##### Table of Contents



United States Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended June 30, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 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)5505 Johns Road, Suite 702
Tampa, Florida
(Address of principal executive offices)
    
    33634
(Zip Code)
 (813) 281-1061
  þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




---



##### 



STINGER SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 2009
 TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATION
    
    
    3ITEM 1. Financial Statements (unaudited)
    
    
    3Consolidated Balance Sheets as of June 30, 2009 (unaudited) and December 31, 2008 (audited)
    
    
    3Consolidated Statements of Operations for the three months and six months ended June 30, 2009 (unaudited) and June
30, 2008 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2009 (unaudited) and June 30, 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16ITEM 4. Controls and Procedures
    
    
    16PART II  OTHER INFORMATION
    
    
    17ITEM 1. Legal Proceedings
    
    
    17ITEM 1A. Risk Factors
    
    
    18ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22ITEM 3. Defaults Upon Senior Securities
    
    
    22ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    22ITEM 5. Other Information
    
    
    22ITEM 6. Exhibits
    
    
    23SIGNATURES
    
    
    24INDEX TO EXHIBITS
    
    
    25EX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 
 STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)CURRENT ASSETSCash
    
    $
    33,633
    
    
    $
    699,934Accounts Receivable, net of $1,800 allowance for uncollectible accounts in 2009 and 2008
    
    
    56,372
    
    
    
    75,200Inventories, at cost
    
    
    169,307
    
    
    
    238,757Prepaid Expenses and Other Current Assets
    
    
    228,704
    
    
    
    254,898TOTAL CURRENT ASSETS
    
    
    488,016
    
    
    
    1,268,789EQUIPMENT AND FURNITUREEquipment and Furniture, net of accumulated depreciation of $298,091 and $229,767 in
2009 and 2008, respectively
    
    
    260,880
    
    
    
    231,706OTHER ASSETSPrepaid Interest, Long Term Asset
    
    
    150,410
    
    
    
    257,373Intangible Assets, net of accumulated amortization of $1,718,123 and $1,527,222 in 2009
and 2008, respectively
    
    
    954,497
    
    
    
    1,145,398Other Assets
    
    
    24,402
    
    
    
    35,898TOTAL OTHER ASSETS
    
    
    1,129,309
    
    
    
    1,438,669TOTAL ASSETS
    
    $
    1,878,205
    
    
    $
    2,939,164
 
 3




---



##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)CURRENT LIABILITIESAccounts Payable
    
    $
    905,263
    
    
    $
    417,425Accrued Liabilities
    
    
    360,287
    
    
    
    254,638Capital Lease Obligation, current portion
    
    
    24,622
    
    
    
    23,571Note Payable-Related Parties
    
    
    31,250
    
    
    
    31,250TOTAL CURRENT LIABILITIES
    
    
    1,321,422
    
    
    
    726,884Capital Lease Obligation, long-term portion
    
    
    39,714
    
    
    
    52,293Note Payable-Convertible, net of debt discount of $5,130,637 and
$5,340,001 for 2009 and 2008, respectively
    
    
    2,760,563
    
    
    
    2,551,199Derivative Liability Associated with Convertible Note and Warrants
    
    
    4,560,000
    
    
    
    7,377,771TOTAL LIABILITIES
    
    
    8,681,699
    
    
    
    10,708,147COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS (DEFICIT) EQUITYPreferred Stock, $0.001 Par Value, 1,000,000 Shares Authorized, None Issued
    
    
    
    
    
    
    Common Stock, $0.001 Par Value, 50,000,000 Shares Authorized, 4,697,945
and 4,001,832 Shares Issued and Outstanding at June 30, 2009 and December
31, 2008, respectively
    
    
    4,298
    
    
    
    4,002Additional Paid-In Capital
    
    
    47,391,973
    
    
    
    47,259,019Retained Deficit
    
    
    (54,199,765
    )
    
    
    (55,032,004
    )TOTAL STOCKHOLDERS (DEFICIT) EQUITY
    
    
    (6,803,494
    )
    
    
    (7,768,983
    )TOTAL LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
    
    $
    1,878,205
    
    
    $
    2,939,164
  4




---



##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUESSales
    
    $
    192,855
    
    
    $
    215,403
    
    
    $
    465,865
    
    
    $
    397,960Cost of Product Sold
    
    
    184,910
    
    
    
    237,546
    
    
    
    484,235
    
    
    
    429,462GROSS MARGIN(LOSS)
    
    
    7,945
    
    
    
    (22,143
    )
    
    
    (18,370
    )
    
    
    (31,502
    )SELLING EXPENSES
    
    
    49,150
    
    
    
    133,500
    
    
    
    124,070
    
    
    
    290,455GENERAL AND ADMINISTRATIVE
EXPENSESEmployee Salaries
    
    
    140,538
    
    
    
    286,853
    
    
    
    391,471
    
    
    
    574,773Other
    
    
    175,738
    
    
    
    1,004,160
    
    
    
    501,160
    
    
    
    2,987,397Depreciation and Amortization
    
    
    127,019
    
    
    
    121,612
    
    
    
    259,225
    
    
    
    242,429Research and Development
    
    
    45,538
    
    
    
    61,139
    
    
    
    130,301
    
    
    
    131,234TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES
    
    
    488,833
    
    
    
    1,473,764
    
    
    
    1,282,157
    
    
    
    3,935,833LOSS FROM OPERATIONS
    
    
    (530,038
    )
    
    
    (1,629,407
    )
    
    
    (1,424,597
    )
    
    
    (4,257,790
    )INTEREST INCOME
    
    
    
    
    
    
    1,308
    
    
    
    5,401
    
    
    
    3,932INTEREST EXPENSE
    
    
    (273,304
    )
    
    
    (204,083
    )
    
    
    (566,336
    )
    
    
    (394,771
    )CHANGE IN DERIVATIVE LIABILITY
    
    
    3,277,075
    
    
    
    (644,000
    )
    
    
    2,817,771
    
    
    
    (4,054,000
    )LOSS BEFORE INCOME TAXES
    
    
    2,473,733
    
    
    
    (2,476,182
    )
    
    
    832,239
    
    
    
    (8,702,629
    )PROVISION FOR INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME
(LOSS)
    
    $
    2,473,733
    
    
    $
    (2,476,182
    )
    
    $
    832,239
    
    
    $
    (8,702,629
    )BASIC AND DILUTED
EARNINGS(LOSS) PER COMMON
SHARE
    
    $
    0.55
    
    
    $
    (0.62
    )
    
    $
    0.19
    
    
    $
    (2.25
    )WEIGHTED AVERAGE NUMBER OF
COMMON SHARESBasic and Diluted
    
    
    4,523,917
    
    
    
    3,991,346
    
    
    
    4,300,166
    
    
    
    3,866,052
  5




---



##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six Months Ended June 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet Income(Loss)
    
    $
    832,239
    
    
    $
    (8,702,629
    )Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:Depreciation and Amortization
    
    
    259,225
    
    
    
    242,430Stock Option Expense
    
    
    
    
    
    
    2,308,591Amortization of Discount on Notes Payable-Convertible
    
    
    209,364
    
    
    
    252,957Derivative Liability Associated with Convertible Note
    
    
    (2,817,771
    )
    
    
    4,054,000Changes in Operating Assets
and LiabilitiesAccounts Receivable
    
    
    18,828
    
    
    
    (17,953
    )Inventory
    
    
    69,450
    
    
    
    (114,130
    )Prepaid Expenses
    
    
    277,903
    
    
    
    47,040Accounts Payable
    
    
    487,838
    
    
    
    218,200Accrued Liabilities
    
    
    105,649
    
    
    
    1,817NET CASH USED IN OPERATING ACTIVITIES
    
    
    (557,275
    )
    
    
    (1,709,677
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment
    
    
    (97,498
    )
    
    
    (12,230
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (97,498
    )
    
    
    (12,230
    )CASH FLOWS FROM FINANCING ACTIVITIESPayments on Capital Lease Obligation
    
    
    (11,528
    )
    
    
    (12,283
    )Proceeds from the Issuance of Convertible Notes Payable, Net of $117,500
Issuance Costs and $641,775 prepaid interest
    
    
    
    
    
    
    1,390,725NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (11,528
    )
    
    
    1,378,442NET DECREASE IN CASH
    
    
    (666,301
    )
    
    
    (343,465
    )CASH BALANCE, BEGINNING OF PERIOD
    
    
    699,934
    
    
    
    345,293CASH BALANCE, END OF PERIOD
    
    $
    33,633
    
    
    $
    1,828NON-CASH INVESTING AND FINANCING ACTIVITIESConversion of Notes Payable to Common Stock
    
    
    
    
    
    
    (320,000
    )Common Stock Issued for Notes Payable Conversion
    
    
    
    
    
    
    1,052Additional Paid in Capital from Conversion of Notes Payable
    
    
    
    
    
    
    318,948Derivative Liability
    
    
    
    
    
    
    (3,130,000
    )Deferred Debt Discount
    
    
    
    
    
    
    (2,032,500
    )Common stock
    
    
    
    
    
    
    1,350Paid-in-capital
    
    
    
    
    
    
    5,161,150$
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    3,111
    
    
    $
    124,783Taxes
    
    $
    
    
    
    $
    
  6




---



##### Table of Contents



STINGER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE 1: BASIS OF PRESENTATION
 ACCOUNTING POLICIES
  Disclosures About Enterprise and
Related Information
  Embedded Derivatives
  Reclassifications
  Loss per Share
  7




---



##### Table of Contents



NOTE 2: USE OF ESTIMATES
  NOTE 3: REVENUE RECOGNITION
  NOTE 4: INVENTORIES
  June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)Raw Materials and Work-In Progress
    
    $
    144,650
    
    
    $
    203,595Finished Goods
    
    
    24,657
    
    
    
    35,161$
    169,307
    
    
    $
    238,757
 NOTE 5: PREPAID EXPENSES AND OTHER CURRENT ASSETS
  June 30,2009(Unaudited)Interest
    
    $
    220,542Legal Deposits
    
    
    7,500Other Deposits
    
    
    662$
    228,704
 NOTE 5: STOCK BASED COMPENSATION
 Share-Based Payment Accounting for Stock Issued to Employees
  Accounting for Stock-Based Compensation
 8




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Estimated fair value
    
    
    
    
    
    $
    0.68
    
    
    
    
    
    
    $
    1.03Expected life (years)
    
    
    
    
    
    
    0.90
    
    
    
    
    
    
    
    2.50Risk free interest rate
    
    
    
    
    
    
    3.51
    %
    
    
    
    
    
    
    3.51
    %Volatility
    
    
    
    
    
    
    132.1
    %
    
    
    
    
    
    
    150.0
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 NOTE 6: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Legal and Professional Fees
    
    $
    69,726
    
    
    $
    102,637
    
    
    $
    203,715
    
    
    $
    221,752Stock Option Expense
    
    
    
    
    
    
    702,274
    
    
    
    
    
    
    
    2,308,591Insurance Expense
    
    
    
    
    
    
    43,885
    
    
    
    1,197
    
    
    
    97,054Other
    
    
    106,012
    
    
    
    155,364
    
    
    
    296,248
    
    
    
    360,000$
    175,738
    
    
    $
    1,004,160
    
    
    $
    501,160
    
    
    $
    2,987,397
 NOTE 7: CAPITAL LEASE OBLIGATIONS
    NOTE 8: NOTES PAYABLE  CONVERTIBLE
  9




---



##### Table of Contents



10




---



##### Table of Contents



NOTE 9: LIQUIDITY AND CAPITAL RESOURCES
  NOTE 10: SUBSEQUENT EVENT
   11




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  Executive Summary
     12




---



##### Table of Contents



Results of Operations
 Revenues.
 Cost of Goods Sold.
 Gross Margin
 Selling Expenses.
 General and Administrative Expenses.
 Research and Development Expenses.
 Interest Income.
 Interest Expense.
 13




---



##### Table of Contents



Net Income.
 Liquidity and Capital Resources
    Critical Accounting Policies
    14




---



##### Table of Contents



15




---



##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
   
 ITEM 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  16




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
    
 17




---



##### Table of Contents



ITEM 1.A. RISK FACTORS
 Investing in our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described below in addition to the other information contained in this
annual report. If any of the following risks actually occur, our business, financial condition or
operating results could be harmed. In that case, the trading price of our common stock could
decline and investors may lose part or all of your investment. In the opinion of management, the risks discussed below represent the material
risks known to the company. Additional risks and uncertainties not currently known to us or that we
currently deem immaterial may also impair our business operations and adversely affect the market
price of our common stock.
 We have a history of operating losses and anticipate future operating losses until such time as we
can generate additional sales.
  If we do not obtain additional funding as needed, we may be unable to fund our engineering,
marketing and production activities and to adequately pursue our business plan.
  Our failure to properly design the Stinger projectile stun gun would have a material adverse effect
on our operations.
  If we fail to convince the market place that we have competitive products, we will not be
commercially successful.
  If third party manufacturers do not perform in a commercially reasonable manner, we may not be
successful.
  Our primary competitor, Taser International Inc., has an established name in the marketplace with
both distributors and the end-users of stun products.
  Negative publicity about less-than-lethal stun weapons may negatively impact sales of our products.
 18




---



##### Table of Contents



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 been the subject of SEC Enforcement action
    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.
  19




---



##### Table of Contents



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-than-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 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.
  20




---



##### Table of Contents



FINRA 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.
  21




---



##### Table of Contents



ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds. Not applicable.
 
 ITEM 3. Defaults Upon Senior Securities. Not applicable.
 
 ITEM 4. Submission of Matters to a Vote of Security Holders. Not applicable.
 
 ITEM 5. Other Information. Not applicable.
 22




---



##### Table of Contents



ITEM 6. EXHIBITS
 Exhibit No.
    
    Description31.1
    
    Section 302 Certification of the Principal Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Section 302 Certification of the Principal Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.32.1
    
    Section 906 Certification of the Principal 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 Principal Financial Officer pursuant to U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 23




---



##### Table of Contents



SIGNATURES
  STINGER SYSTEMS, INC.
(Registrant)Date: August 14, 2009
    /s/ Robert F. GruderRobert F. GruderPresident
(Principal Executive Officer)Date: August 14, 2009
    /s/ Brian S. GannonBrian S. GannonFinancial Controller
(Principal Financial Officer) 24




---



##### Table of Contents



Index to Exhibits
 Exhibit No.
    
    Description31.1
    
    Section 302 Certification of the Principal Executive Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act
of 1934.31.2
    
    Section 302 Certification of the Principal Financial Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act
of 1934.32.1
    
    Section 906 Certification of the Principal 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 Principal Financial Officer
pursuant to U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
 25