Digital Ally(US:DGLY)2025-11-12 11:32Financial Position - The company reported a stockholders' equity deficit of ($2,448,310) as of September 30, 2024, failing to meet the Nasdaq Stockholders' Equity Requirement of $2,500,000[248]. - The company received a notice from Nasdaq on December 20, 2024, regarding non-compliance with the Minimum Bid Price Requirement due to a closing bid price of less than $1 per share for 30 consecutive business days[247]. - The company regained compliance with the Minimum Bid Price Requirement and Stockholders' Equity Requirement as of October 17, 2025, and is now under a one-year Discretionary Panel Monitor[252]. - The company anticipates achieving compliance with Nasdaq requirements and maintaining it, although there are no assurances of continued compliance[251]. - The company has approximately $159,965,000 of federal net operating loss carryforwards available to offset future net taxable income as of September 30, 2025[298]. - The company has a net negative working capital of $115,393 as of September 30, 2025, with accounts receivable and other receivables representing $4,796,447 of net working capital[348]. - Debt obligations totaled $1,003,731 as of September 30, 2025, with current maturities of $865,292[352]. Revenue and Segment Performance - The company entered the revenue cycle management business in the second quarter of 2021, completing four acquisitions of private medical billing companies to enhance service revenues for healthcare organizations[257]. - The video solutions segment generates revenue through subscription models and hardware sales, with revenues recognized upon product delivery and deferred for cloud and warranty subscriptions over 3 to 5 years[256]. - Total net revenues for the three months ended September 30, 2025, were $4,537,157, representing a 12.0% increase from $4,051,711 in 2024[263]. - Entertainment segment revenue was $1,729,773 for the three months ended September 30, 2025, compared to $1,253,557 in 2024, an increase of 37.9%[263]. - Product revenues for the entertainment segment decreased by 12.6% to $434,793 in 2025 from $497,700 in 2024[274]. - Service and other revenues for the entertainment segment increased by 71.3% to $1,294,980 in 2025 from $755,857 in 2024[273]. - Video solutions segment revenue decreased by 25.0% to $229,629 in 2025 from $306,245 in 2024[274]. - Total net revenues for the nine months ended September 30, 2025, were $14,644,460, a decrease of $552,837 (3.6%) from $15,197,297 in 2024[314]. - Revenue cycle management segment revenues decreased to $4,144,008 for the nine months ended September 30, 2025, down $456,738 (9.9%) from $4,600,745 in 2024[314]. - The entertainment segment generated service revenues of $3,911,068 for the nine months ended September 30, 2025, an increase of $743,860 (23.5%) from $3,167,208 in 2024[314]. Profitability and Loss - Total gross profit for the three months ended September 30, 2025, was $1,371,575, down from $1,739,974 in 2024[263]. - Total operating loss for the company was $1,121,782 for the three months ended September 30, 2025, compared to a loss of $7,382,299 in 2024[263]. - The company recorded a net loss before income tax benefit of $(963,342) for the three months ended September 30, 2025, an improvement of $4,507,370 (82.4%) compared to $(5,470,712) in 2024[296]. - Net income improved to $(963,342) for Q3 2025, a $4,507,370 (82.4%) increase from $(5,470,712) in Q3 2024[299]. - Net loss attributable to common stockholders decreased to $(1,021,867) in Q3 2025, an improvement of $2,448,639 (70.6%) from $(3,470,506) in Q3 2024[301]. - Operating loss improved by $6,260,517 (84.8%) to $1,121,782 for the three months ended September 30, 2025, with operating loss as a percentage of revenues improving to 24.7% from 182%[288]. - Net loss improved by $13,239,067 (91.8%) to $(1,185,464) for the nine months ended September 30, 2025, compared to $(14,424,531) in 2024[340]. - Net loss attributable to common stockholders improved to $(1,303,597) for the nine months ended September 30, 2025, compared to $(12,485,388) for the same period in 2024, representing an improvement of $11,181,791 (89.6%) [342]. Expenses and Cash Flow - Selling, general and administrative expenses decreased by $6,628,916 (72.7%) to $2,493,357 for the three months ended September 30, 2025, primarily due to fewer new advertising sponsorships and headcount reductions[285]. - Selling, general and administrative expenses decreased by $9,907,312 (53.7%) to $8,531,984 for the nine months ended September 30, 2025, from $18,439,296 in 2024[322]. - Interest income increased to $17,887 for the three months ended September 30, 2025, from $13,775 in 2024, reflecting higher cash levels due to recent capital raises[289]. - Interest income increased to $95,808 for the nine months ended September 30, 2025, from $63,064 in 2024, reflecting higher cash levels[326]. - Interest expenses decreased significantly to $960,250 for the nine months ended September 30, 2025, from $2,505,536 in 2024, due to debt repayment[327]. - Net cash used in operating activities was $8,996,431 for the nine months ended September 30, 2025, compared to $4,086,023 for the same period in 2024, indicating a deterioration of $4,910,410[345]. - Net cash provided by financing activities was $9,684,796 for the nine months ended September 30, 2025, compared to $3,330,482 for the same period in 2024, driven by a public equity offering generating $14,308,300 in net cash proceeds[346]. Inventory and Asset Management - The company is actively managing inventory, which represents $2,622,542 of net working capital, with a goal to reduce this level during 2025[348]. - The total inventories as of September 30, 2025, amounted to $2,622,542, compared to $2,586,066 as of December 31, 2024, reflecting a slight increase[371][372]. - The reserve for excess and obsolete inventory decreased to $1,766,885 at September 30, 2025, from $2,169,655 at December 31, 2024, representing a reduction in reserves[373]. - Inventory reserves represented 40% of the gross inventory balance at September 30, 2025, down from 46% at December 31, 2024[373]. Impairment and Valuation - The company recorded a non-cash goodwill impairment charge of $4,322,000 for the revenue cycle management segment and $307,000 for the entertainment segment as of September 30, 2024[384]. - The weighted average cost of capital used in the most recent impairment test ranged from 20.9% to 32.5%[382]. - The fair value of the video solutions reporting unit was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined to be impaired[383]. - The company has fully reserved all of its deferred tax assets as of September 30, 2025, and December 31, 2024, due to overall net operating loss carryforwards available[390]. Market and Economic Conditions - Inflation has not materially affected the company during the past fiscal year, and the entertainment segment is expected to generate higher revenue in the second half of the calendar year[393].