COMPANY GENERATES NET INCOME AND EXPECTS STRONG FOURTH QUARTER
OVERLAND PARK, Kan., Nov. 4 /PRNewswire-FirstCall/ -- 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 third
quarter and first nine months of 2009. An investor conference call is
scheduled for 11:00 a.m. EST tomorrow, November 5, 2009 (see details below).
"Although we did not ship any large international orders, I am pleased to
report that the Company generated net income in the three months ended
September 30, 2009," stated Stanton E. Ross, Chief Executive Officer of the
Company. "Gross profit margins recovered to 58.3%, versus 50.0% in the second
quarter and 42.3% in the first quarter of 2009, and we realized positive
results from our cost control initiative to reduce overall selling general and
administrative expenses. Third quarter revenues trailed the levels achieved
in the prior-year quarter and the second quarter of 2009, primarily due to the
absence of significant international sales, which can fluctuate quite
substantially from quarter to quarter. During the third quarter of last year,
international sales exceeded $3.1 million, whereas such sales totaled less
than $300,000 in the quarter ended September 30, 2009."
"We also experienced a reduction in average order size in the most recent
quarter, which we believe reflects the budgetary constraints that are
impacting most law enforcement agencies in the current challenging economic
environment. However, we received and shipped eight $100,000-plus domestic
orders, totaling $1.3 million, during the third quarter, suggesting that
Digital Ally is making inroads with larger law enforcement departments with
its new DVM-750 system. Production rates for our new DVM-750, DVM-500 Ultra
and DVM-500 Plus in-car video systems improved throughout the third quarter,
reaching planned production rates of 60 to 70 units per day in September
2009."
For the three months ended September 30, 2009, the Company reported revenue of
approximately $5.7 million, compared with revenue of approximately $8.5
million in the third quarter of 2008. International revenues decreased to
$270,491 in the third quarter of 2009, compared with approximately $3.2
million (including a single order valued at $2.2 million) in the quarter ended
September 30, 2008. International orders are often larger in size than
typical domestic orders, and the timing of the receipt and shipment of such
orders can have a significant impact upon Digital Ally's sales in particular
quarters. Net income for the quarter ended September 30, 2009 totaled
$81,402, or $0.01 per diluted share, compared with net income of $873,609, or
$0.05 per diluted share, in the prior-year quarter, and net losses in the
three quarters preceding the most recent quarter.
Gross profits declined to $3,334,989 in the third quarter of 2009, compared
with gross profits of $5,167,824 in the prior-year period. Gross profit
margins approximated 58.3% of revenues in the most recent quarter, versus
61.1% in the third quarter of 2008, 50.0% in the second quarter of 2009 and
42.3% in the first quarter of 2009. The decrease in third quarter gross
profit margins, when compared with the prior-year quarter, was primarily due
to product conversion costs and inefficiencies related to the introduction of
new products during 2009. However, the Company experienced a significant
improvement in gross margins during the third quarter of 2009, when compared
with the second and first quarters of 2009. This was attributable to the
successful introduction of, and production efficiencies realized from, the new
products as the year has progressed. As noted earlier, production rates for
the new models steadily improved throughout the quarter ended September 30,
2009, and the Company expects such production rates to improve further during
the fourth quarter. Management also expects gross profit margins to continue
to improve in the quarter ending December 31, 2009.
Selling, General and Administrative ("SG&A") expenses declined 15% to
$3,212,553 (56.2% of sales) in the third quarter of 2009, compared with
$3,798,436 (44.9% of sales) in the year-earlier quarter. The majority of this
decrease was attributable to lower sales commissions resulting from a decline
in sales, along with lower research and development costs, a reduction in
stock compensation expense, and the inclusion of $278,172 in vendor
settlements and credits. The Company has implemented overhead cost
containment initiatives during 2009 that positively impacted operating results
during the third quarter 2009.
For the three months ended September 30, 2009, the Company reported operating
income of $122,436, compared with $1,369,388 in the third quarter of 2008.
The Company reported pretax income of $131,402 in the quarter ended September
30, 2009, versus pretax income of $1,391,609 in the quarter ended September
30, 2008. After an income tax provision of $50,000, the Company reported net
income of $81,402 in the third quarter of 2009. This compared with net income
of $873,609, after income tax expense of $518,000, in the third quarter of
2008.
Basic and diluted earnings per share of $0.01 in the most recent quarter
compared with basic earnings per share of $0.06 and diluted earnings per share
of $0.05 in the prior-year quarter.
On a non-GAAP basis, the Company reported adjusted net income (before income
taxes, depreciation, amortization and stock-based compensation), a non-GAAP
financial measure, of $643,842, or $0.04 per diluted share, in the quarter
ended September 30, 2009, versus adjusted net income of $2,083,370, or $0.16
per diluted share, in the quarter ended September 30, 2008. (Non-GAAP
adjusted net income is described in greater detail in a table at the end of
this news release).
"We expect production rates and gross profit margins to continue to improve
during the fourth quarter, as we put behind us the start-up costs and
inefficiencies associated with the delayed introduction of new products during
the first nine months of the year," Ross said. "Based upon domestic orders
already received or in the pipeline, including $1.6 million in backorders on
our books at the end of September, higher gross margins, and the shipment of a
previously announced $3 million-plus order to the Turkish Police Department,
we expect that our fourth quarter will represent a strong finish to the
current year."
"In light of the encouraging reception among law enforcement personnel of our
new FirstVu wearable body camera and the DV-500 Ultra motorcycle and
watercraft video system at the recent International Association of Chiefs of
Police Conference in Denver, and with additional new product introductions
planned for coming months, we are optimistic that 2010 should be an exciting
year for the Company," concluded Ross.
For the nine months ended September 30, 2009, the Company reported revenue of
approximately $17.1 million, compared with revenue of approximately $25.9
million in the first nine months of 2008. Gross profits declined to
$8,705,134 in the nine months ended September 30, 2009, versus $16,026,314 in
the corresponding period of the previous year. An operating loss of
($2,130,834) was recorded in the first nine months of 2009, compared with
operating income of $6,144,158 in the year-earlier period. The Company
reported a pretax loss of ($2,103,745) in the nine months ended September 30,
2009, versus pretax income of $6,215,676 in the first nine months of 2008.
After an income tax benefit of $720,000, the Company reported a net loss of
($1,383,745) in the first nine months of 2009, versus net income (after income
tax expense of $2,253,000) of $3,962,676 in the nine months ended September
30, 2008.
The Company recorded a net loss per share of $0.01 in the first nine months of
2009 compared with basic earnings per share of $0.26 and diluted earnings per
share of $0.22 in the corresponding period of the previous year.
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 ($20,803) in the nine months ended September 30, 2009,
versus adjusted net income of $7,614,845 in the nine months ended September
30, 2008.
The Company generated $474,691 in net cash from its operating activities
during the first nine months of 2009, compared with $2,951,153 in net cash
used in operating activities during the nine months ended September 30, 2008.
As of September 30, 2009, the Company had $1,017,790 of cash and equivalents,
working capital of $13,876,461, no debt outstanding, and shareholders' equity
of $16,951,030.
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. 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 use
in evaluating 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 11:00 a.m. Eastern Time
tomorrow, November 5, 2009, to discuss its third quarter and nine-month
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 11:00 a.m. EST on November 5, 2009. The call will also be broadcast
live on the Internet at www.videonewswire.com/event.asp?id=62874. A replay of
the conference call will be available one hour after the completion of the
conference call until 5:00 p.m. on Monday, January 4, 2010 by dialing
877-344-7529 (international/local participants dial 412-317-0088) and entering
the conference ID 434680.
The call will also be archived on the Internet through January 4, 2010, at
www.videonewswire.com/event.asp?id=62874 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 federal economic
stimulus funding for law enforcement agencies will have a positive impact on
the Company's revenues; the Company's ability to deliver its new product
offerings as scheduled and have them perform as planned or advertised; its
ability to achieve higher revenues and improved production rates and profit
margins in the fourth quarter of 2009; its ability to increase sales and
profits in 2010; 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; 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,
2008 and its report on Form 10-Q for the three and nine months ended September
30 2009, as filed with the Securities and Exchange Commission.
For Additional Information, Please Contact:
Stanton E. Ross, CEO at (913) 814-7774
or
RJ Falkner & Company, Inc., Investor Relations Counsel
at (800) 377-9893 or via email at info@rjfalkner.com
(Financial Highlights Follow)
DIGITAL ALLY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
2009 2008
---------- ----------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $1,017,790 $1,205,947
Accounts receivable-trade, less
allowance for doubtful accounts
of $110,000 - 2009 and
$90,000 - 2008 5,412,504 6,242,306
Accounts receivable-other 483,414 414,176
Inventories 8,093,499 8,359,961
Prepaid income taxes - 85,943
Prepaid expenses 296,568 217,916
Deferred taxes 1,875,000 1,345,000
--------- ---------
Total current assets 17,178,775 17,871,249
---------- ----------
Furniture, fixtures and equipment 2,869,306 2,471,205
Less accumulated depreciation
and amortization 1,370,103 738,554
--------- -------
1,499,203 1,732,651
--------- ---------
Deferred taxes 1,055,000 975,000
Intangible assets, net 349,391 365,643
Other assets 170,975 149,066
------- -------
Total assets $20,253,344 $21,093,609
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,025,115 $2,791,565
Accrued expenses 1,268,290 1,053,624
Income taxes payable 4,482 -
Customer deposits 4,427 84,039
----- ------
Total current liabilities 3,302,314 3,929,228
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value;
75,000,000 shares authorized;
Shares issued: 16,169,739 -
2009 and 15,926,077 - 2008 16,170 15,926
Additional paid in capital 19,661,554 18,428,292
Treasury stock, at cost
(shares: 248,610 - 2009
and 210,360 - 2008) (1,687,465) (1,624,353)
Retained earnings (deficit) (1,039,229) 344,516
--------- -------
Total stockholders' equity 16,951,030 17,164,381
---------- ----------
Total liabilities and
stockholders' equity $20,253,344 $21,093,609
=========== ===========
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2009 AS FILED WITH THE SEC)
DIGITAL ALLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2009 AND 2008 (Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------- -------------------
2009 2008 2009 2008
---- ---- ---- ----
Product revenue $5,565,667 $8,400,597 $16,270,054 $25,786,496
Other revenue 149,016 50,673 851,009 154,500
------- ------ ------- -------
Total revenue 5,714,683 8,451,270 17,121,063 25,940,996
Cost of revenue 2,379,694 3,283,446 8,415,929 9,914,682
--------- --------- --------- ---------
Gross profit 3,334,989 5,167,824 8,705,134 16,026,314
Selling, general
and administrative
expenses:
Research and
development expense 696,523 785,428 2,803,038 1,893,318
Selling,
advertising and
promotional
expense 748,634 889,496 1,922,535 2,500,789
Stock-based
compensation
expense 348,704 531,947 1,054,003 1,106,258
Charges related
to purchase and
cancellation of
employee stock
options - - 358,104 -
Vendor
settlements
and credits (278,173) - (278,173) -
General and
administrative
expense 1,696,865 1,591,565 4,976,461 4,381,791
--------- --------- --------- ---------
Total selling,
general and
administrative
expenses 3,212,553 3,798,436 10,835,968 9,882,156
--------- --------- ---------- ---------
Operating income
(loss) 122,436 1,369,388 (2,130,834) 6,144,158
------- --------- --------- ---------
Interest income 8,966 22,221 27,089 71,518
----- ------ ------ ------
Income (loss)before
income tax benefit
(provision) 131,402 1,391,609 (2,103,745) 6,215,676
Income tax benefit
(provision) (50,000) (518,000) 720,000 (2,253,000)
------ ------- ------- ---------
Net income (loss) $81,402 $873,609 $(1,383,745) $3,962,676
======= ======== =========== ==========
Net income (loss) per
share information:
Basic $0.01 $0.06 $(0.09) $0.26
Diluted $0.01 $0.05 $(0.09) $0.22
Weighted average
shares outstanding:
Basic 15,821,075 15,736,559 15,756,342 15,181,662
Diluted 16,008,581 17,634,577 15,756,342 17,625,361
DIGITAL ALLY, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED NET INCOME
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2009 AND 2008
(unaudited) (unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------- -------------------
2009 2008 2009 2008
---- ---- ---- ----
Net income (loss) $81,402 $873,609 $(1,383,745) $3,962,676
Non-GAAP adjustments:
Income tax provision
(benefit) 50,000 518,000 (720,000) 2,253,000
Stock-based compensation 348,704 531,947 1,412,107 1,106,258
Depreciation and
amortization 163,736 159,814 670,835 292,911
------- ------- ------- -------
Total Non-GAAP adjustments 562,440 1,209,761 1,362,842 3,652,169
------- --------- --------- ---------
Non-GAAP adjusted net
income(loss) $643,842 $2,083,370 $(20,803) $7,614,845
======== ========== ======== ==========
Non-GAAP adjusted net income
(loss)per share information:
Basic $0.04 $0.18 $(0.01) $0.37
Diluted $0.04 $0.16 $(0.01) $0.32
Weighted average shares
outstanding:
Basic 15,821,075 15,736,559 15,756,342 15,181,662
Diluted 16,008,581 17,634,577 15,756,342 17,625,361
DIGITAL ALLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (Unaudited)
Nine Months Ended
September 30,
--------------------
2009 2008
------ ------
Cash Flows From Operating Activities:
Net income (loss) $(1,383,745) $3,962,676
Adjustments to reconcile net income
(loss) to net cash flows provided by
(used in) operating activities:
Depreciation and amortization 670,835 292,911
Stock based compensation 1,412,107 1,106,258
Reserve for inventory obsolescence 334,754 175,575
Reserve for bad debt allowance 20,000 1,776
Deferred tax (benefit) provision (610,000) (125,000)
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable - trade 809,802 (5,371,199)
Accounts receivable - other (69,238) (210,483)
Inventories (68,292) (3,991,078)
Prepaid income taxes 85,943 -
Prepaid expenses (78,652) 5,339
Other assets (21,909) 47,815
Increase (decrease) in:
Accounts payable (766,450) 1,078,264
Accrued expenses 214,666 416,930
Income taxes payable 4,482 (101,140)
Customer deposits (79,612) (235,933)
Unearned income - (3,864)
--- -----
Net cash provided by (used in)
operating activities 474,691 (2,951,153)
------- ---------
Cash Flows from Investing Activities:
Purchases of furniture, fixtures and
equipment (398,101) (1,066,043)
Additions to intangible assets (23,034) (116,392)
------ -------
Net cash (used in) investing activities (421,135) (1,182,435)
------- ---------
Cash Flows from Financing Activities:
Proceeds from exercise of stock
options and warrants 261,399 2,374,972
Excess (deficiency) in tax benefits
related to stock-based compensation (120,000) 2,345,000
Purchase of common shares for treasury (63,112) (1,624,353)
Purchase of employee stock options (320,000) -
------- ---
Net cash provided by (used in)
financing activities (241,713) 3,095,619
------- ---------
Decrease in cash and cash equivalents (188,157) (1,037,969)
Cash and cash equivalents, beginning
of period 1,205,947 4,255,039
--------- ---------
Cash and cash equivalents, end of
period $1,017,790 $3,217,070
========== ==========
Supplemental disclosures of cash Flow
information:
Cash payments for interest $- $-
=== ===
Cash payments for income taxes $21,500 $131,000
======= ========
Supplemental disclosures of non-cash
investing and financing activities:
Restricted common stock grant $58,750 $-
======= ===
Common stock surrendered as consideration
for exercise of stock options $321,743 $539,566
======== ========
SOURCE Digital Ally, Inc.
Stanton E. Ross, CEO of Digital Ally, Inc., +1-913-814-7774; or RJ Falkner &
Company, Inc., Investor Relations Counsel, 1-800-377-9893, info@rjfalkner.com,
for Digital Ally, Inc.
