Digital Ally, Inc. (Nasdaq: DGLY), which develops, manufactures and
markets advanced video surveillance products for law enforcement,
homeland security and commercial applications, today announced its
operating results for the first quarter of 2019. An investor
conference call is scheduled for 11:15 a.m. EDT on Wednesday, May
15, 2019 (see details below).
Highlights for Quarter Ended March 31,
2019
- Revenues increased in first quarter
2019 to $2,550,796 from $2,378,287 in fourth quarter 2018 and
$2,471,513 in first quarter 2018. The primary reason for the
revenue increases in the first quarter 2019 is that our service
revenues continued to improve. We plan to introduce a new product
platform, the EVO-HD, specifically for in-car systems, in third
quarter 2019 to address our competitors’ new product
features. This new product platform will utilize advanced
chipsets that will generate new and highly advanced products for
our law enforcement and commercial customers. Our law enforcement
revenues remain challenging due to price-cutting, willful
infringement of our patents and other actions by our competitors
and adverse marketplace effects related to the patent
litigation.
- We are concentrating on expanding
our recurring service revenue to help stabilize our revenues on a
quarterly basis. Our revenues from cloud storages have grown in
recent quarters and reached approximately $179,500 in first quarter
2019, an increase of $34,100 (23%) over first quarter 2018.
Additionally, our revenues from extended warranties have grown and
were approximately $327,500 in first quarter 2019, compared to
approximately $253,000 for the prior year period, an increase of
approximately $75,000 (30%). We are pursuing several new
market channels that do not involve our traditional law enforcement
and private security customers, such as our NASCAR affiliation,
which we believe will help expand the appeal of our products and
service capabilities to new commercial markets. If
successful, we believe that these new market channels could yield
additional recurring service revenues for us in the future.
- We have asserted two significant
patent infringement lawsuits involving Axon and WatchGuard that
have had significant impacts on our quarterly results primarily due
to the timing and amount of legal fees expended on such lawsuits.
The WatchGuard lawsuit has been settled, as noted below, while the
Axon lawsuit remains active. Future quarterly results during
2019 and possibly beyond will continue to be impacted as the Axon
case moves to trial. If the jury in the Axon lawsuit
determines that Axon is infringing our patents, it would determine
the amount of compensatory damages owed to us by the defendant and
whether such damage awards should be trebled due to willful
infringement by the defendant. In addition, there may be
attempts by Axon to settle such lawsuit prior to the trial.
Such jury awards and/or potential settlement prior to trial would
likely have a significant impact on our quarterly operating results
if and when it occurs. Axon has been and remains our primary target
for its willful patent infringement of our “auto-activation”
related patents. WatchGuard was an important first step, but Axon
remains the market leader and the party most at risk from our
patent litigation and now that we have settled the lawsuit with
WatchGuard we can focus on holding Axon, its insurers and other
responsible parties accountable for its conduct.
- On May 14, 2019 we and WatchGuard
announced that we had settled the pending patent infringement
litigation. On May 26, 2016, we initiated a patent lawsuit in the
U.S. District Court for the District of Kansas against WatchGuard
for alleged infringement of the ’292 Patent, the ’452 Patent and
the ’950 Patent. On May 14, 2019, the parties resolved the dispute
and executed a settlement agreement in the form of a Release and
License Agreement. The litigation has been dismissed as a result of
this settlement.
The resolution of the dispute includes the
following key terms:
- WatchGuard will pay us a one-time, lump sum settlement payment
of six (6) million dollars.
- We have granted WatchGuard a perpetual covenant not to sue if
WatchGuard’s products incorporate agreed-upon modified recording
functionality.
- We have granted WatchGuard a license to the ’292 Patent and
“452 Patent (and related patents, now existing and yet-to-issue)
through December 31, 2023. The parties have agreed to negotiate in
good faith to attempt to resolve any alleged infringement that
occurs after the license period expires.
- The parties have further agreed to release each other from all
claims or liabilities pre-existing the settlement.
- As part of the settlement, the parties agreed that WatchGuard
is making no admission that it has infringed any of Digital Ally’s
patents.
Management Comments
“We are encouraged that our service- based
revenues increased 31% from the prior year and continued our trend
of growth in this area.,” stated Stanton E. Ross, Chief Executive
Officer of Digital Ally, Inc. “We are also very pleased that we
have settled our lawsuit with WatchGuard. The settlement should
serve notice to the industry that we are the rightful owner of
“auto-activation” patents and that we intend to defend our patents
and to hold infringing parties responsible for their actions. We
believe that this settlement begins our process of monetizing our
robust patent portfolio and specifically the “auto-activation”
technology that we invented and patented. We have long been the
leading company in developing new and advanced technologies used by
our law enforcement and commercial customers, and competitors like
Axon have felt it necessary to infringe on our patents rather than
develop their own new technology.” concluded Ross.
First Quarter Operating
Results
For the three months ended March 31, 2019, our
total revenue increased by 3% to approximately $2.6 million,
compared with revenue of approximately $2.5 million for the three
months ended March 31, 2018. The primary reasons for the
revenue increase in 2019 compared to 2018 was that our
service-based revenues were up 31%. However, our law enforcement
revenues declined over the prior period due to the willful
infringement of our patents and other actions by our competitors
and adverse marketplace effects related to the patent litigation.
We will introduce our EVO-HD in 2019 with the goal of enhancing our
product line features to meet these competitive challenges. Our
gross margin increased 7% to $1,181,740 for the three months ended
March 31, 2019 versus $1,109,394 in 2018. The gross margin increase
is commensurate with the 3% increase in total revenues and a
decline in our cost of sales as a percentage of revenues to 54%
during the three months ended March 31, 2019 from 55% for the three
months ended March 31, 2018.
Selling, General and Administrative (“SG&A”)
expenses increased approximately 38% to $4,267,898 in the three
months ended March 31, 2019 versus $3,082,710 a year earlier. The
primary cause for the increase in SG&A expenses for the three
months ended March 31, 2019 compared to the prior year was
professional fees and expenses attributable to legal fees and
expenses related to the Axon, WatchGuard and PGA lawsuits. The
WatchGuard lawsuit was resolved and settled in May 2019; however,
the Axon lawsuit remains active. The PGA lawsuit was resolved on
April 17, 2019 and the cost to resolve this suit was accrued as of
March 31, 2019. We expect that the legal fees related to the Axon
litigation will remain high in 2019 as we proceed to trial. We
intend to pursue recovery from Axon, its insurers and other
responsible parties as appropriate.
We reported a net loss of ($3,205,174), or
($0.29) per share, in the first quarter of 2019, compared with a
prior-year net loss of ($2,588,232), or ($0.37) per
share.
Investor Conference Call
The Company will host an investor
conference call at 11:15 a.m. EDT on Wednesday May 15, 2019, to
discuss its operating results for the first quarter 2019, along
with other topics of interest.
Shareholders and other interested parties may participate
in the conference call by dialing
844-761-0863 and entering conference
ID# 9081469 a few minutes before
11:15 a.m. EDT on Wednesday May 15, 2019.
A replay of the conference call will be
available two hours after its completion, from May 15, 2019 until
11:59 p.m. on July 15, 2019 by dialing 855-859-2056 and entering
the conference ID #
9081469.
For additional news and information please visit or follow
us on Twitter @digitalallyinc and
Facebook www.facebook.com/DigitalAllyInc
Follow additional Digital Ally Inc. social media channels
here:
Linkedin I Instagram I Google+ I Pinterest
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 improve its revenue and operating results; whether
it will be able to resolve its liquidity and operational
issues; whether it will be able to achieve improved
production and other efficiencies to restore its gross and
operating margins in the future; whether the Company will be
able to continue to expand into non-law enforcement markets and
increase its service based revenue; whether the Company has
resolved its product quality and supply chain issues; whether there
will be commercial markets, domestically and internationally, for
one or more of the Company’s new products; whether the Company will
achieve positive outcomes in its litigation with Axon; whether and
the extent to which the US Patent and Trademark Office (USPTO)
rulings will curtail, eliminate or otherwise have an effect on the
actions of Axon and others in the marketplace respecting the
Company, its products and customers; its ability to deliver its
newer product offerings as scheduled, and in particular the
new EVO-HD product platform, obtain the required components and
products on a timely basis, and have them perform as planned;
whether the new partnership with NASCAR will help expand the appeal
for the Company’s products and services; its ability to maintain or
expand its share of the markets in which it competes, including
those outside the law enforcement industry; whether it 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; 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. It does not
undertake to publicly update or revise forward-looking statements,
whether because 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, 2018 and quarterly report on Form 10-Q for the three
months ended March 31, 2019, filed with the Securities and Exchange
Commission.
For Additional Information, Please
Contact:Stanton E. Ross, CEO, at (913) 814-7774
orThomas J. Heckman, CFO, at (913)
814-7774
(Financial Highlights Follow)
DIGITAL ALLY,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETSMARCH 31, 2019 AND DECEMBER 31,
2018
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
|
|
(Unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,379,521 |
|
|
$ |
3,598,807 |
|
Accounts receivable-trade, less allowance for doubtful accounts of
$70,000 – 2019 and 2018 |
|
|
1,702,249 |
|
|
|
1,847,886 |
|
Accounts receivable-other |
|
|
434,951 |
|
|
|
382,412 |
|
Inventories, net |
|
|
6,995,333 |
|
|
|
6,999,060 |
|
Income tax refund receivable, current |
|
|
44,603 |
|
|
|
44,603 |
|
Prepaid expenses |
|
|
237,631 |
|
|
|
429,403 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
11,794,288 |
|
|
|
13,302,171 |
|
|
|
|
|
|
|
|
|
|
Furniture, fixtures and
equipment, net |
|
|
232,052 |
|
|
|
247,541 |
|
Intangible assets, net |
|
|
477,936 |
|
|
|
486,797 |
|
Operating lease right of use
assets |
|
|
387,426 |
|
|
|
— |
|
Income tax refund
receivable |
|
|
45,397 |
|
|
|
45,397 |
|
Other assets |
|
|
298,552 |
|
|
|
256,749 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
13,235,651 |
|
|
$ |
14,338,655 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
(Deficit) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,623,707 |
|
|
$ |
784,599 |
|
Accrued expenses |
|
|
1,660,972 |
|
|
|
2,080,667 |
|
Current portion of operating lease obligations |
|
|
433,007 |
|
|
|
— |
|
Contract liabilities-current |
|
|
1,663,009 |
|
|
|
1,748,789 |
|
Proceeds investment agreement, at fair value-current |
|
|
6,000,000 |
|
|
|
— |
|
Income taxes payable |
|
|
3,933 |
|
|
|
3,689 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
11,384,628 |
|
|
|
4,617,744 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Proceeds investment agreement, at fair value- less current
portion |
|
|
3,279,000 |
|
|
|
9,142,000 |
|
Operating lease obligations- less current portion |
|
|
35,580 |
|
|
|
— |
|
Contract liabilities-long term |
|
|
1,912,599 |
|
|
|
1,991,091 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
16,611,807 |
|
|
|
15,750,835 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s Equity
(Deficit): |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 50,000,000 shares authorized;
shares issued: 11,126,055 – 2019 and 10,445,445 – 2018 |
|
|
11,126 |
|
|
|
10,445 |
|
Additional paid in capital |
|
|
79,358,024 |
|
|
|
78,117,507 |
|
Treasury stock, at cost (63,518 shares) |
|
|
(2,157,226 |
) |
|
|
(2,157,226 |
) |
Accumulated deficit |
|
|
(80,588,080 |
) |
|
|
(77,382,906 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficit) |
|
|
(3,376,156 |
) |
|
|
(1,412,180 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity (deficit) |
|
$ |
13,235,651 |
|
|
$ |
14,338,655 |
|
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE
COMPANY’S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH
31, 2019 FILED WITH THE SEC)
DIGITAL ALLY,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE MONTHS
ENDED MARCH 31, 2019 AND 2018
(Unaudited)
|
|
Three Months ended March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Product |
|
$ |
1,920,464 |
|
|
$ |
1,991,113 |
|
Service and other |
|
|
630,332 |
|
|
|
480,400 |
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
2,550,796 |
|
|
|
2,471,513 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Product |
|
|
1,263,071 |
|
|
|
1,253,019 |
|
Service and other |
|
|
105,985 |
|
|
|
109,100 |
|
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
|
1,369,056 |
|
|
|
1,362,119 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,181,740 |
|
|
|
1,109,394 |
|
Selling, general and
administrative expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
|
462,171 |
|
|
|
440,120 |
|
Selling, advertising and promotional |
|
|
755,989 |
|
|
|
674,405 |
|
Stock-based compensation |
|
|
725,198 |
|
|
|
493,519 |
|
General and administrative |
|
|
2,324,540 |
|
|
|
1,474,666 |
|
|
|
|
|
|
|
|
|
|
Total selling, general and
administrative expenses |
|
|
4,267,898 |
|
|
|
3,082,710 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(3,086,158 |
) |
|
|
(1,973,316 |
) |
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
17,984 |
|
|
|
1,616 |
|
Change in warrant derivative
liabilities |
|
|
— |
|
|
|
889 |
|
Change in fair value of
secured convertible debentures |
|
|
— |
|
|
|
12,807 |
|
Change in fair value of
proceeds investment agreement |
|
|
(137,000 |
) |
|
|
— |
|
Loss on the extinguishment of
secured convertible debentures |
|
|
— |
|
|
|
(500,000 |
) |
Interest expense |
|
|
— |
|
|
|
(130,228 |
) |
|
|
|
|
|
|
|
|
|
Loss before income tax
(benefit) |
|
|
(3,205,174 |
) |
|
|
(2,588,232 |
) |
Income tax (benefit) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,205,174 |
) |
|
$ |
(2,588,232 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share
information: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.29 |
) |
|
$ |
(0.37 |
) |
Diluted |
|
$ |
(0.29 |
) |
|
$ |
(0.37 |
) |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
10,941,856 |
|
|
|
7,030,809 |
|
Diluted |
|
|
10,941,856 |
|
|
|
7,030,809 |
|
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE
COMPANY’S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH
31, 2019 FILED WITH THE SEC)
Digital Ally (NASDAQ:DGLY)
Historical Stock Chart
From Aug 2024 to Sep 2024
Digital Ally (NASDAQ:DGLY)
Historical Stock Chart
From Sep 2023 to Sep 2024