Digital Ally(DGLY) - 2022 Q4 - Annual Report

Revenue Performance - Total net revenues for 2022 reached $37,009,895, a significant increase from $21,413,434 in 2021, representing a growth of approximately 73%[109] - Total revenue for the year ended December 31, 2022, was $37,009,895, representing a 72.8% increase from $21,413,434 in 2021[125] - Revenue Cycle Management segment generated $7,886,107 in revenues for 2022, a substantial increase from $1,630,048 in 2021, reflecting a growth of approximately 384%[109] - Entertainment segment revenues surged to $20,871,500 in 2022, compared to $10,709,760 in 2021, marking an increase of around 95%[109] - Product revenues increased by 19.8% to $10,999,892 in 2022, driven by a 100.9% increase in entertainment segment revenues[119] - Service and other revenues surged by 112.6% to $26,010,003 in 2022, compared to $12,233,147 in 2021[119] - Revenue cycle management segment revenues increased by 384.0% to $7,886,107 in 2022, compared to $1,630,048 in 2021[119] Segment Performance - Video Solutions segment reported revenues of $8,252,288 in 2022, down from $9,073,626 in 2021, indicating a decline of about 9%[109] - Video Solutions segment incurred an operating loss of $9,278,721 in 2022, worsening from a loss of $4,497,196 in 2021[109] - Revenue Cycle Management segment achieved an operating income of $357,705 in 2022, up from $93,763 in 2021, showing improvement in profitability[109] - Entertainment segment reported an operating loss of $7,369,241 in 2022, compared to a profit of $235,432 in 2021, indicating a significant decline in performance[109] Profitability and Loss - Total gross profit for 2022 was $2,321,941, down from $5,663,775 in 2021, indicating a decline of approximately 59%[109] - Gross profit margin for 2022 was 6%, down from 26% in 2021, indicating increased cost pressures[116] - Operating loss for the year ended December 31, 2022, was 80% of total revenues, compared to 69% in 2021[116] - Net loss attributable to common stockholders for 2022 was $8.50 per share, compared to a net income of $10.14 per share in 2021[116] - The company reported a net loss of ($18,873,758) for the year ended December 31, 2022, a decline of $44,404,719 (174%) compared to a net income of $25,530,961 in 2021[155] Cash Flow and Working Capital - Cash and cash equivalents decreased to $3,532,199 as of December 31, 2022, down from $32,007,792 in 2021, resulting in a net decrease of $28,475,593 during the year[168] - Net cash used in operating activities was $18,580,385 for the year ended December 31, 2022, a deterioration of $755,277 compared to $17,825,108 in 2021[168] - As of December 31, 2022, the company had $3,532,199 in cash and cash equivalents and net positive working capital of $11,447,313[171] - Accounts receivable and other receivable balances accounted for $6,120,578 of net working capital as of December 31, 2022, with plans to collect outstanding receivables timely[171] - Inventory represented $6,839,406 of net working capital as of December 31, 2022, with a goal to reduce inventory levels through increased sales activities in 2023[171] Expenses and Costs - Overall cost of product revenue sold rose to $14,372,115 in 2022, an increase of $5,737,068 (66%) from $8,635,047 in 2021, with the video solutions segment's cost of goods sold as a percentage of revenue increasing to 154%[127] - Selling, general and administrative expenses increased to $32,055,199 in 2022, an increase of $11,630,514 (57%) from $20,424,685 in 2021, largely due to recent acquisitions[135] - Research and development expenses rose to $2,290,293 in 2022, an increase of $359,509 (19%) from $1,930,784 in 2021, reflecting the company's focus on new product development[136] - Professional fees and expenses surged to $3,297,895 in 2022, up by $1,784,033 (118%) from $1,513,862 in 2021, driven by increased legal and due diligence costs related to strategic transactions[140] Inventory and Reserves - Total inventories as of December 31, 2022, were $6,839,406, down 29.0% from $9,659,536 in 2021, primarily due to declining inventory for the new Shield product line and the entertainment segment[206] - The reserve for excess and obsolete inventory increased to $5,489,541 as of December 31, 2022, compared to $3,915,089 in 2021, representing a 40.2% increase[206] - Inventory reserves represented 44.5% of the gross inventory balance as of December 31, 2022, compared to 28.8% in 2021[206] - Warranty reserves increased to $15,694 as of December 31, 2022, from $13,742 in 2021, indicating a 14.2% increase[217] Acquisitions and Growth Strategy - The company completed its fourth medical billing asset acquisition for approximately $230,000 in cash, with a contingent consideration of $105,000[175] - The revenue cycle management segment completed its third medical billing company acquisition for approximately $1.2 million in cash, with a contingent consideration of $750,000[174] Future Outlook and Challenges - Management anticipates needing to restore positive operating cash flows and/or raise additional capital in the short term to fund operations over the next 12 months[165] - Inflation is expected to significantly impact all operating segments in 2023 and beyond, although it has not materially affected the company in the past fiscal year[226] - The company does not believe its business is seasonal, but generally generates higher revenues in the second half of the calendar year compared to the first half[226]