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Digital Ally, Inc. Reports
Record Sales and Earnings

Digital Ally, Inc. Press Release FlashlightNews.org - 8/06/2007

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Gross Profit Margin Expands To Record 69.1% of Revenue


Digital Ally's Video Flashlight

Digital Ally's Video Flashlight

LEAWOOD, Ks. - Digital Ally, Inc. (OTC Bulletin Board: DGLY), which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial security applications, today announced record revenue and net income for the second quarter and first half of 2007. An investor conference call is scheduled for 11:00 a.m. EDT today, August 6, 2007 (see details below).

For the three months ended June 30, 2007, the Company's revenue reached approximately $3.8 million, compared with revenue of approximately $0.8 million in the second quarter of the previous year. Revenue in the most recent quarter compared with revenue of approximately $3.4 million in the first quarter of 2007 and approximately $1.8 million in the fourth quarter of 2006, and continued a trend of impressive sequential growth in quarterly sales that began when Digital Ally commenced shipping its advanced digital surveillance products in March 2006.

The Company incurred non-cash stock compensation expense of $386,609 in the three months ended June 30, 2007, compared with $469,579 in the second quarter of 2006.

"I am pleased to report that 2007 is evolving into a 'breakout' year for Digital Ally, with domestic and international orders continuing to expand across a growing customer base," stated Stanton E. Ross, Chief Executive Officer of the Company. "To date, we have received orders from law enforcement agencies in 48 states, 11 foreign countries, and the U.S. Government. During the second quarter, the number of states that have signed statewide contracts with Digital Ally expanded to four, including West Virginia, New Mexico, Arkansas and Wisconsin. Shortly after the end of the quarter, we received the largest order in our history, from the State of Mississippi, which also signed a contract authorizing the purchase of our DVM-500 Digital In-Car Video Systems by municipal, county and state law enforcement agencies throughout the state. We also recently announced receipt of our largest international order, to date, from the Police Department in the State of Queretaro in Central Mexico. Momentum continues to build as more law enforcement agencies, domestically and abroad, become aware of the space-saving and operational advantages of our DVM-500 in the field, and we look forward to additional contract announcements in the second half of 2007."

"Our operating results, to date, primarily reflect sales of the DVM Digital In-Car Video System Integrated into a Rearview Mirror," continued Ross. "While we believe Digital Ally has only scratched the surface of the market potential for its DVM systems, our sales during the second half of 2007 will also reflect a growing contribution from shipments of our Digital Video Flashlight (DVF), which is creating considerable excitement within the law enforcement industry. Our greatest challenge thus far during 2007 has been to increase production at a rate consistent with our growth in orders from new and existing customers. We significantly increased the production capacity at our Kansas City facilities during the first half of the year, and the Company is well-positioned to handle the higher level of orders anticipated during the third and fourth quarters."

For the six months ended June 30, 2007, the Company's revenue totaled approximately $7.3 million, compared with revenue of approximately $0.8 million in the first half of 2006. Gross profits totaled $4,714,586 in the first half of 2007, for a gross profit margin of 64.9% of revenue, compared with gross profits of $452,999 (54.1% of revenue) for the six months ended June 30, 2006. The Company reported net income of $566,022, or $0.04 per diluted share, in the six months ended June 30, 2007, versus a net loss of ($1,955,371), or ($0.16) per share, in the corresponding period of the previous year.

The Company incurred non-cash stock compensation expense of $908,522 in the six months ended June 30, 2007, compared with $752,588 in the first half of the previous year.

"In addition to the impressive sales growth and profitability achieved during the first two quarters of 2007, our financial condition continues to strengthen," added Ross. "Net cash provided by operating activities totaled $959,903 in the six months ended June 30, 2007, compared with net cash used in operating activities of ($2,331,375) in the first half of 2006. We ended the second quarter with $468,272 of cash in the bank and no debt outstanding, compared with a cash balance of $57,160 and $1 million in outstanding debt at the end of last year."

The Company will host an investor conference call at 11:00 a.m. Eastern Time today, August 6, 2007, to discuss its second quarter operating results and the outlook for the balance of 2007. Shareholders and other interested parties may participate in the conference call by dialing 866-406-5369 (international/local participants dial 973-582-2847) and referencing the ID code 9091527, a few minutes before 11:00 a.m. EDT on August 6, 2007. A replay of the conference call will be available two hours after completion of the conference call from August 6, 2007 until August 13, 2007 by dialing 877-519-4471 (international/local participants dial 973-341-3080) and entering the conference ID 9091527.

About Digital Ally, Inc.

Digital Ally, Inc. is involved in the development, manufacturing and marketing of advanced technology products for law enforcement, homeland security and commercial security applications. The Company's primary development focus involves the field of Digital Video Imaging and Storage. For additional information, visit www.digitalallyinc.com.


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