##### 



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, 2005
    
    Commission File Number 000-51822
 STINGER SYSTEMS, INC.
  Nevada
(State or other jurisdiction
of incorporation or organization)
    
    30-0296398
(I.R.S. employer identification number)
 2701 North Rocky Point Drive, Suite 1130
Tampa, Florida 33607
 (813) 281-1061
 NONE
 Common stock, par value $0.001 per share
 £ R
 £ R
 R £
 R
  £ £ R
 £ R
    DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 Item
    
    Description
    
    PagePART I1
    
    Business.
    
    
    31A
    
    Risk Factors.
    
    
    111B
    
    Unresolved Staff Comments.
    
    
    152
    
    Properties.
    
    
    153
    
    Legal Proceedings.
    
    
    164
    
    Submission of Matters to a Vote of Security Holders.
    
    
    16PART II5
    
    Market for the Registrants Common Equity and Related Stockholders Matters.
    
    
    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.
    
    
    268
    
    Financial Statements and Supplementary Data.
    
    
    269
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
    
    
    269A
    
    Controls and Procedures.
    
    
    269B
    
    Other Information.PART III10
    
    Directors and Executive Officers of the Registrant.
    
    
    2711
    
    Executive Compensation.
    
    
    2912
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
    
    
    3113
    
    Certain Relationships and Related Transactions.
    
    
    3314
    
    Principal Accountant Fees and Services.
    
    
    33PART IV15
    
    Exhibits and Financial Statement Schedules.
    
    
    34Signatures.
    
    
    35Exhibit Index.
    
    
    34
 2




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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
  1/1/05- 12/31/05Sales %State Departments of
Corrections
    
    
    34
    %Federal Bureau of Prisons
    
    
    2
    %US Marshals
    
    
    6
    %County Law Enforcement Agencies
    
    
    44
    %Various Police Departments and
Misc
    
    
    14
    %
 3




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4




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Our Products
 Stinger Handheld Projectile Stun Guns
  TruVu Gun Camera
  Ultron II®, a Hand-held Contact Stun Gun
 ®
 Ice-Shield Electronic Immobilization Riot Shield
  Bandit / The R-E-A-C-T System, an Immobilizing Electronic Restraint
  ® ®
 5




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Patents and Patent Applications Owned by Stinger
 
 Title:
    
    Weapon And Input Device To Record InformationSerial No.:
    
    10/975,563Filing Date:
    

27 October 2004Status:
    
    Patent Pending (Official Filing Receipt Received)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 (Official Filing Receipt Received)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.Quadrashock dart arrangementTitle:
    
    Stun GunSerial No.:
    
    10/957,301Filing Date:
    
    30 September 2004Status:
    
    Patent Pending (Official Filing Receipt Received)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.Stun GunTitle:
    
    Method and apparatus for implementing a two projectile electrical discharge weaponPatent No.:
    
    6,575,073Granted:
    
    10 June 2003
 6




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Subject:
    
    An improved electrical discharge weapon having a longer range of effectiveness than conventional
TASER.RTM. weapons. In a preferred embodiment, the improvement comprises an adaptor having dual
spaced-apart dart cartridges which, because of their relative spacing and angular orientation,
provide an effective range of 2 to 30 feet. The adaptor is configured to be connected to the single
cartridge receiver of a conventional TASER.RTM. weapon.Band-ItTitle:
    
    Remotely activated electrical discharge restraint device using biceps flexion of the leg to restrainPatent No.:
    
    5,841,622Granted:
    
    24 November 1998Subject:
    
    An electrical restraint device which, while compact and convenient for guards to install on often
resistive prisoners, can accommodate a spacing of the opposed circuit contacts through a specific
critical portion of the human body, so an adequately brief shock from the circuit can temporarily
arrest function in the involved portions of the coordinated human muscular skeletal system and,
thereby compromise the shocked individuals ambulation with the individual experiencing pain for
only an extremely brief period and without causing deep burns to any significant area of his/her
body. Shocking current discharged from the circuit, completes a minimal path between the prisoners
legs through a significant area of his/her legs and torso. Preferably, one contact is located at the
right leg where the biceps muscle terminates into the knee and the opposing contact is located at
the left leg where the biceps muscle terminates into the knee. The shocking discharges complete
through a minimal path of at least two feet along the plane of function of the biceps through both
biceps and the torso. During the discharge, both biceps muscles temporarily shorten, and as the
prisoner attempts to step forward, both knee joints rigidly fixate with the legs in a flexed
position and the prisoner collapses.Band-It DesignTitle:
    
    The ornamental design for an electronic restraint weaponPatent No.:
    
    Design 323,870Granted:
    
    11 February 1992Title:
    
    Stun gun with low battery indicator and shutoff timerPatent No:
    
    5,193,048Granted:
    
    9 March 1993Subject:
    
    A hand-held contact shock producing and non-lethal stun device wherein the electrical circuitry
therein includes an oscillator coupled to an inverter transformer which, in turn, cooperates with an
output transformer and spark gap device to produce a high voltage, short duration, and low current
arc across contact probes. The internal circuitry further includes a low battery detection circuit
wherein a visual display of a low battery condition is produced when the gun is activated for a
first predetermined time period. To preclude overzealous application of the device, the oscillator
is disabled after a second predetermined time period. A wrist strap secured to the operator and
having a key portion fixedly attached thereto is also provided. The key portion is received into the
device housing and closes a kill switch within the housing to disable the device when removed from
the housing. The key portion remaining with the operator disables the circuit when the device is
separated from the operator. The key portion further provides means for re-enabling the device if
recovered by the operator.
 7




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Marketing and Competition
         8




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Government Regulation
    Research and Development
    9




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History
  
  10




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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 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, Stinger Systems
may not be successful.
  11




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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.
  12




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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.
  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.
  13




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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 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.
  14




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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 Stinger Systems by our stockholders.
  We do not intend to pay any cash dividends on 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
  15




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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 AND RELATED STOCKHOLDERS
MATTERS
  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
   16




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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 .
 Predecessor Operations
    
    
    The Company
    
    
    The CompanyJanuary 1,
    
    
    September 24,2004 to
    
    
    2004September
    
    
    to December
    Pro FormaYears ended December 31,
    
    
    24,
    
    
    31,
    
    
    Years ended December 312001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2004
    
    
    2004
    
    

2005(Unaudited)Statement of Operations
Data:Sales
    
    $
    394,673
    
    
    $
    361,913
    
    
    $
    264,471
    
    
    $
    198,981
    
    
    $
    63,306
    
    
    $
    262,287
    
    
    $
    469,997Gross Margin (Loss)
    
    
    222,138
    
    
    
    149,098
    
    
    
    108,647
    
    
    
    54,859
    
    
    
    11,620
    
    
    
    66,479
    
    
    
    (139,282
    )Loss from Operations
    
    
    (20,317
    )
    
    
    (208,259
    )
    
    
    (237,363
    )
    
    
    (192,470
    )
    
    
    (8,820,199
    )
    
    
    (9,012,669
    )
    
    
    (10,171,758
    )Net Loss
    
    
    (31,493
    )
    
    
    (219,272
    )
    
    
    (273,922
    )
    
    
    (230,932
    )
    
    
    (8,830,467
    )
    
    
    (9,061,399
    )
    
    
    (10,085,529
    )Net Loss Per Share (Basic
and Diluted)
    
    $
    (0.00
    )
    
    $
    (0.02
    )
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.70
    )
    
    $
    (0.70
    )
    
    $
    (0.67
    )Weighted Average Number
of
Common Shares Outstanding
(Basic and Diluted)
    
    
    10,750,000
    
    
    
    10,750,000
    
    
    
    10,750,000
    
    
    
    10,750,000
    
    
    
    12,640,900
    
    
    
    12,640,900
    
    
    
    14,997,346Balance Sheet Data:Current Assets
    
    $
    75,913
    
    
    $
    67,680
    
    
    $
    69,695
    
    
    $
    13,232
    
    
    $
    9,334,233
    
    
    $
    9,334,233
    
    
    $
    3,294,044Equipment and Furnishings
    
    
    11,584
    
    
    
    118,454
    
    
    
    93,724
    
    
    
    73,204
    
    
    
    105,764
    
    
    
    105,764
    
    
    
    353,388Total Assets
    
    
    87,497
    
    
    
    186,134
    
    
    
    163,419
    
    
    
    86,436
    
    
    
    12,543,911
    
    
    
    12,543,911
    
    
    
    6,374,950Current Liabilities
    
    
    48,210
    
    
    
    68,119
    
    
    
    97,441
    
    
    
    43,746
    
    
    
    556,970
    
    
    
    556,970
    
    
    
    1,048,538Long Term Debt
    
    
    65,000
    
    
    
    363,000
    
    
    
    584,885
    
    
    
    792,529
    
    
    
    
    
    
    
    
    
    
    
    Stockholders Equity
(Deficit)
    
    
    (25,713
    )
    
    
    (244,985
    )
    
    
    (518,907
    )
    
    
    (749,839
    )
    
    
    10,599,441
    
    
    
    10,599,441
    
    
    
    5,326,412
 17




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Executive Summary
 ®
     18




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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.
    
    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.
 19




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Results of Operations
  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.
 Comparison of the Years ended December 31, 2004 (Pro Forma) and 2003
  20




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Liquidity and Capital Resources
    21




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##### 



Contractual Obligations
  Intangible Assets
     22




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23




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##### 



Critical Accounting Policies
  Revenue Recognition.
 Warranty Costs.
 Intangible Assets.
 Common Stock Issued for Goods and Services.
 Purchase Accounting.
 Stock Options. Accounting for Stock Issued to Employees
 24




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Accounting for Stock-Based Compensation Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling Goods or Services
 Limited Trading Market.
 25




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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
  Changes in Internal Control
  ITEM 9B. OTHER INFORMATION
  26




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PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    PositionRobert F. Gruder
    
    
    47
    
    
    Chief Executive Officer and ChairmanDavid J. Meador
    
    
    34
    
    
    Chief Financial Officer and SecretaryT. Yates Exley
    
    
    45
    
    
    DirectorMichael Racaniello
    
    
    53
    
    
    DirectorAndrew P. Helene
    
    
    45
    
    
    Director
 Robert F. Gruder
 David J. Meador
 T. Yates Exley
 Michael Racaniello
 Andrew P. Helene
 27




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Director Compensation
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  28




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##### 

'

ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
 Annual Compensation
    
    
    Long Term CompensationOther
    
    
    Restricted2005
    
    
    Annual
    
    
    Stock
    
    
    Options/
    
    

LTIP
    
    

All OtherName
    
    Title
    
    
    Compensation
    
    
    Bonus
    
    
    Compensation
    
    
    Awarded
    
    
    SARs(#)
    
    
    payouts($)
    
    
    CompensationRobert F. Gruder
    
    Chief Executive Officer, Director
    
    $
    205,769
    
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0David J. Meador
    
    Chief Financial Officer
    
    $
    47,885
    
    
    
    10,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0J. Wayne Thomas
    
    Former CFO/Operations
    
    $
    148,654
    
    
    
    24,000
    
    
    
    0
    
    
    
    0
    
    
    
    10,000
    
    
    
    0
    
    
    
    0
    OPTIONS GRANTED IN 2005
 Potential realizableIndividual Grants
    
    
    value at assumedPercent of total
    
    
    
    
    
    
    
    
    
    
    annual rates of stockoptions granted
    
    
    Exercise price
    
    
    price appreciationOptions
    
    
    to all employees
    
    
    per share
    
    
    Expiration
    
    
    for option term(1)Name
    
    (#)
    
    
    in fiscal year
    
    
    ($)
    
    
    date
    
    
    5%($)
    
    
    10%($)Robert F. Gruder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David J. Meador
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    J. Wayne
Thomas (2)
    
    
    10,000
    
    
    
    7.1
    %
    
    
    5.25
    
    
    
    08/23/2010
    
    
    
    14,505
    
    
    
    17,695
 
 (1)
    
    The assumed annual rates of stock price appreciation of 5% and 10% over five years are required by the Securities and Exchange Commission to be used for illustration
purposes and are not intended to forecast possible future appreciation, if any, of the Companys common stock.(2)
    
    In December 2005, Mr. Thomas ceased serving as CFO. 29




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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT END OF FISCAL YEAR
 Number of unexercised
    
    
    Value of unexercisedShares
    
    
    
    
    
    
    options at
    
    
    in-the-money options atacquired on
    
    
    Value
    
    
    fiscal year-end(#)
    
    
    fiscal year-end($) (1)Name
    
    exercise(#)
    
    
    Realized($)
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableRobert F. Gruder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David J. Meador
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    J. Wayne
Thomas(2)
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Value is based on the difference between the stock option exercise price and the closing price of the Companys common stock on the Pink Sheets on December
30, 2005 of $4.51 per share.(2)
    
    In December 2005, Mr. Thomas ceased serving as CFO. 30




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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
    
    
    900,000
    (1)
    
    
    5.9
    %Dallas, TX 75201Tonga
Partners, L.P.
150 California Street, 5th Floor
    
    
    877,561
    (2)
    
    
    5.7
    %San Francisco, CA 94111Robert F.
Gruder
2701 N Rocky Point Drive, Suite 1130
    
    
    4,685,000
    (6)
    
    
    31.1
    %Tampa, FL 33607T. Yates
Exley
2239 Forrest Drive
    
    
    4,680,000
    (3)
    
    
    31.0
    %Charlotte, NC 28211Andrew
Helene
307 Main Street
    
    
    30,000
    (4,5)
    
    
    *Hyannis, MA 02653David J. Meador
    
    
    60,000
    (7)
    
    
    *2701 N Rocky
Point Drive, Suite 1130
Tampa, FL 33607Michael
Racaniello
1101 Tyvola Road
    
    
    30,000
    (4,5)
    
    
    *Charlotte, NC 28217All directors and executive officers as a group (5 persons)
    
    
    9,485,000
    
    
    
    62.1
    %
 
 *
    
    Less than one percent (1%).   31




---



##### 



EQUITY COMPENSATION PLAN INFORMATION
  Number of securities remainingNumber of securities to be
    
    
    Weighted average
    
    
    available for future issuance underissued upon exercise of
    
    
    exercise price of
    
    
    equity compensation plansoutstanding options, warrants
    
    
    outstanding options,
    
    
    (excluding securities reflected in thePlan Category
    
    and rights (1)
    
    
    warrants and rights
    
    
    first column)Equity compensation
plans approved by
security holders
    
    
    90,000
    
    
    $
    5.82
    
    
    
    1,910,000Equity compensation
plan not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    90,000
    
    
    
    
    
    
    
    1,910,000
 
 (1)
    
    Represents shares of the Companys Common Stock issuable in connection with such equity
compensation plans. 32




---



##### 



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 Audit Fees
  Audit-Related Fees
  Tax Fees
  All Other Fees
  Pre-Approval of Non-Audit Services
  33




---



##### 



PART IV
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   PageNumberReport of  Independent Registered Public
Accounting Firm Killman, Murrell & Company, P.C.
    
    
    F-2Financial StatementsConsolidated 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 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
    
    
    F-27
  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)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. 34




---



##### 



SIGNATURES
  STINGER SYSTEMS, INC.By:
    /s/ Robert F. GruderRobert F. GruderChief Executive Officer
(Principal Executive Officer)  Signature
    
    Title
    
    Date/s/ Robert F. Gruder

Robert F. Gruder
    
    Chief Executive Officer and Director(Principal Executive Officer)
    
    March 31, 2006/s/ David J. Meador

David J. Meador
    
    Chief Financial Officer(Principal Financial and Accounting
Officer)
    
    March 31, 2006/s/ T. Yates Exley

T. Yates Exley
    
    Director
    
    March 31, 2006/s/ Michael Racaniello

Michael Racaniello
    
    Director
    
    March 31, 2006/s/ Andrew P. Helene

Andrew P. Helene
    
    Director
    
    March 31, 2006
 35




---



##### 



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, 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 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 Period September 24, 2004 to December 31, 2004
    
    F-7Notes to Consolidated Financial Statements
    
    F-9Pro Forma Combined Statement of Operations
    
    F-27
 F-1




---



##### 



Killman, Murrell & Company, P.C.
Certified Public Accountants
 3300 N. A Street, Bldg. 4, Suite 200
Midland, Texas 79705
(432) 686-9381
Fax (432) 684-6722
    
    1931 E. 37th Street, Suite 7
Odessa, Texas 79762
(432) 363-0067
Fax (432) 363-0376
    
    2626 Royal Circle
Kingwood, Texas 77339
(281) 359-7224
Fax (281) 359-7112
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/ Killman, Murrell & Company, P.C.KILLMAN, MURRELL & COMPANY, P.C. 
 F-2




---



##### 



STINGER SYSTEMS, INC.
 CONSOLIDATED BALANCE SHEETS
 ASSETS
 December 31,2005
    
    
    2004CURRENT ASSETSCash
    
    $
    2,408,556
    
    
    $
    9,093,634Accounts Receivable, net of $1,800 Allowance for
Uncollectible Accounts in 2005 and 2004
    
    
    32,591
    
    
    
    20,773Inventories, at Cost
    
    
    199,765
    
    
    
    78,162Inventory Purchase Deposits
    
    
    
    
    
    
    139,190Prepaid Expenses and Other Current Assets
    
    
    653,132
    
    
    
    2,474TOTAL CURRENT ASSETS
    
    
    3,294,044
    
    
    
    9,334,233EQUIPMENT AND FURNITURE, net of AccumulatedDepreciation of $14,685 and $404 in 2005 and 2004, respectively
    
    
    353,388
    
    
    
    105,764OTHER ASSETSIntangible Assets, net of $381,813 Accumulated
Amortization in 2005
    
    
    2,720,807
    
    
    
    3,102,620Other
    
    
    6,711
    
    
    
    1,294TOTAL ASSETS
    
    $
    6,374,950
    
    
    $
    12,543,911
 
 F-3




---



##### 



STINGER SYSTEMS, INC.
 CONSOLIDATED BALANCE SHEETS
(Continued)
 LIABILITIES AND STOCKHOLDERS EQUITY
 December 31,2005
    
    
    2004CURRENT LIABILITIESAccounts Payable
    
   $
    542,406
    
    
   $
    2,552Accrued Liabilities
    
    
    175,997
    
    
    
    491,918Insurance Note Payable
    
    
    267,635
    
    
    
    Notes Payable Related Party
    
    
    62,500
    
    
    
    62,500TOTAL CURRENT LIABILITIES
    
    
    1,048,538
    
    
    
    556,970COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    REDEEMABLE COMMON STOCK:75,000 Shares issued,redemption value $1,387,500, in 2004
    
    
    
    
    
    
    1,387,500STOCKHOLDERS EQUITYCommon Stock, $0.001 Par Value; 50,000,000 Shares Authorized,
14,993,500 and 15,003,500 Shares Issued and Outstanding in 2005
and 2004, respectively
    
    
    14,994
    
    
    
    14,929Additional Paid-In Capital
    
    
    24,227,414
    
    
    
    19,414,979Retained Deficit
    
    
    (18,915,996
    )
    
    
    (8,830,467
    )TOTAL STOCKHOLDERS EQUITY
    
    
    5,326,412
    
    
    
    10,599,441$
    6,374,950
    
    
    $
    12,543,911
  F-4




---



##### 



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




---



##### 



STINGER SYSTEMS, INC.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 FOR THE YEAR ENDED DECEMBER 31, 2005 AND
FOR THE PERIOD SEPTEMBER 24, 2004 TO DECEMBER 31, 2004
 Common Stock
    
    
    Additional
    
    
    Deficit AccumulatedNumber of
    
    
    
    
    
    
    Paid-In
    
    
    During 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 Option 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 Option Issued To Employee
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    $
    5,326,412
  F-6




---



##### 



STINGER SYSTEMS, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the PeriodFor the Year
    
    
    September 24, 2004Ended
    
    
    to December 31,December 31, 2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (10,085,529
    )
    
    $
    (8,830,467
    )Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities:Employee Acquisition Cost
    
    
    3,475,000
    
    
    
    7,520,000Common Stock Issued for Services
    
    
    
    
    
    
    738,700Depreciation and Amortization
    
    
    396,094
    
    
    
    404Bad Debt
    
    
    
    
    
    
    1,800Changes in Operating Assets and Liabilities
Accounts Receivable
    
    
    (11,818
    )
    
    
    (11,313
    )Inventories
    
    
    (121,603
    )
    
    
    16,617Inventory Deposits
    
    
    139,190
    
    
    
    (139,190
    )Prepaid Expenses
    
    
    231,699
    
    
    
    1,946Other Assets
    
    
    (5,417
    )
    
    
    1,756Accounts Payable
    
    
    539,854
    
    
    
    (24,335
    )Accrued Liabilities
    
    
    (315,921
    )
    
    
    312,026NET CASH USED BY OPERATING ACTIVITIES
    
    
    (5,758,451
    )
    
    
    (412,056
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment and Furniture
    
    
    (261,905
    )
    
    
    (28,218
    )Purchase of Patent
    
    
    
    
    
    
    (100,000
    )NET CASH USED BY INVESTING ACTIVITIES
    
    
    (261,905
    )
    
    
    (128,218
    )CASH FLOWS FROM INVESTING ACTIVITIESCommon Stock Sales
    
    
    
    
    
    
    10,234,965Payment of Note Payable
    
    
    (614,722
    )
    
    
    (601,057
    )Repurchase of Common Stock
    
    
    (50,000
    )
    
    
    NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES
    
    
    (664,722
    )
    
    
    9,633,908INCREASE (DECREASE) IN CASH
    
    
    (6,685,078
    )
    
    
    9,093,634CASH BALANCE BEGINNING OF PERIOD
    
    
    9,093,634
    
    
    
    CASH BALANCE END OF PERIOD
    
    $
    2,408,556
    
    
    $
    9,093,634
 
 F-7




---



##### 



STINGER SYSTEMS, INC.
 CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
 For the Year
    
    
    For the PeriodEnded
    
    
    September 24, 2004December 31,
    
    
    to December 31,2005
    
    
    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
    
    
    (882,357
    )
    
    
    Insurance Note Payable
    
    
    882,357
    
    
    
    $
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    9,767
    
    
    $
    9,626Income Taxes
    
    $
    
    
    
    $
    
  F-8




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 1: GENERAL
 Nature of Business
   NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Accounting
   Estimates
   F-9




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Cash and Cash Equivalents
  Inventories
  December 31,
    
    
    December 31,2005
    
    
    2004Raw Materials and Work-in Progress
    
    $
    175,882
    
    
    $
    41,300Ammunition
    
    
    
    
    
    
    18,968Finished Goods
    
    
    23,883
    
    
    
    17,894$
    199,765
    
    
    $
    78,162
 Furniture and Equipment
  December 31,
    
    
    December 31,Useful Life
    
    
    2005
    
    
    2004Furniture
    
    5 Years
    
    $
    18,070
    
    
    $
    5,813Machinery
    
    3 Years
    
    
    87,059
    
    
    
    Mold For Stun Gun
    
    2.5 Years
    
    
    237,532
    
    
    
    95,581Computers and Equipment
    
    3 Years
    
    
    25,412
    
    
    
    4,774368,073
    
    
    
    106,168Accumulated Depreciation
    
    
    
    
    
    
    (14,685
    )
    
    
    (404
    )$
    353,388
    
    
    $
    105,764
  F-10




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Long-Lived Assets
  Deferred Compensation
  Revenue Recognition
  Cost of Goods Sold
  Advertising
  Research and Development Costs
   F-11




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Concentrations of Credit Risk and Fair Value of Financial Instruments
  Net (Loss) Per Share
  Income Taxes
  Other Comprehensive Income
   F-12




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 Warranty Costs
  Recent Accounting Pronouncements
   F-13




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 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
    )
 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
    )
 F-14




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 and 2004
 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Year EndedDecember31, 2005Estimated fair value
    
    $
    14.47Expected life (years)
    
    
    4.64Risk free interest rate
    
    
    4.21
    %Volatility
    
    
    139
    %Dividend yield
    
    
    0
 Fair Value of Financial Instruments
  Reclassification
  F-15




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 3: INTANGIBLE ASSETS
  December 31, 2005
    
    
    December 31, 2004Patent for Stun Gun
    
    $
    2,672,620
    
    
    $
    2,672,620Patent for Camera
    
    
    430,000
    
    
    
    430,0003,102,620
    
    
    
    3,102,620Accumulated Amortization
    
    
    (381,813
    )
    
    
    $
    2,720,807
    
    
    $
    3,102,620
   Year
    
    Amount2006
    
    $
    443,2312007
    
    
    443,2312008
    
    
    443,2312009
    
    
    443,2312010
    
    
    443,231Thereafter
    
    
    504,652$
    2,720,807
 NOTE 4: OPERATING LEASES
   F-16




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 5: COMMITMENTS
  NOTE 6: EMPLOYMENT AGREEMENTS
    NOTE 7: CAPITAL STOCK TRANSACTIONS
   F-17




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 7: CAPITAL STOCK TRANSACTIONS (CONTINUED)
        F-18




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 7: CAPITAL STOCK TRANSACTIONS (CONTINUED)
 
      F-19




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 7: CAPITAL STOCK TRANSACTIONS (CONTINUED)
  NOTE 8: INCOME TAXES
  Period FromFor the Year Ended
    
    
    September 24, 2004 toDecember 31, 2005
    
    
    December 31, 2004Benefit for Income Taxes Computed Using the
Statutory Rate of 34%
    
    $
    (3,429,080
    )
    
    $
    (3,002,359
    )Difference Between Book Expense and Tax
Expense of Charges for Stock Issued for Services
    
    
    1,071,372
    
    
    
    2,650,747Other
    
    
    1,548
    
    
    
    275Change in Valuation Allowance
    
    
    2,356,160
    
    
    
    351,337Income Tax Benefit
    
    $
    
    
    
    $
    
  December 31, 2005
    
    
    December 31, 2004Deferred Tax Assets:Net Operating Loss
Carryforward
    
    $
    2,707,497
    
    
    $
    351,337Valuation Allowance
    
    
    (2,707,497
    )
    
    
    (351,337
    )Net Deferred Tax Asset
    
    $
    
    
    
    $
    
  F-20




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 8: INCOME TAXES (CONTINUED)
  NOTE 9: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  For the PeriodSeptember 24,2004 toFor the Year Ended
    
    
    December 31,December 31, 2005
    
    
    2004Stock issued for services
    
    $
    
    
    
    $
    345,340Legal fees
    
    
    594,356
    
    
    
    479,698Liquidated damages to
investors
    
    
    964,343
    
    
    
    Insurance
    
    
    566,824
    
    
    
    Shareholder and public
relations
    
    
    265,561
    
    
    
    8,910Other
    
    
    561,185
    
    
    
    297,355$
    2,952,269
    
    
    $
    1,131,303
 NOTE 10: NOTE PAYABLE
  NOTE 11: NOTES PAYABLE TO RELATED PARTIES
  F-21




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 12: ACCRUED LIABILITIES
  2005
    
    
    2004Accrued Professional Fees
    
    $
    
    
    
    $
    138,158Accrued Payroll Liabilities
    
    
    52,351
    
    
    
    172,793Accrued Invoices
    
    
    
    
    
    
    75,326Accrued Liabilities for
Camera Patent
    
    
    
    
    
    
    75,000Accrued Financing Fees
    
    
    
    
    
    
    30,000Accrued Interest
    
    
    3,250
    
    
    
    641Accrued Severance Cost
    
    
    60,976
    
    
    
    Other Accruals
    
    
    59,420
    
    
    
    $
    175,997
    
    
    $
    491,918
 NOTE 13: STOCK OPTION/BONUS PLAN
     F-22




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 13: STOCK OPTION/BONUS PLAN (CONTINUED)
  Weighted AverageShares
    
    
    Exercise PriceOutstanding beginning of year
    
    
    
    
    
    
    Granted
    
    
    90,000
    
    
    
    5.82Exercised
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    Outstanding end of year
    
    
    90,000
    
    
    
    5.82Exercisable end of year
    
    
    90,000
    
    
    
    5.82
 NOTE 14: LITIGATION
 Taser International, Inc. v. Stinger Systems,
Inc. and Robert F. Gruder
   F-23




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 14: LITIGATION (CONTINUED)
  NOTE 15: SUMMARIZED QUARTERLY DATA (UNAUDITED)
   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
    )
    
    
    (0.38
    )
    
    
    (0.20
    )
    
    
    (0.10
    )Diluted loss per share
    
    
    (0.23
    )
    
    
    (0.38
    )
    
    
    (0.20
    )
    
    
    (0.10
    )
 NOTE 16: SUBSEQUENT EVENT
  NOTE 17: ACQUISITIONS
   F-24




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 17: ACQUISITIONS (CONTINUED)
     AT SEPTEMBER 24, 2004
 Current Assets
    
    $
    110,460Equipment and Furniture
    
    
    77,950Other Assets
    
    
    3,050Total Assets Acquired
    
    
    191,460Current Liabilities
    
    
    194,280Long Term Debt
    
    
    708,000Total Liabilities Assumed
    
    
    902,280Excess of Liabilities Assumes
Over Tangible Assets Acquired
    
    
    710,820Purchase PriceCash
    
    
    250,000Note Payable
    
    
    200,000Common Stock Issuance
    
    
    24,300Total Intangible Asset Acquired
    
    $
    1,185,120
  F-25




---



##### 



STINGER SYSTEMS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005 and 2004
 NOTE 17: ACQUISITIONS (CONTINUED)
       F-26




---



##### 



STINGER SYSTEMS, INC.
 PRO FORMA COMBINED STATEMENT OF OPERATIONS
 FOR THE YEAR ENDED DECEMBER 31, 2004
    F-27




---



##### 



STINGER SYSTEMS, INC.
 PRO FORMA COMBINED STATEMENT OF OPERATIONS
 FOR THE YEAR ENDED DECEMBER 31, 2004
 Electronic DefenseTechnology, LLC
    
    
    The CompanyJanuary 1, 2004 to
    
    
    September 24, 2004 toSeptember 24, 2004
    
    
    December 31, 2004
    
    
    TotalSALES
    
    $
    198,981
    
    
    $
    63,306
    
    
    $
    262,287COST OF PRODUCT SOLD
    
    
    144,122
    
    
    
    51,686
    
    
    
    195,808GROSS MARGIN
    
    
    54,859
    
    
    
    11,620
    
    
    
    66,479SELLING EXPENSES
    
    
    
    
    
    
    45,348
    
    
    
    45,348GENERAL AND
ADMINISTRATIVE EXPENSES
Employee Salaries and Benefits
    
    
    57,011
    
    
    
    78,829
    
    
    
    135,840Employee Acquisition Costs
    
    
    
    
    
    
    7,520,000
    
    
    
    7,520,000Other
    
    
    165,136
    
    
    
    1,131,303
    
    
    
    1,296,439Depreciation
    
    
    20,520
    
    
    
    404
    
    
    
    20,924Research and Development Costs
    
    
    4,662
    
    
    
    55,935
    
    
    
    60,597247,329
    
    
    
    8,786,471
    
    
    
    9,033,800LOSS FROM OPERATIONS
    
    
    (192,470
    )
    
    
    (8,820,199
    )
    
    
    (9,012,669
    )INTEREST EXPENSES
    
    
    38,462
    
    
    
    10,268
    
    
    
    48,730LOSS BEFORE INCOME TAXES
    
    
    (230,932
    )
    
    
    (8,830,467
    )
    
    
    (9,061,399
    )PROVISIONS FOR INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (230,632
    )
    
    $
    (8,830,467
    )
    
    $
    (9,061,399
    )NET LOSS PER SHARE
Basic
    
    
    
    
    
    
    
    
    
    $
    (0.72
    )Diluted
    
    
    
    
    
    
    
    
    
    $
    (0.72
    )WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING
Basic
    
    
    
    
    
    
    
    
    
    
    12,640,900Diluted
    
    
    
    
    
    
    
    
    
    
    12,640,900
 F-28