OVERLAND PARK, KS--(Marketwire - August 16, 2010) - Digital Ally, Inc. (
NASDAQ:
DGLY), which
develops, manufactures and markets advanced video surveillance products for
law enforcement, homeland security and commercial security applications,
today announced its operating results for the second quarter and first half
of 2010. An investor conference call is scheduled for 11:15 a.m. EDT
today, August 16, 2010 (see details below).
"While our second quarter operating results trailed prior-year levels,
primarily due to the delayed shipment of a significant international order
and delays in the shipment of certain domestic orders because of a
temporary shortage of a wireless component, we expect a rebound in revenues
during the second half of 2010," stated Stanton E. Ross, Chief Executive
Officer of Digital Ally, Inc. "The lack of significant international
revenues in the second quarter was partially due to our policy of not
shipping products to international customers until payment has been
received or a letter of credit has been executed. We expect to receive
payment soon and to commence shipments in accordance with delivery
schedules on a previously announced order for DVM-750 systems that we
received from a South American country. We also anticipate the receipt of a
number of sizeable international and domestic orders during the course of
the current quarter. Finally, after locating a new source, supplies of
wireless components have been replenished, allowing us to commence
deliveries on an approximately $1 million domestic order backlog that was
originally expected to ship during the second quarter of 2010."
"The steps that we have taken to control costs and enhance operating
efficiencies should become apparent as revenues strengthen in the second
half of the year," continued Ross. "Operating margins should also benefit
as deliveries of new products, including the FirstVU wearable body camera
and the LaserAlly speed detection system, ramp up to levels that allow us
to more effectively absorb our fixed manufacturing overhead costs. Our
goal is to increase gross profit margins to 60% or better during the
balance of 2010 and beyond, compared with gross margins of 52.5% in the
first half of the year."
"While there has been a great deal of publicity regarding cutbacks in
spending by state and local governments due to lower tax revenues, to date
we have not seen a significant impact upon our monthly 'run rate' of orders
from domestic law enforcement agencies. We believe the unique features of
our DVMs and expanding product line, along with our ability to be
price-competitive when bidding on new contracts, will serve us well in the
current difficult economic environment.
"Based on information currently available to us, we believe third quarter
operating results will improve significantly from second quarter levels.
We continue to expect record sales and operating income for the full year
ending December 31, 2010," noted Ross.
For the three months ended June 30, 2010, the Company's revenue
approximated $5.5 million, compared with revenue of approximately $7.0
million in the quarter ended June 30, 2009. The Company sold a total of
1,235 digital video mirror units (DVMs) during the second quarter of 2010,
compared with sales of 1,567 DVMs in the prior-year quarter. The primary
reasons for the decline in second quarter revenues related to the absence
of major new international orders and a delay in the shipment of a
previously announced order to a South American country. During April 2010,
the Company received an order from a South American country for
approximately 700 DVM-750 units, deliveries of which were expected to
commence in the most recent quarter. However, due to certain factors, the
customer delayed deliveries of the units until early in the third quarter.
Furthermore, several other international orders that would have improved
second quarter revenues significantly did not materialize until the third
quarter. The Company was also unable to ship some domestic orders that
required wireless downloading upgrades, due to a temporary shortage of
supplies of wireless transmitter modules. As a result, Digital Ally ended
the second quarter with a $1 million-plus backlog of orders that are
currently being shipped to customers.
International revenue declined to $44,159 (1% of total revenues) in the
second quarter of 2010, versus $174,478 (3% of total revenues) in the
prior-year period. International orders are often larger in size than
typical domestic orders, and timing of the receipt and shipment of such
orders can have a significant impact upon the Company's sales and operating
results during individual quarters.
Gross profits declined 21% to $2,771,684 in the second quarter of 2010,
versus $3,510,605 in the second quarter of 2009. The decrease in gross
profits during the most recent quarter was consistent with the 21%
reduction in revenues. Gross profit margins approximated 50.2% of revenue
in the three months ended June 30, 2010, versus 50.0% in the prior-year
quarter. Gross margins suffered from the decline in sales volumes and the
fixed overhead component of manufacturing expenses. Management expects
gross margins to improve during the second half of 2010, as sales of new
products gain momentum and international orders increase, thereby allowing
the Company to benefit from economies of scale and more effective
utilization of fixed manufacturing overhead components.
Selling, General and Administrative ("SG&A") expenses were relatively
unchanged at $3,867,341 (70.1% of sales) in the most recent quarter, versus
$3,796,248 (54.1% of sales) in the three months ended June 30, 2009.
Research and development expenses declined slightly to $780,327 (vs.
$792,149). The Company has active research and development projects
underway involving several new products designed for the school bus, mass
transit, taxi cab, law enforcement and other markets, along with upgrades
to Digital Ally's existing product lines. Sales commission expense totaled
$504,994 in the second quarter of 2010, compared with $640,314 in the three
months ended June 30, 2009, reflecting a 21% decline that was consistent
with the reduction in revenues. Promotional and advertising expenses
increased 83% to $240,769 (vs. $131,864), as marketing brochures and other
marketing initiatives were launched in support of the FirstVU, LaserAlly
and other new products being introduced in 2010. Meanwhile, stock-based
compensation increased from $349,480 to $441,192 due to restricted stock
grants with shorter vesting periods that were issued to officers and
directors in January 2010. Meanwhile, charges related to the purchase and
cancellation of employee stock options decreased to $0 in the second
quarter of 2010, compared with $358,104 in the year-earlier period, when
the Company executed a separation agreement with its former Vice President
of Engineering and Production. Professional fees and expense decreased to
$214,460 in the most recent quarter, from $284,665 a year earlier.
Executive, sales and administrative staff payroll expenses totaled $976,611
in the three months ended June 30, 2010, versus $651,461 in the three
months ended June 30, 2009, primarily due to higher payroll costs related
to additional sales and marketing personnel, the addition of a Vice
President of Strategic Development and the restoration of a 25% salary
reduction voluntarily taken by officers and directors during 2009. The
Company also hired six additional technical support staff to handle field
inquiries and installation issues. Other SG&A expenses increased to
$708,988 in the second quarter of 2010, versus $588,211 in the second
quarter of 2009.
The Company reported an operating loss in the most recent quarter of
($1,095,657), compared with an operating loss of ($285,643) in the second
quarter of 2009.
A pretax loss of ($1,095,657) was recorded in the quarter ended June 30,
2010, versus a pretax loss of ($276,654) in the quarter ended June 30,
2009. After an income tax benefit of $330,000, the Company reported a net
loss of ($760,664) in the second quarter of 2010. This compared with a net
loss of ($164,654), including an income tax benefit of $112,000, in the
quarter ended June 30, 2009.
On a per-share basis, the Company reported a net loss of ($0.05) in the
most recent quarter, compared with a net loss of ($0.01) per share in the
prior-year quarter.
On a non-GAAP basis, the Company reported an adjusted net loss (before
income taxes, depreciation, amortization and stock-based compensation), a
non-GAAP financial measure, of ($439,936), or ($0.03) per basic and diluted
share, in the quarter ended June 30, 2010, versus adjusted net income of
$644,589, or $0.04 per basic and diluted share, in the quarter ended June
30, 2009. (Non-GAAP adjusted net income (loss) is described in greater
detail in a table at the end of this news release).
For the six months ended June 30, 2010, the Company's revenue increased 4%
to approximately $11.8 million, compared with revenue of approximately
$11.4 million in the first half of 2009. International revenue declined to
$116,948 (1% of total revenues) in the first half of 2010, versus $325,246
(3% of total revenues) in the corresponding period of the previous year.
Gross profits increased 16% to $6,213,510, versus $5,370,145 in the six
months ended June 30, 2009. Gross profit margins approximated 52.5% of
revenue in the first half of 2010, versus 47.1% in the year-earlier period.
Selling, General and Administrative ("SG&A") expenses increased 4% to
$7,939,581 (67.1% of sales) in the six months ended June 30, 2010, versus
$7,623,414 (66.8% of sales) in the first half of 2009. Research and
development expenses declined 18% to $1,695,590, versus $2,067,473 in the
six months ended June 30, 2009. Sales commission expense totaled
$1,077,240 in the first half of 2010, compared with $939,276 in the six
months ended June 30, 2009. Promotional and advertising expenses increased
54% to $361,753, versus $234,624 in the first half of 2009. Stock-based
compensation increased from $705,299 in the first six months of 2009 to
$982,673 in the most recent six-month period; and charges related to
purchase and cancellation of employee stock options decreased to $0 in the
first half of 2010, compared with $358,104 in the year-earlier period.
Professional fees and expense decreased to $495,757 in the first half of
2010 from $613,667 a year earlier. Executive, sales and administrative
staff payroll expenses totaled $1,937,667 in the six months ended June 30,
2010, versus $1,412,471 in the six months ended June 30, 2009. Other SG&A
expenses rose modestly to $1,388,901 in the first half of 2010, versus
$1,292,500 in the corresponding period of the previous year.
The Company reported an operating loss of ($1,726,071) in the six months
ended June 30, 2010, compared with an operating loss of ($2,253,269) in the
prior-year period.
A pretax loss of ($1,711,831) was recorded in the six months ended June 30,
2010, versus a pretax loss of ($2,235,137) in the first half of 2009.
After an income tax benefit of $595,000, the Company reported a net loss of
($1,116,831) in the first half of 2010. This compared with a net loss of
($1,465,147), including an income tax benefit of $770,000, in the six
months ended June 30, 2009.
On a per-share basis, the Company reported a net loss of ($0.07) in the six
months ended June 30, 2010, compared with a net loss of ($0.09) per share
in the six months ended June 30, 2009.
On a non-GAAP basis, the Company reported an adjusted net loss (before
income taxes, depreciation, amortization and stock-based compensation), a
non-GAAP financial measure, of ($311,111), or ($0.02) per basic and diluted
share, in the six months ended June 30, 2010, versus an adjusted net loss
of ($737,173), or ($0.05) per basic and diluted share, in the six months
ended June 30, 2009. (Non-GAAP adjusted net income (loss) is described in
greater detail in a table at the end of this news release).
"A number of improvements to our balance sheet as of the end of the second
quarter are worth mentioning," added Ross. "Strong cash flows during the
first half of 2010, when we generated over $1.7 million in cash from
operating activities, allowed us to end the most recent quarter with
approximately $1.8 million of cash on hand, compared with $183,150 in cash
as of December 31, 2009. We reduced our outstanding accounts receivable by
52% during the first half of 2010 to $4.1 million, versus $8.4 million at
the end of last year. And finally, we remained debt-free as of June 30,
2010, with a healthy current ratio of 5.0-to-1.0."
Non-GAAP Financial Measures
Digital Ally, Inc. has provided financial information in this release that
has not been prepared in accordance with GAAP. This information includes
non-GAAP adjusted net income (loss). Digital Ally uses such non-GAAP
financial measures internally in analyzing its financial results and
believes they are useful to investors, as a supplement to GAAP measures, in
evaluating Digital Ally's ongoing operational performance. Digital Ally
believes that the use of these non-GAAP financial measures provides an
additional tool for investors to evaluate ongoing operating results and
trends and in comparing its financial measures with other companies in
Digital Ally's industry, many of which present similar non-GAAP financial
measures to investors. As noted, the non-GAAP financial measures discussed
above exclude certain non-cash expenses/income including: (1) income tax
expense/benefit, (2) depreciation and amortization expenses and (3)
share-based compensation expense pursuant to SFAS 123(R).
Non-GAAP financial measures should not be considered in isolation from, or
as a substitute for, financial information prepared in accordance with
GAAP. Investors are encouraged to review the reconciliation of these
non-GAAP measures to their most directly comparable GAAP financial measure
as detailed above. As previously mentioned, a reconciliation of GAAP to the
non-GAAP financial measures has been provided in the tables included as
part of this press release.
Investor Conference Call
The Company will host an investor conference call at 11:15 a.m. Eastern
Time (EDT) today, August 16, 2010, to discuss its first quarter operating
results, along with other topics of interest. Shareholders and other
interested parties may participate in the conference call by dialing
800-860-2442 (international/local participants dial
412-858-4600) and asking to be connected to the "Digital Ally, Inc.
Conference Call" a few minutes before 11:15 a.m. EDT on August 16, 2010.
The call will also be broadcast live on the Internet at
www.videonewswire.com/event.asp?id=71570. A replay of the conference call
will be available one hour after the completion of the conference call
until 9:00 a.m. on Monday, October 18, 2010 by dialing 877-344-7529
(international/local participants dial 412-317-0088) and entering the
conference ID 443444.
The call will also be archived on the Internet through October 8, 2010, at
www.videonewswire.com/event.asp?id=71570 and on the Company's website at
www.digitalallyinc.com.
About Digital Ally, Inc.
Digital Ally, Inc. develops, manufactures and markets advanced technology
products for law enforcement, homeland security and commercial security
applications. The Company's primary focus is digital video imaging and
storage. For additional information, visit
www.digitalallyinc.com
The Company is headquartered in Overland Park, Kansas, and its shares are
traded on The Nasdaq Capital Market under the symbol "DGLY".
This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Act of 1934. These forward-looking statements are based largely
on the expectations or forecasts of future events, can be affected by
inaccurate assumptions, and are subject to various business risks and known
and unknown uncertainties, a number of which are beyond the control of
management. Therefore, actual results could differ materially from the
forward-looking statements contained in this press release. A wide variety
of factors that may cause actual results to differ from the forward-looking
statements include, but are not limited to, the following: whether the
Company will be able to achieve record revenues and operating income in
2010 in the current uncertain economic environment; whether the federal
economic stimulus funding for law enforcement agencies will have a positive
impact on the Company's revenue; the Company's ability to deliver its new
product offerings as scheduled, including its ability to obtain the
required components on a timely basis, and have them perform as planned or
advertised; its ability to achieve improved production and other
efficiencies to improve its gross and operating margins; its ability to
expand its share of the in-car video market in the domestic and
international law enforcement communities; whether there will be a
commercial market, domestically and internationally, for one or more of its
new products; whether the initial interest in its new products will
translate into sales; whether its international marketing initiatives will
increase its revenues outside of the U.S.; its ability to commercialize its
products and production processes, including increasing its production
capabilities to satisfy orders in a cost-effective manner; whether the
Company will be able to adapt its technology to new and different uses,
including being able to introduce new products; competition from larger,
more established companies with far greater economic and human resources;
its ability to attract and retain customers and quality employees; its
ability to obtain patent protection on any of its products and, if
obtained, to defend such intellectual property rights; the effect of
changing economic conditions; and changes in government regulations, tax
rates and similar matters. These cautionary statements should not be
construed as exhaustive or as any admission as to the adequacy of the
Company's disclosures. The Company cannot predict or determine after the
fact what factors would cause actual results to differ materially from
those indicated by the forward-looking statements or other statements. The
reader should consider statements that include the words "believes",
"expects", "anticipates", "intends", "estimates", "plans", "projects",
"should", or other expressions that are predictions of or indicate future
events or trends, to be uncertain and forward-looking. The Company does
not undertake to publicly update or revise forward-looking statements,
whether as a result of new information, future events or otherwise.
Additional information respecting factors that could materially affect the
Company and its operations are contained in its annual report on Form 10-K
for the year ended December 31, 2009, and its quarterly report on Form 10-Q
for the three and six months ended June 30, 2010, as filed with the
Securities and Exchange Commission.
DIGITAL ALLY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2010 AND DECEMBER 31, 2009
June 30, December 31,
2010 2009
------------ ------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 1,840,258 $ 183,150
Accounts receivable - trade, less allowance
for doubtful accounts of $110,000 - 2010
and $110,000 - 2009 4,051,930 8,398,353
Accounts receivable - other 425,945 476,049
Inventories 9,313,206 7,370,505
Prepaid expenses 273,826 224,923
Deferred taxes 2,250,000 1,695,000
------------ ------------
Total current assets 18,155,165 18,347,980
------------ ------------
Furniture, fixtures and equipment 3,152,763 3,010,977
Less accumulated depreciation and amortization 1,968,421 1,592,874
------------ ------------
1,184,342 1,418,103
------------ ------------
Deferred taxes 1,265,000 1,160,000
Intangible assets, net 306,206 336,182
Other assets 121,920 135,674
------------ ------------
Total assets $ 21,032,633 $ 21,397,939
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,530,319 $ 2,000,541
Accrued expenses 1,049,741 1,781,969
Income taxes payable 23,497 9,171
Customer deposits -- 39,924
------------ ------------
Total current liabilities 3,603,557 3,831,605
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 75,000,000
shares authorized; Shares issued:
16,570,608 - 2010 and 16,169,739 - 2009 16,571 16,170
Additional paid in capital 20,986,602 20,007,430
Treasury stock, at cost (shares: 248,610 -
2010 and 248,610 - 2009) (1,687,465) (1,687,465)
Retained earnings (deficit) (1,886,632) (769,801)
------------ ------------
Total stockholders' equity 17,429,076 17,566,334
------------ ------------
Total liabilities and stockholders' equity $ 21,032,633 $ 21,397,939
============ ============
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S QUARTERLY REPORT
ON FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND ANNUAL
REPORT ON FORM 10-K AS FILED WITH THE SEC)
DIGITAL ALLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2010 AND 2009
(unaudited)
Three months ended June 30, Six months ended June 30,
2010 2009 2010 2009
------------- ------------ ------------ ------------
Product revenue $ 5,381,789 $ 6,661,182 $ 11,531,021 $ 10,704,386
Other revenue 136,018 356,014 296,673 701,994
------------- ------------ ------------ ------------
Total revenue 5,517,807 7,017,196 11,827,694 11,406,380
Cost of revenue 2,746,123 3,506,591 5,614,184 6,036,235
------------- ------------ ------------ ------------
Gross profit 2,771,684 3,510,605 6,213,510 5,370,145
Selling, general
and administrative
expenses:
Research and
development
expense 780,327 792,149 1,695,590 2,067,473
Selling,
advertising and
promotional
expense 745,763 772,178 1,438,993 1,173,900
Stock-based
compensation
expense 441,192 349,480 982,673 705,299
Charges related
to purchase and
cancellation of
employee stock
options -- 358,104 -- 358,104
General and
administrative
expense 1,900,059 1,524,337 3,822,325 3,318,638
------------- ------------ ------------ ------------
Total selling,
general and
administrative
expenses 3,867,341 3,796,248 7,939,581 7,623,414
------------- ------------ ------------ ------------
Operating loss (1,095,657) (285,643) (1,726,071) (2,253,269)
------------- ------------ ------------ ------------
Interest income 4,993 8,989 14,240 18,122
------------- ------------ ------------ ------------
Loss before income
tax benefit
(provision) (1,090,664) (276,654) (1,711,831) (2,235,137)
Income tax benefit 330,000 112,000 595,000 770,000
------------- ------------ ------------ ------------
Net loss $ (760,664) $ (164,654) $ (1,116,831) $ (1,465,147)
============= ============ ============ ============
Net loss per share
information:
Basic $ (0.05) $ (0.01) $ (0.07) $ (0.09)
Diluted $ (0.05) $ (0.01) $ (0.07) $ (0.09)
Weighted average
shares
outstanding:
Basic 16,321,998 15,730,657 16,287,484 15,723,402
Diluted 16,321,998 15,730,657 16,287,484 15,723,402
DIGITAL ALLY, INC.
RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED NET INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2010 AND 2009
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2010 2009 2010 2009
------------ ------------ ------------ ------------
Net loss $ (760,664) $ (164,654) $ (1,116,831) $ (1,465,147)
Non-GAAP
adjustments:
Income tax
provision
(benefit) (330,000) (112,000) (595,000) (770,000)
Stock-based
compensation 441,192 707,584 982,673 1,063,403
Depreciation and
amortization 209,536 213,659 418,047 434,571
------------ ------------ ------------ ------------
Total Non-GAAP
adjustments 320,728 809,243 805,720 727,974
------------ ------------ ------------ ------------
Non-GAAP adjusted
net income (loss) $ (439,936) $ 644,589 $ (311,111) $ (737,173)
============ ============ ============ ============
Non-GAAP adjusted
net income (loss)
per share
information:
Basic $ (0.03) $ 0.04 $ (0.02) $ (0.05)
Diluted $ (0.03) $ 0.04 $ (0.02) $ (0.05)
Weighted average
shares
outstanding:
Basic 16,321,998 15,730,657 16,287,484 15,723,402
Diluted 16,321,998 15,730,657 16,287,484 15,723,402
DIGITAL ALLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Unaudited)
2010 2009
------------ ------------
Cash Flows From Operating Activities:
Net loss $ (1,116,831) $ (1,465,147)
Adjustments to reconcile net loss to net
cash flows provided by (used in) operating
activities:
Depreciation and amortization 418,047 434,571
Stock based compensation 982,673 1,063,403
Reserve for inventory obsolescence (26,046) 167,728
Reserve for bad debt allowance -- 20,000
Deferred tax (benefit) provision (660,000) (650,000)
Change in operating assets and liabilities:
Accounts receivable - trade 4,346,423 (138,078)
Accounts receivable - other 50,104 (126,154)
Inventories (1,916,655) 20,146
Prepaid income taxes -- (11,500)
Prepaid expenses (48,903) 41,834
Other assets 13,754 49,173
Accounts payable 529,778 392,789
Accrued expenses (815,629) 152,061
Income taxes payable 14,326 --
Customer deposits (39,924) (19,920)
------------ ------------
Net cash provided by (used in) operating
activities 1,731,117 (69,094)
------------ ------------
Cash Flows from Investing Activities:
Purchases of furniture, fixtures and
equipment (141,786) (287,818)
Additions to intangible assets (12,524) (14,456)
------------ ------------
Net cash used in investing activities (154,310) (302,274)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from exercise of stock options and
warrants 45,301 2,900
Excess in tax benefits related to stock-based
compensation 35,000 (130,000)
Purchase of common shares for treasury -- (63,112)
Purchase of employee stock options -- (320,000)
------------ ------------
Net cash provided by (used in) financing
activities 80,301 (510,212)
------------ ------------
Increase (decrease) in cash and cash
equivalents 1,657,108 (881,580)
Cash and cash equivalents, beginning of period 183,150 1,205,947
------------ ------------
Cash and cash equivalents, end of period $ 1,840,258 $ 324,367
============ ============
Supplemental disclosures of cash flow
information:
Cash payments for interest $ -- $ --
============ ============
Cash payments for income taxes $ 15,674 $ 21,500
============ ============
Supplemental disclosures of non-cash investing
and financing activities:
Common stock surrendered as consideration
for exercise of stock options $ 513,100 $ 315,342
============ ============
Contact Information: For Additional Information, Please Contact:
Stanton E. Ross
CEO
(913) 814-7774
or
RJ Falkner & Company, Inc.
Investor Relations Counsel
(800) 377-9893
info@rjfalkner.com