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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, 2008
 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
    
    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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
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STINGER SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2008
TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONITEM 1. Financial Statements (unaudited)Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007 (audited)Consolidated Statements of Operations for the three months ended March 31, 2008 (unaudited)
and March 31, 2007 (unaudited)Consolidated Statements of Cash Flows for the three months ended March 31, 2008 (unaudited)
and March 31, 2007 (unaudited)Notes to Consolidated Financial Statements (unaudited)ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 3. Quantitative and Qualitative Disclosures about Market RiskITEM 4. Controls and ProceduresPART II  OTHER INFORMATIONITEM 1. Legal ProceedingsITEM 1A. Risk FactorsITEM 2. Unregistered Sales of Equity Securities and Use of ProceedsITEM 3. Defaults Upon Senior SecuritiesITEM 4. Submission of Matters to a Vote of Security HoldersITEM 5. Other InformationITEM 6. ExhibitsSIGNATURESINDEX TO EXHIBITSEX-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 31,2008
    
    
    2007(Unaudited)CURRENT ASSETSCash
    
    $
    779,108
    
    
    $
    345,293Accounts Receivable, net of $1,800 allowance for uncollectible accounts in 2008 and 2007
    
    
    121,859
    
    
    
    81,201Inventories, at cost
    
    
    187,767
    
    
    
    128,841Prepaid Expenses and Other Current Assets
    
    
    653,992
    
    
    
    35,149TOTAL CURRENT ASSETS
    
    
    1,742,726
    
    
    
    590,484EQUIPMENT AND FURNITUREEquipment and Furniture, net of accumulated depreciation of $151,780 and $126,414 in 2008 and
2007
    
    
    258,697
    
    
    
    276,590OTHER ASSETSIntangible Assets, net of accumulated amortization of $1,240,870 and $1,145,419 in 2008 and 2007
    
    
    1,431,750
    
    
    
    1,527,201Other Assets
    
    
    11,496
    
    
    
    11,496TOTAL OTHER ASSETS
    
    
    1,443,246
    
    
    
    1,538,697TOTAL ASSETS
    
    $
    3,444,669
    
    
    $
    2,405,771
 
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STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)CURRENT LIABILITIESAccounts Payable
    
    $
    475,614
    
    
    $
    393,842Accrued Liabilities
    
    
    94,745
    
    
    
    124,846Capital Lease Obligation, current portion
    
    
    22,078
    
    
    
    21,445Note Payable-Related Parties
    
    
    31,250
    
    
    
    31,250TOTAL CURRENT LIABILITIES
    
    
    623,687
    
    
    
    571,383Capital Lease Obligation, long-term portion
    
    
    70,163
    
    
    
    77,739Note Payable-Convertible, net of debt discount of $3,699,638
    
    
    1,191,562
    
    
    
    1,339,763Derivative Liability Associated with Convertible Note and Warrants
    
    
    3,940,000
    
    
    
    3,660,000TOTAL LIABILITIES
    
    
    5,825,412
    
    
    
    5,648,885COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS (DEFICIT) EQUITYCommon Stock, $0.001 Par Value, 50,000,000 Shares Authorized,
19,889,230 and 17,527,171 Shares Issued and Outstanding at March
31, 2008 and December 31, 2007, respectively
    
    
    19,929
    
    
    
    17,527Additional Paid-In Capital
    
    
    37,396,401
    
    
    
    30,309,985Retained Deficit
    
    
    (39,797,073
    )
    
    
    (33,570,626
    )TOTAL STOCKHOLDERS (DEFICIT) EQUITY
    
    
    (2,380,743
    )
    
    
    (3,243,114
    )TOTAL LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
    
    $
    3,444,669
    
    
    $
    2,405,771
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STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended March 31,2008
    
    
    2007REVENUESSales
    
    $
    182,557
    
    
    $
    96,169Cost of Product Sold
    
    
    191,916
    
    
    
    98,052GROSS (LOSS) MARGIN
    
    
    (9,359
    )
    
    
    (1,883
    )SELLING EXPENSES
    
    
    156,955
    
    
    
    40,726GENERAL AND ADMINISTRATIVE
EXPENSESEmployee Salaries
    
    
    287,921
    
    
    
    296,910Employee Acquisition Cost
    
    
    6,000
    
    
    
    1,144Employee Severance Cost
    
    
    
    
    
    
    480Other
    
    
    1,977,237
    
    
    
    334,808Depreciation and Amortization
    
    
    120,817
    
    
    
    107,473Research and Development
    
    
    70,096
    
    
    
    116,468TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES
    
    
    2,462,071
    
    
    
    857,283LOSS FROM OPERATIONS
    
    
    (2,628,385
    )
    
    
    (899,892
    )INTEREST INCOME
    
    
    2,624
    
    
    
    1,814INTEREST EXPENSE
    
    
    (190,688
    )
    
    
    (23,555
    )DERIVATIVE LIABILITY EXPENSE
    
    
    (3,410,000
    )
    
    
    LOSS BEFORE INCOME TAXES
    
    
    (6,226,449
    )
    
    
    (921,633
    )PROVISION FOR INCOME TAXES
    
    
    
    
    
    
    NET LOSS
    
    $
    (6,226,449
    )
    
    $
    (921,633
    )BASIC AND DILUTED LOSS PER
COMMON SHARE
    
    $
    (0.33
    )
    
    $
    (0.06
    )WEIGHTED AVERAGE NUMBER OF
COMMON SHARESBasic and Diluted
    
    
    18,843,536
    
    
    
    15,876,911
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STINGER SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended March 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (6,226,449
    )
    
    $
    (921,633
    )Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:Depreciation and Amortization
    
    
    120,817
    
    
    
    107,473Stock Option Expense
    
    
    1,606,317
    
    
    
    127,107Amortization of Discount on Notes Payable-Convertible
    
    
    191,015
    
    
    
    Derivative Liability Associated with Convertible Note and Warrants
    
    
    3,410,000Changes in Operating Assets and LiabilitiesAccounts Receivable
    
    
    (40,658
    )
    
    
    7,683Inventory
    
    
    (58,926
    )
    
    
    (24,206
    )Prepaid Expenses
    
    
    3,718
    
    
    
    (24,547
    )Accounts Payable
    
    
    81,772
    
    
    
    (121,113
    )Accrued Liabilities
    
    
    (30,101
    )
    
    
    30,100NET CASH USED IN OPERATING ACTIVITIES
    
    
    (942,495
    )
    
    
    (819,136
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment
    
    
    (7,473
    )
    
    
    (22,264
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (7,473
    )
    
    
    (22,264
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the Sale of Common Stock
    
    
    
    
    
    
    849,999Payments on Capital Lease Obligation
    
    
    (6,942
    )
    
    
    (3,724
    )Proceeds from the Issuance of Convertible Notes Payable, Net of $117,500
Issuance Costs and $641,775 prepaid interest
    
    
    1,390,725
    
    
    
    NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    1,383,783
    
    
    
    846,275NET DECREASE IN CASH
    
    
    433,815
    
    
    
    4,875CASH BALANCE, BEGINNING OF PERIOD
    
    
    345,293
    
    
    
    121,047CASH BALANCE, END OF PERIOD
    
    $
    779,108
    
    
    $
    125,922NON-CASH INVESTING AND FINANCING ACTIVITIESPurchase of Equipment with Capital Lease
    
    
    
    
    
    
    (28,307
    )Capital Lease Obligation
    
    
    
    
    
    
    28,307Conversion of Notes Payable to Common Stock
    
    
    (320,000
    )
    
    
    Common Stock Issued for Notes Payable Conversion
    
    
    1,052
    
    
    
    Paid in Capital for Notes Payable Conversion
    
    
    318,948
    
    
    
    Derivative Liability
    
    
    (3,130,000
    )
    
    
    Paid-in-capital
    
    
    3,130,000
    
    
    
    Deferred Debt Discount
    
    
    (2,032,500
    )
    
    
    Common stock
    
    
    1,350
    
    
    
    Paid-in-capital
    
    
    2,031,150$
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    2,094
    
    
    $
    186Taxes
    
    $
    
    
    
    $
    
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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
 Embedded Derivatives
   Embedded Derivative Liability, December 31, 2007
    
    $
    3,660,000Adjustment of Liability due to amended August 3, 2007 Note
    
    
    (3,130,000
    )Embedded Derivative Liability Expense, March 31, 2008
    
    
    3,410,000Ending Balance, March 31, 2008
    
    $
    3,940,000
 Reclassifications
  Loss per Share
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NOTE 2: USE OF ESTIMATES
  NOTE 3: REVENUE RECOGNITION
  NOTE 4: INVENTORIES
  March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)Raw Materials and Work-In Progress
    
    $
    142,542
    
    
    $
    99,853Finished Goods
    
    
    45,225
    
    
    
    28,988$
    187,767
    
    
    $
    128,841
 NOTE 5: STOCK BASED COMPENSATION
      Three Months EndedMarch 31,2008
    
    2007Estimated fair value
    
    $
    0.70
    
    
    $
    1.03Expected life (years)
    
    
    1.15
    
    
    
    2.50Risk free interest rate
    
    
    1.54
    %
    
    
    4.35
    %Volatility
    
    
    140.93
    %
    
    
    137.1
    %Dividend yield
    
    
    
    
    
    
    
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NOTE 6: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  Three Months EndedMarch 31,2008
    
    
    2007Legal and Professional Fees
    
    $
    119,114
    
    
    $
    84,945Stock Option Expense
    
    
    1,606,317
    
    
    
    127,107Insurance Expense
    
    
    53,169
    
    
    
    Other
    
    
    198,637
    
    
    
    122,756$
    1,977,237
    
    
    $
    334,808
 NOTE 7: CAPITAL LEASE OBLIGATIONS
    NOTE 8: NOTES PAYABLE  CONVERTIBLE
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NOTE 9: LIQUIDITY AND CAPITAL RESOURCES
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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.
 Interest Expense.
 Net Loss.
 Liquidity and Capital Resources
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Critical Accounting Policies
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
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ITEM 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes in Internal Controls Over Financial Reporting
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PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
    
 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.
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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-lethal stun weapons may negatively impact sales of our products.
  The sale and use of our products may result in claims against us.
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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.
  Law enforcement, correction and military operations are government agencies which are subject to
budgetary constraints, which may inhibit sales.
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There exist some state, local and international regulations and/or prohibitions on less-lethal
weapon systems which will make it more difficult or impossible to market our products in those
jurisdictions thereby limiting potential revenues.
  If we cannot retain or hire qualified personnel, our programs could be delayed.
  Because our common stock is quoted only on the OTC Bulletin Board and the Pink Sheets, your ability
to sell your shares in the secondary trading market may be limited.
  Our stock price has been volatile and your investment in our common stock could suffer a decline in
value.
  
    
    sales of the Stinger projectile stun gun;
    
    announcements of technological innovations or new products by us or our competitors;
    
    government regulatory action affecting our products or our competitors products;
    
    developments or disputes concerning patent or proprietary rights;
    
    actual or anticipated fluctuations in our operating results;
    
    changes in our financial estimates by securities analysts;
    
    broad market fluctuations; and
    
    economic conditions in the United States.
  Trading of our stock may be restricted by the SECs penny stock regulations, which may limit a
stockholders ability to buy and sell our stock.
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NASD sales practice requirements may also limit a stockholders ability to buy and sell our stock.
  Sales of a substantial number of shares of our common stock in the public market could lower our
stock price and impair our ability to raise funds in stock offerings and impair the ability of
stockholders to receive a return on their investment in Stinger Systems.
  Exercise of outstanding options, warrants and convertible securities will dilute existing
shareholders and could decrease the market price of our common stock.
  We likely will issue additional equity securities which will dilute your share ownership.
  Any short selling of our stock could depress the stocks price and have a negative impact on the
investments in us by our stockholders.
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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.
      
 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.
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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 Principal Financial and Accounting 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 Principal Financial and Accounting 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, 2008
    /s/ Ronald T. BellistriRonald T. BellistriChief Executive Officer
(Principal Executive Officer)Date: May 15, 2008
    /s/ Brian S. GannonBrian S. GannonFinancial Controller
(Principal Financial and Accounting Officer) 23