Digital Ally (DGLY) Stock: Why The Price Jumped

By Amit Chowdhry ● Nov 18, 2021
  • The shares of Digital Ally, Inc. (NASDAQ: DGLY) increased by 12.7% yesterday. This is why it happened.

The shares of Digital Ally, Inc. (NASDAQ: DGLY) increased by 12.7% yesterday.

Q3 2021 Operating Results

— For the third quarter of 2021, the total revenue increased by 29% to $4,639,822, compared with revenue of $3,588,640 for the third quarter of 2020.

— Gross profit increased 15% to $1,400,570 for the third quarter 2021 versus $1,222,648 in 2020. The gross profit increase is commensurate with the increase in product and service revenues during the 3 months ended September 30, 2021, compared to the same period in 2020.

— The Selling, General and Administrative (SG&A) expenses increased approximately 63% to $4,999,543 in the third quarter of 2021 versus $3,066,605 in 2020. And the increase was attributable to a large increase in insurance premiums for general liability and related coverages that are generally the impact of COVID-19 on such coverages, an increase in travel expenses as COVID-19 restrictions begin to ease, increased promotional and advertising expenses, increased legal and acquisition-related expenses, along with increased expenses from three new subsidiary companies for the quarter ended September 30, 2021, that were not applicable for the same period in 2020.

— The company reported an operating loss of $3,598,973 for the third quarter of 2021, compared to an operating loss of $1,843,958 in 2020. And the operating loss as a percentage of revenues worsened to 77% in the three months ended September 30, 2021, from 51% in the same period in 2020.

— During the first quarter of 2021, the company issued detachable warrants to purchase a total of 42,550,000 shares of Common Stock in association with the two underwritten public offerings previously described. And 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 consolidated statements of operations as the change in fair value of warrant derivative liabilities. The change in fair value from June 30, 2021, to September 30, 2021, totaled $11,585,204 which was recognized as a gain in the third quarter of 2021.

— The company reported a net income of $8,068,799, or $0.16 per share, in the third quarter ended September 30, 2021, compared to a prior-year net income of $527,442 or $0.02 per share. No income tax provision or benefit was recorded in either 2021 or 2020 as the Company has maintained a full valuation reserve on its deferred tax assets.

KEY QUOTES:

“We are very pleased to report a 29% increase in total revenues for the third quarter of 2021 as compared to 2020. Importantly, we were able to report improvements in revenue and net income margin regardless of the challenges to our legacy business caused by the COVID-19 pandemic during 2021 and 2020. Additionally, we are happy to report our earnings per share of $0.16 for the three months ended September 30, 2021, a great improvement in comparison to the third quarter of 2020. We continue to stand behind our decision to be proactive during the COVID-19 pandemic and to use our legacy distribution network to expand our product offerings to include the ThermoVu and Shield lines. This decision has helped us weather the Covid storm and has helped us continue to generate revenues and opportunities during the third quarter of 2021 beyond our historical product line. We’re confident further expansion of the ThermoVu and Shield product lines to include complementary products, services, and other offerings will achieve similar market acceptance. Additionally, we refuse to stand still regarding our legacy product lines, as we were very excited to announce our FirstVu II and QuickVu docking stations in mid-October; which are already eliciting immediate interest and excitement in the marketplace.”

“We are excited about yet another addition to the Digital Ally Healthcare venture, as Nobility Healthcare, LLC completed its second acquisition on September 1, 2021, and is continuing actively to pursue other acquisitions to complete during the fourth quarter. The second acquisition of a medical billing company demonstrates our roll-up strategy is attractive to potential targets. We look forward to seeing the growth potential of this venture come to fruition and continue for the remainder of 2021 and beyond. Additionally, we are very thrilled to add TicketSmarter to our growing holdings of solid earnings and growth-potential businesses, as we believe the TicketSmarter acquisition will be accretive to earnings immediately, which was clearly indicated by the earnings provided by TicketSmarter in just one month of results. We are very excited to see the results of our operations moving forward, as we will see a full quarter of results from these acquisitions and begin to expand and grow their operations. We believe shareholders will benefit from its long-term value based on the attractive price the Company paid, in comparison to the multiples commanded by similar public companies. We continue to have substantial liquid resources available to us that will enable us to pursue organic expansion of our legacy business as well as potential acquisitions. As discussed, we have already put these resources to work and plan to continue pursuing and reviewing several opportunities; however, we 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.”

— Stanton E. Ross, Chief Executive Officer of Digital Ally

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