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
first quarter 2021 operating results. An investor conference call
is scheduled for 11:15 p.m. EDT on Tuesday, May 18, 2021 (see
details below).
Highlights for the first quarter ended
March 31, 2021
● |
Total revenues increased in 2021 to $2,535,829 from $2,425,745 in
2020. The primary reason for the overall revenue increase is an
increase of $146,041 (8%), in product revenues, offset by a slight
decline in service and other revenue of $35,957 (5%), from 2020
levels. Products revenues experienced an increase due to revenues
generated by the Company’s new ThermoVU™ and Shield™ product lines
introduced to the market in 2020. Additionally, the Company
experienced an increase in DVM-800 sales during the first quarter
of 2021 in comparison to the same period in 2020. Service and other
revenues declined over the prior period due to continuing impacts
of the Covid-19 pandemic, as travel restrictions have affected many
of our commercial customers in particular the cruise ship industry
and the elimination of public events continue to adversely affect
our installation and situational security revenues. |
|
|
● |
During 2020, continuing into the first quarter 2021, the Company
added two new lines of branded products: (1) the ThermoVu™ which is
a line of self-contained temperature monitoring systems that
provides alerts and controls facility access when an individual’s
temperature exceeds a pre-set threshold and (2) our Shield™
disinfectants and cleansers which are for use against viruses and
bacteria. We began offering such products beginning late in the
second quarter 2020 and experienced strong demand. Shield™
disinfectants has been listed on the United States Environmental
Protection Agency’s List N: Disinfectants for Use Against
SARS-CoV-2, the virus that causes COVID-19. We expect continued
revenues from these two new product lines in future quarters as the
economy continues to recover from the COVID-19 pandemic. The
Company has also begun expanding the ShieldTM brand with additional
products to complement these new safety product lines. These
branded products are being offered to our first responder customers
including police, fire, and paramedics. Commercial customers such
as schools, cruise lines, taxicab, and para transit are natural
users for the products, which the Company is actively
pursuing. |
|
|
● |
On January 14, 2021, we consummated a registered direct offering of
2,800,000 shares of common stock at $3.095 per share, warrants to
purchase 10,000,000 shares of common stock at $3.25 per share and
prefunded warrants to purchase 7,200,000 shares of common stock, at
$3.095 per share ($3.085 prefunded at closing). The net proceeds,
after deducting underwriting discounts, commissions, and other
expenses in connection with the offering, were approximately $28.9
million. We plan to use the net proceeds from the January Offering
for working capital, product development, order fulfillment and for
general corporate purposes. This offering was completed under the
Company’s effective shelf registration statement on Form S-3. |
|
|
● |
On February 1, 2021, we consummated a registered direct offering of
3,250,000 shares of common stock at $2.80 per share, warrants to
purchase 14,300,000 shares of common stock at $3.25 per share and
prefunded warrants to purchase 11,050,000 shares of common stock at
a price of $2.80 per share ($2.79 prefunded at closing). The net
proceeds, after deducting underwriting discounts and commissions
and other expenses in connection with the offering, were
approximately $37.5 million. We plan to use the net proceeds from
the February Offering for working capital, product development,
order fulfillment and for general corporate purposes. This offering
was completed under the Company’s effective shelf registration
statement on Form S-3. |
|
|
● |
Our overall gross margin percentage decreased to 32% in the first
quarter 2021 compared to 52% in 2020. The decline is attributable
to increased inbound freight costs due to the impacts of the
COVID-19 pandemic, a reduction in the overall sales mix represented
by higher-margin service sales, and increases to inventory reserves
during the first quarter 2021 compared to 2020. Our goal continues
to improve our margins to 60% over the longer term based on the
expected margins of our EVO-HD, DVM-800, VuLink, FirstVU HD,
ThermoVuTM, ShieldTM disinfectants and our cloud evidence storage
and management offering if they gain traction in the marketplace
and subject to a normalizing economy in the wake of the COVID-19
pandemic. |
|
|
● |
Selling, general and administrative expenses were $3,667,575 and
$3,192,396 for the first quarter 2021 and 2020, respectively, an
increase of $485,179 (15%). The increase was attributable to an
increase in travel expenses as COVID-19 restrictions begin to ease,
as well as an increase in insurance expenses for the first quarter
2021 compared to 2020. We have incurred substantial increases in
our insurance premiums for general liability and related coverages
that are generally the impact of COVID-19 on such coverages. |
|
|
● |
During the first quarter of 2021, the Company issued detachable
warrants to purchase a total of 42,500,000 shares of Common Stock
in association with the two registered direct offerings previously
described. The underlying warrant agreement terms provide for net
cash settlement outside the control of the Company in the event of
tender offers under certain circumstances. As such, the Company is
required to treat these warrants as derivative liabilities which
are valued at their estimated fair value at their issuance date and
at each reporting date with any subsequent changes reported in the
statement of operations as the change in fair value of warrant
derivative liabilities. The change in fair value of the warrant
derivative liabilities from their issuance date to March 31, 2021
totaled $24,552,257 which was recognized as a gain in the first
quarter of 2021. |
|
|
● |
The COVID-19 pandemic represents a fluid situation that presents a
wide range of potential impacts of varying durations for different
global geographies, including locations where we have offices,
employees, customers, vendors and other suppliers and business
partners. Like most US-based businesses, the COVID-19 pandemic and
efforts to mitigate the same began to have impacts on our business
in March 2020. During 2020, and continuing in early 2021, we have
observed decreases in demand from certain customers, including
primarily our law-enforcement and commercial customers. |
|
|
|
Given the fact that our products are sold through a variety of
distribution channels, we expect our sales will experience more
volatility as a result of the changing and less predictable
operational needs of many customers as a result of the COVID-19
pandemic. We are aware that many companies, including many of our
suppliers and customers, are reporting or predicting negative
impacts from COVID-19 on future operating results. Although we
observed significant declines in demand for our products from
certain customers during 2020, and continuing in early 2021, we
believe that it remains too early for us to know the exact impact
COVID-19 will have on the long-term demand for our products. We
also cannot be certain how demand may shift over time as the
impacts of the COVID-19 pandemic may go through several phases of
varying severity and duration. |
|
|
|
Like most companies, we have taken a range of actions with respect
to how we operate to assure we comply with government restrictions
and guidelines as well as best practices to protect the health and
well-being of our employees and our ability to continue operating
our business effectively. To date, we have been able to operate our
business effectively using these measures and to maintain all
internal controls as documented and posted. We also have not
experienced significant challenges in maintaining business
continuity and do not expect to incur material expenditures to do
so. However, the impacts of COVID-19 and efforts to mitigate the
same have remained unpredictable and it remains possible that
challenges may arise in the future. |
Recent Developments
|
On April 30, 2021, the Company closed on the purchase and sale
agreement to acquire a 71,361 square foot building located in
Lenexa, Kansas, which is intended to serve as the Company’s future
headquarters office and warehouse. The building contains
approximately 30,000 square foot of office space and the remainder
warehouse space. The total purchase price is approximately $5.3
million, the Company funded the purchase price with cash on hand,
without the need for external debt or other financing. |
Management Comments
Stanton E. Ross, Chief Executive Officer of
Digital Ally, stated, “We are very pleased to report a 4% increase
in total revenues for the first quarter of 2021 as compared to
2020. Importantly, we were able to report improvements in revenue
and net loss regardless of the challenges to our legacy business
caused by the COVID-19 pandemic during 2021 and 2020. Our decision
not to stand still during the COVID-19 pandemic and proactively
expand our product offerings to include the ThermoVU and Shield
lines has proven to be successful as they continued to generate
significant revenues and opportunities during the first quarter of
2021. We are considering further expansion of the ThermoVU and
Shield product lines to include complementary products that we hope
they will achieve similar market acceptance. We completed two
registered direct offerings during the first quarter of 2021 which
yielded total net proceeds of approximatly $66.4 million. As a
result, we have substantial liquid resources available to us that
will enable us to pursue organic expansion of our legacy business
as well as potential acquisitions. We continue to pursue and review
several opportunities and are proceeding cautiously given the
current environment and future uncertainties. We will inform our
investors as we attempt to take advantage of new business
opportunities and to expand our existing business lines to benefit
the Company and its shareholders for 2021 and beyond” concluded
Ross.
First Quarter 2021 Operating
Results
For the first quarter 2021, our total revenue
increased by 4% to $2,535,829, compared with revenue of $2,425,745
for the first quarter 2020.
Gross profit decreased 36% to $811,882 for the
first quarter 2021 versus $1,265,028 in 2020. Our gross margin
decline is primarily attributable to the cost of sales as
percentage of revenues increasing to 68% for first quarter 2021
from 48% for 2020.
Selling, General and Administrative (“SG&A”)
expenses increased approximately 15% to $3,677,575 in the first
quarter 2021 versus $3,192,396 in 2020. The increase was
attributable to an increase in travel expenses for the first
quarter 2021 as compared to 2020, as COVID-19 restrictions begin to
ease. Additionally, increases in insurance expenses for the first
quarter 2021 contributed to the increase, along with the Company
beginning to increase staff levels in the first quarter 2021 in
comparison to 2020.
We reported an operating loss of $2,865,693 for
the first quarter 2021, compared to an operating loss of $1,927,368
in 2020.
During the first quarter of 2021, the Company
issued detachable warrants to purchase a total of 42,500,000 shares
of Common Stock in association with the two registered direct
offerings completed in the first quarter of 2021. The underlying
warrant agreement terms provide for net cash settlement outside the
control of the Company under certain circumstances in the event of
tender offers. As such, the Company is required to treat these
warrants as derivative liabilities which are valued at their
estimated fair value at their issuance date and at each reporting
date with any subsequent changes reported in the statement of
operations as the change in fair value of warrant derivative
liabilities. The change in fair value of the warrant derivative
liabilities from the issuance date to March 31, 2021 was
$24,552,257, which was recognized as a gain in the Statement of
Operations for the first quarter ended March 31, 2021.
We reported net income of $21,721,858, or $0.49
per share, in the first quarter ended March 31, 2021 compared to a
prior-year net loss of ($2,334,110) or ($0.17) per share. This
represents an improvement of $24,055,968 or 1,031% when comparing
the first quarter of 2021 to the same period in 2020. No income tax
provision or benefit was recorded in the either 2021 or 2020 as the
Company has maintained a full valuation reserve on its deferred tax
assets.
Investor Conference Call
The Company will host an investor
conference call at 11:15 a.m. EDT on Tuesday, May 18, 2021, to
discuss its operating results for the first quarter 2021,
developments related to its disinfectant and safety products, the
impact of the Covid-19 pandemic and other topics of interest.
Shareholders and other interested parties may participate in the
conference call by dialing 844-761-0863 and entering conference ID#
2687583 a few minutes before 11:15 a.m. EDT on Tuesday, May 18,
2021.
A replay of the conference call will be available two
hours after its completion, from May 18, 2021 until 11:59 p.m. on
July 17, 2021 by dialing 855-859-2056 and entering the conference
ID #
2687583.
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:
Facebook | Instagram |
LinkedIn | Twitter
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
successfully identify and execute on opportunities to expand its
current business lines and/or new acquisition targets and that it
will be successful in integrating such new businesses in order to
generate profits for the Company; whether the Company will be able
to improve its revenue and operating results, especially in light
of the adverse effects of the Covid-19 pandemic on our customers,
suppliers and employees; whether it will be able to resolve its
liquidity and operational issues given the impact of the Covid-19
pandemic; 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, including
disinfectant/sanitizer and temperature screening products, and
increase its service based revenue; whether the Company has
resolved its product quality and supply chain issues; whether the
EVO-HD will help the Company increase its product revenues; whether
the Company will continue to experience declines in legal expenses
as a result of concluding its patent litigation; 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 competitors 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; 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-Q for the three months ended March 31,
2021 and in its annual report on Form 10-K for the year ended
December 31, 2020, filed with the Securities and Exchange
Commission (the “SEC”).
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, 2021 AND DECEMBER 31,
2020
|
|
March 31, 2021 (Unaudited) |
|
|
December 31,2020 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
67,626,240 |
|
|
$ |
4,361,758 |
|
Accounts receivable-trade, less allowance for doubtful accounts of
$123,224 – March 31, 2021 and December 31, 2020 |
|
|
1,131,389 |
|
|
|
1,705,461 |
|
Other receivables |
|
|
1,909,392 |
|
|
|
1,529,920 |
|
Inventories, net |
|
|
8,889,916 |
|
|
|
8,202,274 |
|
Prepaid expenses |
|
|
1,830,666 |
|
|
|
2,030,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
81,387,603 |
|
|
|
17,830,106 |
|
|
|
|
|
|
|
|
|
|
Furniture, fixtures and
equipment, net |
|
|
711,020 |
|
|
|
666,800 |
|
Intangible assets, net |
|
|
392,196 |
|
|
|
392,564 |
|
Operating lease right of use
assets, net |
|
|
748,741 |
|
|
|
753,175 |
|
Other assets |
|
|
1,342,173 |
|
|
|
1,154,881 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
84,581,733 |
|
|
$ |
20,797,527 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
666,067 |
|
|
$ |
1,144,676 |
|
Accrued expenses |
|
|
865,724 |
|
|
|
796,094 |
|
Current portion of operating lease obligations |
|
|
117,322 |
|
|
|
113,484 |
|
Contract liabilities-current |
|
|
1,608,384 |
|
|
|
1,647,469 |
|
Subordinated notes payable – current portion |
|
|
12,234 |
|
|
|
11,727 |
|
Warrant derivative liabilities |
|
|
26,663,802 |
|
|
|
— |
|
Income taxes payable |
|
|
7,158 |
|
|
|
7,158 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
29,940,691 |
|
|
|
3,720,608 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Subordinated notes payable – long term |
|
|
147,766 |
|
|
|
148,273 |
|
Operating lease obligation, long term |
|
|
703,983 |
|
|
|
723,272 |
|
Contract liabilities-long term |
|
|
2,030,224 |
|
|
|
1,848,869 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
32,822,664 |
|
|
|
6,441,022 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value per share; 100,000,000 shares
authorized; 51,577,209 shares issued – March 31, 2021 and
26,834,709 shares issued – December 31, 2020 |
|
|
51,577 |
|
|
|
26,835 |
|
Additional paid in capital |
|
|
122,157,360 |
|
|
|
106,501,396 |
|
Treasury stock, at cost (63,518 shares) |
|
|
(2,157,226 |
) |
|
|
(2,157,226 |
) |
Accumulated deficit |
|
|
(68,292,642 |
) |
|
|
(90,014,500 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
51,759,069 |
|
|
|
14,356,505 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders’ equity |
|
$ |
84,581,733 |
|
|
$ |
20,797,527 |
|
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE
COMPANY’S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED
MARCH 31, 2021 FILED WITH THE SEC)
DIGITAL ALLY,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE MONTHS
ENDEDMARCH 31, 2021 AND
2020(unaudited)
|
|
Three months ended March
31, 2021 |
|
|
Three months ended March
31, 2020 |
|
Revenue: |
|
|
|
|
|
|
|
|
Product |
|
$ |
1,912,577 |
|
|
$ |
1,766,536 |
|
Service and other |
|
|
623,252 |
|
|
|
659,209 |
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
2,535,829 |
|
|
|
2,425,745 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Product |
|
|
1,561,310 |
|
|
|
989,247 |
|
Service and other |
|
|
162,637 |
|
|
|
171,470 |
|
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
|
1,723,947 |
|
|
|
1,160,717 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
811,882 |
|
|
|
1,265,028 |
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses: |
|
|
|
|
|
|
|
|
Research and development expense |
|
|
448,965 |
|
|
|
485,748 |
|
Selling, advertising and promotional expense |
|
|
596,755 |
|
|
|
682,381 |
|
General and administrative expense |
|
|
2,631,855 |
|
|
|
2,024,267 |
|
|
|
|
|
|
|
|
|
|
Total selling, general and
administrative expenses |
|
|
3,677,575 |
|
|
|
3,192,396 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(2,865,693 |
) |
|
|
(1,927,368 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest income |
|
|
41,686 |
|
|
|
6,263 |
|
Interest expense |
|
|
(1,427 |
) |
|
|
(307,560 |
) |
Change in fair value of
secured convertible notes |
|
|
— |
|
|
|
(412,445 |
) |
Change in fair value of
proceeds investment agreement |
|
|
— |
|
|
|
307,000 |
|
Change in fair value of
short-term investments |
|
|
(4,964 |
) |
|
|
— |
|
Change in fair value of
warrant derivative liabilities |
|
|
24,552,257 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total other income
(expense) |
|
|
24,587,551 |
|
|
|
(406,742 |
) |
|
|
|
|
|
|
|
|
|
Income (loss) before income
tax benefit |
|
|
21,721,858 |
|
|
|
(2,334,110 |
) |
Income tax benefit |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
21,721,858 |
|
|
$ |
(2,334,110 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) per share
information: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.49 |
|
|
$ |
(0.17 |
) |
Diluted |
|
$ |
0.49 |
|
|
$ |
(0.17 |
) |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
44,766,135 |
|
|
|
13,888,438 |
|
Diluted |
|
|
44,766,135 |
|
|
|
13,888,438 |
|
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE
COMPANY’S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED
MARCH 31, 2021 FILED WITH THE SEC)
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