Digital Ally, Inc. Reports Record Third Quarter Sales and Earnings

OVERLAND PARK, Kan., Nov. 7 /PRNewswire-FirstCall/ -- 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 third quarter and first nine months of 2007. An investor conference call is scheduled for 11:00 a.m. EST today, November 7, 2007 (see details below).

For the three months ended September 30, 2007 , revenue increased 255% to approximately $5.1 million, when compared with revenue of approximately $1.4 million in the third quarter of 2006. Revenue in the most recent quarter increased 34% when compared with approximately $3.8 million in the second quarter of 2007 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 .

Gross profits totaled $3,557,032 in the third quarter of 2007, and gross profit margin reached a record 69.7% of revenue. The Company reported net income of $2,973,562 in the quarter ended September 30, 2007 , versus a net loss of ($1,240,663) in the third quarter of the previous year. Basic earnings per share of $0.21 in the quarter ended September 30, 2007 , compared with a net loss of ($0.10) per share in the prior-year period. Diluted earnings per share totaled $0.18 in the quarter ended September 30, 2007 , versus a net loss of ($0.10) per share in the third quarter of 2006. Net income for the three months ended September 30, 2007 included a $2,153,143 income tax benefit. 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 the quarter and anticipated future usage of the carryforward because of its expected profitability, among other items. Excluding this income tax benefit, the Company would have reported record net income of $820,419, or $0.06 per basic and $0.05 per diluted share, for the quarter ended September 30, 2007 .

The Company incurred non-cash stock compensation expense of $385,756 for the quarter ended September 30, 2007 , compared with $744,832 in the prior-year quarter.

"I am very pleased to report that the sales and earnings momentum evident during the first half of 2007 was maintained, and in fact accelerated, during the third quarter, as our domestic and international orders from law enforcement agencies continued to expand," stated Stanton E. Ross, Chief Executive Officer of the Company. "Highlights of the third quarter included the development of several new features that enhance the functionality and utility of our DVM-500 Digital In-Car Video System Integrated into a Rearview Mirror. In July, we announced the availability of a wireless software file transfer feature that allows law enforcement officers to easily and inexpensively download video files from the DVM-500 to police headquarters or other remote locations. Shortly after the end of the third quarter, we introduced at the 114th Annual Association of Chiefs of Police (IACP) Conference in New Orleans our Live Streaming Video solution, which will allow the DVM-500 to transmit live video of field activities to headquarters and multiple other locations, while at the same time recording the video. At the IACP Conference, we also introduced our new VideoManager Server, which enhances the ability of authorized headquarters personnel to view, upload, playback, search and manage DVM-500 video files from any networked computer with proper access rights."

"While ramping up production at our Kansas City facilities has proven to be quite a challenge during this period of rapid sales growth, I am pleased with the progress we have made in this regard," continued Ross. "We shipped approximately 1,250 DVM-500 units, along with a modest number of Digital Video Flashlights (DVF), in the most recent quarter, which exceeded our expectations of just a few months earlier."