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Digital Ally, Inc. Announces Second Quarter Operating Results

Digital Ally, Inc. Announces Second Quarter Operating Results 
Six-Month Diluted E.P.S. of $0.02 Compare With Prior-Year Net Loss of
($0.87) per Share 
LENEXA, KS -- (Marketwired) -- 07/23/13 --  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 second quarter and first half of 2013. An investor conference
call is scheduled for 2:15 p.m. EDT tomorrow, July 24, 2013 (see
details below). 
Second Quarter Highlights 


 
--  Total revenue increased 10% to $5.1 million, compared with total
    revenue of $4.6 million in the second quarter of 2012.
--  Gross profit margin improved to 60.1% of revenue vs. 53.8% in
    prior-year period.
--  General and administrative expenses declined 6% from year-earlier
    levels.
--  The Company reported an operating loss of ($21,239), which represented
    an improvement of $854,291 when compared with an operating loss of
    ($875,530) in the second quarter of 2012.
--  The Company reduced its net loss by 93% to ($67,151), or ($0.03) per
    diluted share, compared with a year-earlier net loss of ($949,201), or
    ($0.47) per share.
--  Non-GAAP adjusted net income improved to $306,462, or $0.15 per
    diluted share, versus non-GAAP adjusted net income of $79,411, or
    $0.04 per diluted share, in the prior-year quarter.
--  The Company was notified in July 2013 that the U.S. Patent Office has
    allowed two patent applications for the Company's Digital Video Mirror
    ("DVM") product offerings and related transmitters that are used by
    law enforcement personnel in the field.

  
Six-Month Highlights 


 
--  Total revenue increased 17% to $9.8 million, versus total revenue of
    $8.4 million in the first half of 2012.
--  Gross profit margin widened to 60.3% of revenue, compared with 53.3%
    in corresponding period of previous year.
--  General and administrative expenses were 10% lower than in prior-year
    period.
--  An operating profit of $160,178 compared with an operating loss of
    ($1,607,710) in the six months ended June 30, 2012.
--  Net income improved by $1.8 million to $46,544, or $0.02 per diluted
    share, in the first half of 2013, compared with a net loss of
    ($1,753,930), or ($0.87) per share, in the first half of 2012.
--  Non-GAAP adjusted net income improved to $700,014, or $0.33 per
    diluted share, versus a non-GAAP adjusted net loss of ($335,261), or
    ($0.17) per share, in the year-earlier period.

  
Management Comments 
"The turnaround in our operating results in the first quarter of 2013
continued into the second quarter, and we are pleased to report that
our net profitability for the first half of the year improved by
approximately $1.8 million, or $0.86 per diluted share, when compared
with the first half of last year," stated Stanton E. Ross, Chief
Executive Officer of Digital Ally, Inc. "On a non-GAAP basis, our
adjusted net income improved by 286% in the most recent quarter, to
$306,462, or $0.15 per diluted share, compared with non-GAAP adjusted
net income of $79,411, or $0.04 per diluted share, in last year's
second quarter." 
"Higher gross margins due to an improved sales mix, reductions in
production overhead costs and better outsourcing of component parts,
are playing a key role in our earnings turnaround, and we continue to
realize benefits from the cost containment plan that was implemented
in 2011. Our goal is to continue to improve gross margins during the
balance of 2013 when compared with prior-year levels through better
outsourcing, reductions in manufacturing overhead, higher sales and
improvements in our product mix. When combined with a more productive
sales force, this should allow us to continue to increase
profitability, while at the same time expanding research and
development activities associated with several new products released
or to be released in 2013."   
"We continue to have one of the most aggressive new product
development programs in our industry, which we believe will benefit
our shareholders in the second half of 2013 and in future years,"
continued Ross. "We are particularly enthusiastic about the prospects
for our new FirstVU HD body camera in the law enforcement field and
our DVM-250 and DVM250Plus event recorders, which are designed to
meet the safety and security needs of commercial fleets such as
ambulances, taxis, utility vehicles, and shuttle bus operators.
Whenever practical, we seek to protect our product and technological
innovations by expanding our intellectual property portfolio, and we
were pleased to recently announce the receipt of two new U.S. patents
for our core product line." 
"Overall, we were pleased with our operating results during the first
half of 2013, and the outlook for the balance of the year is
promising. We have 'right-sized' our manufacturing and expense
infrastructure for the current market environment, and we believe the
Company is well-positioned to benefit from substantial operating
leverage when revenue levels increase," concluded Ross.  
Second Quarter Results 
In the quarter ended June 30, 2013, the Company's total revenue
increased 10% to approximately $5.1 million, compared with revenue of
approximately $4.6 million in the second quarter of 2012. This
represented the highest level of quarterly revenue since the third
quarter of 2011. Management attributes the revenue increase primarily
to the reorganization of the Company's law enforcement sales force
and higher sales of recently released new products, which contributed
14% of total sales in the most recent quarter, versus 9% of total
sales in the second quarter of 2012. International revenue increased
to $91,784 in the three months ended June 30, 2013, versus $11,681 in
the second quarter of 2012. 
Gross profit improved 23% to $3,037,815 (60.1% of revenue) in the
most recent quarter, versus $2,475,663 (53.8% of revenue) in the
prior-year quarter. The improvement in gross profit margin was
primarily due to the supply chain improvement initiative for better
outsourcing of components, reductions in engineering changes and
rework expenses, and the introduction of new products that have
higher gross margins than legacy in-car video systems.  
Selling, General and Administrative ("SG&A") expenses declined 9% to
$3,059,054 (60.5% of revenue) in the three months ended June 30,
2013, versus $3,351,193 (72.8% of revenue) in the corresponding
period of the previous year. SG&A expenses in the second quarter of
2012 included $654,082 in litigation charges and related expenses,
whereas there were no such charges in the most recent quarter. Higher
research and development; selling, advertising and promotional; and
stock-based compensation expenses were more than offset by the
reduction in litigation charges and related expenses, along with
lower administrative costs and a reduction in professional fees and
expenses. Research and development expenses increased approximately
16% to $921,937 in the second quarter of 2013, relative to $794,162
in the first quarter of 2013. Over 50% of the increase is considered
non-recurring in nature and was associated with the launch of the
FirstVU HD. The balance of the R&D expense increase primarily
reflects an expansion in the Company's engineering resources. 
The Company reported an operating loss of ($21,239) for the quarter
ended June 30, 2013, compared with an operating loss of ($875,530) in
th
e quarter ended June 30, 2012.  
Net interest and other expense declined 38% to $45,912 in the second
quarter of 2013, from $73,671 in the three months ended June 30,
2012. 
The Company reported a net loss of ($67,151), or $0.03 per diluted
share, for the three months ended June 30, 2013, which represented an
improvement of $882,050, or 93%, when compared with a prior-year net
loss of ($949,201), or ($0.47) per share. No income tax provision or
benefit was recorded in the second quarters of either 2013 or 2012.
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.  
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 adjusted net income (before
income taxes, depreciation, amortization, interest expense,
litigation-related expenses and stock-based compensation), a non-GAAP
financial measure, of $306,462, or $0.15 per diluted share, in the
second quarter of 2013, versus adjusted net income of $79,411, or
$0.04 per share, in the quarter ended June 30, 2012. (Non-GAAP
adjusted net income is described in greater detail in a table at the
end of this press release). 
The relatively low level of cash and equivalents ($209,457) on the
Company's balance sheet at June 30, 2013 was partially due to the
shipment of two large orders near the end of the second quarter, with
the anticipated revenue from such orders reflected in accounts
receivable until payment is received. Also, inventories were higher
than normal at June 30, 2013 due to an inventory build-up related to
the launch of the FirstVU HD and a high level of DVM-750 systems on
hand in anticipation of pending orders. 
Based on currently available information related to operating
budgets, accounts receivable collections, and the anticipated receipt
of certain pending orders, the Company expects to generate positive
free cash flow from operations in the quarter ending September 30,
2013. 
Six-Month Results 
In the six months ended June 30, 2013, the Company's total revenue
increased 17% to approximately $9.8 million, compared with revenue of
approximately $8.4 million in the first half of 2012. International
revenue increased to $172,598 in the six months ended June 30, 2013,
versus $170,096 in the six months ended June 30, 2012. 
Gross profit improved 33% to $5,933,742 (60.3% of revenue) in the
first half of 2013, versus $4,472,280 (53.3% of revenue) in the
prior-year period.  
Selling, General and Administrative ("SG&A") expenses declined 5% to
$5,773,564 (58.7% of revenue) in the six months ended June 30, 2013,
versus $6,079,990 (72.5% of revenue) in the corresponding period of
the previous year. SG&A expenses in the first six months of 2012
included $654,082 in litigation charges and related expenses, whereas
there were no such charges in the first half of 2013.  
The Company reported operating income of $160,178 for the first half
of 2013, compared with an operating loss of ($1,607,710) in the six
months ended June 30, 2012.  
Net interest and other expense declined 22% to $113,634 in the first
half of 2013, from $146,220 in the six months ended June 30, 2012. 
The Company reported net income of $46,544, or $0.02 per diluted
share, for the six months ended June 30, 2013, which represented an
improvement of $1,800,474 when compared with a prior-year net loss of
($1,753,930), or ($0.87) per share. No income tax provision or
benefit was recorded in the first six months of either 2013 or 2012.  
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 adjusted net income (before
income taxes, depreciation, amortization, interest expense,
litigation-related expenses and stock-based compensation), a non-GAAP
financial measure, of $700,014, or $0.33 per diluted share, in the
first half of 2013, versus an adjusted net loss of ($335,261), or
($0.17) per share, in the six months ended June 30, 2012. (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 and/or
non-recurring expenses/income including: (1) income tax
expense/benefit, (2) depreciation and amortization expense, (3) net
interest expense, (4) share-based compensation expense, and (5)
litigation charges and related expenses. 
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 2:15 p.m.
Eastern Daylight Time (EDT) tomorrow, July 24, 2013, to discuss its
operating results for the second quarter and first half of 2013,
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 2:15 p.m. Eastern Time on July 24, 2013.  
A replay of the conference call will be available one hour after the
completion of the conference call from July 24, 2013 until 9:00 a.m.
on September 24, 2013 by dialing 877-344-7529 (international/local
participants dial 412-317-0088) and entering the conference ID#
10031724.  
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 continue to improve its revenues and operating results in 2013
given the current economic environment; whether it will be able to
continue to achieve improved production and other efficiencies to
maintain its increased 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, including the FirstVU HD; 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 continue to result in a recovery 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; whether and the extent to which the new
patents allowed by the US Patent Office will give the Company
effective, enforceable protection of the intellectual property
contained in its products in the marketplace; 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 and
quarterly report on Form 10-Q for the three and six months ended June
30, 2013, as filed with the Securities and Exchange Commission.  
(Financial Highlights Follow) 


 
                                                                            
                             DIGITAL ALLY, INC.                             
                        CONSOLIDATED BALANCE SHEETS                         
                     JUNE 30, 2013 AND DECEMBER 31, 2012                    
                                                                            
                                                                            
                                                  June 30,     December 31, 
                                                    2013           2012     
                                               -------------  ------------- 
                    Assets                      (unaudited)                 
Current assets:                                                             
  Cash and cash equivalents                    $     209,457  $     703,172 
  Accounts receivable-trade, less allowance                                 
   for doubtful accounts of $55,033 - 2013 and                              
   $70,193 - 2012                                  2,769,062      2,956,654 
  Accounts receivable-other                          106,543         71,148 
  Inventories                                      8,238,792      7,294,721 
  Prepaid expenses                                   406,657        258,642 
                                               -------------  ------------- 
                                                                            
    Total curren
t assets                          11,730,511     11,284,337 
                                               -------------  ------------- 
                                                                            
Furniture, fixtures and equipment                  4,485,398      4,392,880 
Less accumulated depreciation and amortization     3,468,571      3,454,087 
                                               -------------  ------------- 
                                                                            
                                                   1,016,827        938,793 
                                               -------------  ------------- 
                                                                            
Restricted cash                                      662,500        662,500 
Intangible assets, net                               217,035        217,660 
Other assets                                         268,415        241,446 
                                               -------------  ------------- 
                                                                            
  Total assets                                 $  13,895,288  $  13,344,736 
                                               =============  ============= 
                                                                            
     Liabilities and Stockholders' Equity                                   
Current liabilities:                                                        
  Accounts payable                             $   1,335,412  $   1,520,207 
  Subordinated note payable-current, net of                                 
   discount of $62,362 - 2013 and $0 - 2012        2,437,638             -- 
  Accrued expenses                                 1,163,386        793,524 
  Capital lease obligation-current                    77,344         66,087 
  Income taxes payable                                 5,667          6,717 
  Customer deposits                                    1,878          1,878 
                                               -------------  ------------- 
                                                                            
    Total current liabilities                      5,021,325      2,388,413 
Long-term liabilities:                                                      
  Subordinated note payable-long-term, net of                               
   discount of $0 - 2013 and $96,378 - 2012               --      2,403,622 
  Litigation accrual-long term                       530,000        530,000 
  Capital lease obligation-long term                 100,693        120,988 
                                               -------------  ------------- 
                                                                            
Total long term liabilities                          630,693      3,054,610 
                                               -------------  ------------- 
                                                                            
Commitments and contingencies                                               
                                                                            
Stockholders' equity:                                                       
  Common stock, $0.001 par value; 9,375,000                                 
   shares authorized; shares issued: 2,199,082                              
   - 2013 and 2,099,082 - 2012                         2,199          2,099 
  Additional paid in capital                      23,599,314     23,304,401 
  Treasury stock, at cost (shares: 63,518 -                                 
   2013 and 63,518 - 2012)                        (2,157,226)    (2,157,226)
  Accumulated deficit                            (13,201,017)   (13,247,561)
                                               -------------  ------------- 
                                                                            
    Total stockholders' equity                     8,243,270      7,901,713 
                                               -------------  ------------- 
                                                                            
  Total liabilities and stockholders' equity   $  13,895,288  $  13,344,736 
                                               =============  ============= 

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2013 FILED WITH THE
SEC) 


 
                                                                            
                                                                            
                                                                            
                              DIGITAL ALLY, INC.                            
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS              
                     FOR THE THREE AND SIX MONTHS ENDED      
               
                           JUNE 30, 2013 AND 2012                           
                                 (Unaudited)                                
                                                                            
                                                                            
                            Three months ended         Six months ended     
                                 June 30,                  June 30,         
                         ------------------------  ------------------------ 
                             2013         2012         2013         2012    
                         -----------  -----------  -----------  ----------- 
                                                                            
Product revenue          $ 4,801,499  $ 4,392,133  $ 9,393,622  $ 7,980,686 
Other revenue                250,396      208,664      438,822      402,567 
                         -----------  -----------  -----------  ----------- 
                                                                            
Total revenue              5,051,895    4,600,797    9,832,444    8,383,253 
Cost of revenue            2,014,080    2,125,134    3,898,702    3,910,973 
                         -----------  -----------  -----------  ----------- 
                                                                            
  Gross profit             3,037,815    2,475,663    5,933,742    4,472,280 
Selling, general and                                                        
 administrative                                                             
 expenses:                                                                  
  Research and                                                              
   development expense       921,937      574,883    1,716,099    1,177,786 
  Selling, advertising                                                      
   and promotional                                                          
   expense                   715,051      691,481    1,289,490    1,273,142 
  Stock-based                                                               
   compensation expense      191,521      120,796      295,013      241,437 
  Litigation charge and                                                     
   related expenses               --      654,082           --      654,082 
  General and                                                               
   administrative                                                           
   expense                 1,230,545    1,309,951    2,472,962    2,733,543 
                         -----------  -----------  -----------  ----------- 
                                                                            
Total selling, general                                                      
 and administrative                                                         
 expenses                  3,059,054    3,351,193    5,773,564    6,079,990 
                         -----------  -----------  -----------  ----------- 
                                                                            
  Operating income                                                          
   (loss)                    (21,239)    (875,530)     160,178   (1,607,710)
                         -----------  -----------  -----------  ----------- 
                                                                            
                                                                            
Interest income                3,637        2,143        6,820        4,779 
Other income                  21,219           --       21,219           -- 
Interest expense             (70,768)     (75,814)    (141,673)    (150,999)
                         -----------  -----------  -----------  ----------- 
                                                                            
Income (loss) before                                                        
 income tax (expense)                                                       
 benefit                     (67,151)    (949,201)      46,544   (1,753,930)
Income tax (expense)                                                        
 benefit                          --           --           --           -- 
                         -----------  -----------  -----------  ----------- 
                                                                            
Net income (loss)        $   (67,151) $  (949,201) $    46,544  $(1,753,930)
                         ===========  ===========  ===========  =========== 
                                                                            
Net income (loss) per                                                       
 share information:                                                         
  Basic                  $     (0.03) $     (0.47) $      0.02  $     (0.87)
  Diluted                $     (0.03) $     (0.47) $      0.02  $     (0.87)

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2013 FILED WITH THE
SEC) 


 
                                                                            
                                                                            
                                                                            
                             DIGITAL ALLY, INC.                             
      RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED NET INCOME (LOSS)     
                     FOR THE THREE AND SIX MONTHS ENDED                     
                           JUNE 30, 2013 AND 2012                           
                                (unaudited)                                 
                                                                            
                                                                            
                            Three Months Ended         Six Months Ended     
                                 June 30,                  June 30,         
                         ------------------------  ------------------------ 
                             2013         2012         2013         2012    
                         -----------  -----------  ------------ ----------- 
                                                                        
    
Net income (loss)        $   (67,151) $  (949,201) $     46,544 $(1,753,930)
Non-GAAP adjustments:                                                       
  Stock-based                                                               
   compensation              191,521      120,796       295,013     241,437 
  Depreciation and                                                          
   amortization              111,324      177,920       216,784     372,151 
  Litigation charge and                                                     
   related expenses               --      654,082            --     654,082 
  Interest expense            70,768       75,814       141,673     150,999 
                         -----------  -----------  ------------ ----------- 
                                                                            
Total Non-GAAP                                                              
 adjustments                 373,613    1,028,612       653,470   1,418,669 
                         -----------  -----------  ------------ ----------- 
                                                                            
                                                                            
Non-GAAP adjusted net                                                       
 income (loss)           $   306,462  $    79,411  $    700,014 $  (335,261)
                         ===========  ===========  ============ =========== 
                                                                            
                                                          
                  
Non-GAAP adjusted net                                                       
 income (loss) per share                                                    
 information:                                                               
Basic                    $      0.15  $      0.04  $       0.34 $     (0.17)
Diluted                  $      0.15  $      0.04  $       0.33 $     (0.17)
                                                                            
Weighted average shares                                                     
 outstanding:                                                               
Basic                      2,096,231    2,025,759     2,080,342   2,022,491 
Diluted                    2,096,231    2,025,759     2,094,329   2,022,491 

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2013 FILED WITH THE
SEC) 


 
                                                                            
                                                                            
                                                                            
                             DIGITAL ALLY, INC.                             
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
               FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012              
                                 (Unaudited)                                
                                                                            
                                                                            
                                                     2013          2012     
                                                 ------------  ------------ 
Cash Flows From Operating Activities:                                       
  Net income (loss)                              $     46,544  $ (1,753,930)
  Adjustments to reconcile net loss to net cash                             
   flowsused in operating activities:                                       
    Depreciation and amortization                     216,784       372,151 
    Stock based compensation                          295,013       241,437 
    Provision for inventory obsolescence             (120,046)        3,306 
    Provision for doubtful accounts receivable        (15,160)      (13,392)
  Change in assets and liabilities:                                         
  (Increase) decrease in:                                                   
    Accounts receivable - trade                       202,752       (68,000)
    Accounts receivable - other                       (35,395)       44,721 
    Inventories                                      (824,025)     (270,859)
    Prepaid expenses                                 (157,694)       21,357 
    Other assets                                      (26,969)       16,997 
  Increase (decrease) in:                                                   
    Accounts payable                                 (184,795)       53,106 
    Accrued expenses                                  369,862      (107,033)
    Litigation accrual                                     --       530,000 
    Income taxes payable                               (1,050)      (17,000)
    Customer deposits                                      --       (30,021)
                                                 ------------  ------------ 
  Net cash used in operating activities              (234,179)     (977,160)
                                                 ------------  ------------ 
Cash Flows from Investing Activities:                                       
  Purchases of furniture, fixtures and equipment     (222,371)      (96,880)
  Additions to intangible assets                       (3,830)      (10,955)
                                                 ------------  ------------ 
  Net cash used in investing activities              (226,201)     (107,835)
                                                 ------------  ------------ 
Cash Flows from Financing Activities:                                       
  Payments on capital lease obligation                (33,335)       (2,338)
                                                 ------------  ------------ 
  Net cash used in financing activities               (33,335)       (2,338)
                                                 ------------  ------------ 
Net decrease in cash and cash equivalents            (493,715)   (1,087,333)
Cash and cash equivalents, beginning of period        703,172     2,270,393 
                                                 ------------  ------------ 
Cash and cash equivalents, end of period         $    209,457  $  1,183,060 
                                                 ============  ============ 
Supplemental disclosures of cash flow                                       
 information:                                                               
  Cash payments for interest                     $    107,722  $    100,631 
                                                 ============  ============ 
  Cash payments for income taxes                 $      1,325  $     17,000 
                                                 ============  ============ 
Supplemental disclosures of non-cash investing             
                 
 and financing activities:                                                  
  Restricted common stock grant                  $        100  $        130 
                                                 ============  ============ 
  Capital expenditures financed by capital lease                            
   obligations                                   $     24,362  $     94,760 
                                                 ============  ============ 

 
(FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2013 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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