 LENEXA, Kansas, Aug. 13, 2020 GLOBE NEWSWIRE -- 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 second quarter 2020 operating results. An investor conference call is scheduled for 4:00 p.m. EDT on Thursday, August 13, 2020 see details below.Highlights for the Second Quarter Ended June 30, 2020Total revenues decreased in the second quarter 2020 to 1,732,192 from 2,546,983 in the comparable 2019 period. The primary reason for the overall revenue decrease is a decline of 892,143 46, in 2020 product revenues, offset by an increase in service and other revenue of 77,352 13, from 2019 levels. Product sales continue to face challenges for our in-car and body-worn systems because of the effects of the Covid-19 pandemic, and our competitors actions of releasing new products with advanced features and maintaining their product price cuts. In response, we have launched a program to migrate current and new customers, and in particular our commercial customers, from a hardware sale to a service fee model. Therefore, we expect a reduction in law enforcement and commercial hardware sales principally EVO-HD, DVM-800, DVM-250s and FirstVUs as we convert these customers to a service model under which we provide the hardware as part of a recurring monthly service fee. The Covid-19 pandemic delayed the shipment of orders in the second quarter 2020 as police forces and governments reacted to its impact. In general, our salesmen were unable to travel and meet with potential customers as they normally do to demonstrate our hardware, to promote our integrated solutions and close hardware sales. Specifically, we were unable to ship the initial purchase orders under a substantial contract awarded by the Director of Strategic Procurement of a country for the expected deployment of body cameras to its entire national police force. The contract was expected to include up to 5,000 body cameras with our web-based software infrastructure service over a three-year period. Contract deliveries were suspended pending the governments decision to freeze the planned deployment until such time as the pandemic is contained within its population. The initial purchase order was expected to ship during the first quarter 2020 with follow-on orders for the second quarter 2020 and would have made a substantial impact to our product revenues for the second quarter of 2020. At this point, we are unable to forecast if and when this major project will be restarted or how it may be modified as a result of the pandemic. Upon completion, the original contract would have been the largest body camera deployment in our history and the largest contract for recurring service revenues for our web-based software related to the body cameras. Our overall gross margin percentage declined to 23 in the second quarter 2020 compared to 37 in the 2019 period. The deterioration is attributable to the manufacturing inefficiencies and unfavorable overhead variances caused by the Covid-19 pandemic. We also experienced significant disruptions in the second quarter 2020 as we moved our office, manufacturing and warehouse facility to a newer and smaller location. We scrapped many older and damaged inventory items rather than moving them to the new facility coupled with the loss of production as we prepared for and moved our manufacturing operations which adversely affected our gross margins. Selling, general and administrative expenses were 2,535,912 and 1,616,830 for the second quarter 2020 and 2019, respectively, an increase of 4,152,742 257. The significant increase was attributable to the patent litigation settlement of 6.0 million that we received in the second quarter of 2019. Exclusive of the patent litigation settlement, overall selling, general and administrative expenses would have decreased by 1,847,258 42 in the second quarter 2020 compared to the 2019 period. The significant decrease was the result of sales and support staff headcount reductions and we reduced overall travel in response to the impact of the Covid-19 pandemic during the second quarter 2020. The Company recently added two new lines of branded products: 1 the ThermoVuTM which is a line of self-contained temperature monitoring systems that provides alerts and controls facility access when an individuals temperature exceeds a pre-set threshold and 2 our ShieldTM disinfectants and cleansers which are for use against viruses and bacteria. We began offering such products beginning late in the second quarter 2020. ShieldTM disinfectants has been listed on the United States Environmental Protection Agencys List N: Disinfectants for Use Against SARS-CoV-2, the virus that causes COVID-19. We are ramping up our supply chain for both of these new product lines, which are manufactured by third-parties. These branded products are being offered to our first responder customers including police, fire and paramedics. Commercial customers such as schools, cruise lines, taxi-cab and para transit may also be good candidates for the products. On June 2, 2020, the Company entered into an underwriting agreement, pursuant to which the Company agreed to sell in an underwritten public offering an aggregate of 3,090,909 shares of the Companys common stock, at a public price of 1.65 per share the June 2nd Offering. The Company also granted the underwriters a forty-five 45-day option to purchase up to an additional 463,636 shares of common stock to cover over-allotments, if any the June 2nd Option Shares. The common shares sold in the June 2nd Offering were registered and issued under the Companys effective shelf registration statement on Form S-3. On June 8, 2020, the underwriters fully exercised their over-allotment option to acquire the June 2nd Option Shares at 1.65 per share, which closed on June 10, 2020. The exercise of such over-allotment option resulted in additional gross proceeds, before deducting underwriting discounts and commissions and other estimated offering expenses, of 765,000, which the Company used for general corporate purposes, including continued investments in the Companys commercialization efforts. The net proceeds to the Company from the June 2nd Offering totaled 5,350,413, including the exercise of the underwriters overallotment option and after deducting underwriting discounts and commissions and estimated expenses payable by the Company. On June 8, 2020, the Company entered into an underwriting agreement, pursuant to which the Company agreed to sell in an underwritten public offering an aggregate of 2,325,581 shares of common stock at a public price of 2.15 per share the June 8th Offering. The Company also granted the underwriters a forty-five 45-day option to purchase up to an additional 213,953 shares of common stock to cover over-allotments, if any the June 8th Option Shares.The common shares in the June 8th Offering were registered and issued under the Companys effective shelf registration statement on Form S-3. On June 10, 2020, the underwriters fully exercised their over-allotment option to acquire the June 8th Option Shares at 2.15 per share, which closed on June 10, 2020. The exercise of such over-allotment option resulted in additional gross proceeds, before deducting underwriting discounts and commissions and other estimated Offering expenses, of 460,000, which the Company intends to use for general corporate purposes, including continued investments in the Companys commercialization efforts. The net proceeds to the Company from the June 8th Offering totaled 4,976,692, including the exercise of the underwriters overallotment option and after deducting underwriting discounts and commissions and estimated expenses payable by the Company. On April 17, 2020, the Company entered into a securities purchase agreement with accredited investors providing for the issuance of i the Companys 8 Senior Secured Convertible Promissory Notes due April 16, 2021 with an aggregate principal face amount of 1,666,666, which were convertible into an aggregate of 1,650,164 shares of the Companys common stock at a price per share of 1.01 and ii five-year warrants to purchase an aggregate of up to 1,237,624 shares of common stock at an exercise price of 1.31. The offering closed on April 17, 2020 whereby the investors purchased the securities for an aggregate purchase price of 1,500,000. During June 2020, the holders of the convertible notes exercised their right to convert principal balances aggregating 1,665,666 into equity. In addition, on June 12, 2020, the Company exercised its right to prepay in cash the remaining outstanding principal balance aggregating 1,000. The convertible notes balances are fully paid-off as of June 30, 2020 as a result of these conversions and prepayments. In addition, all warrants to purchase an aggregate of up to 1,237,624 shares of common stock at an exercise price of 1.31 were exercised in June 2020. On April 4, 2020, the Company entered into a promissory note with a bank, which provided for a loan in the amount of 1,418,900 the PPP Loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act the CARES Act. The PPP Loan has a two-year term and bears interest at a rate of 1 per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type. 