Digital Ally, Inc. Announces 2012 Operating Results

Digital Ally, Inc. Announces 2012 Operating Results 
Gross Profit Margin Improves to 54% Versus 45% in Previous Year 
LENEXA, KS -- (Marketwire) -- 03/26/13 --  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 operating results
for the year and quarter ended December 31, 2012. An investor
conference call is scheduled for 11:15 a.m. EDT tomorrow, March 27,
2013 (see details below). 
FY2012 Highlights: 


 
--  FY2012 revenue totaled $17.6 million, compared with $19.6 million in
    the previous year.
--  Gross profit margin improved to 54% of revenue in FY2012 vs. 45% in
    FY2011.
--  Total SG&A expenses declined 10% in the most recent year when
    compared with the previous year.
--  The Company incurred certain non-recurring expenses during the fourth
    quarter of 2012, including costs related to the consolidation of its
    operations into a new facility and expenses related to the
    discontinuation of certain early version digital video mirror systems.
--  The Company recorded a net loss of approximately ($2.0 million) in
    FY2012, which represented a 50% improvement relative to a FY2011 net
    loss of approximately ($4.0 million).
--  New products introduced since the third quarter of FY2010 generated
    13% of product sales in FY2012 vs. 8% of total sales in FY2011.
--  International revenue decreased to approximately $1.0 million in
    FY2012 (6% of total revenue), compared with approximately $2.0 million
    (10% of total revenue) in the previous year.
--  During FY2012, the Company began to realize meaningful benefits from
    the reorganization of (1) its manufacturing operations to more
    effectively outsource component parts production and (2) its law
    enforcement sales force.
--  The Company ended FY2012 with available unrestricted cash of $703,000
    and restricted cash of $662,000 on its balance sheet.
--  The Company implemented a reverse stock split in the third quarter of
    FY2012 in order to remain listed on Nasdaq.

  
"The year ended December 31, 2012 was marked by tremendous progress in
terms of improving our Company's production efficiencies and reducing
the level of revenue required for profitability," stated Stanton E.
Ross, Chief Executive Officer of Digital Ally, Inc. "Our ability to
achieve these goals was particularly impressive in light of a
challenging economic environment, which has negatively impacted
state, county and municipal government budgets that fund the law
enforcement agencies that represent our primary customer base. Gross
profit margins improved significantly, from 45% in 2011 to 54% in
2012, as we realized benefits from improved outsourcing of components
and other supplier cost reduction initiatives. We also reduced our
corporate and manufacturing overhead substantially and reorganized
our law enforcement products sales force in a manner that more
effectively ties the compensation of our sales personnel to relevant
performance metrics. The overall benefit from these actions was
evident in a 50% reduction in our net loss for 2012 on revenue that
was 10% lower than 2011 levels." 
"We believe Digital Ally is well-positioned to leverage its more
cost-effective infrastructure and outsourcing capabilities into a
restoration of profitability with even modest growth in revenue. The
new products that we have introduced during the past 30 months are
gaining acceptance in the marketplace, and such products accounted
for 13% of our sales in 2012, compared with 8% in the previous year.
Our sales initiatives outside the law enforcement industry are also
beginning to bear fruit, as illustrated by our recent receipt of an
order from the largest near-airport parking company in the United
States to complete the deployment of 344 DVM-250Plus commercial event
recorders. Our goal is to make further inroads with commercial
customers in a number of industries during the current year." 
"We believe our reorganized sales force can take full advantage of a
recovery in demand for domestic law enforcement equipment and
opportunities to penetrate the commercial market with new products.
We have also reorganized our international sales force after several
years of underperformance, with very positive initial results, and we
believe our new international sales structure should allow revenue
from foreign customers to improve," concluded Ross. 
For the twelve months ended December 31, 2012, the Company's revenue
declined 10% to approximately $17.6 million, compared with revenue of
approximately $19.6 million in FY2011. However, gross profit improved
8% to $9,481,987 (54% of revenue) in FY2012, versus $8,771,930 (45%
of revenue) in FY2011. The improvement in gross profit margin was
primarily due to lower component costs resulting from the Company's
supplier cost reduction initiative. Better outsourcing, including
from foreign sources, allowed the Company to lower component costs
for products sold. Furthermore, the Company continued to reduce
production costs through operating efficiencies and a significant
reduction in manufacturing overhead costs. The Company's goal is to
continue to improve gross margins in FY2013 through the supply chain
initiative, reduced manufacturing overhead, increased sales volumes
and an improved product mix, the benefits of which may be partially
offset by increased price competition in the in-car video system
market. 
Selling, General and Administrative ("SG&A") expenses decreased 10%
in the year ended December 31, 2012, to $11,168,505, compared with
$12,396,731 in the previous year. If net litigation charges of
$313,950 are excluded from FY2012 results, SG&A expenses declined 12%
in FY2012 versus FY2011. The improvement in SG&A expenses resulted
from the success of the Company's cost containment and reduction
initiative, which was evident in lower research and development
costs; stock-based compensation expense; professional fees; and
executive, sales and administrative staff payroll expense, partially
offset by higher selling, advertising and promotional expense and the
abovementioned net charges related to the settlement of lawsuits. The
Company is appealing certain court rulings against it in the lawsuit
with Z3 Technologies. If the appeal is successful, the Company could
recoup some of the litigation costs that penalized its operating
results in FY2012.  
The Company reported an operating loss of ($1,686,518) in FY2012.
This represented a 53% improvement when compared with an operating
loss of ($3,624,801) in FY2011.  
Interest income declined to $10,088 and the Company incurred $294,559
of interest expense on borrowings in the year ended December 31,
2012. Interest income and interest expense totaled $16,108 and
$224,460, respectively, in the year ended December 31, 2011. The
Company also recognized a loss on the extinguishment of debt totaling
$131,093 in FY2011. No such loss was recorded in FY2012. 
The Company reported a 50% reduction in net loss, which totaled
($1,970,989) in FY2012 on both a pretax and after-tax basis, compared
with a pretax and after-tax net loss of ($3,962,246) in FY2011. No
income tax provision or benefit was recorded for either FY2012 or
FY2011. The Company expects to continue to maintain a full valuation
allowance on its deferred tax assets, including net operating loss
carry forwards, until it determines that it can sustain a level of
profitability that demonstrates its ability to realize such assets.  
The Company reported a net loss of ($0.97) per share for the year
ended December 31, 2012, compared with a net loss of ($1.96) per
share in the year ended December 31, 2011. The weighted average
number of shares outstanding totaled 2,029,109 in FY2012, compared
with 2,018,979 shares in FY2011. All per share figures and the number
of shares outstanding have been adjusted to reflect a 1-for-8 reverse
stock split that was effective August 24, 2012.  
On a non-GAAP basis, the Company reported an adjusted net loss
(before income taxes, depreciation, amortization, interest expense,
net litigation settlement charges, stock-based compensation, and loss
on extinguishment of debt), a non-GAAP financial measure, of
($168,963), or ($0.08) per share, in FY2012, which represented a 90%
reduction in adjusted net loss when compared with ($1,707,358), or
($0.85) per share, in the year ended December 31, 2011. (Non-GAAP
adjusted net income is described in greater detail in a table at the
end of this press release). 
For the three months ended December 31, 2012, revenue improved 8% to
approximately $4.6 million, compared with revenue of approximately
$4.3 million in the fourth quarter of FY2011.  
Gross profit increased 30% to $2,392,397 (52% of revenue) in the
final quarter of FY2012, compared with $1,841,104 (43% of revenue) in
the three months ended December 31, 2011.  
The Company was able to reduce Selling, General and Administrative
("SG&A") expenses by 11% to $2,807,221 in the fourth quarter of
FY2012, versus $3,143,348 in the prior-year period. The improvement
in SG&A expenses resulted from lower stock-based compensation and a
24% reduction in general and administrative expenses, partially
offset by higher research and development costs, a modest increase in
selling, advertising and promotional expenses, and additional
litigation expense.  
The Company's reduced its operating loss 68% to ($414,824) in the
fourth quarter of FY2012, when compared with an operating loss of
($1,302,244) in the corresponding period of the previous year.  
Interest income declined to $3,062 in the most recent quarter, versus
$3,644 in the year-earlier quarter. Interest expense decreased to
$75,337 in the three months ended December 31, 2012, compared with
$87,443 in the fourth quarter of FY2011. The Company recorded a
$131,093 non-cash loss related to the extinguishment of debt in the
fourth quarter of FY2011. No such charge was incurred in the fourth
quarter of FY2012. 
The Company reported a 68% reduction in net loss, which totaled
($487,099) in the quarter ended December 31, 2012, on both a pretax
and after-tax basis, compared with a pretax and after-tax net loss of
($1,517,136) in the fourth quarter of FY2011. No income tax provision
or benefit was recorded in the fourth quarters of either FY2012 or
FY2011. The Company expects to continue to maintain a full valuation
allowance on its deferred tax assets, including net operating loss
carry forwards, until it determines that it can sustain a level of
profitability that demonstrates its ability to realize such assets.  
The Company reported a net loss of ($0.24) per share for the quarter
ended December 31, 2012, compared with a net loss of ($0.75) per
share in the quarter ended December 31, 2011. The weighted average
number of shares outstanding totaled 2,035,564 in the fourth quarter
of FY2012, compared with 2,019,259 shares in the FY2011 period. All
per-share figures and the number of shares outstanding have been
adjusted to reflect a 1-for-8 reverse stock split that was effective
August 24, 2012.  
On a non-GAAP basis, the Company reported an adjusted net loss
(before income taxes, depreciation, amortization, interest expense,
net litigation settlement charges, stock-based compensation, and loss
on extinguishment of debt), a non-GAAP financial measure, of
($97,317), or ($0.05) per share, in the fourth quarter of FY2012,
representing an 88% reduction in adjusted net loss when compared with
($793,618), or ($0.39) per share, in the quarter ended December 31,
2011. (Non-GAAP adjusted net income is described in greater detail in
a table at the end of this press release). 
Non-GAAP Financial Measures  
Digital Ally, Inc. has provided financial information in this release
that has not been prepared in accordance with GAAP. This information
includes non-GAAP adjusted net income (loss). Digital Ally uses such
non-GAAP financial measures internally in analyzing its financial
results and believes they are useful to investors, as a supplement to
GAAP measures, in evaluating Digital Ally's ongoing operational
performance. Digital Ally believes that the use of these non-GAAP
financial measures provides an additional tool for investors to
evaluate ongoing operating results and trends and in comparing its
financial measures with other companies in Digital Ally's industry,
many of which present similar non-GAAP financial measures to
investors. As noted, the non-GAAP financial measures discussed above
exclude certain non-cash expenses/income including: (1) income tax
expense/benefit, (2) depreciation and amortization expense, (3)
interest expense, (4) litigation charges (credits) and related
expenses, and (5) share-based compensation expense.  
Non-GAAP financial measures should not be considered in isolation
from, or as a substitute for, financial information prepared in
accordance with GAAP. Investors are encouraged to review the
reconciliation of these non-GAAP measures to their most directly
comparable GAAP financial measure as detailed above. As previously
mentioned, a reconciliation of GAAP to the non-GAAP financial
measures has been provided in the tables included as part of this
press release.  
Investor Conference Call  
The Company will host an investor conference call at 11:15 a.m.
Eastern Daylight Time (EDT) tomorrow, March 27, 2013, to discuss its
2012 operating results, along with other topics of interest.
Shareholders and other interested parties may participate in the
conference call by dialing 877-374-8416 (international/local
participants dial 412-317-6716) and asking to be connected to the
"Digital Ally Conference Call" a few minutes before 11:15 a.m.
Eastern Time on March 27, 2013.  
A replay of the conference call will be available one hour after the
completion of the conference call from March 27, 2013 until 9:00 a.m.
on May 28, 2013 by dialing 877-344-7529 (international/local
participants dial 412-317-0088) and entering the conference ID#
10026631.  
About Digital Ally, Inc. 
Digital Ally, Inc. develops, manufactures and markets advanced
technology products for law enforcement, homeland security and
commercial applications. The Company's primary focus is digital video
imaging and storage. For additional information, visit
www.digitalallyinc.com  
The Company is headquartered in Lenexa, Kansas, and its shares are
traded on The Nasdaq Capital Market under the symbol "DGLY". 
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 improve its revenues and operating results in 2013 given the
current economic environment; whether it will be able to achieve
improved production and other efficiencies to continue to increase
its gross and operating margins; whether the federal economic
stimulus funding for law enforcement agencies will have a positive
impact on the Company's revenue; the Company's ability to deliver its
new product offerings as scheduled, including its ability to 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 there will be a commercial market,
domestically and internationally, for one or more of its new
products; whether the Company's new products, including the DVM-250
Video Event Recorder, will continue to generate an increasing portion
of its total sales; whether its reorganized domestic and
international sales force will result in a rebound in revenues in and
outside of the U.S.; whether the Company 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. The Company does not undertake to
publicly update or revise forward-looking statements, whether as a
result 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-K for the year ended December 31, 2012, as filed with the
Securities and Exchange Commission.  
For Additional Information, Please Contact: 
Stanton E. Ross, CEO at (913) 814-7774
or 
RJ Falkner & Company, Inc., Investor Relations Counsel at (800)
377-9893 or via email at info@rjfalkner.com 
(Financial Highlights Follow) 


 
                                                                            
                                                                            
                             DIGITAL ALLY, INC.                             
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                  DECEMBER 31, 2012 AND DECEMBER 31, 2011                   
                                (Unaudited)                                 
                                                                            
                                                 December 31,  December 31, 
                                                     2012          2011     
                                                 ------------  ------------ 
                      Assets                                                
Current assets:                                                             
  Cash and cash equivalents                      $    703,172  $  2,270,393 
  Accounts receivable-trade, less allowance for                             
   doubtful accounts of $70,193 - 2012 and                                  
   $125,000 - 2011                                  2,956,654     2,853,049 
  Accounts receivable-other                            71,148       104,318 
  Inventories                                       7,294,721     6,683,289 
  Prepaid expenses                                    258,642       302,318 
                                                 ------------  ------------ 
                                                                            
      Total current assets                         11,284,337    12,213,367 
                                                 ------------  ------------ 
                                                                            
Furniture, fixtures and equipment                   4,392,880     4,073,713 
Less accumulated depreciation and amortization      3,454,087     3,212,827 
                                                 ------------  ------------ 
                                                                            
                                                      938,793       860,886 
                                                 ------------  ------------ 
                                                                            
Restricted cash                                       662,500            -- 
Intangible assets, net                                217,660       226,802 
Other assets                                          241,446        97,854 
                                                 ------------  ------------ 
                                                                            
  Total assets                                   $ 13,344,736  $ 13,398,909 
                                                 ============  ============ 
                                                                            
       Liabilities and Stockholders' Equity                                 
Current liabilities:                                                        
  Accounts payable                               $  1,520,207  $    847,036 
  Accrued expenses                                    793,524       833,260 
  Capital lease obligation -current                    66,087            -- 
  Income taxes payable                                  6,717        21,046 
  Customer deposits                                     1,878        31,899 
                                                 ------------  ------------ 
                                                                            
      Total current liabilities                     2,388,413     1,733,241 
                                                 ------------  ------------ 
                                                                            
Long-term liabilities:                                                      
  Subordinated notes payable-long-term, net of                              
   discount $96,378 and $142,711                    2,403,622     2,357,289 
  Litigation accrual -long term                       530,000            -- 
  Capital lease obligation -long term                 120,988            -- 
                                                 ------------  ------------ 
                                                                            
      Total long term liabilities                   3,054,610     2,357,289 
                                                                            
Commitments and contingencies                                               
Stockholders' equity:                                                       
  Common stock, $0.001 par value; 9,375,000                                 
   shares authorized; shares issued: 2,099,082 -                            
   2012 and 2,082,832 - 2011                            2,099         2,083 
  Additional paid in capital                       23,304,401    22,740,094 
  Treasury stock, at cost (shares: 63,518 - 2012                            
   and 63,518 - 2011)                              (2,157,226)   (2,157,226)
  Accumulated deficit                             (13,247,561)  (11,276,572)
                                                 ------------  ------------ 
                                                                            
      Total stockholders' equity                    7,901,713     9,308,379 
                                                 ------------  ------------ 
                                                                            
    Total liabilities and stockholders' equity   $ 13,344,736  $ 13,398,909 
                                                 ============  ============ 

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S ANNUAL
REPORT ON 
 FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2012 FILED WITH
THE SEC) 


 
                                                                            
                                                                            
                             DIGITAL ALLY, INC.                             
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
                    FOR THE THREE MONTHS AND YEARS ENDED                    
                         DECEMBER 31, 2012 AND 2011                         
                                (Unaudited)                                 
                                                                            
                            Three months ended        Twelve months ended   
                               December 31,              December 31,       
                         ------------------------  ------------------------ 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                                                                            
Product revenue          $ 4,353,427  $ 4,041,017  $16,691,136  $18,858,656 
Other revenue                284,660      245,297      926,972      718,497 
                         -----------  -----------  -----------  ----------- 
                                                                            
Total revenue              4,638,087    4,286,314   17,618,108   19,577,153 
Cost of revenue            2,245,690    2,445,210    8,136,121   10,805,223 
                         -----------  -----------  -----------  ----------- 
                                                                            
  Gross profit             2,392,397    1,841,104    9,481,987    8,771,930 
Selling, general and                                                        
 administrative expenses:                                                   
  Research and                                                              
   development expense       723,858      634,685    2,528,790    2,773,962 
  Selling, advertising                                                      
   and promotional                                                          
   expense                   597,289      587,240    2,587,427    2,232,831 
  Stock-based                                                               
   compensation expense      139,996      203,163      521,427      839,232 
  Litigation charges                                                        
   (credits) and related                                                    
   expenses                   24,933           --      313,950           -- 
  General and                                                               
   administrative expense  1,321,145    1,718,260    5,216,911    6,550,706 
                         -----------  -----------  -----------  ----------- 
                                                                            
Total selling, general                                                      
 and administrative                                                         
 expenses                  2,807,221    3,143,348   11,168,505   12,396,731 
                         -----------  -----------  -----------  ----------- 
                                                                            
  Operating loss            (414,824)  (1,302,244)  (1,686,518)  (3,624,801)
                         -----------  -----------  -----------  ----------- 
                                                                            
                                                                            
Interest income                3,062        3,644       10,088       16,108 
Interest expense             (75,337)     (87,443)    (294,559)    (224,460)
Loss on extinguishment of                                                   
 debt                             --     (131,093)          --     (131,093)
                         -----------  -----------  -----------  ----------- 
                                                                            
Loss before income tax                                                      
 benefit                    (487,099)  (1,517,136)  (1,970,989)  (3,962,246)
Income tax benefit                --           --           --           -- 
                         -----------  -----------  -----------  ----------- 
                                                                            
Net loss                 $  (487,099) $(1,517,136) $(1,970,989) $(3,962,246)
                         ===========  ===========  ===========  =========== 
                                                                            
Net loss per share                                                          
 information:                                                               
  Basic                  $     (0.24) $     (0.75) $     (0.97) $     (1.96)
  Diluted                $     (0.24) $     (0.75) $     (0.97) $     (1.96)
                                                                            
Weighted average shares                                                     
 outstanding:                                                               
  Basic                    2,035,564    2,019,259    2,029,109    2,018,979 
  Diluted                  2,035,564    2,019,259    2,029,109    2,018,979 

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S ANNUAL
REPORT ON 
 FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2012 FILED WITH
THE SEC) 


 
                                                                            
                                                                            
                             DIGITAL ALLY, INC.                             
     RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED NET INCOME (LOSS)      
                    FOR THE THREE MONTHS AND YEARS ENDED                    
                         DECEMBER 31, 2012 AND 2011                         
                                (unaudited)                                 
                                                                            
                            Three Months Ended            Year Ended        
                               December 31,              December 31,       
                         ------------------------  ------------------------ 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                                                                            
Net loss                 $  (487,099) $(1,517,136) $(1,970,989) $(3,962,246)
Non-GAAP adjustments:                                                       
  Stock-based                                                               
   compensation              139,996      203,163      521,427      839,232 
  Depreciation and                                                          
   amortization              149,516      301,819      672,090    1,062,103 
  Litigation (charges)                                                      
   credits and related                                                      
   expenses                   24,933           --      313,950           -- 
  Interest expense            75,337       87,443      294,559      222,460 
  Loss on extinguishment                                                    
   of debt                        --      131,093           --      131,093 
                         -----------  -----------  -----------  ----------- 
                                                                            
Non-GAAP adjustments, net    389,782      723,518    1,802,026    2,254,888 
                         -----------  -----------  -----------  ----------- 
                                                                            
                                                                            
Non-GAAP adjusted net                                                       
 loss                    $   (97,317) $  (793,618) $  (168,963) $(1,707,358)
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
Non-GAAP adjusted net                                                       
 loss per share                                                             
 information:                                                               
Basic                    $     (0.05) $     (0.39) $     (0.08) $     (0.85)
Diluted                  $     (0.05) $     (0.39) $     (0.08) $     (0.85)
                                                                            
Weighted average shares                                                     
 outstanding:                                                               
Basic                      2,035,564    2,019,259    2,029,109    2,018,979 
Diluted                    2,035,564    2,019,259    2,029,109    2,018,979 

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S ANNUAL ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2012 FILED WITH THE SEC) 


 
                                                                            
                                                                            
                             DIGITAL ALLY, INC.                             
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
               FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011               
                                (Unaudited)                                 
                                                                            
                                                       2012         2011    
                                                   -----------  ----------- 
Cash Flows From Operating Activities:                                       
  Net loss                                         $(1,970,989) $(3,962,246)
  Adjustments to reconcile net loss to net cash                             
   flows used in operating activities:                                      
    Depreciation and amortization                      672,090    1,062,103 
    Stock based compensation                           521,427      839,232 
    Provision for inventory obsolescence              (169,852)    (186,396)
    Provision for doubtful accounts receivable         (54,807)      15,000 
    Loss on extinguishment of debt                          --      131,093 
                                                                            
  Change in assets and liabilities:                                         
  (Increase) decrease in:                                                   
    Accounts receivable - trade                        (48,798)   1,911,504 
    Accounts receivable - other                         33,170      241,393 
    Inventories                                       (441,580)   3,041,829 
    Prepaid expenses                                    42,874       39,266 
    Other assets                                      (143,592)      (6,721)
  Increase (decrease) in:                                                   
    Accounts payable                                   673,171   (2,309,997)
    Accrued expenses                                   (39,736)     104,781 
    Litigation accrual                                 530,000           -- 
    Income taxes payable                               (14,329)      (4,579)
    Customer deposits                                  (30,021)      29,257 
                                                   -----------  ----------- 
                                                                            
  Net cash provided by (used in) operating                                  
   activities                                         (440,972)     945,519 
                                                   -----------  ----------- 
                                                                            
Cash Flows from Investing Activities:                                       
  Purchases of furniture, fixtures and equipment      (389,037)    (120,978)
  Additions to intangible assets                       (26,556)     (30,123)
  Restricted cash for appealed litigation             (662,500)          -- 
                                                   -----------  ----------- 
                                                                            
  Net cash used in investing activities             (1,078,093)    (151,101)
                                                   -----------  ----------- 
                                                                            
Cash Flows from Financing Activities:                                       
  Proceeds from issuance of subordinated note                               
   payable                                                  --    2,309,774 
  Proceeds from issuance of common stock purchase                           
   warrants                                                 --      190,226 
  Change in line of credit                                  --   (1,500,000)
  Deferred issuance costs for subordinated note                             
   payable                                                  --     (147,500)
  Payments on capital lease obligation                 (48,156)          -- 
                                                   -----------  ----------- 
  Net cash provided by (used in) financing                                  
   activities                                          (48,156)     852,500 
                                                   -----------  ----------- 
                                                                            
Net increase (decrease) in cash and cash                                    
 equivalents                                        (1,567,221)   1,646,918 
Cash and cash equivalents, beginning of period       2,270,393      623,475 
                                                   -----------  ----------- 
Cash and cash equivalents, end of period           $   703,172  $ 2,270,393 
                                                   ===========  =========== 
                                                                            
Supplemental disclosures of cash flow information:                          
  Cash payments for interest                       $   209,877  $   112,036 
                                                   ===========  =========== 
  Cash payments for income taxes                   $     9,350  $     4,416 
                                                   ===========  =========== 
                                                                            
Supplemental disclosures of non-cash investing and                          
 financing activities:                                                      
  Issuance of common stock purchase warrants for                            
   issuance costs of subordinated notes payable    $    38,052  $    46,500 
                                                   ===========  =========== 
  Issuance of common stock purchase warrants                                
   related to consulting agreement                 $     4,844  $        -- 
                                                   ===========  =========== 
  Restricted common stock grant                    $        16  $         1 
                                                   ===========  =========== 
  Capital expenditures financed by capital lease                            
   obligations                                     $   234,933  $        -- 
                                                   ===========  =========== 

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2012 FILED WITH
THE SEC) 
For Additional Information, Please Contact: 
Stanton E. Ross
CEO
(913) 814-7774
or
RJ Falkner & Company, Inc.
Investor Relations Counsel
(800) 377-9893
info@rjfalkner.com 
 
 
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