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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 1934For the quarterly period ended March 31, 2009o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For 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
    
    Smaller reporting Company þ
 o þ




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##### 



STINGER SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2009
TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATION
    
    
    3ITEM 1.
    
    Financial Statements (unaudited)
    
    
    3Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December 31, 2008 (audited)
    
    
    3Consolidated Statements of Operations for the three months ended March 31, 2009 (unaudited)
and March 31, 2008 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the three months ended March 31, 2009 (unaudited)
and March 31, 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    8ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    16ITEM 4.
    
    Controls and Procedures
    
    
    17PART II  OTHER INFORMATION
    
    
    18ITEM 1.
    
    Legal Proceedings
    
    
    18ITEM 1A.
    
    Risk Factors
    
    
    19ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    23ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23ITEM 5.
    
    Other Information
    
    
    23ITEM 6.
    
    Exhibits
    
    
    24SIGNATURES
    
    
    25INDEX TO EXHIBITS
    
    
    26EX-31.1EX-31.2EX-32.1EX-32.2
   
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PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    Financial Statements
 
 STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)CURRENT ASSETSCash
    
    $
    25,261
    
    
    $
    699,934Accounts Receivable, net of $1,800 allowance for uncollectible accounts in 2009 and 2008
    
    
    119,298
    
    
    
    75,200Inventories, at cost
    
    
    248,795
    
    
    
    238,757Prepaid Expenses and Other Current Assets
    
    
    220,910
    
    
    
    254,898TOTAL CURRENT ASSETS
    
    
    614,264
    
    
    
    1,268,789EQUIPMENT AND FURNITUREEquipment and Furniture, net of accumulated depreciation of $266,522 and $229,767 in
2009 and 2008, respectively
    
    
    305,764
    
    
    
    231,706OTHER ASSETSPrepaid Interest, Long Term Asset
    
    
    203,892
    
    
    
    257,373Intangible Assets, net of accumulated amortization of $1,622,672 and $1,527,222 in 2009
and 2008, respectively
    
    
    1,049,947
    
    
    
    1,145,398Other Assets
    
    
    35,898
    
    
    
    35,898TOTAL OTHER ASSETS
    
    
    1,289,737
    
    
    
    1,438,669TOTAL ASSETS
    
    $
    2,209,765
    
    
    $
    2,939,164
 
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STINGER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)CURRENT LIABILITIESAccounts Payable
    
    $
    643,710
    
    
    $
    417,425Accrued Liabilities
    
    
    382,164
    
    
    
    254,638Capital Lease Obligation, current portion
    
    
    24,090
    
    
    
    23,571Note Payable-Related Parties
    
    
    31,250
    
    
    
    31,250TOTAL CURRENT LIABILITIES
    
    
    1,081,214
    
    
    
    726,884Capital Lease Obligation, long-term portion
    
    
    46,072
    
    
    
    52,293Note Payable-Convertible, net of debt discount of $5,235,319 and
$5,340,001 for 2009 and 2008, respectively
    
    
    2,655,881
    
    
    
    2,551,199Derivative Liability Associated with Convertible Note and Warrants
    
    
    7,837,074
    
    
    
    7,377,771TOTAL LIABILITIES
    
    
    11,620,241
    
    
    
    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, 4,001,832
and 4,001,832 Shares Issued and Outstanding at March 31, 2009 and December
31, 2008, respectively
    
    
    4,002
    
    
    
    4,002Additional Paid-In Capital
    
    
    47,259,019
    
    
    
    47,259,019Retained Deficit
    
    
    (56,673,497
    )
    
    
    (55,032,004
    )TOTAL STOCKHOLDERS (DEFICIT) EQUITY
    
    
    (9,410,476
    )
    
    
    (7,768,983
    )TOTAL LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
    
    $
    2,209,765
    
    
    $
    2,939,164
  4




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STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended March 31,2009
    
    
    2008REVENUESSales
    
    $
    273,009
    
    
    $
    182,557Cost of Product Sold
    
    
    299,325
    
    
    
    191,916GROSS (LOSS) MARGIN
    
    
    (26,316
    )
    
    
    (9,359
    )SELLING EXPENSES
    
    
    74,920
    
    
    
    156,955GENERAL AND ADMINISTRATIVE
EXPENSESEmployee Salaries
    
    
    250,933
    
    
    
    287,921Other
    
    
    325,422
    
    
    
    1,983,237Depreciation and Amortization
    
    
    132,206
    
    
    
    120,817Research and Development
    
    
    84,763
    
    
    
    70,096TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES
    
    
    793,324
    
    
    
    2,462,071LOSS FROM OPERATIONS
    
    
    (894,560
    )
    
    
    (2,628,385
    )INTEREST INCOME
    
    
    5,402
    
    
    
    2,624INTEREST EXPENSE
    
    
    (293,032
    )
    
    
    (190,688
    )DERIVATIVE LIABILITY EXPENSE
    
    
    (459,303
    )
    
    
    (3,410,000
    )LOSS BEFORE INCOME TAXES
    
    
    (1,641,493
    )
    
    
    (6,226,449
    )PROVISION FOR INCOME TAXES
    
    
    
    
    
    
    NET LOSS
    
    $
    (1,641,493
    )
    
    $
    (6,226,449
    )BASIC AND DILUTED LOSS PER
COMMON SHARE
    
    $
    (0.41
    )
    
    $
    (1.65
    )WEIGHTED AVERAGE NUMBER OF
COMMON SHARESBasic and Diluted
    
    
    4,001,832
    
    
    
    3,768,707
  5




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STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended March 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (1,641,493
    )
    
    $
    (6,226,449
    )Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:Depreciation and Amortization
    
    
    132,206
    
    
    
    120,817Stock Option Expense
    
    
    
    
    
    
    1,606,317Amortization of Discount on Notes Payable-Convertible
    
    
    104,682
    
    
    
    191,015Derivative Liability Associated with Convertible Note and Warrants
    
    
    459,303
    
    
    
    3,410,000Changes in Operating Assets and Liabilities
Accounts Receivable
    
    
    (44,098
    )
    
    
    (40,658
    )Inventory
    
    
    (10,038
    )
    
    
    (58,926
    )Prepaid Expenses
    
    
    87,469
    
    
    
    3,718Accounts Payable
    
    
    226,285
    
    
    
    81,772Accrued Liabilities
    
    
    127,526
    
    
    
    (30,101
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (558,158
    )
    
    
    (942,495
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment
    
    
    (110,813
    )
    
    
    (7,473
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (110,813
    )
    
    
    (7,473
    )CASH FLOWS FROM FINANCING ACTIVITIESPayments on Capital Lease Obligation
    
    
    (5,702
    )
    
    
    (6,942
    )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
    
    
    (5,702
    )
    
    
    1,383,783NET DECREASE IN CASH
    
    
    (674,673
    )
    
    
    433,815CASH BALANCE, BEGINNING OF PERIOD
    
    
    699,934
    
    
    
    345,293CASH BALANCE, END OF PERIOD
    
    $
    25,261
    
    
    $
    779,108
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STINGER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended March 31,2009
    
    
    2008NON-CASH INVESTING AND FINANCING ACTIVITIESAdditional Paid in Capital from Termination of Registration Rights on Debt
    
    
    
    
    
    
    3,130,000Reduction of Derivative Liability due to Termination of Registration Rights on Debt
    
    
    
    
    
    
    (3,130,000
    )Additional Paid in Capital, Issued in Connection with Financing from Stock
    
    
    
    
    
    
    1,059,480Common Stock Issued for Debt Discount
    
    
    
    
    
    
    270Debt Discount from Issuance of Common Stock
    
    
    
    
    
    
    (1,059,750
    )Prepaid Interest from Convertible Note
    
    
    
    
    
    
    (641,775
    )Debt Discount from Fees Retained
    
    
    
    
    
    
    (422,450
    )Convertible Note
    
    
    
    
    
    
    1,064,225Conversion of Notes Payable to Common Stock
    
    
    
    
    
    
    (320,000
    )Common Stock Issued for Notes Payable Conversion
    
    
    
    
    
    
    210Additional Paid in Capital from Conversion of Notes Payable
    
    
    
    
    
    
    319,790Debt Discount on Notes Payable
    
    
    
    
    
    
    (3,595,300
    )Additional Paid in Capital, Issued in connection of Notes Payable
    
    
    
    
    
    
    3,595,300Deferred Debt Discount
    
    
    
    
    
    
    Common stock
    
    
    
    
    
    
    Paid-in-capital
    
    
    
    
    
    
    $
    
    
    
    $
    SUPPLEMENTAL CASH FLOW DISCLOSURESCash Paid During the Year For:Interest
    
    $
    1,618
    
    
    $
    330,646Taxes
    
    $
    
    
    
    $
    
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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  2007 Note
    
    
    (3,130,000
    )Embedded Derivative Liability Expense, December 31, 2008
    
    
    6,847,771Embedded Derivative Liability Expense, March 31, 2009
    
    
    459,303Ending Balance, December 31, 2008
    
    $
    7,837,074
 Reclassifications
  Loss per Share
  8




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NOTE 2: USE OF ESTIMATES
  NOTE 3: REVENUE RECOGNITION
  NOTE 4: INVENTORIES
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Raw Materials and Work-In Progress
    
    $
    206,265
    
    
    $
    203,595Finished Goods
    
    
    42,530
    
    
    
    35,161$
    248,795
    
    
    $
    238,757
 NOTE 5: STOCK BASED COMPENSATION
 Share-Based Payment Accounting for Stock Issued to Employees
  Accounting for Stock-Based Compensation
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Three Months EndedMarch 31,2009
    
    
    2008Estimated fair value
    
    $
    0.70
    
    
    $
    0.70Expected life (years)
    
    
    1.15
    
    
    
    1.15Risk free interest rate
    
    
    1.54
    %
    
    
    1.54
    %Volatility
    
    
    132.05
    %
    
    
    140.93
    %Dividend yield
    
    
    
    
    
    
    
 NOTE 6: GENERAL AND ADMINISTRATIVE EXPENSES, OTHER
  Three Months EndedMarch 31,2009
    
    
    2008Legal and Professional Fees
    
    $
    186,995
    
    
    $
    158,086Stock Option Expense
    
    
    
    
    
    
    1,606,317Rent and Utilities
    
    
    52,045
    
    
    
    43,073Other
    
    
    85,285
    
    
    
    116,592$
    325,422
    
    
    $
    1,977,237
 NOTE 7: CAPITAL LEASE OBLIGATIONS
    NOTE 8: NOTES PAYABLE  CONVERTIBLE
  10




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11




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NOTE 9: LIQUIDITY AND CAPITAL RESOURCES
    12




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  Executive Summary
    13




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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.
 Derivative Liability.
 Net Loss.
 14




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Liquidity and Capital Resources
      Critical Accounting Policies
      15




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ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  16




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ITEM 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  17




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PART II  OTHER INFORMATION
 
 ITEM 1.
    
    Legal Proceedings
     18




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ITEM 1A. 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.
  19




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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.
  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.
  20




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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-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.
  21




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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.
  FINRA sales practice requirements may also limit a stockholders ability to buy and sell our stock.
  22




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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 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 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.
 24




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SIGNATURES
  STINGER SYSTEMS, INC.
(Registrant)Date: May 15, 2009
    /s/ Robert F. GruderRobert F. GruderPresident
(Principal Executive Officer) Date: May 15, 2009
    /s/ Brian S. GannonBrian S. GannonFinancial Controller
(Principal Financial Officer) 25




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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.
 26