The year is young, and it's a good time to check in with old familiar faces. Today, let's catch up with Stinger Systems (OTC BB: STIY.PK), the would-be competitor to TASER (Nasdaq: TASR). I say "competitor," but back in late 2004, when I started looking into Stinger and its CEO Robert Gruder, I believed I saw something else: an opportunistic coattail-rider with no real product, not much cash, and a suspiciously hyped-up story.

After a bit more digging, I soon found out that in the past, Gruder had cratered high-flying, headline-grabbing tech companies after his big promises turned flat. Investors got hammered, and I figured the same would happen with Stinger. (Stinger actually sued me and The Motley Fool for publishing those articles. The lawsuit was later dropped.)

For those who don't remember, the stock initially roared out of pennyland into a half-billion-dollar market cap. Its rise was fueled by a string of press releases that looked misleading to me, if not patently false.

Apparently, the SEC agrees. This week, after a long investigation, it finally filed a lawsuit against Stinger and Robert Gruder. The SEC says that Stinger made "a series of material misrepresentations and omissions regarding Stinger's 'flagship' stun gun product," as well as the company itself, including misrepresentations about the gun's production and availability, an Alcohol, Tobacco and Firearms "certification," and that Stinger traded on the Nasdaq.

Perhaps the most damning of all the SEC's charges (PDF file) is this excerpt:

Although Stinger and Gruder constantly emphasized the superiority of its technology and product, in reality, it appears that: a) the patent that covered the stun gun technology had been offered to, and rejected by, several companies, including Smith & Wesson, prior to being purchased by Gruder; and b) the technology at the core of Stinger's stun gun was actually 20-years-old and had been abandoned by a number of companies, including Stinger's primary competitor, Taser International, Inc.

Let's try to summarize. The SEC is alleging that Stinger's stun-gun technology is old and unwanted in the industry, and that the CEO, Robert Gruder, made a series of misstatements about that technology, the product, and the company itself. That soundsprettyfamiliar to me.

Gruder's public response to the charges? "I do not believe I committed securities fraud..." (Read the rest.) The $1.5 million that Gruder invested in Stinger, which he cites in his own defense, is a mere fraction of the shareholder capital his company has torched. As of September, Stinger had a retained deficit of more than $30 million.

As far as protecting investors, I think the lawsuit could not have come at a better time. Gruder and Stinger have been amping up the PR machine again, releasing a spate of press releases touting Stinger's hiring of celebrity cops and attacking TASER. Stinger's share price has popped as a result of these releases.

Still, I don't think the company's PR can change the fact that Stinger is selling too few of these guns to cover its costs, nor that its financials are a shambles. As of September 2007, the company had a mere $4.2 million in total assets, with $2.1 million comprising "intangibles." Liabilities stood at $5.6 million, and the company had negative free cash flow of $2.8 million over the trailing 12 months. Those figures suggest a company that's not long for this world -- unless it can create some buzz, and find some investors to pour in more cash.

Alas, the SEC's lawsuit seems likely to convince potential saviors that neither Gruder nor his product can be trusted. As before, individual investors would do well to avoid Stinger altogether. I believe, as before, that it's one of the rare companies in the market with an actual value of zero.

A few blasts from the Foolish past:

At the time of publication, Seth Jayson, a top 10 CAPS player, had no position in any company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. TASER is a Motley Fool Rule Breakers recommendation. Fool rules are here.