##### 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, 2007
 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)
 2701 N. Rocky Point Drive, Suite 1130
Tampa, Florida
(Address of principal executive offices)
    
    33607
(Zip Code)
 (813) 281-1061
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




---



##### 



STINGER SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 2007
TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATION
    
    
    2ITEM 1. Financial Statements (unaudited)
    
    
    2Consolidated Balance Sheets as of June 30, 2007 (unaudited) and December 31, 2006 (audited)
    
    
    2Consolidated Statements of Operations for the three months ended June 30, 2007 (unaudited) and June 30, 2006 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the three months ended June 30, 2007 (unaudited) and June 30, 2006 (unaudited)
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16ITEM 4. Controls and Procedures
    
    
    16PART II  OTHER INFORMATION
    
    
    16ITEM 1. Legal Proceedings
    
    
    16ITEM 1A. Risk Factors
    
    
    17ITEM 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-31.1 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




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 
 STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)CURRENT ASSETSCash
    
    $
    13,480
    
    
    $
    121,047Accounts Receivable, net of $1,800 allowance
for uncollectible accounts in 2007 and 2006
    
    
    27,216
    
    
    
    46,978Inventories, at cost
    
    
    248,488
    
    
    
    292,426Prepaid Expenses and Other Current Assets
    
    
    37,727
    
    
    
    41,747TOTAL CURRENT ASSETS
    
    
    326,911
    
    
    
    502,198EQUIPMENT AND FURNITUREEquipment and Furniture, net of accumulated
depreciation of $101,214 and $52,982 in 2007
and 2006
    
    
    320,410
    
    
    
    303,295OTHER ASSETSIntangible Assets, net of accumulated
amortization of $954,517 and $763,616 in
2007 and 2006
    
    
    2,148,102
    
    
    
    2,339,004Other Assets
    
    
    11,496
    
    
    
    11,496TOTAL OTHER ASSETS
    
    
    2,159,598
    
    
    
    2,350,500TOTAL ASSETS
    
    $
    2,806,919
    
    
    $
    3,155,993
 
 2




---



##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS EQUITY
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)CURRENT LIABILITIESAccounts Payable
    
    $
    1,311,406
    
    
    $
    1,375,594Accrued Liabilities
    
    
    123,578
    
    
    
    79,341Capital Lease Obligation, current portion
    
    
    5,768
    
    
    
    Notes Payable-Related Parties
    
    
    962,500
    
    
    
    962,500Notes Payable-Convertible, net of debt discount of $95,719
    
    
    108,281
    
    
    
    TOTAL CURRENT LIABILITIES
    
    
    2,511,533
    
    
    
    2,417,435Capital Lease Obligation, long-term portion
    
    
    17,450
    
    
    
    TOTAL LIABILITIES
    
    
    2,528,983
    
    
    
    2,417,435COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYCommon Stock, $0.001 Par Value, 50,000,000 Shares
Authorized, 16,452,144 and 15,068,500 Shares Issued and
Outstanding at June 30, 2007 and December 31, 2006,
respectively
    
    
    16,452
    
    
    
    15,069Additional Paid-In Capital
    
    
    27,208,691
    
    
    
    25,945,830Retained Deficit
    
    
    (26,947,207
    )
    
    
    (25,222,341
    )TOTAL STOCKHOLDERS EQUITY
    
    
    277,936
    
    
    
    738,558TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,806,919
    
    
    $
    3,155,993
  3




---



##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUESSales
    
    $
    102,170
    
    
    $
    110,751
    
    
    $
    198,339
    
    
    $
    228,890Cost of Product Sold
    
    
    179,572
    
    
    
    62,618
    
    
    
    277,624
    
    
    
    135,374GROSS (LOSS) MARGIN
    
    
    (77,402
    )
    
    
    48,133
    
    
    
    (79,285
    )
    
    
    93,516SELLING EXPENSES
    
    
    32,671
    
    
    
    66,404
    
    
    
    73,397
    
    
    
    138,475GENERAL AND
ADMINISTRATIVE EXPENSESEmployee Salaries
    
    
    252,809
    
    
    
    246,099
    
    
    
    549,718
    
    
    
    452,149Employee Acquisition Cost
    
    
    1,238
    
    
    
    10,686
    
    
    
    2,382
    
    
    
    10,686Employee Severance Cost
    
    
    
    
    
    
    
    
    
    
    480
    
    
    
    895Other
    
    
    252,138
    
    
    
    1,256,696
    
    
    
    586,946
    
    
    
    3,098,124Depreciation and Amortization
    
    
    131,658
    
    
    
    105,732
    
    
    
    239,132
    
    
    
    209,591Research and Development
    
    
    23,961
    
    
    
    194,631
    
    
    
    140,429
    
    
    
    391,438TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES
    
    
    661,804
    
    
    
    1,813,844
    
    
    
    1,519,087
    
    
    
    4,162,883LOSS FROM OPERATIONS
    
    
    (771,877
    )
    
    
    (1,832,115
    )
    
    
    (1,671,769
    )
    
    
    (4,207,842
    )INTEREST INCOME
    
    
    595
    
    
    
    7,432
    
    
    
    2,409
    
    
    
    23,389INTEREST EXPENSE
    
    
    (31,951
    )
    
    
    (3,965
    )
    
    
    (55,507
    )
    
    
    (10,399
    )LOSS BEFORE INCOME TAXES
    
    
    (803,233
    )
    
    
    (1,828,648
    )
    
    
    (1,724,867
    )
    
    
    (4,194,852
    )PROVISION FOR INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (803,233
    )
    
    $
    (1,828,648
    )
    
    $
    (1,724,867
    )
    
    $
    (4,194,852
    )BASIC AND DILUTED LOSS
PER COMMON SHARE
    
    $
    (0.05
    )
    
    $
    (0.12
    )
    
    $
    (0.11
    )
    
    $
    (0.28
    )WEIGHTED AVERAGE NUMBER
OF COMMON SHARESBasic and Diluted
    
    
    16,372,144
    
    
    
    15,031,000
    
    
    
    16,099,153
    
    
    
    15,014,929
  4




---



##### Table of Contents



STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six Months Ended June 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (1,724,867
    )
    
    $
    (4,194,852
    )Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:Depreciation and Amortization
    
    
    239,132
    
    
    
    209,591Stock Option Expense
    
    
    210,246
    
    
    
    1,307,885Stock Issued for Services
    
    
    
    
    
    
    166,875Amortization of Discount on Notes Payable-Convertible
    
    
    6,281
    
    
    
    Loss on Sale of Asset
    
    
    
    
    
    
    3,381Changes in Operating Assets and LiabilitiesAccounts Receivable
    
    
    19,762
    
    
    
    (5,762
    )Inventory
    
    
    43,938
    
    
    
    (80,053
    )Prepaid Expenses
    
    
    4,020
    
    
    
    505,767Other Assets
    
    
    
    
    
    
    (11,253
    )Accounts Payable
    
    
    (64,189
    )
    
    
    616,827Accrued Liabilities
    
    
    44,237
    
    
    
    (111,217
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (1,221,440
    )
    
    
    (1,592,811
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment
    
    
    (37,038
    )
    
    
    (67,936
    )Proceeds from Sale of Asset
    
    
    
    
    
    
    1,157NET CASH USED IN INVESTING ACTIVITIES
    
    
    (37,038
    )
    
    
    (66,779
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the Sale of Common Stock
    
    
    952,000
    
    
    
    Payments on Capital Lease Obligation
    
    
    (5,089
    )
    
    
    Proceeds
from the Issuance of Notes Payable - Convertible
    
    
    204,000
    
    
    
    Payments on Insurance Notes Payable
    
    
    
    
    
    
    (435,175
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    1,150,911
    
    
    
    (435,175
    )NET DECREASE IN CASH
    
    
    (107,567
    )
    
    
    (2,094,765
    )CASH BALANCE, BEGINNING OF PERIOD
    
    
    121,047
    
    
    
    2,408,556CASH BALANCE, END OF PERIOD
    
    $
    13,480
    
    
    $
    313,791NON-CASH INVESTING AND FINANCING ACTIVITIESPurchase of Equipment
    
    
    (28,307
    )
    
    
    Capital Lease Obligation
    
    
    28,307
    
    
    
    Discount on Issuance of Notes Payable-Convertible
    
    
    (102,000
    )
    
    
    Discount on Issuance of Notes Payable-Convertible
    
    
    102,000
    
    
    
    Prepaid Insurance
    
    
    
    
    
    
    (304,832
    )Insurance Note Payable
    
    
    
    
    
    
    304,832$
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    896
    
    
    $
    9,066Taxes
    
    $
    
    
    
    $
    
  5




---



##### 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.
 Reclassifications
  Loss per Share
  NOTE 2: USE OF ESTIMATES
  NOTE 3: REVENUE RECOGNITION
  6




---



##### Table of Contents



NOTE 4: INVENTORIES
  June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)Raw Materials and Work-In Progress
    
    $
    226,251
    
    
    $
    216,865Finished Goods
    
    
    22,237
    
    
    
    75,561$
    248,488
    
    
    $
    292,426
 NOTE 5: STOCK BASED COMPENSATION
      Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Estimated fair value
    
    $
    0.60
    
    
    $
    1.47
    
    
    $
    0.82
    
    
    $
    2.74Expected life (years)
    
    
    2.50
    
    
    
    2.50
    
    
    
    2.50
    
    
    
    4.64Risk free interest rate
    
    
    5.01
    %
    
    
    4.08
    %
    
    
    4.68
    %
    
    
    4.65
    %Volatility
    
    
    141.0
    %
    
    
    116.6
    %
    
    
    139.0
    %
    
    
    136.4
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 7




---



##### Table of Contents



NOTE 6: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Legal and Professional Fees
    
    $
    34,172
    
    
    $
    320,782
    
    
    $
    119,117
    
    
    $
    666,404Stock Option Expense
    
    
    83,139
    
    
    
    276,062
    
    
    
    210,246
    
    
    
    1,307,885Stock Issued for Services
    
    
    
    
    
    
    166,875
    
    
    
    
    
    
    
    166,875Insurance Expense
    
    
    
    
    
    
    322,111
    
    
    
    
    
    
    
    638,640Other
    
    
    134,827
    
    
    
    170,866
    
    
    
    257,583
    
    
    
    318,320$
    252,138
    
    
    $
    1,256,696
    
    
    $
    586,946
    
    
    $
    3,098,124
 NOTE 7: CAPITAL LEASE OBLIGATION
  NOTE 8: NOTES PAYABLE-RELATED PARTIES
       NOTE 9: NOTES PAYABLE-CONVERTIBLE
  8




---



##### Table of Contents



NOTE 10: CAPITAL STOCK TRANSACTIONS
     NOTE 11: LIQUIDITY AND CAPITAL RESOURCES
  9




---



##### Table of Contents



NOTE 12: SUBSEQUENT EVENTS
    10




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  Executive Summary
 ®
  11




---



##### Table of Contents



Results of Operations
 Revenues.
 12




---



##### Table of Contents



Cost of Goods Sold.
 Gross Margin
 Selling Expenses.
 General and Administrative Expenses.
 Research and Development Expenses.
 Interest Income.
 Net Loss.
 13




---



##### Table of Contents



Liquidity and Capital Resources
       Critical Accounting Policies
  Revenue
Recognition
 Warranty
Costs
 14




---



##### Table of Contents



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
 15




---



##### Table of Contents



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
  16




---



##### Table of Contents



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.
  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.
  17




---



##### Table of Contents



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.
  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 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.
  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-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;
 20




---



##### Table of Contents




    
    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.
  NASD sales practice requirements may also limit a stockholders ability to buy and sell our stock.
  21




---



##### Table of Contents



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.
  
 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.
    
    Description10.1
    
    Securities Purchase Agreement dated August 2, 2007 among Stinger Systems, Inc. and the investor party thereto(1)10.2
    
    Senior Secured Convertible Note dated August 3, 2007(1)10.3
    
    Warrant dated August 3, 2007(1)10.4
    
    Registration Rights Agreement dated August 3, 2007 among Stinger Systems, Inc. and the investor party thereto(1)10.5
    
    Security Agreement dated August 3, 2007(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 Current Report on Form 8-K on August 3, 2007
 23




---



##### Table of Contents



SIGNATURES
  STINGER SYSTEMS, INC.
(Registrant)Date: August 14, 2007
    /s/ Robert F. GruderRobert F. GruderChief Executive Officer
(Principal Executive Officer) Date: August 14, 2007
    /s/ David J. MeadorDavid J. MeadorChief Financial Officer
(Principal Financial and Accounting Officer) 24




---



##### Table of Contents



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.
 25