SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STINGER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Nevada (State or other jurisdiction of incorporation or organization) | | 5099 (Primary Standard Industrial Classification Code Number) | | 88-0367706 (I.R.S. Employer Identification Number) |
1901 Roxborough Road, Suite 118
Charlotte, North Carolina 28211
(866) 788-6746
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Gary R. Henrie, Esq.
10616 Eagle Nest Street
Las Vegas, Nevada 89141
(702) 616-3093
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of Communications to:
Gary R. Henrie, Esq.
10616 Eagle Nest Street
Las Vegas, Nevada 89141
Tel: (702) 616-3093 Fax: (435) 753-1775
Approximate date of commencement of proposed sale to public:
From time to time after the effective date of this registration statement.
If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
| |
Title of Each Class of Securities To Be Registered | | Amount to be Registered(1) | | Proposed Maximum Offering Price Per Share(2) | | Proposed Maximum Aggregate Offering Price(2) | | Amount of Registration Fee(3) |
|
| Common stock, par value $.001 per share | | 16,153,500 shares | | $17.13 | | $276,628,687.50 | | $32,559.20 |
|
(1)
Number of shares to be registered includes shares of common stock underlying warrants. Pursuant to Rule 416 under the Securities Act, this registration statement also covers such additional shares as may hereafter be offered or issued to prevent dilution resulting from stock splits, stock dividends, recapitalizations or certain other capital adjustments.
(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low sale prices of the registrant's common stock on the "pink sheets" on February 3, 2005.
(3)
Previously paid.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and the selling stockholders are not soliciting offers to buy these securities in any state where such offers are not permitted.
Subject to completion,
February 4, 2005
PROSPECTUS
16,153,500 Shares
STINGER SYSTEMS, INC.
Common Stock
We are registering 16,153,500 shares of common stock issued or issuable upon the exercise of the warrants of Stinger Systems, Inc., a Nevada corporation (“Stinger Systems”), held by the selling stockholders. The selling stockholders will receive all of the proceeds from the sale of the shares. We will pay all expenses incident to the registration of the shares under the Securities Act of 1933, as amended.
Our common stock is currently trading in the "pink sheets" under the symbol "STIY.PK." On February 3, 2005, the last reported sale price of our common stock was $16.50 per share.
Investing in our common stock involves risks, which are described in the "Risk Factors" section beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is ____________________ , 2005.
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with any information or represent anything not contained in this prospectus, and, if given or made, any such other information or representation should not be relied upon as having been authorized by us. The selling stockholders are not offering to sell, or seeking offers to buy, our common stock in any jurisdiction where the offer or sale is not permitted. You should not assume that the information provided this prospectus is accurate as of any date other than the date on the front cover of this prospectus.
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS |
| |
| PROSPECTUS SUMMARY |
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA |
RISK FACTORS |
USE OF PROCEEDS |
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS MANAGEMENT CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS VOTING SECURITIES AND PRINCIPAL HOLDERS SELLING STOCKHOLDERS PLAN OF DISTRIBUTION DESCRIPTION OF CAPITAL STOCK LEGAL MATTERS EXPERTS WHERE YOU CAN FIND MORE INFORMATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this prospectus contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words "forecast," "estimate," "project," "intend," "expect," "should," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including those discussed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which may cause our actual results, performance or achieve ments to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the following:
| · | Our ability to achieve our business strategy of producing and selling our products; |
| · | Our ability to attract, retain and motivate qualified employees and management; |
| · | The impact of federal, state or local government regulations; |
| · | Competition in the electronic defense technology industry; |
| · | Availability and cost of additional capital; |
| · | Litigation in connection with our business, including potential wrongful death claims; |
| · | Our ability to protect our trademarks, patents and other proprietary rights; |
| · | Other risks described from time to time in our periodic reports filed with the Securities and Exchange Commission. |
This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative but not exhaustive. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty.
Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this prospectus. It is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under "Risk Factors" and our consolidated financial statements and accompanying notes. Any references to "Stinger Systems" "we," "us" or "our" refer to Stinger Systems, Inc. and our subsidiary, Electronic Defense Technology, LLC, an Ohio limited liability company.
Our Business
Stinger Systems is in the business of producing and marketing less-lethal electronic products to police, prison, professional security and military sectors. Stinger Systems’ products include the Ultron II® handheld contact stun gun, the ice-shield electronic immobilization riot shield, and the Bandit / R-E-A-C-T system, an electronic immobilizing restraint. In 2004, Stinger Systems began the development of the Stinger projectile stun gun (the “Stinger Stun Gun”). Stinger’s success is based largely upon the success of the Stinger Stun Gun.
Our Offices
Stinger Systems, Inc. is a Nevada corporation organized on July 2, 1996. Our principal executive offices are located at 1901 Roxborough Road, Suite 118, Charlotte, North Carolina 28211. The telephone number of our principal executive offices is (866) 788-6746.
Our Website
Our Internet address iswww.stingersystems.com. Information contained on our website isnot part of this prospectus.
The Offering
Shares of common stock offered by us:
None.
Shares of common stock that may be sold by the selling stockholders:
16,153,500.
Use of proceeds:
We will not receive any proceeds from the resale of the shares offered hereby, all of which proceeds will be paid to the selling stockholders.
Risk factors:
The purchase of our common stock involves a high degree of risk. You should carefully review and consider “Risk Factors” beginning on page 7.
Pink Sheet Trading Symbol:
STIY.PK
We will pay all expenses incident to the registration of the shares under the Securities Act.
RISK FACTORS
This offering 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 prospectus before deciding whether to invest in shares of our common stock. 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 you may lose part or all of your investment. These risks and uncertainties described below are not the only ones facing 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.
Since beginning operations, we have sustained substantial operating losses. At the present time we do not generate sufficient revenues to pay our operating expenses. In addition, we expect to accelerate our losses in the near future as we increase our expenses by developing and rolling out our new products in order to generate additional sales.
If we do not obtain additional funding as needed, we may be unable to fund our research and development activities and to adequately pursue our business plan.
In November and December, 2004, we closed on private placements of our common stock for net proceeds of $10,234,965. However, our business plan requires significant ongoing expenditures for product research and development and for the marketing of our products. It is possible that we will need additional outside funding sources in the future to continue the development and the promotion of our products. If we are not successful in obtaining additional funding for operations if and when needed, we may have to discontinue some or all of our business activities and our stockholders might lose all of their investment.
Our failure to properly design the Stinger Stun Gun would have a material adverse effect on our operations.
Stinger Systems will be devoting its capital and research and development activities to the design, production and marketing of the Stinger Stun Gun. There is no assurance that the design will be successful or timely, or that if these products are designed successfully, they can be sold at competitive prices. The failure to effectively design and to market these products at competitive prices would have a material adverse effect on our potential profitability.
If we fail to convince the market place that we have superior products, we will not be commercially successful.
Even if we are successful in designing products superior to those of our competitors, it will be necessary for us to educate and convince the market place of that superiority. If we are unable to do so, we will not be able to achieve the market penetration necessary to become commercially successful and our investors may lose their investments.
If third party manufacturers do not perform in a commercially reasonable manner, Stinger Systems may not be successful.
Stinger Systems engages the services of third parties to do much of its manufacturing. The ability of Stinger Systems to provide the market with quality products in the volume needed will depend upon whether these third party manufacturers can produce our technical products under quality control circumstances. In the event these third parties are not successful in meeting our production needs, it is not likely Stinger Systems will be successful and our investors could lose their investments.
Our primary competitor, Taser International Inc., has an established name in the marketplace with both distributors and the end-users of stun products.
Taser International is the dominant player in our industry. Taser has been able to successfully launch its products, and penetrate the marketplace. While we are hopeful of designing a superior product to the products produced by Taser, there is no assurance that we will be able to do so or that we will be able to successfully market such products. While we believe we have competitive advantages over the Taser products, unless we are able to persuade gun companies and/or the distributors and end-users of such products of the advantages of our products, we will be unable to generate sufficient sales of our products to become viable. Taser already has contracts with a number of distributors and end-users, who may be unwilling or unable to distribute or purchase our products, respectively.
Negative publicity about less-lethal stun weapons may negatively impact sales of our products.
There have been a number of negative articles about the use and abuse of less-lethal weapons by law enforcement and correctional officers. While we believe that the use of less-lethal weapons saves lives, there has been negative publicity associated with their use. There have been accusations that stun guns have caused the deaths of subjects who have been stunned while in custody or involved in possible criminal activity. The safety of such less-lethal weapons has been a matter of some controversy.
The sale and use of our products may result in claims against us.
As noted above, the use of stun weapons has been associated with causing injuries, some serious and permanent, including death, to certain individuals. While we are attempting to design our products, the Stinger Stun Gun, to have an energy load which diminishes the risk of such injuries, there is no assurance that injuries will not be associated with and/or caused by their use resulting in claims against Stinger Systems. Although we intend to maintain liability insurance for our products, there can be no assurance that the coverage limits of our insurance policies will be adequate. Claims brought against us, whether fully covered by insurance or not, will likely have a material adverse effect upon us.
We have been sued by Taser International, Inc. which could result in a judgment against us that could negatively impact our operations.
Stinger Systems is a defendant in a lawsuit brought by Taser International pending in the United States District Court for the Western District of North Carolina. In the suit, Taser principally asserts a claim for false advertising and seeks injunctive relief, monetary damages in an unspecified amount, trebling of damages, attorneys fees and destruction of certain advertising material. A judgment in the suit adverse to our interests could jeopardize our business operations.
Claims by others that our products infringed their patents or other intellectual property rights could adversely affect our financial condition.
Any claim of patent or other proprietary right infringement brought against us would be time consuming to defend and could likely result in costly litigation, divert the time and attention of our personnel and management and cause product development delays. Moreover, an adverse determination in a judicial or administrative proceeding could prevent us from developing manufacturing and/or selling some of our products, which could harm our business, financial condition and operating results.
We may not be able to protect our patent rights, trademarks, and other proprietary rights.
We believe that our patent rights, trademarks, and other proprietary rights are important to our success and our competitive position. While we have patents and licenses with respect to certain of our products, there is no assurance that they are adequate to protect our proprietary rights. Accordingly, we plan to devote substantial resources to the establishment and maintenance of these rights. However, the actions taken by us may be inadequate to prevent others from infringing upon our rights which could compromise any competitive position we may develop in the marketplace.
Police, prison and military operations are government agencies which are subject to budgetary constraints, which may inhibit sales.
Government agencies are generally subject to budgets which limit the amount of money that they can spend on weapons procurement. It may be that although a government agency is interested in acquiring our products, it will be unable to purchase our products because of budgetary constraints. Further, the lead time for an agency acquiring new weapons and receiving approval to acquire them may delay sales to such agencies. Any such delay will have an adverse effect upon our revenues.
There exist some state, local and international regulations and/or prohibitions on less-lethal weapon systems which will make it more difficult to market our products in those jurisdictions thereby limiting potential revenues.
Some states prohibit the sale of less-lethal weapon systems to law enforcement agencies. Additional negative publicity with respect to less-lethal weapon systems may cause other jurisdictions to ban or restrict the sale of our products. Internationally, there are some countries which restrict and/or prohibit the sale of less-lethal weapon systems. Further, the export of our less-lethal weapon systems is regulated. Export licenses must be obtained from the Department of Commerce for all shipments to foreign countries other than Canada. To the extent that states, local governments or other countries impose restrictions or prohibitions on the sale and use of our products or to the extent we are unable to obtain export licenses for the sales of our weapons to international customers, each of these cou ld materially and adversely affect our results of operations and financial condition.
If we cannot retain or hire qualified personnel, our programs could be delayed.
Our business is a technical and a highly specialized area of the firearm industry. We are dependent on the principal members of the management and technical staff. The loss of key employees could disrupt our research and development and product promotion activities. We believe that our future success will depend in large part upon our ability to attract and retain highly skilled scientific and managerial personnel. We face intense competition for these kinds of personnel from other companies and organizations. We might not be successful in hiring or retaining the personnel needed for success.
Because our common stock is quoted on the Pink Sheets, your ability to sell your shares in the secondary trading market may be limited
Our common stock currently is quoted on the over-the-counter market on the OTC Bulletin Board. Consequently, the liquidity of our common stock is impaired, not only in the number of shares that are bought and sold, but also through delays in the timing of transactions, and coverage by security analysts and the news media, if any, of our company. As a result, prices for shares of our common stock may be lower than might otherwise prevail if our common stock was quoted on the Nasdaq Stock Market or traded a national securities exchange, like the New York Stock Exchange or American Stock Exchange.
Sales of a substantial number of shares of our common stock in the public market, including the shares offered under this prospectus and under other registration statements, could lower our stock price and impair our ability to raise funds in new stock offerings.
Future sales of a substantial number of shares of our common stock in the public market, including the shares offered under this prospectus and under other registration statements, or the perception that such sales could occur, could aversely affect the prevailing market price of our common stock and could make it more difficult for us to raise additional capital through the sale of equity securities.
Our stock price has been volatile and your investment in our common stock could suffer a decline in value.
Our common stock is quoted on the Pink Sheets. The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control. These factors include:
| · | progress of the Stinger 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. |
From November 12, 2004 through February 3, 2005, the closing sales price of our stock has ranged from $1.25 to $48.55.
Purchasers in this offering will experience immediate and substantial dilution of their investment.
We expect that the offering price per share of the shares being sold by the Selling Stockholders will significantly exceed the net tangible book value per share of the outstanding common stock. Accordingly, purchasers of common stock in this offering would pay a price per share that substantially exceeds the value of our assets after subtracting our liabilities.
Exercise of outstanding options will dilute existing shareholders and could decrease the market price of our common stock.
As of December 31, 2004, we had issued and outstanding 15,003,500 shares of common stock and outstanding options and warrants of 2,170,000 for additional shares of common stock at an average exercise price of approximately $4.43 per share. To the extent these outstanding options are ultimately exercised, there will be further dilution to investors in this offering. The existence of the outstanding options may adversely affect the market price of our common stock and the terms under which we could obtain additional equity capital.
We likely will issue additional equity securities which will dilute your share ownership.
We likely will issue additional equity securities through the exercise of options that are outstanding or may be outstanding, and possibly to raise capital. These additional issuances will dilute your share ownership.
We do not intend to pay any cash dividends on 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.
We have never paid a cash dividend on our common stock. We do not intend to pay 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.
USE OF PROCEEDS
The shares offered by this prospectus are being offered solely for the account of the selling stockholders. We will not receive any proceeds from the sale of the shares by the selling stockholders. Some of the common shares registered hereby totaling 1,000,000 in the aggregate underlie certain warrants. We would receive up to $7.5 million upon payment of the exercise price of those warrants. The warrants allow for cashless exercise and we will not receive any proceeds from a warrant exercised under the cashless exercise provisions or from any warrants that are not exercised. However, a cashless exercise is available only if after one year from the date of issuance of the warrants there is no effective registration statement registering the resale of the warrant shares by the holder. We intend to use proceeds from the exercise of warrants, if any, for general working capital.
MARKET FOR OUR COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
On November 12, 2004, our stock began trading on the pink sheets. Our stock trades on the pink sheets under the symbol STIY.PK. Beginning on November 12, 2004, our stock has traded at between $1.25 and $48.55 per share. Over-the-Counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. On February 3, 2005, our stock closed at $16.50. You are advised to obtain current market quotations for our common stock. No assurance can be given as to the market prices of our common stock at any time after the date of this prospectus.
As of February 3, 2005, there were approximately 435 holders of record of our common stock. This number does not include individual stockholders who own common stock registered in the name of a nominee under nominee security listings.
We have not declared or paid any cash dividends on our common stock since our inception. We do not intend to pay any cash dividends in the foreseeable future, and we are precluded from paying cash dividends on our common stock under our financing agreements.
SELECTED FINANCIAL DATA
The following table sets forth our selected historical financial and operating data for Stinger Systems Inc. formerly United Consulting Corporation.:
Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year. The data presented below should be read in conjunction with, and is qualified in its entirety by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements and the notes thereto appearing elsewhere in this prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this offering circular. This discussion contains forward-looking statements that involve risks and uncertainties. Stinger Systems’ actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this offering circular.
Background
In September, 2004, agreements were reached between Stinger Systems, Inc. (formerly United Consulting Corporation) (the “Company”), Electronic Defense Technology, LLC (“EDT”), EDT Acquisition, LLC (“EDTA”), Mr. Richard Bass (owner of 100% of the member interest in EDT) (“Bass”), and Mr. Robert F. Gruder and T. Yates Exley (owners of 100% of the member interest in EDTA). These agreements enabled EDTA to acquire a 95% ownership interest in EDT in exchange for a combination of notes payable and cash of $450,000. Subsequent to this purchase the Company exchanged 9,750,000 shares of its $0.001 par value common stock for 100% of the ownership interest in EDT.
These transactions were entered into to allow the Company to acquire various licenses related to electronic stun devices. The Company negotiated agreements to purchase the patents applicable to these licenses in exchange for the issuance of 75,000 shares of the Company’s common stock. Also, the Company issued 25,000 shares of its common stock for the acquisition of miniature camera technology.
EDT had reported operating losses since inception (approximately $645,000 from January 1, 2001 to September, 2004), due to the small sales volume of its existing products. While the research and development had basically been completed on the handheld projectile stun gun prior to September 24, 2004, no stun guns had been sold. The new management of the Company has made the manufacture, distribution and sale of the handheld projectile stun gun its main sales objective. To that end, in December, 2004, the Company placed an order for the manufacture of 10,000 stun guns.
The Company after it’s acquisition of EDT required funds to support current operations and to provide future working capital. In September, 2004, the Company sold 1,122,000 shares of common stock for $400,000 to two individuals who were accredited investors, one of which is the father of T. Yates Exley, an executive officer of the Company.
Subsequent to September, 2004, the Company and its management initiated hiring of employees, rental of office and warehouse space and a sales program designed to generate interest in the handheld projectile stun gun. The result of operations for the period September 24, 2004 to December 31, 2004 is as follows:
| Sales | | $ | 63,603 | |
| Cost of Product Sold | | | 51,686 | |
| | | | | |
| Gross Margin | | | 11,620 | |
| | | | | |
| Selling Expenses | | | 45,348 | |
| | | | | |
| General and Administrative Expenses | | | | |
| Employee Salaries and Benefits | | | 78,829 | |
| Employee Acquisition Cost | | | 7,520,000 | |
| Other | | | 867,642 | |
| Interest Expense | | | 10,268 | |
| | | | | |
| Net Loss | | | (8,510,467 | ) |
EDT has continued its limited sales of other stun technology devices. However, the management of the Company placed its major emphasis during this time period on the employment of qualified individuals to assume executive management and selling positions with the Company. In December, 2004, the Company entered into an employment agreement with Roy C. Cuny, former president and chief executive officer of Smith & Wesson Holding Corporation. The employment agreement included among other provisions, a stock option to purchase 500,000 shares of the Company’s common stock for $1.00. The fair value of the option shares was $7,520,000 and has been reflected as employee acquisition cost at December 31, 2004, since the options vested immediately.
The other general and administrative expenses primarily consist of consulting fees ($315,000), director fees ($93,000), legal fees ($160,000), research and development cost ($56,000) and a one time payment to Smith & Wesson Holding Corporation of ( $152,000) associated with the employment of Mr. C. Cuny. Approximately $419,000 of these costs and expenses represents non-cash charges due to the fact that the Company exchanged shares of its common stock for services rendered.
Liquidity and Capital Resources
At December 31, 2004, the financial statement of the Company reflected a cash balance of $9,093,634. These funds will be used to meet the Company’s liquidity needs in 2005.
Cash Flow Operating Activities
The Company reported a use of funds of $412,056 from operating activities at December 31, 2004. The operating loss of $8,510,467 was offset by non cash charges of $7,938,700 which represented the value of stock issuances and stock options exchanged for services rendered. The Company paid deposits on certain inventory purchases ($139,190) and has unpaid commitments for inventory purchases of $1,497,140 at December 31, 2004.
Cash Flow for Investing Activities
The Company used $128,218 to purchase equipment, fixtures and patents. The Company has no outstanding commitments to purchase equipment, fixtures or patents.
Cash Flow From Financial Activities
The Company sold 3,222,000 shares of its common stock and netted $10,234,965. These funds were used to pay a $600,000 note that was assumed by the Company in September, 2004.
Off-Balance Sheet Arrangements and Commitments
The following table summarizes our contractual obligations at December 31, 2004:
| Description | | | Amount | |
| | | | |
| Office and Warehouse Rental | | $ | 24,700 | |
| Inventory Purchases | | | 1,497,140 | |
| | | $ | 1,521,840 | |
All obligations are due and payable in 2005.
The Company has an employment agreement with Roy C. Cuny that is for a period of two years commencing on January 5, 2005, at the rate of $25,000 per month. On January 19, 2005, the Company entered into an employment agreement with Christopher Killoy at the rate of $14,600 per month.
BUSINESS
History
Stinger Systems was organized under the laws of the State of Nevada under the name United Consulting Corporation on July 2, 1996. United Consulting Corporation changed its name to Stinger Systems, Inc. on September 27, 2004. Stinger Systems has never been in bankruptcy, receivership or any similar proceeding.
Stinger Systems was formed for the purpose of providing consulting services to various industries as determined by Stinger Systems and pursuant to the expertise of consultants retained by Stinger Systems. On September 24, 2004, EDT Acquisition LLC, a Michigan limited liability company owned by Robert Gruder and T. Yates Exley, acquired a 95% interest in Electronic Defense Technologies, LLC, an Ohio limited liability company. The interest was acquired in exchange for $250,000 in cash and a $200,000 note payable on or before March 24, 2006 from EDT Acquisition, LLC. The 95% interest in Electronic Defense Technologies, LLC together with the remaining 5% interest in the same company was then transferred on the same day to Stinger Systems in exchange for the issuance by Stinger Systems o f 9,750,000 shares of Stinger Systems’ common stock. In connection with the transaction, 10,000,000 shares of Stinger Systems that had been issued and outstanding previously was returned to Stinger Systems for cancellation. This transaction transferred control of Stinger Systems to Robert Gruder and T. Yates Exley. These two gentlemen are now executive officers and directors of Stinger Systems with Mr. Gruder also serving as the chairman of the board of directors. The ownership of EDT Acquisition, LLC has now been changed as reflected elsewhere in this registration statement. Mr. Gruder’s portion of the shares of Stinger Systems formerly held in EDT Acquisition, LLC have been paid out of the LLC and are held by him directly.
Our Business
Stinger Systems is engaged in the manufacture of electronic stun devices for the control of, and to provide temporary incapacitation of, potentially dangerous persons. Stinger Systems, through its wholly owned subsidiary Electronic Defense Technologies, LLC, produces a variety of control products including Ice Shield, an electrified riot shield, Bandit, a remote controlled or movement controlled electrified wrap used for controlling potentially dangerous detainees in public situations or during transport, and Ultron, a handheld contact stun gun used to temporarily incapacitate potentially dangerous individuals. The products of Stinger Systems are classified under the SIC code 5099. Following is a list of entities that use to some extent one or more of Stinger Systems’ products:
| · | U.S. Marshals nationwide; |
| · | various state department of corrections; |
| · | various county sheriffs’ departments; |
| · | New York City Department of Corrections at Rikers Island; |
| · | U.S. Federal Bureau of Prisons; |
| · | U.S. Border Patrol Academy. |
Our Products
Handheld Projectile Stun Guns
The Stinger Stun Gun is an electro-stun device that utilizes self-contained primer charged cartridges to shoot darts at targets up to 31 feet away. Stinger Systems’ immediate business focus is on completing development of and marketing this product. The user loads one or two cartridges into the gun, aims the laser guide at the intended target and pulls the trigger. The primer charge propels darts connected to the gun by thin insulated wires and, upon contact, a pulsed electrical current is passed through the subject. The electrical charge temporarily impairs the subject’s ability to control muscles, dropping the subject to the ground and rendering him/her harmless to the user, surrounding people, and themselves. The Stinger Stun Gun offers the option of video and voice capture t hrough Stinger Systems’ patent-pending TruVu camera that provides an impartial fact witness of the situation and manner in which a weapon has been used. Prototypes of the Stinger Stun Gun and TruVu camera have been built and tested and the final design and engineering of these products is underway.
In December of 2005, the Company began demonstrating the Stinger Projectile Stun Gun prototype. The Company is encouraged by the response it has received to date from product demonstrations to various law enforcement departments, but because Stinger Systems relies completely on its manufacturers and suppliers to assemble and ship its products and because the Stinger Stun Gun is transitioning from a prototype to a finished deliverable product, the Company can not provide definitive assurances of when the Stinger Stun Gun will actually be commercially available.
Ultron II®, a Hand-held Contact Stun Gun
The ULTRON II® is a handheld contact stun gun. The unit operates on a lithium battery power source and has a patented disabler wrist strap that disables the device in the event that it is removed from the user.
Ice-Shield Electronic Immobilization Riot Shield
The Ice Shield is an electrified riot shield designed to provide added protection for police and military personnel in hazardous crowd control situations. The shields are constructed of polycarbonate Lexan and feature spark display points on its exterior surface providing a visible deterrent. The shock shields may be used as traditional riot shields or activated to provide a less-lethal, immobilizing or repelling contact shock. Applications to date have centered on hazardous crowd control, civil disturbances, prison uprisings and forced prison cell entries.
Bandit / The R-E-A-C-T System, an Immobilizing Electronic Restraint
The Bandit / The Remote Electronically Activated Control Technology (REACT) addresses safety issues associated with the transportation of potentially violent prisoners and the handling of potentially dangerous defendants in courtroom situations. The product consists of a system of bands that are put on the subject. The bands deliver an incapacitating or disruptive electric shock if the subject attempts to flee or attack. The shock may be set to activate automatically on movement or may be delivered by an operator up to 150 feet away through a wireless remote.
Marketing and Competition
As mentioned previously, Stinger Systems markets its products primarily to the police, prison, professional security and military sectors. Orders are received from both end users and from authorized distributors. Stinger Systems’ marketing strategy is to engage the services of manufacturing representatives and distributors that specialize in Stinger Systems’ industry. Stinger Systems’ plan is to aggressively pursue the development of a network of such representatives and distributors throughout the United States and abroad as soon as we take the Stinger Stun Gun into the market.
Stinger System’s primary competitor is Taser International, Inc., a publicly held corporation that is substantially larger and has better access to capital. Taser is dominant within Stinger Systems’ industry. Nevertheless, Stinger Systems’ management feels its Stinger Stun Gun has certain advantages over Taser’s stun guns including range and cost. Accordingly, we believe we will be able to compete with Taser in the industry. Stinger Systems also expects to compete with Law Enforcement Associates which has announced its plans to introduce its own projectile stun gun.
The primary raw materials in the company’s products are electrical components and various plastic resins. There are multiple suppliers of such materials and management believes that it could readily replace all current vendors if necessary. Current vendors include Hitachi, Samsung, Texas Instruments, General Electric and DuPont.
Stinger Systems has filed patent applications surrounding the use of its four dart stun gun system. These patents are pending and there can be no certainty that they will be approved and if approved up-held on challenge. Stinger Systems also holds the exclusive license for the use of a four dart projectile system in a handheld stun gun under patent number 6,575,073 dated 5/12/2000.
Government Regulation
The Stinger Stun Gun uses primer charges to propel the dart wire system to the target. The use of primer as a propellant classifies the Stinger Stun Gun as a hand gun and as such the manufacture, distribution and sale of the gun is regulated by the Bureau of Alcohol Tobacco and Firearms. Some states, cities, and municipalities have outlawed the use of stun guns either entirely or in part. It is not clear which regulations will have any affect on the Stinger System’s products as they will be treated as hand guns. Since the Stinger Stun Gun is considered a hand gun by the ATF, it must be manufactured in a secure environment at an ATF approved site, serial numbered and documented appropriately and shipped in accordance with all applicable regulations.
Management believes that due to the nature of the Company’s product offering and the outsourcing of a majority of its manufacturing, there is minimal cost to complying with current environmental laws.
Research and Development
Stinger Systems, Inc., both directly and through its wholly owned subsidiary Electronic Defense Technologies, LLC, has spent approximately $55,935 in research and development since September 24, 2004. We intend to substantially increase spending in this area.
Properties
Stinger Systems’ corporate offices located at 1901 Roxborough Rd., Suite 118, Charlotte NC 28211 include 1,100 sq ft. It pays $1,000 per month for this space on a lease running through July of 2005. These facilities are adequate for the scope of Stinger Systems’ current operations. It should be noted that Stinger Systems is currently making arrangements to move its corporate offices to Springfield, Massachusetts by February, 15, 2005. Stinger Systems has offices and a manufacturing site at 23050 Miles Rd, Bedford Heights OH 44128 which is approximately 3,000 sq. ft. The current lease rate for this space is $1,820 per month and is on a lease that runs to October of 2005. Additional space is readily available in both the North Carolina and Ohio locations should it ever be necessary.
Legal Proceedings
Stinger Systems is a party in Case Number 3:04CV620K styledTaser International, Inc. v. Stinger Systems, Inc. and Robert F. Gruder, pending in the United States District Court for the Western District of North Carolina. In the suit, Taser asserts a claim for false advertising under 15 U.S.C. Section 1125(a) and seeks injunctive relief, monetary damages in an unspecified amount, trebling of damages, attorneys fees and destruction of certain advertising material. Based upon a review of the pleading, it is Stinger Systems’ counsel’s opinion that Taser’s claims center around the allegation that the Stinger Stun Gun does not exist and therefore Stinger System’s statements about its existence and capabilities are false and misleading. Inasmuch as Stinger Systems has demonstr ated its Stinger Stun Gun on several occasions, most recently in a news story on a local North Carolina television station, it is Stinger System’s counsel’s opinion that Stinger System will prevail in the lawsuit. Stinger Systems has moved to dismiss Taser’s claims, responded to the allegations and countersued Taser for defamation. It is seeking monetary damages, punitive damages and attorney fees.
MANAGEMENT
Executive Officers and Directors
Set forth below is certain information with respect to our executive officers and directors:
| Name | | Age | | Position |
| Robert F. Gruder | | 45 | | CEO and Chairman |
| Roy Cuny | | 51 | | President |
| T. Yates Exley | | 44 | | Secretary, CFO and Director |
| Chris Killoy | | 46 | | Vice President of Marketing and Sales |
| Denise Medved | | 44 | | Director |
| Michael Racaniello | | 52 | | Director |
| Andrew P. Helene | | 44 | | Director |
Robert F. Gruder - Chairman and CEO of Stinger Systems, Inc. Mr. Gruder is co-founder of Stinger Systems, Inc. Prior to founding Stinger Systems, Mr. Gruder was a independent investor since September, 2002, managing his personal portfolio. For the three years prior thereto, he was Chairman and Chief Executive Officer of Information Architects Corporation a public company traded on NADASQ. Mr. Gruder has over 15 years of experience in the technology industry. Mr. Gruder holds no outside board affiliations.
Roy C. Cuny - President of Stinger Systems, Inc. Prior to joining Stinger Systems, Mr. Cuny was the President and Chief Executive Officer of Smith & Wesson Holding Corporation, the largest manufacturer of handguns in the United States and the largest U.S. exporter of handguns. Mr. Cuny served in these capacities from December 2003 to November 2004. From December 2002 until November 2004, Mr. Cuny also served as the President and Chief Executive Officer of Smith & Wesson Holding Corporation's wholly owned subsidiary, Smith & Wesson Corp. and was its Vice President of Operations when he joined in October 2002. Mr. Cuny was President from April 2001 to July 2002 and Chief Operating Officer from April 2000 to July 2002 of Peerless Manufacturing Co., an equipment manufacturer based in Dallas , Texas. Mr. Cuny held various responsibilities; including Vice President with Foster Wheeler Corporation, a construction and engineering company, during the 20-year period ended April 2000. Mr. Cuny graduated from Rutgers University with two degrees, one in Mechanical Engineering and one in Business Administration.
T. Yates Exley - Secretary, Chief Financial Officer and Director of Stinger Systems, Inc. Mr. Exley is co-founder of Stinger Systems, Inc. Before Stinger Systems, Mr. Exley worked as an independent financial consultant for the prior two years. Before that, he worked for Wachovia Securities for three years. Mr. Exley obtained a Masters in Business Administration from the Wharton School of Business at the University of Pennsylvania. He has over 15 years of experience in investment and commercial banking. Mr. Exley holds no outside board affiliations.
Chris Killoy - Vice President of Marketing and Sales of Stinger Systems, Inc. Mr. Killoy’s most recent position was as Vice President of Sales and Marketing for Sturm, Ruger and Co., Inc., the nations largest firearms manufacturer. Before joining Sturm, Ruger and Co., Inc., Mr. Killoy was Vice President of Sales and Marketing for Smith & Wesson Corp. (2001 - 2003) Prior to that, he worked for Smith & Wesson in various capacities, including as its Vice President of Consumer Products (1999 - 2001), Vice President of Domestic Sales (1997 - 1999), Director of Commercial Sales (1996 - 1997), and Director of Marketing and Product Management (1989 - 1995). Previously, he was employed with GE Aerospace in their Tactical Systems Department and Ordnance Systems Division as a Program Engineer (19 86 - 1988) and as a Deputy Program Manager (1988 - 1989). Mr. Killoy graduated with a Bachelor of Science degree from the United States Military Academy at West Point in 1981. From 1981 to 1986 he served in the U.S. Army as an Armor officer on active duty. He retired as a Major from the U.S. Army Reserve with over twenty years combined active and reserve service, including Armor and Infantry assignments.
Denise Medved is a member of our board of directors. She is General Manager of National Trade Productions, Inc. Ms. Medved has worked in various capacities for National Trade Productions, Inc. for the past three years where she started the firms focus on the security and law enforcement sector. She is a recognized authority on marketing to the law enforcement and security organization. For the two years prior to National Trade Productions, Inc. Ms. Medved worked for CMGI a venture capital firm. She serves on the board of the Congressional Youth Leadership Counsel in Washington, DC.
Michael Racaniello is a member of our board of directors. He is a self employed CPA - Tax Consultant. Mr. Racaniello has been in private practice focusing primarily on tax accounting for the past five years. Prior to that Mr. Racaniello served as Corporate Controller for Information Architects Corporation based in Charlotte, North Carolina. Mr. Racaniello has no other outside board affiliations.
Andrew P. Helene is a member of our board of directors. He is currently Vice President, Banknorth, N.A. Mr. Helene has over 15 years experience in commercial and investment banking. Mr. Helene graduated from Williams College and holds a Masters degree in Business Administration from Columbia University and a Masters degree in International Studies from Johns Hopkins University. Mr. Helene has no outside board affiliations.
Director Compensation
There have been no arrangements established at the present time for directors to be compensated for their service on the board of directors. Denise Medved, Michael Racaniello and Andrew P. Helene were each given 10,000 shares of common stock for joining the board of directors.
Executive Compensation
No executive officer of Stinger System or its predecessors has received any compensation during the past three fiscal years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 24, 2004, EDT Acquisition LLC, a Michigan limited liability company owned by Robert Gruder and T. Yates Exley, acquired a 95% interest in Electronic Defense Technologies, LLC, an Ohio limited liability company. The interest was acquired in exchange for $250,000 in cash and a $200,000 note payable on or before March 24,2006 from EDT Acquisition, LLC. The 95% interest in Electronic Defense Technologies, LLC together with the remaining 5% interest in the same company was then transferred on the same day to Stinger Systems in exchange for the issuance by Stinger Systems of 9,750,000 shares of Stinger Systems’ common stock. This transaction transferred control of Stinger Systems to Robert Gruder and T. Yates Exley by virtue of their ownership of EDT Acquisition LLC which no w holds 9,250,000 common shares of Stinger Systems. These two gentlemen are now officers and directors of Stinger Systems.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of December 31, 2004, we had 15,003,500 shares of common stock outstanding (excluding certain options and warrants), which are our only outstanding voting securities. The following table sets forth information regarding the beneficial ownership of our common stock as of February 3, 2005, by:
each person (or group of affiliated persons) who is known by us to own beneficially more than 5% of our common stock;
each of our executive officers;
each of our current directors; and
all directors and executive officers as a group.
Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percentage | |
EDT Acquisition, L.L.C. c/o Bodman LLP Attn: David P. Larsen 100 Renaissance Center, 34th Floor Detroit, MI 48243 | | 4,625,000 | (1) | 30.8 | % |
Bonanza Master Fund Ltd. 300 Crescent Court, Suite 1740 Dallas, TX 75201 | | 900,000 | (2) | 6.0 | % |
Tonga Partners, L.P. c/o Goldman Sachs & Company Attn: Jeff Brill 555 California Street, 44th Floor San Francisco, CA 94104 | | 877,562 | (3) | 5.9 | % |
Robert F. Gruder 1901 Roxborough Road, Suite 118 Charlotte, NC 28211 | | 4,625,000 | | 30.8 | % |
T. Yates Exley 1901 Roxborough Road, Suite 118 Charlotte, NC 28211 | | 4,625,000 | (4) | 30.8 | % |
Roy C. Cuny 1901 Roxborough Road, Suite 118 Charlotte, NC 28211 | | 500,000 | (5) | 3.3 | % |
Chris Killoy 1901 Roxborough Road, Suite 118 Charlotte, NC 28211 | | 0 | | 0 | % |
Andrew Helene 4849 Connecticut Ave NW # 624 Washington DC 20008 | | 10,000 | | * | % |
Denise Medved 5115 Ravensworth Road Ananndale, VA 22003 | | 10,000 | | * | % |
Michael Racaniello 1101 Tyvola Road Charlotte, NC 28217 | | 10,000 | | * | % |
| All directors and executive officers as a group (7 persons) | | 9,780,000 | (6) | 65.2 | % |
* Less than one percent (1%).
| (1) | The beneficial owner of EDT Acquisition, LLC is T. Yates Exley who is an executive officer and director of Stinger Systems. |
(2) Includes 300,000 shares of common stock that may be purchased upon the exercise of warrants. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock.
(3) Includes 292,521 shares of common stock that may be purchased upon the exercise of warrants. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock.
| (4) | Represents a beneficial interest in 4,625,000 common shares held by EDT Acquisitions, LLC. Mr. Exley also has a potential minority beneficial interest in 561,000 shares held by Exley Management Services LLC, a company principally owned and controlled by his father. Because Mr. T. Yates Exley cannot control the disposition or the voting of the shares held in this company, they have not been allocated to him as part of his beneficial holdings. |
| (5) | The 500,000 shares of common stock represented are shares that may be obtained upon the exercise of options that are presently exercisable. |
| (6) | Includes 500,000 shares of common stock that may be obtained upon the exercise of options. |
SELLING STOCKHOLDERS
This prospectus relates to the offer and sale from time to time by the selling stockholders of 16,153,500 shares of common stock that have been issued or will be issued upon the exercise of certain warrants. There can be no assurance that the selling stockholders will sell any or all of their common stock offered by this prospectus. We do not know if, when, or in what amounts the selling stockholders may offer the common stock for sale.
Selling Stockholders
The following table sets forth:
| · | the names of the selling stockholders; |
| · | the number of shares of common stock owned by each of the selling stockholders; |
| · | the percentage of the class of common stock owned by each of the selling stockholders; and |
| · | the number of shares of common stock being offered by the selling stockholders in this prospectus. |
This table is based on information furnished to us by or on behalf of the selling stockholders.
As of December 31, 2004, there were 15,003,500 shares of common stock outstanding.
| | | | | | | Shares Beneficially Owned After the Offering | |
| | Shares Beneficially Owned Before the Offering | | | |
Selling Stockholder | | Shares Being Registered | |
| Number | | Percentage | |
| BONANZA MASTER FUND LTD. | | 900,000 | (1) | 900,000 | | 0 | | 0 | |
| TONGA PARTNERS, L.P. | | 877,562 | (2) | 877,562 | | 0 | | 0 | |
| THE CUTTYHUNK FUND LIMITED | | 620,275 | (3) | 620,275 | | 0 | | 0 | |
| ANEGADA MASTER FUND, LTD. | | 602,163 | (4) | 602,163 | | 0 | | 0 | |
| ROBERT F. GRUDER | | 4,625,000 | (5) | 4,625,000 | | 0 | | 0 | |
| OLIVIA K. GRUDER | | 42,500 | (6) | 42,500 | | 0 | | 0 | |
| MAXIMILAN M. GRUDER | | 42,500 | (6) | 42,500 | | 0 | | 0 | |
| EDT ACQUISITION LLC | | 4,625,000 | (7) | 4,625,000 | | 0 | | 0 | |
EXLEY GRANDCHILDREN'S TRUST UAD 12/20/96 | | 85,000 | (8) | 85,000 | | 0 | | 0 | |
| RICHARD BASS | | 200,000 | | 200,000 | | 0 | | 0 | |
RICHARD M. BASS, TRUSTEE FBO IRREVOCABLE TRUST AGREEMENT FOR STEPHANIE BASS | | 50,000 | | 50,000 | | 0 | | 0 | |
| RICHARD M. BASS FAMILY LLC | | 248,000 | | 248,000 | | 0 | | 0 | |
| ENID S. GURNEY | | 2,000 | | 2,000 | | 0 | | 0 | |
| 3831 LLC | | 250,000 | (9) | 250,000 | | 0 | | 0 | |
| ROY CUNY | | 500,000 | (10) | 500,000 | | 0 | | 0 | |
| CHRIS KILLOY | | 50,000 | (11) | 50,000 | | 0 | | 0 | |
| EXLEY MANAGEMENT SERVICES LLC | | 561,000 | (12) | 561,000 | | 0 | | 0 | |
| SCOTT D GOODSPEED | | 10,000 | | 10,000 | | 0 | | 0 | |
| E GARY HANCE | | 5,000 | | 5,000 | | 0 | | 0 | |
| ANDREW HELENE | | 10,000 | (13) | 10,000 | | 0 | | 0 | |
| TOM DUDCHIK | | 400,000 | | 400,000 | | 0 | | 0 | |
| OZZIE D HOLSHOUSER JR | | 5,000 | | 5,000 | | 0 | | 0 | |
| CYNTHIA W JONES | | 5,000 | | 5,000 | | 0 | | 0 | |
| CARLETON KRUSHINSKI | | 5,000 | | 5,000 | | 0 | | 0 | |
| JAMES MCNULTY | | 75,000 | | 75,000 | | 0 | | 0 | |
| DENISE MEDVED | | 10,000 | (14) | 10,000 | | 0 | | 0 | |
| GLEN M MOWREY | | 5,000 | | 5,000 | | 0 | | 0 | |
| DOUG MURRELL | | 220,000 | | 220,000 | | 0 | | 0 | |
| MICHAEL RACANIELLO | | 10,000 | (15) | 10,000 | | 0 | | 0 | |
| RODNEY R SCHOEMANN | | 561,000 | | 561,000 | | 0 | | 0 | |
| DENISE SHAFFER | | 5,000 | | 5,000 | | 0 | | 0 | |
| JAMES A THIBEAULT | | 5,000 | | 5,000 | | 0 | | 0 | |
| WAYNE THOMAS | | 100,000 | | 100,000 | | 0 | | 0 | |
| J WAYNE THOMAS | | 50,000 | | 50,000 | | 0 | | 0 | |
| ALGERD M ULINSKAS | | 5,000 | | 5,000 | | 0 | | 0 | |
| JOE VALENCIC | | 55,000 | | 55,000 | | 0 | | 0 | |
| YUNG U. RYU | | 100,000 | | 100,000 | | 0 | | 0 | |
| JESSE SHELMIRE | | 100,000 | (16) | 100,000 | | 0 | | 0 | |
| SCOTT GRIFFITH | | 100,000 | (17) | 100,000 | | 0 | | 0 | |
| CM PARTNERS | | 10,000 | | 10,000 | | 0 | | 0 | |
| SCHOX PLC | | 20,000 | | 20,000 | | 0 | | 0 | |
| TRIMECH | | 500 | | 500 | | 0 | | 0 | |
| JEANETTE OUSLEY | | 1,000 | | 1,000 | | 0 | | 0 | |
(1) Includes 300,000 shares of common stock that may be purchased upon exercise of presently exercisable warrants. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock.
(2) Includes 292,519 shares of common stock that may be purchased upon exercise of presently exercisable warrants. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock.
(3) Includes 206,758 shares of common stock that may be purchased upon exercise of presently exercisable warrants. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock.
(4) Includes 200,721 shares of common stock that may be purchased upon exercise of presently exercisable warrants. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock.
(5) Includes 85,000 shares of common stock that may be obtained upon conversion of a promissory note. Mr. Gruder is the CEO and the chairman of the board of directors of Stinger Systems.
(6) Includes 42,500 shares of common stock that may be obtained upon conversion of a promissory note.
(7) T. Yates Exley is the owner of EDT ACQUISITION LLC. Mr. Exley is an executive officer and a director of Stinger Systems.
(8) The 85,000 shares of common stock listed are shares that may be obtained upon conversion of a promissory note.
(9) The 250,000 shares of common stock listed are shares that may be purchased upon the exercise of warrants. Fifty percent of the warrants are presently exercisable and 50% become exercisable in November, 2005.
(10) The 500,000 shares of common stock listed are shares that may be purchased upon exercise of options. Mr. Cuny is the president of Stinger Systems.
(11) The 50,000 shares of common stock listed are shares that may be purchased upon exercise of options. Mr. Killoy is an executive officer of Stinger Systems.
(12) Exley Management Services LLC is principally owned and controlled by the father of T. Yates Exley, an officer and a director of Stinger Systems. Even though T. Yates Exley is potentially a beneficiary of the assets of this LLC, at the present time he cannot control the voting of or the disposition of the shares of Stinger Systems held by this LLC and accordingly is not considered the beneficial owner of such shares.
(13) Andrew Helene is a director of Stinger Systems.
(14) Denise Medved is a director of Stinger Systems.
(15) Michael Racaniello is a director of Stinger Systems.
(16) The 100,000 shares of common stock listed are shares that may be purchased upon exercise of presently exercisable warrants.
(17) The 100,000 shares of common stock listed are shares that may be purchased upon exercise of presently exercisable warrants.
PLAN OF DISTRIBUTION
The Selling Stockholders (the “Selling Stockholders”) of the common stock (“Common Stock”) of the Company and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling shares:
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| · | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | settlement of short sales entered into after the date of this prospectus; |
| · | broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; |
| · | a combination of any such methods of sale; |
| · | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or |
| · | any other method permitted pursuant to applicable law. |
The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with NASDR Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASDR IM-2440.
In connection with the sale of the Common Stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. The Selling Stockholders may also sell shares of the Common Stock short and deliver these securities to close out their short positions, or loan or pledge the Common Stock to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by th is prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the shares. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. Each Selling Stockholder has advised us that they have not entered into any written or oral agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the resale shares. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the Selling Stockholders without registration and without regard to any volume limitations by reason of Rule 144(e) under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to the prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is comp lied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the Common Stock for a period of two business days prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the Common Stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock, $0.001 par value. As of February 3, 2005, 15,003,500 shares of common stock were issued and outstanding. The outstanding shares of common stock have been duly authorized and are fully paid and non-assessable.
Common Stock
The holders of common stock are entitled to one vote per share on all matters to be voted on by stockholders and are entitled to receive such dividends, if any, as may be declared from time to time by our board of directors from funds legally available therefor, subject to the dividend preferences of the preferred stock, if any. Upon our liquidation or dissolution, the holders of common stock are entitled to share ratably in all assets available for distribution after payment of liabilities and liquidation preferences of the preferred stock, if any. Holders of common stock have no preemptive rights, no cumulative voting rights and no rights to convert their common stock into any other securities. Any action taken by holders of common stock must be tak en at an annual or special meeting or by written consent of the holders of over 50% of our capital stock entitled to vote on such action.
Warrants
As of February 3, 2005, Singer has warrants and derivative securities issued and outstanding as follows:
| · | 3831 LLC, an entity owned by Richard Bass, has an option to purchase 250,000 shares of common stock at the exercise price of $0.001 per share. Fifty percent of those options may be exercised at the present time and the remaining fifty percent may be exercised after November 24, 2005. |
| · | Olivia K. Gruder and Maximilan M. Gruder each own a note payable by Stinger Systems for $15,625. Each $15,625 note carries the right to be converted to common stock at the rate of $.40 per share. |
| · | Bonanza Master Fund Ltd. holds warrants, presently exercisable, for the purchase of 300,000 shares at the exercise price of $7.50 per share. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock. |
| · | The Exley Grandchildren’s Trust UAD 12/20/96 owns a note payable by Stinger Systems for $31,250. The note carries the right to be converted to common stock at the rate of $.40 per share |
| · | Tonga Partners, L.P. holds warrants, presently exercisable, for the purchase of 292,521 shares at the exercise price of $7.50 per share. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock. |
| · | The Cuttyhunk Fund Limited holds warrants, presently exercisable, for the purchase of 206,758 shares at the exercise price of $7.50 per share. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock. |
| · | Anegada Master Fund, Ltd. holds warrants, presently exercisable, for the purchase of 200,721 shares at the exercise price of $7.50 per share. Such warrants are not exercisable to the extent that their exercise would cause the holder to be the beneficial owner of more than 4.99% of the Company’s common stock. |
| · | Roy Cuny holds options for the purchase of 500,000 shares of common stock. |
| · | Chris Killoy holds options for the purchase of 50,000 shares of common stock. |
| · | Jesse Shelmire holds options for the purchase of 100,000 shares of common stock. |
| · | Scott Griffith holds options for the purchase of 100,000 shares of common stock. |
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon for us by Gary R. Henrie, Attorney at Law, Las Vegas, Nevada.
EXPERTS
Our consolidated financial statements as of December 31, 2004, included in this prospectus have been audited by Killman, Murrell & Company, P.C., independent registered public accounting firm, as stated in their report appearing elsewhere herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The audited financial statements of our subsidiary Electronc Defense Technology, LLC as of December 31, 2003 and December 31, 2002 included in this prospectus have been audited by Jaspers & Hall, P.C., independent registered public accounting firm, as stated in their report appearing elsewhere herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 to register the shares offered by the selling stockholders. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and our securities. The rules and regulations of the SEC allow us to omit certain information included in the registration statement from this prospectus.
STINGER SYSTEMS, INC
FORMERLY UNITED CONSULTING CORPORATION)
TABLE OF CONTENTS
| | Page |
| | |
| Report of Independent Registered Public Accounting Firm | |
Killman, Murrell & Co., P.C. | F-2 |
| | |
| Financial Statements | |
| | |
Consolidated Balance Sheet as of December 31, 2004 | F-3 |
| | |
Consolidated Statement of Operations for the Period September 24, 2004 to December 31, 2004 | F-5 |
| | |
Consolidated Statement of Stockholders' Equity for the Period September 24, 2004 to December 31, 2004 | F-6 |
| | |
Consolidated Statement of Cash Flows for the Period September 24, 2004 to December 31, 2004 | F-7 |
| | |
Notes to Consolidated Financial Statements | F-9 |
Killman, Murrell& Company P.C.
Certified Public Accountants
3300 N. A Street, Bldg. 4, Suite 200 | 1931 E. 37th Street, Suite 7 | 3051 West Commerce | 2626 Royal Circle |
Midland, Texas 79705 | Odessa, Texas 79762 | Dallas, Texas 75212 | Kingwood, Texas 77339 |
(432) 686-9381 | (432) 363-0067 | (972) 238-7776 | (281) 359-7224 |
Fax (432) 684-6722 | Fax (432) 363-0376 | Fax (972) 889-0109 | Fax (281) 359-7112 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Stinger Systems, Inc. (Formerly United Consulting Corporation)
We have audited the accompanying consolidated balance sheet of Stinger Systems, Inc. as of December 31, 2004 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the period September 24, 2004 to December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Stinger Systems, Inc. as of December 31, 2004 and the consolidated results of their operations and their cash flows for the period September 24, 2004 to December 31, 2004 in conformity with United States generally accepted accounting principles.
/s/ Killman, Murrell & Company, P.C.
KILLMAN, MURRELL & COMPANY, P.C.
Dallas, Texas
January 29, 2005
STINGER SYSTEMS, INC.
(FORMERLY UNITED CONSULTING CORPORATION)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2004
ASSETS
CURRENT ASSETS | | | |
| | | | | |
| Cash | | $ | 9,093,634 | |
| | | | | |
| Accounts Receivable, net of $1,800 allowance for | | | | |
| uncollectible accounts | | | 20,773 | |
| | | | | |
| Inventories | | | 78,162 | |
| | | | | |
| Inventory Purchase Deposits | | | 139,190 | |
| | | | | |
| Prepaid Expenses and Other Current Assets | | | 322,474 | |
| | | | | |
| TOTAL CURRENT ASSETS | | | 9,654,233 | |
| | | | | |
EQUIPMENT AND FURNITURE, net of accumulated | | | | |
| depreciation of $404 | | | 105,764 | |
| | | | | |
OTHER ASSETS | | | | |
| Intangible Assets | | | 3,102,620 | |
| | | | | |
| Other | | | 1,294 | |
| | | | | |
| TOTAL ASSETS | | $ | 12,863,911 | |
The accompanying notes are an
integral part of these consolidated financial statements.
(Continued)
STINGER SYSTEMS, INC.
(FORMERLY UNITED CONSULTING CORPORATION)
CONSOLIDATED BALANCE SHEET
(Continued)
DECEMBER 31, 2004
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES | | | | |
| Notes Payable to Related Parties | | $ | 62,500 | |
| | | | | |
| Accounts Payable | | | 2,552 | |
| | | | | |
| Accrued Liabilities | | | 491,918 | |
| | | | | |
| TOTAL CURRENT LIABILITIES | | | 556,970 | |
| | | | | |
COMMITMENTS AND CONTINGENCIES | | | - | |
| | | | | |
STOCKHOLDERS’ EQUITY | | | | |
| Common Stock, $0.001 Par Value; 50,000,000 Shares | | | | |
| | | | | |
| Authorized, 15,003,500 Shares Issued and Outstanding | | | 15,004 | |
| | | | | |
| Additional Paid-In-Capital | | | 20,802,404 | |
| | | | | |
| Accumulated Deficit | | | (8,510,467 | ) |
| | | | | |
| TOTAL STOCKHOLDERS’ EQUITY | | | 12,306,941 | |
| | | | | |
| | | $ | 12,863,911 | |
The accompanying notes are an
integral part of these consolidated financial statements.
STINGER SYSTEMS, INC.
(FORMERLY UNITED CONSULTING CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD SEPTEMBER 24, 2004 TO DECEMBER 31, 2004
SALES | | $ | 63,306 | |
| | | | | |
COST OF PRODUCT SOLD | | | 51,686 | |
| | | | | |
| GROSS MARGIN | | | 11,620 | |
| | | | | |
SELLING EXPENSES | | | 45,348 | |
| | | | | |
GENERAL AND ADMINISTRATIVE EXPENSES | | | | |
| Employee Salaries and Benefits | | | 78,829 | |
| Employee Acquisition Cost | | | 7,520,000 | |
| Other | | | 811,303 | |
| Depreciation | | | 404 | |
| Research and Development Costs | | | 55,935 | |
| | | | | |
| LOSS FROM OPERATIONS | | | (8,500,199 | ) |
| | | | | |
INTEREST EXPENSE | | | (10,268 | ) |
| | | | | |
| LOSS BEFORE INCOME TAXES | | | (8,510,467 | ) |
| | | | | |
PROVISIONS FOR INCOME TAXES | | | - | |
| | | | | |
| NET LOSS | | $ | (8,510,467 | ) |
| | | | | |
NET LOSS PER SHARE | | | | |
| Basic | | $ | (0.67 | ) |
| Diluted | | $ | (0.67 | ) |
| | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON AND | | | | |
COMMON EQUIVALENT SHARES OUTSTANDING | | | | |
| Basic | | | 12,640,900 | |
| Diluted | | | 12,640,900 | |
The accompanying notes are an
integral part of these consolidated financial statements.
STINGER SYSTEMS, INC.
(FORMERLY UNITED CONSULTING CORPORATION)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE PERIOD SEPTEMBER 24, 2004 TO DECEMBER 31, 2004
| | | Common Stock | | | | Deficit Accumulated | | | | | |
| | | Number of | | | | Paid-In | | During Developmental | | Retained | | | |
| | Shares | | Par Value | | Capital | | Stage | | (Deficit) | | Total | |
Balance, September 24, 2004 | | | 11,000,000 | | $ | 11,000 | | $ | 1,960 | | $ | (12,960 | ) | $ | - | | $ | - | |
Acquisition of Subsidiary | | | | | | | | | | | | | | | | | | | |
Cancellation of Common Shares | | | (10,000,000 | ) | | (10,000 | ) | | 10,000 | | | - | | | - | | | - | |
| Reclassification ofAccumulated Deficit | | | - | | | - | | | (12,960 | ) | | 12,960 | | | - | | | - | |
| Acquisition Shares Issued | | | 9,750,000 | | | 9,750 | | | 464,550 | | | - | | | - | | | 474,300 | |
| | | | | | | | | | | | | | | | | | | | |
Balance, September 24, 2004 | | | 10,750,000 | | | 10,750 | | | 463,550 | | | - | | | - | | | 474,300 | |
| Sale of Common Stock, Netof $665,035 of OfferingCosts | | | 3,222,000 | | | 3,222 | | | 10,231,743 | | | - | | | - | | | 10,234,965 | |
Common Stock Issued for Patents | | | 100,000 | | | 100 | | | 1,742,400 | | | - | | | - | | | 1,742,500 | |
Common stock Issued For Services | | | 921,500 | | | 922 | | | 725,278 | | | - | | | - | | | 726,200 | |
Common Stock Issued in payment of Debtand Interest | | | 10,000 | | | 10 | | | 106,933 | | | - | | | - | | | 106,943 | |
Stock Option Issued to Executive Officer | | | - | | | - | | | 7,520,000 | | | - | | | - | | | 7,520,000 | |
Stock Option Issued for Services | | | - | | | - | | | 12,500 | | | - | | | - | | | 12,500 | |
Net Loss, December 31, 2004 | | | - | | | - | | | - | | | - | | | (8,510,467 | ) | | (8,510,467 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2004 | | | 15,003,500 | | $ | 15,004 | | $ | 20,802,404 | | $ | - | | $ | (8,510,467 | ) | $ | 12,306,941 | |
The accompanying notes are an
integral part of these consolidated financial statements.
(Continued)
