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Digital Ally Reports 372% Sales Increase

Digital Ally, Inc. Press Release FlashlightNews.org - 2/25/2008

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Company expects revenue to more than double in 2008


VF2 Digital Video Flashlight from Digital Ally

VF2 Digital Video Flashlight from Digital Ally

OVERLAND PARK, Ks. - Digital Ally, Inc. (Nasdaq: DGLY), which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial security applications, today reported record revenue and net income for the fourth quarter and full year 2007.

For the three months ended December 31, 2007, revenue increased 283% to approximately $7.0 million, when compared with revenue of approximately $1.8 million in the fourth quarter of 2006. Sales during the fourth quarter of 2007 increased 38% when compared with approximately $5.1 million in the third quarter of 2007.

Gross profits totaled $4,066,712 (57.8% of revenue) in the quarter ended December 31, 2007, compared with gross profits of $911,243 (49.6% of revenue) in the corresponding period of the previous year. The Company recorded net income of $983,750 in the fourth quarter of 2007, versus a net loss of ($165,195) in the prior-year quarter. Basic earnings per share of $0.07 in the quarter ended December 31, 2007 compared with a net loss of ($0.01) per share in the prior-year period. Diluted earnings per share totaled $0.06 in the quarter ended December 31, 2007, versus a net loss of ($0.01) per share in the fourth quarter of 2006. Net income for the three months ended December 31, 2007 included a $490,143 income tax expense.

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The Company incurred non-cash stock compensation expense of $402,681 for the quarter ended December 31, 2007, compared with $147,662 in the prior-year quarter.

For the twelve months ended December 31, 2007, revenue increased 372% to approximately $19.4 million, when compared with revenue of approximately $4.1 million in year ended December 31, 2006. Gross profits improved 492% to $11,741,152 (60.5% of revenue) in 2007, when compared with gross profits of $1,982,650 (48.2% of revenue) in the previous year. The Company reported net income of $4,523,334 in the year ended December 31, 2007, versus a net loss of ($3,361,229) in the year ended December 31, 2006. Basic earnings per share of $0.33 in 2007 compared with a net loss of ($0.26) per share in 2006. Diluted earnings per share totaled $0.28 in the year ended December 31, 2007, versus a net loss of ($0.26) per share in 2006. Net income for the year ended December 31, 2007 included an income tax benefit of $1,663,000. This benefit resulted from the Company’s reduction of its deferred tax valuation allowance due to the utilization of its net operating loss carryforward in 2007 and anticipated future usage of the carryforward because of expected future profitability, among other items. Excluding this income tax benefit, the Company would have reported net income of $2,860,334, or $0.21 per basic and $0.18 per diluted share, for the year ended December 31, 2007.

The Company incurred non-cash stock compensation expense totaling $1,784,459 in the year ended December 31, 2007, compared with $1,940,998 in 2006.

“I am very pleased to report outstanding growth in sales and earnings for the quarter and year ended December 31, 2007, as enthusiasm for our DVM-500 In-Car Video Mirror continued to build among law enforcement agencies throughout the United States and internationally,” stated Stanton E. Ross, Chief Executive Officer of the Company. “Not only did our sales increase 372% to a record $19.4 million in 2007, but our gross profits rose at an even faster pace as gross margins improved to 60.5% of revenue, compared with 48.2% in 2006. Sales during the three months ended December 31, 2007 represented the seventh consecutive increase in quarterly sales since Digital Ally commenced shipping its advanced digital surveillance products to customers in March 2006.”

“We now have customers in all 50 states and 12 foreign countries, and our largest order, to date, was from an international customer that has since placed additional orders for the DVM-500. We introduced a number of additional features to enhance the functionality and utility of our DVM-500 last year, including a wireless software file transfer feature that allows law enforcement officers to easily and inexpensively download video files to police headquarters or other remote locations, a Live Streaming Video capability, and a new VideoManager Server that enhances the ability of authorized headquarters personnel to view, upload, playback, search and manage video files from any networked computer with proper access rights.”

“Improvements in our balance sheet during 2007 were as strong as our operating results,” observed Ross. “Stockholders’ equity increased from $1.9 million at the end of 2006 to $9.0 million as of December 31, 2007, we paid off all of our short and long-term debt during the year, and we had $4.2 million of cash and a current ratio of 5.0-to-1.0 at year-end. Financially, we are very well-positioned for the growth anticipated in 2008.”

“Looking forward, 2008 will be a year marked by our introduction of several new products and our entry into new markets,” continued Ross. ”Our experience with the Digital Video Flashlight (“DVF”), which contributed modestly to 2007 sales, has resulted in a redesign of that product that we believe will increase its appeal to both existing and new customers. We plan to introduce our initial digital surveillance products for the school bus and mass transit markets during the second quarter of 2008, and a new product for law enforcement and military applications should be forthcoming in the second half of the year.”

“We expect to achieve our eighth consecutive quarter of record sales during the three months ending March 31, 2008, and based upon information currently available to the Company, we anticipate that full year 2008 revenues should more than double to approximately $40 million. We also believe that the Company should be able to maintain the 21% operating margin reported in the most recent quarter in 2008”

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 the field of 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”.