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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 March 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission File Number 000-51822
 STINGER SYSTEMS, INC.
  NEVADA
    
    30-0296398(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)2701 N. Rocky Point Drive, Suite 1130Tampa, Florida
    
    33607(Address of principal executive offices)
    
    (Zip Code)
 (813) 281-1061
 þ o
  o o þ
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##### Table of Contents



STINGER SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2007
TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATION
    
    
    3ITEM 1. Financial Statements (unaudited)
    
    
    3Consolidated Balance Sheets as of March 31, 2007 (unaudited) and
December 31, 2006 (audited)
    
    
    3Consolidated Statements of Operations for the three months ended
March 31, 2007 (unaudited) and March 31, 2006 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the three months ended
March 31, 2007 (unaudited) and March 31, 2006 (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
    
    
    17ITEM 4. Controls and Procedures
    
    
    17PART II  OTHER INFORMATION
    
    
    17ITEM 1. Legal Proceedings
    
    
    17ITEM 1A. Risk Factors
    
    
    18ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24ITEM 3. Defaults Upon Senior Securities
    
    
    24ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    24ITEM 5. Other Information
    
    
    24ITEM 6. Exhibits
    
    
    25SIGNATURES
    
    
    26INDEX TO EXHIBITS
    
    
    27EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 STINGER SYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 ASSETS
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)CURRENT ASSETSCash
    
    $
    125,922
    
    
    $
    121,047Accounts Receivable, net of $1,800 allowance
for uncollectible accounts in 2007 and 2006
    
    
    39,295
    
    
    
    46,978Inventories, at cost
    
    
    316,632
    
    
    
    292,426Prepaid Expenses and Other Current Assets
    
    
    66,294
    
    
    
    41,747TOTAL CURRENT ASSETS
    
    
    548,143
    
    
    
    502,198EQUIPMENT AND FURNITUREEquipment and Furniture, net of accumulated
depreciation of $65,006 and $52,982 in 2007
and 2006
    
    
    341,844
    
    
    
    303,295OTHER ASSETSIntangible Assets, net of accumulated
amortization of $859,067 and $763,616 in
2007 and 2006
    
    
    2,243,553
    
    
    
    2,339,004Other Assets
    
    
    11,496
    
    
    
    11,496TOTAL OTHER ASSETS
    
    
    2,255,049
    
    
    
    2,350,500TOTAL ASSETS
    
    $
    3,145,036
    
    
    $
    3,155,993
 
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STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS EQUITY
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)CURRENT LIABILITIESAccounts Payable
    
    $
    1,254,482
    
    
    $
    1,375,594Accrued Liabilities
    
    
    109,441
    
    
    
    79,341Capital Lease Obligation, current portion
    
    
    5,643
    
    
    
    Notes Payable-Related Parties
    
    
    962,500
    
    
    
    962,500TOTAL CURRENT LIABILITIES
    
    
    2,332,066
    
    
    
    2,417,435Capital Lease Obligation, long-term portion
    
    
    18,940
    
    
    
    TOTAL LIABILITIES
    
    
    2,351,006
    
    
    
    2,417,435COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYCommon Stock, $0.001 Par Value, 50,000,000
Shares Authorized, 16,302,144 and 15,068,500
Shares Issued and Outstanding at March 31, 2007
and December 31, 2006, respectively
    
    
    16,302
    
    
    
    15,069Additional Paid-In Capital
    
    
    26,921,702
    
    
    
    25,945,830Retained Deficit
    
    
    (26,143,974
    )
    
    
    (25,222,341
    )TOTAL STOCKHOLDERS EQUITY
    
    
    794,030
    
    
    
    738,558TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,145,036
    
    
    $
    3,155,993
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STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three Months Ended March 31,2007
    
    
    2006REVENUESSales
    
    $
    96,169
    
    
    $
    118,138Cost of Product Sold
    
    
    98,052
    
    
    
    72,755GROSS (LOSS) MARGIN
    
    
    (1,883
    )
    
    
    45,383SELLING EXPENSES
    
    
    40,726
    
    
    
    72,071GENERAL AND ADMINISTRATIVE EXPENSESEmployee Salaries
    
    
    296,910
    
    
    
    206,051Employee Acquisition Cost
    
    
    1,144
    
    
    
    Employee Severance Cost
    
    
    480
    
    
    
    Other
    
    
    334,808
    
    
    
    1,842,323Depreciation and Amortization
    
    
    107,473
    
    
    
    103,858Research and Development
    
    
    116,468
    
    
    
    196,806TOTAL GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    857,283
    
    
    
    2,349,038LOSS FROM OPERATIONS
    
    
    (899,892
    )
    
    
    (2,375,726
    )INTEREST INCOME
    
    
    1,814
    
    
    
    15,958INTEREST EXPENSE
    
    
    (23,555
    )
    
    
    (6,435
    )LOSS BEFORE INCOME TAXES
    
    
    (921,633
    )
    
    
    (2,366,203
    )PROVISION FOR INCOME TAXES
    
    
    
    
    
    
    NET LOSS
    
    $
    (921,633
    )
    
    $
    (2,366,203
    )BASIC AND DILUTED LOSS PER COMMON SHARE
    
    $
    (0.06
    )
    
    $
    (0.16
    )WEIGHTED AVERAGE NUMBER OF COMMON SHARESBasic and Diluted
    
    
    15,876,911
    
    
    
    14,993,500
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STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Three Months Ended March 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (921,633
    )
    
    $
    (2,366,203
    )Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:Depreciation and Amortization
    
    
    107,473
    
    
    
    103,858Stock Option Expense
    
    
    127,107
    
    
    
    1,031,822Changes in Operating Assets and LiabilitiesAccounts Receivable
    
    
    7,683
    
    
    
    (17,533
    )Inventory
    
    
    (24,206
    )
    
    
    10,452Prepaid Expenses
    
    
    (24,547
    )
    
    
    203,733Accounts Payable
    
    
    (121,113
    )
    
    
    186,930Accrued Liabilities
    
    
    30,100
    
    
    
    (104,591
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (819,136
    )
    
    
    (951,532
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment
    
    
    (22,264
    )
    
    
    (13,779
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (22,264
    )
    
    
    (13,779
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the Sale of Common Stock
    
    
    849,999
    
    
    
    Payments on Capital Lease Obligation
    
    
    (3,724
    )
    
    
    Payments on Insurance Notes Payable
    
    
    
    
    
    
    (334,115
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    846,275
    
    
    
    (334,115
    )NET INCREASE (DECREASE) IN CASH
    
    
    4,875
    
    
    
    (1,299,426
    )CASH BALANCE, BEGINNING OF PERIOD
    
    
    121,047
    
    
    
    2,408,556CASH BALANCE, END OF PERIOD
    
    $
    125,922
    
    
    $
    1,109,130NON-CASH INVESTING AND FINANCING ACTIVITIESPurchase of Equipment
    
    
    (28,307
    )
    
    
    Capital Lease Obligation
    
    
    28,307
    
    
    
    Prepaid Insurance
    
    
    
    
    
    
    (304,832
    )Insurance Note Payable
    
    
    
    
    
    
    304,832$
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    186
    
    
    $
    5,775Taxes
    
    $
    
    
    
    $
    
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STINGER SYSTEMS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 NOTE 1: BASIS OF PRESENTATION
 ACCOUNTING POLICIES
  Disclosures About Enterprise and
Related Information
 Reclassifications
  Loss per Share
  NOTE 2: USE OF ESTIMATES
  NOTE 3: REVENUE RECOGNITION
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NOTE 4: INVENTORIES
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Raw Materials and Work-In Progress
    
    $
    291,242
    
    
    $
    216,865Finished Goods
    
    
    25,390
    
    
    
    75,561$
    316,632
    
    
    $
    292,426
 NOTE 5: STOCK BASED COMPENSATION
      Three Months Ended March 31,2007
    
    2006Estimated fair value
    
    $
    1.03
    
    
    $
    2.95Expected life (years)
    
    
    2.50
    
    
    
    2.50Risk free interest rate
    
    
    4.35
    %
    
    
    4.75
    %Volatility
    
    
    137.1
    %
    
    
    140.0
    %Dividend yield
    
    
    
    
    
    
    
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NOTE 6: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  Three Months Ended March 31,2007
    
    
    2006Legal and Professional Fees
    
    $
    84,945
    
    
    $
    345,623Stock Option Expense
    
    
    127,107
    
    
    
    1,031,822Insurance Expense
    
    
    
    
    
    
    316,528Other
    
    
    122,756
    
    
    
    148,350$
    334,808
    
    
    $
    1,842,323
 NOTE 7: CAPITAL LEASE OBLIGATION
  NOTE 8: NOTES PAYABLE-RELATED PARTIES
       NOTE 9: CAPITAL STOCK TRANSACTIONS
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NOTE 10: LIQUIDITY AND CAPITAL RESOURCES
  NOTE 11: SUBSEQUENT EVENTS
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  Executive Summary
 ®
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Results of Operations
 Revenues.
 Cost of Goods Sold.
 Gross Margin
 Selling Expenses.
 General and Administrative Expenses.
 Research and Development Expenses.
 Interest Income.
 Net Loss.
 Liquidity and Capital Resources
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Critical Accounting Policies
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Revenue Recognition
 Warranty Costs
 Intangible Assets
 Purchase Accounting
 Stock Options Accounting for Stock Issued to Employees Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services
 Limited Trading Market
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
   
 ITEM 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes in Internal Controls Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
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ITEM 1A. 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.
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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.
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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.
  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.
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Any short selling of our stock could depress the stocks price and have a negative impact on the
investments in us by our stockholders.
  We do not intend to pay any cash dividends on our common stock in the foreseeable future and,
therefore, any return on your investment in our common stock must come from increases in the fair
market value and trading price of our common stock.
  
 ITEM 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.
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ITEM 6. EXHIBITS
 Exhibit No.
    
    Description31.1
    
    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.
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SIGNATURES
  STINGER SYSTEMS, INC.
(Registrant)Date: May 15, 2007
    /s/ Robert F. GruderRobert F. GruderChief Executive Officer
(Principal Executive Officer) Date: May 15, 2007
    /s/ David J. MeadorDavid J. MeadorChief Financial Officer
(Principal Financial and Accounting Officer) 26




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Index to Exhibits
 Exhibit No.
    
    Description31.1
    
    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.
 27