments.
    
    
    172
    
    Properties.
    
    
    173
    
    Legal Proceedings.
    
    
    174
    
    Submission of Matters to a Vote of Security Holders.
    
    
    17PART II5
    
    Market for the Registrants Common Equity, Related Stockholders Matters and Issuer Repurchases of Equity Securities.
    
    
    176
    
    Selected Financial Data.
    
    
    197
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    207A
    
    Quantitative and Qualitative Disclosures about Market Risk.
    
    
    278
    
    Financial Statements and Supplementary Data.
    
    
    279
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
    
    
    279A
    
    Controls and Procedures.
    
    
    289B
    
    Other Information.PART III10
    
    Directors, Executive Officers and Corporate Governance.
    
    
    2811
    
    Executive Compensation.
    
    
    3012
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
    
    
    3613
    
    Certain Relationships and Related Transactions and Director Independence.
    
    
    3814
    
    Principal Accountant Fees and Services.
    
    
    38PART IV15
    
    Exhibits and Financial Statement Schedules.
    
    
    38Signatures.
    
    
    40Exhibit Index.EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO
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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
  1/1/06- 12/31/06Sales %State Departments of Corrections
    
    
    26
    %Federal Bureau of Prisons
    
    
    2
    %US Marshals
    
    
    4
    %County Law Enforcement Agencies
    
    
    34
    %Various Police Departments and Misc
    
    
    34
    %
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Our Products
 Stinger S-200 Two Dart Projectile Stun Guns
  ® ®
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Stinger S-400 Four Dart Projectile Stun Guns
       TruVu Gun Camera
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Ice-Shield Electronic Immobilization Riot Shield
  1 4 ®
   Bandit / The R-E-A-C-T System, an Immobilizing Electronic Restraint
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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.TruVuTMvideo/audio captureTitle:
    
    Weapon And Input Device To Record InformationSerial No.:
    
    10/975,563Filing Date:
    
    27 October 2004Status:
    
    Patent Pending (Response to Non-Final Office Action Entered and Forwarded to Examiner)Subject:
    
    The system includes a weapon, an input device to record information, a memory device to store
recorded information, and a security device to inhibit unauthorized tampering of the recorded
information.Title:
    
    Weapon With Illuminator And CameraSerial No.:
    
    11/012,541Filing Date:
    
    14 December 2004Status:
    
    Patent Pending (4 months to first Office Action)Subject:
    
    The system includes a weapon, an illuminator, a camera to record information, a memory device
to store recorded information, and a security device to inhibit unauthorized tampering of the
recorded information.
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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.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 to
be 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.
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Patents and Patent Applications Licensed by Stinger SystemsQuadrashockTMdart 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.
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Description of the Patent Process
     Marketing and Competition
     Government Regulation
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Research and Development
     History
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ITEM 1.A. RISK FACTORS
 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 are unable to raise additional capital in the near term, we may not be able to continue to
operate as a going concern.
  If we do not obtain additional funding as needed, we may be unable to fund our re-engineering 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.
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Our primary competitor, Taser International Inc., has an established name in the marketplace with
both distributors and the end-users of stun products.
  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 .
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Claims by others that our products infringed their patents or other intellectual property rights
could adversely affect our financial condition.
  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.
  Because our common stock is quoted only on the OTC Bulletin Board and the Pink Sheets, your ability
to sell
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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.
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NASD sales practice requirements may also limit a stockholders ability to buy and sell our stock.
  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.
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ITEM 1.B UNRESOLVED STAFF COMMENTS
 None
 
 ITEM 2. PROPERTIES
   
 ITEM 3. LEGAL PROCEEDINGS
     
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR
REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER REPURCHASES
OF EQUITY SECURITIES
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2004
    
    High
    
    LowFourth Quarter
    
    $
    19.25
    
    
    $
    1.25


2005
    
    High
    
    LowFirst Quarter
    
    $
    46.00
    
    
    $
    9.00Second Quarter
    
    $
    10.15
    
    
    $
    3.90Third Quarter
    
    $
    7.75
    
    
    $
    3.92Fourth Quarter
    
    $
    7.50
    
    
    $
    4.25


2006
    
    High
    
    LowFirst Quarter
    
    $
    4.75
    
    
    $
    1.50Second Quarter
    
    $
    2.85
    
    
    $
    1.25Third Quarter
    
    $
    2.00
    
    
    $
    1.07Fourth Quarter
    
    $
    1.10
    
    
    $
    0.55




Stock Performance Graph







Unregistered
Sales of Equity Securities








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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 .
 Predecessor Operations
    
    The Company
    
    The CompanyJanuary 1,
    
    September 24,2004 to
    
    2004September
    
    to December
    
    Year Ended December 31,Years ended December 31,
    
    24,
    
    31,
    
    Pro Forma2002
    
    2003
    
    2004
    
    2004
    
    2004
    
    2005
    
    2006Statement of
Operations Data:Sales
    
    $
    361,913
    
    
    $
    264,471
    
    
    $
    198,981
    
    
    $
    63,306
    
    
    $
    262,287
    
    
    $
    469,997
    
    
    $
    454,454Gross Margin (Loss)
    
    
    149,098
    
    
    
    108,647
    
    
    
    54,859
    
    
    
    11,620
    
    
    
    66,479
    
    
    
    (139,282
    )
    
    
    (207,338
    )Loss from Operations
    
    
    (208,259
    )
    
    
    (237,363
    )
    
    
    (192,470
    )
    
    
    (8,820,199
    )
    
    
    (9,012,669
    )
    
    
    (10,171,758
    )
    
    
    (6,300,966
    )Net Loss
    
    
    (219,272
    )
    
    
    (273,922
    )
    
    
    (230,932
    )
    
    
    (8,830,467
    )
    
    
    (9,061,399
    )
    
    
    (10,085,529
    )
    
    
    (6,306,345
    )Net Loss Per Share
(Basic and Diluted)
    
    $
    (0.02
    )
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.70
    )
    
    $
    (0.70
    )
    
    $
    (0.67
    )
    
    $
    (0.42
    )Weighted Average
Number of Common
Shares Outstanding
(Basic and Diluted)
    
    
    10,750,000
    
    
    
    10,750,000
    
    
    
    10,750,000
    
    
    
    12,640,900
    
    
    
    12,640,900
    
    
    
    14,997,346
    
    
    
    15,038,500Balance Sheet Data:Current Assets
    
    $
    67,680
    
    
    $
    69,695
    
    
    $
    13,232
    
    
    $
    9,334,233
    
    
    $
    9,334,233
    
    
    $
    3,294,044
    
    
    $
    502,198Equipment and
Furnishings
    
    
    118,454
    
    
    
    93,724
    
    
    
    73,204
    
    
    
    105,764
    
    
    
    105,764
    
    
    
    353,388
    
    
    
    303,295Total Assets
    
    
    186,134
    
    
    
    163,419
    
    
    
    86,436
    
    
    
    12,543,911
    
    
    
    12,543,911
    
    
    
    6,374,950
    
    
    
    3,155,993Current Liabilities
    
    
    68,119
    
    
    
    97,441
    
    
    
    43,746
    
    
    
    556,970
    
    
    
    556,970
    
    
    
    1,048,538
    
    
    
    2,417,435Long Term Debt
    
    
    363,000
    
    
    
    584,885
    
    
    
    792,529
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders Equity
(Deficit)
    
    
    (244,985
    )
    
    
    (518,907
    )
    
    
    (749,839
    )
    
    
    10,599,441
    
    
    
    10,599,441
    
    
    
    5,326,412
    
    
    
    738,558
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Executive Summary
 ®
      - 20 -




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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.
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
    
    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.
 Results of Operations
  Comparison of the Years Ended December 31, 2006 and 2005
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Comparison of the Years Ended December 31, 2005 and 2004 (Pro Forma)
 Revenues.
 Cost of Goods Sold.
 Gross Margin.
 Selling Expenses, and General and Administrative Expenses.
 Research and Development Expenses.
 Interest Income.
 Net Loss.
 Liquidity and Capital Resources
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Off-Balance Sheet Arrangements
  Contractual Obligations
  - 24 -




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Intangible Assets
       Critical Accounting Policies
  Revenue Recognition.
 - 25 -




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Warranty Costs.
 Intangible Assets.
 Common Stock Issued for Goods and Services.
 Purchase Accounting.
 Stock Options.
    - 26 -




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Limited Trading Market.
 
 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
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Changes in Internal Control
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    PositionRobert F. Gruder
    
    
    48
    
    
    Chief Executive Officer and ChairmanDavid J. Meador
    
    
    35
    
    
    Chief Financial Officer and SecretaryT. Yates Exley
    
    
    46
    
    
    DirectorMichael Racaniello
    
    
    54
    
    
    DirectorAndrew P. Helene
    
    
    46
    
    
    Director
 Robert F. Gruder
 David J. Meador
 T. Yates Exley
 Michael Racaniello
 - 28 -




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Andrew P. Helene
 Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  - 29 -




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ITEM 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
 Overview
   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
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Post-Termination Payments
  Interlocks and Insider Participation
  Compensation Report
   
 - 31 -




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SUMMARY COMPENSATION TABLE
    Change inPensionValue andNon-Equity
    
    NonqualifiedName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    Option
    
    Incentive Plan
    
    Deferred
    
    All OtherPrincipal
    
    
    
    
    
    Salary
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    Compensation
    
    Compensation
    
    TotalPosition
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($) (1)
    
    ($)
    
    Earnings ($)
    
    ($)
    
    ($)Robert F. Gruder
    
    
    2006
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Chief Executive
Officer & ChairmanDavid J. Meador
    
    
    2006
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    667,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842,150Chief Financial
Officer & Corporate
Secretary
 
 (1)
    
    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. - 32 -




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GRANTS OF PLAN BASED AWARDS
  All OtherAwards:
    
    ExerciseNumber of
    
    or Base
    
    Grant DateEstimated Future Payouts Under Non-
    
    Estimated Future Payouts Under
    
    Securities
    
    Price of
    
    Fair ValueGrant
    
    Equity Incentive Plan Awards
    
    Equity Incentive Plan Awards
    
    Underlying
    
    Option
    
    of StockDate
    
    Threshold
    
    Target
    
    Maximum
    
    Threshold
    
    Target
    
    Maximum
    
    Options
    
    Awards
    
    and OptionName
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    (#)
    
    ($)(3)
    

Awards
($)(3)Robert F. GruderDavid J. Meador
    
    1/26/06(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    3.98
    
    
    
    666,06712/21/06(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    0.55
    
    
    
    1,083
 
 (1)
    
    This Option Award will vest 60,000 shares on March 1, 2006,
115,000 shares on October 1, 2006, and 75,000 shares on May 1, 2007.(2)
    
    This Option Award will vest on June 20, 2007.(3)
    
    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. - 33 -




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##### Table of Contents



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
  Option Awards
    
    Stock AwardsEquity
    
    EquityEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive Plan
    
    Incentive PlanIncentive Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    Awards:Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    Number of
    
    Market orNumber of
    
    Number of
    
    Number of
    
    
    
    
    
    
    
    
    
    Number of
    
    Value of
    
    Unearned
    
    Payout ValueSecurities
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares or
    
    Shares or
    
    Shares, Units
    
    of UnearnedUnderlying
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    Units of
    
    Units of
    
    or Other
    
    Shares, UnitsUnexercised
    
    Unexercised
    
    Unexercised
    
    Option
    
    Option
    
    Stock That
    
    Stock That
    
    Rights That
    
    or Other RightsOptions (#)
    
    Options (#)
    
    Unearned Options
    
    Exercise
    
    Expiration
    
    Have Not
    
    Have Not
    
    Have Not
    
    That Have NotName
    
    Exercisable
    
    Unexercisable
    
    (#)
    
    Price ($)
    
    Date
    
    Vested (#)
    
    Vested ($)
    
    Vested (#)
    
    VestedRobert F. GruderDavid J. Meador
(1)
    
    
    175,000
    
    
    
    75,000
    
    
    
    
    
    
    
    3.98
    
    
    
    01/25/11(2)
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    0.55
    
    
    
    12/20/11
 
 (1)
    
    This Option Award will vest 60,000 shares on March 1, 2006, 115,000 shares on October 1, 2006, and 75,000 shares on May 1, 2007.(2)
    
    This Option Award will vest on June 20, 2007. - 34 -




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##### Table of Contents



OPTION EXERCISES AND STOCK VESTED
  Option Awards
    
    
    Stock AwardsNumber of Shares Acquired
    
    
    Value Realized on Exercise
    
    
    Number of Shares
    
    
    Value Realized on VestingName
    
    on Exercise (#)
    
    
    ($)(1)
    
    
    Acquired on Vesting (#)
    
    
    ($)(2)Robert F. GruderDavid J. Meador
 
 (1)
    
    Based on the difference between the market price of our Common Stock on the date of exercise and the exercise price.(2)
    
    Based on the market price for our Common Stock on the vesting date. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
  - 35 -




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##### Table of Contents



DIRECTOR COMPENSATION
  Change inPension ValueFees
    
    
    
    
    
    Option
    
    Non-Equity
    
    and NonqualifiedEarned or
    
    Stock
    
    Awards
    
    Incentive Plan
    
    Deferred
    
    All OtherPaid in
    
    Awards
    
    ($)
    
    Compensation
    
    Compensation
    
    CompensationName
    
    Cash ($)
    
    ($)
    
    (1)(2)
    
    ($)
    
    Earnings ($)
    
    ($)
    
    Total ($)T. Yates ExleyMichael Racaniello
    
    
    
    
    
    
    
    
    
    
    58,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,800Andrew P. Helene
    
    
    
    
    
    
    
    
    
    
    58,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,800
 
 (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)
    
    The Option Awards reported will vest immediately.  
 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
    
    PercentageBonanza Master Fund Ltd. 
300 Crescent Court, Suite 1740
    
    
    1,303,500
    (1)
    
    
    7.9
    %Dallas, TX 75201Cannell Capital LLC
240 East Deloney Avenue
    
    
    2,788,525
    (2)
    
    
    16.3
    %Jackson, WY 83001Robert F. Gruder 
2701 N Rocky Point Drive, Suite 1130
    
    
    4,351,667
    (5)
    
    
    26.9
    %Tampa, FL 33607T. Yates Exley 
2239 Forrest Drive
    
    
    4,615,000
    (3)
    
    
    28.6
    %Charlotte, NC 28211Andrew Helene 
307 Main Street
    
    
    70,000
    (4)
    
    
    *Hyannis, MA 02653
 - 36 -




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##### Table of Contents



Amount and Nature ofBeneficial Owner
    
    Beneficial Ownership
    
    PercentageDavid J. Meador
    
    
    250,000
    (6)
    
    
    1.5
    %2701 N Rocky Point Drive, Suite 1130
Tampa, FL 33607Michael Racaniello 
1101 Tyvola Road
    
    
    70,000
    (4)
    
    
    *Charlotte, NC 28217All directors and executive officers as a group (5 persons)
    
    
    9,356,667
    
    
    
    56.3
    %
 
 *
    
    Less than one percent (1%).(1)
    
    As reported on a Schedule 13G filed on March 28, 2007 by Bonanza Capital, Ltd. Includes
450,000 shares of common stock that may be purchased upon the exercise of warrants. Such warrants
are not exercisable to the extent that their exercise would cause the holder to be the beneficial
owner of more than 4.99% of the Companys common stock.(2)
    
    As reported on a Schedule 13G filed on March 28, 2007 by J. Carlo Cannell and a Form 4 filed by
Cannell Capital LLC on February 27, 2007. Includes 1,050,000 shares of common stock that may be
purchased upon the exercise of warrants. Such warrants are not exercisable to the extent that their
exercise would cause the holder to be the beneficial owner of more than 4.99% of the Companys
common stock.(3)
    
    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.(4)
    
    Includes 60,000 shares of common stock that may be purchased upon the exercise of options.(5)
    
    Includes approximately 85,000 shares of common stock issuable upon conversion of a convertible
promissory note held by Mr. Gruders children.(6)
    
    Includes 250,000 shares of common stock that may be purchased upon the exercise of options. EQUITY COMPENSATION PLAN INFORMATION
  Number ofsecuritiesNumber of
    
    Weighted
    
    remainingsecurities to be
    
    average
    
    available for futureissued upon
    
    exercise
    
    issuance underexercise of
    
    price of
    
    equityoutstanding
    
    outstanding
    
    compensationoptions,
    
    options,
    
    plans (excludingwarrants and
    
    warrants
    
    securities reflectedPlan Category
    
    rights (1)
    
    and rights
    
    in the first column)Equity
compensation
plans approved
by security
holders
    
    
    807,000
    
    
    $
    3.33
    
    
    
    1,193,000Equity
compensation
plan not
approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    807,000
    
    
    
    3.33
    
    
    
    1,193,000
 
 (1)
    
    Represents shares of the Companys Common Stock issuable in connection with such equity
compensation plans. - 37 -




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##### Table of Contents



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
  Pre-Approval of Non-Audit Services
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   - 38 -




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##### Table of Contents



PageNumberReport of Independent Registered Public Accounting Firm
Killman, Murrell & Company, P.C.
    
    
    2Financial StatementsConsolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    3Consolidated Statements of Operations for the year ended
December 31, 2005 and for the Period September 24, 2004 to
December 31, 2004
    
    
    5Consolidated Statements of Stockholders Equity for the year
ended December 31, 2005 and for the Period September 24,
2004 to December 31, 2004
    
    
    6Consolidated Statements of Cash Flows for the year ended
December 31, 2005 and for the Period September 24, 2004 to
December 31, 2004
    
    
    8Notes to Consolidated Financial Statements
    
    
    10Pro 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)10.18
    
    Form of New Warrant (5)10.19
    
    Registration Rights Agreement used in the January 2007 offering (5)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.
 - 39 -




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##### Table of Contents



Exhibit No.
    
    Description32.2
    
    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 
 SIGNATURES
  STINGER SYSTEMS, INC.By:
    /s/ David J. MeadorDavid J. MeadorChief Financial Officer   Signature
    
    Title
    
    Date/s/ Robert F. Gruder
    
    Chief Executive Officer and Director
    
    April 16, 2007Robert F. Gruder
    
    (Principal Executive Officer)/s/ David J. Meador
    
    Chief Financial Officer
    
    April 16, 2007David J. Meador
    
    (Principal Financial and Accounting Officer)/s/ T. Yates ExleyT. Yates Exley
    
    Director
    
    April 16, 2007/s/ Michael RacanielloMichael Racaniello
    
    Director
    
    April 16, 2007/s/ Andrew P. HeleneAndrew P. Helene
    
    Director
    
    April 16, 2007
 - 40 -




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public
Accounting Firm Killman, Murrell & Company, P.C.
    
    
    2Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    3Consolidated Statements of Operations for the years ended December 31, 2006 and 2005 and for
the Period September 24, 2004 to December 31, 2004
    
    
    5Consolidated Statements of Stockholders Equity for the years ended December 31, 2006 and
2005 and for the Period September 24, 2004 to December 31, 2004
    
    
    6Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005 and For
Period September 24, 2004 to December 31, 2004
    
    
    8Notes to Consolidated Financial Statements
    
    
    10
 - 1 -




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##### 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.
 
 - 2 -




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##### Table of Contents



STINGER SYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 ASSETS
 December 31,2006
    
    
    2005CURRENT ASSETSCash
    
    $
    121,047
    
    
    $
    2,408,556Accounts Receivable, net of $1,800 Allowance for Uncollectible Accounts in 2006 and 2005
    
    
    46,978
    
    
    
    32,591Inventories, at cost
    
    
    292,426
    
    
    
    199,765Prepaid Expenses and Other Current Assets
    
    
    41,747
    
    
    
    653,132TOTAL CURRENT ASSETS
    
    
    502,198
    
    
    
    3,294,044EQUIPMENT AND FURNITUREEquipment and Furniture, net of accumulate depreciation of $52,982 and $14,685 in 2006 and 2005
    
    
    303,295
    
    
    
    353,388OTHER ASSETS, net of AccumulatedIntangible Assets, net of accumulated amortization of $763,616 and $381,813 in 2006 and 2005
    
    
    2,339,004
    
    
    
    2,720,807Other Assets
    
    
    11,496
    
    
    
    6,711TOTAL OTHER ASSETS
    
    
    2,350,500
    
    
    
    2,727,518TOTAL ASSETS
    
    $
    3,155,993
    
    
    $
    6,374,950
   - 3 -




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##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS EQUITY
 December 31,2006
    
    
    2005CURRENT LIABILITIESAccounts Payable
    
    $
    1,375,594
    
    
    $
    542,406Accrued Liabilities
    
    
    79,341
    
    
    
    175,997Insurance Note Payable
    
    
    
    
    
    
    267,635Notes Payable-Related Party
    
    
    962,500
    
    
    
    62,500TOTAL CURRENT LIABILITIES
    
    
    2,417,435
    
    
    
    1,048,538COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYCommon Stock, $0.001 Par Value; 50,000,000
Shares Authorized, 15,068,500 and 14,993,500
Shares Issued and Outstanding at December 31,
2006 and 2005, respectively
    
    
    15,069
    
    
    
    14,994Additional Paid-In Capital
    
    
    25,945,830
    
    
    
    24,227,414Retained Deficit
    
    
    (25,222,341
    )
    
    
    (18,915,996
    )TOTAL STOCKHOLDERS EQUITY
    
    
    738,558
    
    
    
    5,326,412TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,155,993
    
    
    $
    6,374,950
  - 4 -




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##### Table of Contents



STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the PeriodSeptember 24, 2004Year Ended
    
    
    Year Ended
    
    
    to December 31,December 31, 2006
    
    
    December 31, 2005
    
    
    2004SALES
    
    $
    454,454
    
    
    $
    469,997
    
    
    $
    63,306COST OF PRODUCT SOLD
    
    
    661,792
    
    
    
    609,279
    
    
    
    51,686GROSS (LOSS) MARGIN
    
    
    (207,338
    )
    
    
    (139,282
    )
    
    
    11,620SELLING EXPENSES
    
    
    243,585
    
    
    
    344,103
    
    
    
    45,348GENERAL AND ADMINISTRATIVE EXPENSESEmployee Salaries
    
    
    953,119
    
    
    
    782,605
    
    
    
    78,829Employee Acquisition Cost
    
    
    10,686
    
    
    
    3,475,000
    
    
    
    7,520,000Employee Severance Cost
    
    
    895
    
    
    
    719,346
    
    
    
    Other
    
    
    3,765,173
    
    
    
    2,952,269
    
    
    
    1,131,303Depreciation and Amortization
    
    
    462,759
    
    
    
    396,094
    
    
    
    404Research and Development
    
    
    657,411
    
    
    
    1,363,059
    
    
    
    55,935LOSS FROM OPERATIONS
    
    
    (6,300,966
    )
    
    
    (10,171,758
    )
    
    
    (8,820,199
    )INTEREST INCOME
    
    
    25,931
    
    
    
    98,605
    
    
    
    INTEREST EXPENSE
    
    
    (31,310
    )
    
    
    (12,376
    )
    
    
    (10,268
    )LOSS BEFORE INCOME TAXES
    
    
    (6,306,345
    )
    
    
    (10,085,529
    )
    
    
    (8,830,467
    )PROVISIONS FOR INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (6,306,345
    )
    
    $
    (10,085,529
    )
    
    $
    (8,830,467
    )NET LOSS PER SHAREBasic
    
    $
    (0.42
    )
    
    $
    (0.67
    )
    
    $
    (0.70
    )Diluted
    
    $
    (0.42
    )
    
    $
    (0.67
    )
    
    $
    (0.70
    )WEIGHTED AVERAGE NUMBER OF COMMON
STOCK AND COMMON STOCK EQUIVALENT
SHARES OUTSTANDINGBasic
    
    
    15,038,500
    
    
    
    14,997,346
    
    
    
    12,640,900Diluted
    
    
    15,038,500
    
    
    
    14,997,346
    
    
    
    12,640,900
  - 5 -




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##### Table of Contents



STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005, AND
 FOR THE PERIOD SEPTEMBER 24, 2004 TO DECEMBER 31, 2004
 DeficitAccumulatedCommon Stock
    
    
    Additional
    
    
    DuringNumber of
    
    
    
    
    
    
    Paid-In
    
    
    Developmental
    
    
    RetainedShares
    
    
    Par Value
    
    
    Capital
    
    
    Stage
    
    
    Deficit
    
    
    TotalBalance,
September 24, 2004
    
    
    11,000,000
    
    
    $
    11,000
    
    
    $
    1,960
    
    
    $
    (12,960
    )
    
    $
    
    
    
    $
    Acquisition of
Subsidiary
Cancellation
of Common
Shares
    
    
    (10,000,000
    )
    
    
    (10,000
    )
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    Reclassification
of Accumulated
Deficit
    
    
    
    
    
    
    
    
    
    
    (12,960
    )
    
    
    12,960
    
    
    
    
    
    
    
    Acquisition
Shares Issued
    
    
    9,750,000
    
    
    
    9,750
    
    
    
    464,550
    
    
    
    
    
    
    
    
    
    
    
    474,300Balance, September
24, 2004
    
    
    10,750,000
    
    
    
    10,750
    
    
    
    463,550
    
    
    
    
    
    
    
    
    
    
    
    474,300Sale of Common
Stock, Net of
$665,035 of
Offering Costs
    
    
    3,222,000
    
    
    
    3,222
    
    
    
    10,231,743
    
    
    
    
    
    
    
    
    
    
    
    10,234,965Common Stock
Issued for
Patents
    
    
    25,000
    
    
    
    25
    
    
    
    354,975
    
    
    
    
    
    
    
    
    
    
    
    355,000Common Stock
Issued For
Services
    
    
    921,500
    
    
    
    922
    
    
    
    725,278
    
    
    
    
    
    
    
    
    
    
    
    726,200Common Stock
Issued in
Payment of Debt
and Interest
    
    
    10,000
    
    
    
    10
    
    
    
    106,933
    
    
    
    
    
    
    
    
    
    
    
    106,943Stock Options
Issued to
Executive
Officer
    
    
    
    
    
    
    
    
    
    
    7,520,000
    
    
    
    
    
    
    
    
    
    
    
    7,520,000Stock Option
Issued for
Services
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    
    
    
    
    
    
    
    
    12,500Net Loss,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,830,467
    )
    
    
    (8,830,467
    )Balance, 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
    )
    
    $
    738,558
  - 6 -




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##### Table of Contents



STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the PeriodFor the Year
    
    
    For the Year
    
    
    September 24, 2004Ended
    
    
    Ended
    
    
    to December 31,December 31, 2006
    
    
    December 31, 2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (6,306,345
    )
    
    $
    (10,085,529
    )
    
    $
    (8,830,467
    )Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:Depreciation and Amortization
    
    
    462,759
    
    
    
    396,094
    
    
    
    404Stock Option Expense
    
    
    1,551,616
    
    
    
    
    
    
    
    Stock Issued for Services
    
    
    166,875
    
    
    
    
    
    
    
    738,700Employee Acquisition Cost
    
    
    
    
    
    
    3,475,000
    
    
    
    7,520,000Loss on Sale of Assets
    
    
    3,381
    
    
    
    
    
    
    
    Asset
Impairment (included in Cost of Product Sold)
    
    
    201,943
    
    
    
    
    
    
    
    Changes in Operating Assets and LiabilitiesAccounts Receivable
    
    
    (14,387
    )
    
    
    (11,818
    )
    
    
    (9,513
    )Inventory
    
    
    (92,661
    )
    
    
    (121,603
    )
    
    
    16,617Inventory Deposits
    
    
    
    
    
    
    139,190
    
    
    
    (139,190
    )Prepaid Expenses
    
    
    748,677
    
    
    
    231,699
    
    
    
    1,946Other Assets
    
    
    (4,785
    )
    
    
    (5,417
    )
    
    
    1,756Accounts Payable
    
    
    833,188
    
    
    
    539,854
    
    
    
    (24,335
    )Accrued Liabilities
    
    
    (96,656
    )
    
    
    (315,921
    )
    
    
    312,026NET CASH USED IN OPERATING ACTIVITIES
    
    
    (2,546,395
    )
    
    
    (5,758,451
    )
    
    
    (412,056
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment
    
    
    (91,065
    )
    
    
    (261,905
    )
    
    
    (28,218
    )Purchase of Patent
    
    
    
    
    
    
    
    
    
    
    (100,000
    )Proceeds from Sale of Assets
    
    
    1,157
    
    
    
    
    
    
    
    NET CASH USED IN INVESTING ACTIVITIES
    
    
    (89,908
    )
    
    
    (261,905
    )
    
    
    (128,218
    )CASH FLOWS FROM FINANCING ACTIVITIESCommon Stock Sales
    
    
    
    
    
    
    
    
    
    
    10,234,965Proceeds from issuance of Notes Payable
    
    
    753,721
    
    
    
    
    
    
    
    Payment on Insurance Notes Payable
    
    
    (404,927
    )
    
    
    (614,722
    )
    
    
    (601,057
    )Repurchase of Common Stock
    
    
    
    
    
    
    (50,000
    )
    
    
    NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    348,794
    
    
    
    (664,722
    )
    
    
    9,633,908NET INCREASE (DECREASE) IN CASH
    
    
    (2,287,509
    )
    
    
    (6,685,078
    )
    
    
    9,093,634CASH BALANCE, BEGINNING OF PERIOD
    
    
    2,408,556
    
    
    
    9,093,634
    
    
    
    CASH BALANCE, END OF PERIOD
    
    $
    121,047
    
    
    $
    2,408,556
    
    
    $
    9,093,634
   - 7 -




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##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
 For the Year
    
    
    For the Year
    
    
    For the PeriodEnded
    
    
    Ended
    
    
    September 24, 2004December 31,
    
    
    December 31,
    
    
    to December 31,2006
    
    
    2005
    
    
    2004NON-CASH INVESTING AND FINANCING ACTIVITIESAcquisition of Subsidiary Assets Acquired
    
    $
    
    
    
    $
    
    
    
    $
    (1,376,579
    )Liabilities Assumed
    
    
    
    
    
    
    
    
    
    
    902,279Par Value of Stock Issued
    
    
    
    
    
    
    
    
    
    
    9,750Additional Paid-In Capital
    
    
    
    
    
    
    
    
    
    
    464,550Investment in Intangible Patents
    
    
    
    
    
    
    
    
    
    
    (1,817,500
    )Common Stock Issued for Intangible Patents
    
    
    
    
    
    
    
    
    
    
    100Additional Paid-In Capital for Intangible Patents
    
    
    
    
    
    
    
    
    
    
    1,742,400Accrued Liabilities Assumed for Intangible Patents
    
    
    
    
    
    
    
    
    
    
    75,000Note Payable Cancelled for Stock
    
    
    
    
    
    
    
    
    
    
    (106,943
    )Common Stock Issued in Satisfaction of Debt
    
    
    
    
    
    
    
    
    
    
    10Additional Paid-In Capital Issued in Satisfaction of Debt
    
    
    
    
    
    
    
    
    
    
    106,933Common Stock Cancelled on September 24, 2004
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Additional Paid-In Capital from Stock Cancellation
    
    
    
    
    
    
    
    
    
    
    10,000Retained Deficit Eliminated Against Paid-In Capital on September 24, 2003
    
    
    
    
    
    
    
    
    
    
    12,960Reduction in Paid-In Capital From Elimination of Retained Deficit
    
    
    
    
    
    
    
    
    
    
    (12,960
    )Common Stock Issued From Conversion of Redeemable Common Stock
    
    
    
    
    
    
    75
    
    
    
    Additional Paid-In Capital From Conversion of Redeemable Common Stock
    
    
    
    
    
    
    1,387,425
    
    
    
    Conversion of Redeemable Common Stock to Common Stock
    
    
    
    
    
    
    (1,387,500
    )
    
    
    Prepaid Insurance
    
    
    (268,797
    )
    
    
    (882,357
    )
    
    
    Insurance Note Payable
    
    
    268,797
    
    
    
    882,357
    
    
    
    Purchase of Equipment
    
    
    (146,279
    )
    
    
    
    
    
    
    Notes Payable-Related Parties
    
    
    146,279
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    9,066
    
    
    $
    9,767
    
    
    $
    9,626Income Taxes
    
    $
    
    
    
    $
    
    
    
    $
    
  - 8 -




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##### Table of Contents



STINGER SYSTEMS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006 and 2005
 NOTE 1: GENERAL
 Nature of Business
   NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Accounting
   Estimates
   - 9 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Cash and Cash Equivalents
  Inventories
  December 31,
    
    
    December 31,2006
    
    
    2005Raw Materials and Work-in Progress
    
    $
    216,865
    
    
    $
    175,882Finished Goods
    
    
    75,561
    
    
    
    23,883$
    292,426
    
    
    $
    199,765
 Furniture and Equipment
  Useful
    
    
    December 31,
    
    
    December 31,Life
    
    
    2006
    
    
    2005Furniture
    
    5 Years
    
    $
    21,825
    
    
    $
    18,070Machinery
    
    3 Years
    
    
    143,495
    
    
    
    87,059Mold For Stun Gun
    
    2.5 Years
    
    
    160,841
    
    
    
    237,532Computers and Equipment
    
    3 Years
    
    
    30,116
    
    
    
    25,412356,277
    
    
    
    368,073Accumulated Depreciation
    
    
    
    
    
    
    (52,982
    )
    
    
    (14,685
    )$
    303,295
    
    
    $
    353,388
  - 10 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Long-Lived Assets
  Deferred Compensation
    Revenue Recognition
  Cost of Goods Sold
   - 11 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 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
   - 12 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Other Comprehensive Income
  Warranty Costs
  Recent Accounting Pronouncements
     - 13 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 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
    )
  - 14 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 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 EndedDecember 31,
    
    December 31,2006
    
    2005Estimated fair value
    
    $
    2.29
    
    
    $
    14.47Expected life (years)
    
    
    5.00
    
    
    
    4.64Risk free interest rate
    
    
    4.57
    %
    
    
    4.21
    %Volatility
    
    
    135
    %
    
    
    139
    %Dividend yield
    
    
    
    
    
    
    
 Fair Value of Financial Instruments
  Reclassification
  - 15 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 3: INTANGIBLE ASSETS
  December 31, 2006
    
    
    December 31, 2005Patent for Stun Gun
    
    $
    2,672,620
    
    
    $
    2,672,620Patent for Camera
    
    
    430,000
    
    
    
    430,0003,102,620
    
    
    
    3,102,620Accumulated Amortization
    
    
    (763,616
    )
    
    
    (381,813
    )$
    2,339,004
    
    
    $
    2,720,807
 
 Year
    
    Amount2007
    
    $
    443,2312008
    
    
    443,2312009
    
    
    443,2312010
    
    
    443,2312011
    
    
    443,231Thereafter
    
    
    122,849$
    2,339,004
 - 16 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 4: OPERATING LEASES
     NOTE 5: COMMITMENTS
  NOTE 6: EMPLOYMENT AGREEMENTS
    - 17 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 7: CAPITAL STOCK TRANSACTIONS
         - 18 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 7: CAPITAL STOCK TRANSACTIONS (CONTINUED)
        - 19 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 8: INCOME TAXES
  Period FromFor the year Ended
    
    
    For the Year Ended
    
    
    September 24, 2004 toDecember 31, 2006
    
    
    December 31, 2005
    
    
    December 31, 2004Benefit for Income Taxes Computed Using the Statutory Rate of 34%
    
    $
    (2,144,157
    )
    
    $
    (3,429,080
    )
    
    $
    (3,002,359
    )Difference Between Book Expense and Tax Expense of Charges for
Stock Issued for Services
    
    
    527,549
    
    
    
    1,071,372
    
    
    
    2,650,747Other
    
    
    23,683
    
    
    
    1,548
    
    
    
    275Change in Valuation Allowance
    
    
    1,592,925
    
    
    
    2,356,160
    
    
    
    351,337Income Tax Benefit
    
    $
    
    
    
    $
    
    
    
    $
    
  December 31, 2006
    
    
    December 31, 2005Deferred Tax Assets:Net Operating Loss Carryforward
    
    $
    4,214,528
    
    
    $
    2,707,497Depreciation and Amortization
    
    
    85,894
    
    
    
    Valuation Allowance
    
    
    (4,300,422
    )
    
    
    (2,707,497
    )Net Deferred Tax Asset
    
    $
    
    
    
    $
    
  - 20 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 9: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  For the PeriodSeptember 24,2004 toFor the Year Ended
    
    
    For the Year Ended
    
    
    December 31,December 31, 2006
    
    
    December 31, 2005
    
    
    2004Legal and Professional Fees
    
    $
    825,251
    
    
    $
    594,356
    
    
    $
    479,698Stock Option Expense
    
    
    1,551,616
    
    
    
    
    
    
    
    Liquidated Damages to Investors
    
    
    
    
    
    
    964,343
    
    
    
    Insurance Expense
    
    
    765,824
    
    
    
    573,117
    
    
    
    Other
    
    
    622,482
    
    
    
    820,453
    
    
    
    651,605$
    3,765,173
    
    
    $
    2,952,269
    
    
    $
    1,131,303
 NOTE 10: NOTE PAYABLE
  NOTE 11: NOTES PAYABLE TO RELATED PARTIES
       - 21 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 12: ACCRUED LIABILITIES
  2006
    
    
    2005Accrued Payroll Liabilities
    
    $
    12,578
    
    
    $
    52,351Accrued Interest
    
    
    25,494
    
    
    
    3,250Accrued Severance Cost
    
    
    
    
    
    
    60,976Other Accruals
    
    
    41,269
    
    
    
    59,420$
    79,341
    
    
    $
    175,997
 NOTE 13: STOCK OPTION/STOCK BONUS PLAN
     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
    
    
    575,000
    
    
    
    3.95
  Weighted AverageShares
    
    
    Exercise PriceOutstanding beginning of year
    
    
    
    
    
    $
    Granted
    
    
    90,000
    
    
    
    5.82Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (15,000
    )
    
    
    6.67Outstanding end of year
    
    
    75,000
    
    
    
    5.65Exercisable end of year
    
    
    75,000
    
    
    
    5.65
 - 22 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 14: LITIGATION
     - 23 -




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##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005
 NOTE 15: SUMMARIZED QUARTERLY DATA (UNAUDITED)
   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
    )
    
    
    (0.07
    )Diluted loss per share
    
    $
    (0.16
    )
    
    $
    (0.12
    )
    
    $
    (0.07
    )
    
    $
    (0.07
    )
  Three months endedMarch 31
    
    June 30
    
    September 30
    
    December 31Revenues
    
    $
    124,095
    
    
    $
    145,511
    
    
    $
    126,601
    
    
    $
    73,790Loss from operations
    
    
    (3,508,997
    )
    
    
    (2,200,604
    )
    
    
    (3,017,679
    )
    
    
    (1,444,478
    )Net Loss
    
    
    (3,508,873
    )
    
    
    (2,165,644
    )
    
    
    (2,986,274
    )
    
    
    (1,424,738
    )Basic net loss per share
    
    
    (0.23
    )
    
    
    (0.14
    )
    
    
    (0.20
    )
    
    
    (0.10
    )Diluted loss per share
    
    $
    (0.23
    )
    
    $
    (0.14
    )
    
    $
    (0.20
    )
    
    $
    (0.10
    )
 NOTE 16: LIQUIDITY AND CAPITAL RESOURCES
  NOTE 17: SUBSEQUENT EVENTS
     - 24 -