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Edited Transcript of DGLY earnings conference call or presentation 1-Apr-19 3:15pm GMT

Q4 2018 Digital Ally Inc Earnings Call

Overland Park Apr 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Digital Ally Inc earnings conference call or presentation Monday, April 1, 2019 at 3:15:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Stanton E. Ross

Digital Ally, Inc. - Chairman, CEO & President

* Thomas J. Heckman

Digital Ally, Inc. - CFO, VP, Treasurer & Secretary

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Conference Call Participants

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* Bryan Preston Lubitz

Aegis Capital Corporation, Research Division - VP of Investments

* Nathan S. Weinstein

Aegis Capital Corporation, Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to Digital Ally 2018 Fourth Quarter Results Conference Call. (Operator Instructions)

The conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words believe, expect, anticipate, intend, estimate, may, should, could, will, plan, future, continue and other expressions that are predictions or indicate future events and trends and that do not relate to historical matters identify forward-looking statements.

These forward-looking statements are based largely on our expectations or forecast 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 our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements.

Digital Ally will undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.

I'd now like to turn the call over to Stan Ross, CEO. Please go ahead, sir.

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [2]

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Thank you. Thanks, everybody, for joining us today. I'm fighting a little bit of a cold here, so I apologize for a bit of rough voice here. I've got Tom Heckman in here, the company's CFO. He will go over the numbers and give you a little bit of a recap. Then I'll come in and comment a little bit on our litigation that we have going on with -- far as the patent infringement cases. And then, we'll open it up for Q&A. So that being said, Tom?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [3]

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Thank you, Stan, and welcome, everyone. I appreciate you joining us this morning. Hopefully, you guys have seen our Form 10-K, which we filed on Friday, so you had the weekend to peruse that and, hopefully, have had a chance to do that. I don't intend to spend a lot of time on certain things, but I will hit some of the highlights and, hopefully, be able to answer some of the questions before you ask them.

So anyway, let's first look at the P&L statement. And obviously, 2018 was a challenging year, particularly in our law enforcement revenues. They were depressed this year. That's no secret. We've seen that throughout the year and talked about it pretty much on each of the quarterly conference calls. We think price competition has become more and more fierce. And quite frankly, we think even the patent infringement that we're seeing out there is becoming more and more brazen, not only with Axon and WatchGuard, who we have active lawsuits with, but we believe potentially even other competitors out there.

So we believe they're becoming more brazen. And obviously, as we move forward with the trials and lawsuits, and that, hopefully, we knock that down and are able to reverse that trend. In addition, we noted in recent weeks and actually months that Axon is becoming more monopolistic in their behavior. And we hope that the regulators will take notice of that and make appropriate adjustments in that. But in that regard, we also intend to be addressing that legally as well.

So we understand the law enforcement is -- revenues have been depressed, and we're taking actions to hopefully fix that. One of the things we're doing is, our current product line was initially introduced back in 2012, 2013, the DVM-800 and its derivatives. So obviously, we need to freshen that up. And what we've done and have already announced is our new EVO-HD platform, which we're very excited about. It has advanced features, and it's at a very economical price point. We are now conducting or moving into beta tests at various customers.

So we're excited about being able to unveil that product in the second quarter and certainly, if not in the second quarter, the third quarter. But we do believe that some customers have delayed purchasing, waiting on the new product and this new product line, and we think they will be well rewarded once that thing is out commercially. We also believe that this platform will be extended over to our commercial product line, not probably this year, but certainly in 2020. We believe that we'll be able to advance our commercial technology and commercial products with this new platform that we're introducing.

Some of the optimistic signs, though, that we're seeing in the revenue -- on the revenue side is, our overall service revenues increased 20% year-over-year. But if you dig into that more, the cloud revenues, which is obviously the most -- generates the most margin for us were up over 150% year-over-year. So obviously, that's exciting for us and a very optimistic sign. The margins in our service revenues increased to 75%. That's our gross margin, 75% in 2018 versus 30% in 2017. That really shows the effect of the increase in the cloud revenues as an overall percentage of our service revenues.

We're seeing good signs in the taxicab market. We see some growth in the future. Hopefully, we'll be able to announce something in the near future on that. Our sports and event services is also beginning to take off. We made an investment in our NASCAR relationship. And we believe that, that has generated some excitement in adjacent fields, particularly in pro sports. So we're excited about what's going on in our commercial markets and especially in these newer markets that we're going into.

On the SG&A expense side, we did the major push to reduce and manage our SG&A expenses towards the end of 2017 and first quarter 2018. Overall, we saw a decrease of $1.2 million year-over-year. But if you exclude professional fees, which is largely driven by the Axon and WatchGuard legal cases and stock-based compensation, which is noncash in nature, we're almost down $4 million year-over-year, which is a 30% decline. So we're very proud of what we've been able to accomplish on the SG&A side, and hope that, that continues. We're going to manage it that way.

Legal fees, unfortunately, are expected to continue high as we continue to prosecute our cases against Axon and WatchGuard. So we don't see any relief there. But it's hard to say the legal fees are an investment, but I think, in our case here they certainly are. We've got nothing but good results so far certainly from the patent office, and we've had good results at the federal district court. We hope that continues. And I know Stan will probably address that matter in further detail later on in the call here.

One thing to also recognize, with the 30% decline year-over-year in SG&A overall expenses, we've, at the same time, been able to develop the EVO platform. So we've done that on less dollars than we historically have, and we've been very smart about how we've gone about that. So we're proud of what we've done with less SG&A expense dollars in 2018.

Beyond that, nonoperating expenses, obviously, had a huge impact in 2018. But nonoperating expenses that includes charges like interest, changes in derivative values, debt issuance and extinguishment costs. All total, they were almost $5 million in 2018 versus $1.1 million in 2017. So obviously had a huge impact. We do not believe that those will recur in the future since we -- after the proceed -- the litigation proceeds investment agreement we signed late in 2018, we're able to pay off all our interest-bearing debt with structured repayment terms.

They are all paid off at 12/31/2018. The only remaining obligation is the litigation proceeds agreement, which we discussed previously. And remember that the repayment of that is only triggered when we're successful against Axon and WatchGuard in prosecuting our patent infringement cases. So we're happy with that obligation versus where we were going into 2018. We had a lot of derivatives and structured repayment terms that we had to deal with. We dealt with those, paid them off, and we're glad we did so. That means 2019 should not have the same amount of nonoperating expense that we did in 2018.

If you look over at our balance sheet, it's much improved year-over-year. We ended the year with $3.6 million of cash on the balance sheet -- in cash reserves. Inventory was down about $1.8 million year-over-year, which is always a good figure to look at. Our total current liabilities declined to $4.6 million versus $10.1 million going into the year, so obviously a big impact on our current ratio and our working capital. Basically, we spent 2018 cleaning up the balance sheet.

Things we're looking forward to in 2019. There are some good signs. We've talked about a little bit before. Obviously, the launch of the new EVO-HD platform is exciting for us, and we believe that it will help stem the depression in the law enforcement revenues side. The service revenues continue to increase, and that's where the margins are. Although the service revenues are starting from a lower base, they're starting to become a big contributor to our gross margins and our bottom line.

Commercial revenues we believe will continue to improve. The law enforcement market will remain in disarray until the patent infringement case is concluded, and hopefully, the regulators are able to deal with Axon's monopolistic tendencies. So in any event, we're excited about 2019. 2018 was a difficult year for us, but we think we made some strides, certainly, in the financing and the funding side of the business that sets us up for good things in 2019.

Last thing I'll say, I'll remind you that we have filed or we'll be filing our definitive proxy statement. We're going to have our 2019 annual shareholders meeting here at the office in our training room on Tuesday, May 21, 2019. So hopefully everybody, if you can, will attend that. We look forward to seeing you and talking to you. With that, I'll turn it back over to Stan.

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [4]

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Thanks a lot, Tom. Yes. We're pretty excited about 2019. We obviously feel like there is a high probability we'll be finalizing some of this litigation with both Axon and WatchGuard. As Thomas mentioned, we've been very successful in the patent office and so far in the courtroom. And so, we've got a couple of open issues that we're waiting on the judges to rule on. But as that -- those rulings come down, I think, it will be a lot clear in regards to the kind of, what we'll say, damages that we're actually going after. I think it's already been out there in print that we're looking at over $200 million that we're going after Axon for. And there is nothing out there on the WatchGuard front, but it's a large number as well, not to that extent, but very big number.

Then we will also look at monetizing with anyone else that's out there that may be copying our technology. The launch of the EVO, we've already started receiving orders on that. So we're very excited of get it out in the marketplace. It has tremendous amount of upside potential for us. We do believe it's probably one of the most dominant in-car video systems that will be out on the market. So we hope for a late second quarter launch with that particular product.

I think we'll go ahead and open this up for Q&A now.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question is from Bryan Lubitz, Aegis Capital.

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Bryan Preston Lubitz, Aegis Capital Corporation, Research Division - VP of Investments [2]

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Stan, you had just left off with the $200 million that was already put out there in print. Since we filed against Taser and that number of the $204 million has come out, Taser's reported about, at least for 1 quarter I know of, $100 million in sales and about $25 million from cloud services. That number of the $204 million, that's as of September of last year, am I right?

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [3]

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I think it's actually August of last year. But you are correct. Those damages are continuing to pile up for us.

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Bryan Preston Lubitz, Aegis Capital Corporation, Research Division - VP of Investments [4]

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So can we gauge for like every $100 million that they do in sales what to expect that number to increase by?

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [5]

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I don't know, it would hit the -- I'd have to dig a little harder on that, Bryan. But again, it's a big number, and here's the other side of it. It's not only is it a big number, but again, we truly believe that this was all willful infringement. So whatever that number is, gets tripled.

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Bryan Preston Lubitz, Aegis Capital Corporation, Research Division - VP of Investments [6]

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Okay, a percentage of their sales. So Taser has put out some articles where they are totally going against your number and saying it's a much smaller percentage, as you would imagine. But they're trying to -- in at least the articles I've seen, say you guys really have no claim to the cloud service part of it. Can you comment on that?

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [7]

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The way the legal side of things is looked at in regards to these patent damages is, don't look at the whole package. I think I may -- tried to explain on a prior call. But let's say that Phoenix is going out for a beard, and they're asking for 2,000 body cameras and auto activation and cloud storage. It's a package. It's a whole complete package. And so, the convoyed sales side of it, we believe will come into play on this. So we'll be looking at the big picture, not just the individual item.

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Bryan Preston Lubitz, Aegis Capital Corporation, Research Division - VP of Investments [8]

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Okay. Just piggybacking that, and then I'll put it to bed. So it's been about 7 months since we've had that number adjusted. In your mind's eye, do you think we've crossed $0.25 billion in terms of damages or liabilities for them?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [9]

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I'd tell you...

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [10]

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Go ahead.

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [11]

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Yes. Bryan, the $200 million came from financial experts and that, and we didn't have privy to how that was particularly calculated and that. But you can make your own assumptions on that. It's a big number. It's a big, big number. And certainly, from this, what they call, convoyed sales, where what Axon and others have done is that they have pretty much given away the hardware in order to get the 5-year contract for the cloud services. So obviously, what Axon is promoting out there is, well, the hardware, which is our part of it, the VuLink wasn't that valuable because we gave it away. Well, sure, they gave it way, so they get 5 years of recurring revenue at 80%, 90%, 95% margin. So yes, it make sense, and the law provides for that or at least we believe that the law provides for that. So that will be a matter that's addressed by the court even before we hit the courthouse steps for the final court hearings and the trial. So hopefully, that gets taken care of in our favor, which we truly believe that it will and it should be. It makes common sense. If that happens, then the number is quite, quite large, and it's growing every day.

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Bryan Preston Lubitz, Aegis Capital Corporation, Research Division - VP of Investments [12]

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Okay. Now Axon finally in their last report addressed in your 10-K your lawsuit. It's been several years that this has been going on. And I know you're not here to comment on their price drop from that. But shortly thereafter, there was an article written where they entitled that they are confident that they would prevail. They referenced something called Slate technology. I've never seen a PR. Have you guys seen a PR from them at all with any sales over the last couple years with this new technology, Slate technology?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [13]

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No. Bryan, they can call it what they want. What we believe is happening there is it all -- that you have lost 7 times at the patent court. They've lost pretty much everything at the district court. They've got to bring some type of defense to bear in this matter, and I think they are grasping for thin air, at least we believe so. I've never heard of this Slate technology. I don't think anybody in the industry has. So we believe it's apparent what's going on there. They have lost at every turn. The patent court has denied pretty much every challenge that they've had. Their defenses at the federal district court are very, very minimal at this point, if anything. So they're trying to gen up new ideas, new theories in order to defend the matter. But luckily or not likely, but we think appropriately the district court has dispensed with those theories as well as the patent court and, hopefully, they will continue to do that.

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Bryan Preston Lubitz, Aegis Capital Corporation, Research Division - VP of Investments [14]

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All right. I got 2 more and I'll let you guys go. So just piggybacking that, Tom, again we've talked in the past less than 5% of these cases ever really make the courthouse steps. Do you guys believe this is posturing?

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [15]

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It could be. I'll tell you that we do have some litigation with WatchGuard. And as you may have seen in the filing, we delayed a little bit of our discovery because the parties are talking. So at some point, this posturing will have to come to hit. And as we continue to have more and more success, it just strengthens our -- I'd say I guess our position as far as any kind of posturing, so.

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [16]

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Bryan, one thing -- and I did see the release from Axon, and they basically said that all the court rulings to-date are irrelevant, which I would bare to say that if they had won those, they'd certainly would be relevant. So how can they said they are irrelevant now? So anyway, it's the way things go, especially with companies like Axon. They're not used to losing patent cases and even cases in general. But to-date, they've done nothing but lose, and we hope that they continue.

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Bryan Preston Lubitz, Aegis Capital Corporation, Research Division - VP of Investments [17]

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Okay. And I understand exactly what you're saying. And this is my last one for you guys, and then I'll let you run. Switching real quick to WatchGuard, there was a document that was released on Taser about a week or so ago. And it looked like -- I don't know if you guys filed it together or at the very least that both sides were already agreeing on certain issues. It feels like the pace of that is a little quicker than what we've seen so far with the Taser case. Is there any comment from you guys in terms of that case looking like or at least feeling like it's proceeding at a quicker pace?

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [18]

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Yes, Bryan, it's in a different court, but it's still here in Kansas. It's actually down in Wichita, Kansas. And they did add a couple more judges down there. And so, I don't know if it's because of the workload or what's happening. But we literally had a call with the judge, and he wanted to get a status report. And while we accomplished a lot without the help of the court, there was some open issues that we needed to have the court's help on. And so, the judge says -- the judge just replied, said, "Okay, guys, what are you doing next week instead of 3 months from now or something?" I mean, this guy -- this particular judge, he wants stuff resolved and off of his docket as quick as possible. So it's very possible that we'll go to court maybe before -- in the WatchGuard case before we do the Taser.

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Operator [19]

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Your next question is from Nathan Weinstein with Aegis Capital.

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Nathan S. Weinstein, Aegis Capital Corporation, Research Division - Analyst [20]

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So I just want to go through a couple different buckets, but if we could just start on the operational side first. The service line has been coming in nicely with that growth rate. And obviously right now, to move the needle, it's a little small. But potentially if you extrapolate those growth rates out a couple years, it sets to be really interesting. So structurally, is there anything that we should think about that would stop you guys from growing that as a customer concentration or do you see a lot of open run rate with that?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [21]

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Well, there is a lot of -- this is Tom, Nathan. Appreciate the question. There is a lot of green field out there. And the reason I say that is the service revenue is derived both from law enforcement and commercial. Commercial is really driving it right now, and that the fleet manager tool that we have out there has been wildly successful and is increasing in popularity. So I don't see anything stopping that. In fact, I think that may accelerate. The other part of that is law enforcement. And I think once the court addresses the patent infringement side of things, that will unleash the revenues on the cloud service side in law enforcement. So I think actually, to the contrary, I think if a couple things happen, especially from the court side, you could see those numbers move up dramatically. And we -- the law enforcement customer base is much larger revenue wise than the commercial market right now. So you can see that if that happens, there could be some good results in the service line.

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Nathan S. Weinstein, Aegis Capital Corporation, Research Division - Analyst [22]

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And then just a couple other questions. So if we're able to monetize the patents either through litigation or in some other fashion, and then there were a large influx of money into the company, in terms of how you would allocate that cash, is return to -- is cash return to shareholders in the plan or have you thought about what that might look like?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [23]

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Yes. Nathan, I mean it's all well and fine to kind of count money before it comes in, but that would be up to the board. And certainly, that would be a consideration, but it's at the board level that, that would be determined. And quite frankly, we're so focused on being successful in the court cases that we haven't moved beyond that yet. But obviously, that will be a matter for discussion.

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Nathan S. Weinstein, Aegis Capital Corporation, Research Division - Analyst [24]

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That's a fair answer. And then just, finally, a housekeeping question. Obviously, the legal fees are a big portion of the SG&A spend. It was, obviously, in fact, higher during cases when you're more in the court. And so I'm just wondering when we think about 2019, you mentioned there wasn't going to be much relief there. But as the litigation activity picks up, should we expect it actually to inflect higher?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [25]

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I found it very difficult to predict legal fees, certainly, when you got 2 cases running on separate tracks. We did almost $3.5 million of professional fees in 2018, which was up from $1.5 million the year prior. And predominantly, the increase was in legal fees with both Axon and WatchGuard cases. So I do not see any relief. But then, again, it could go away tomorrow if we resolve the thing and settle the deal. So I don't see a relief, but there is a lot of unanswered questions right now whether the thing actually goes to trial or not. If it does go to trial, then, obviously, the legal fees will remain high for the next 3 or 4 quarters.

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [26]

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Yes, Nathan, this is Stan. We went through, I guess, the toughest part in regards to the expense and the legal side against Taser. We've already had all our depositions. We had expert witnesses. So we've done a tremendous amount of the legwork on that and financially. So you really just have maybe the trial dates and a few more -- I don't even know if there's that many more motions that really will be going.

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [27]

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No.

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [28]

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So Taser is not that -- that much more expensive until time for trial. And then Axon, we still have to sort of go ahead and start the depositions and expert witnesses. And I don't see it being quite as expensive as what Taser's was. We have 3 different patents against WatchGuard. And their -- I guess, I'd say, their business model is a little bit different than Taser's as well, and they actually have the auto activation built into their equipment. So it probably is a lot easier a case to prove in front of the judge and jury. So I wouldn't expect the same kind of legal as we had with Taser, but we'll just have to see how it plays out.

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [29]

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And I would add also that part of the increase was due to the IPRs, the inter partes reviews that were outstanding. And then I think there was even an appeal on one. So those things are statutorily barred now. So that won't -- will not recur. And unfortunately, I don't have the amount of legal fees related just to the IPRs from 2018. But it was not a minimal amount. It was substantial. So that bodes well for 2019 in terms of total legal fees.

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Operator [30]

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Our next question is from [Mahank Aduri], private investor.

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Unidentified Participant, [31]

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I was just curious regarding all the press releases from the Axon side as well as from Digital Ally side. If Axon really had this Slate technology for some time now, I think, what's their rationale do you guys think in coming up with that kind of a statement at this late in the game, so to speak?

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [32]

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This is Stan, but I can't find anything on their website about this technology that they're talking about. And we clearly haven't seen it out in the industry. So I don't even know how to address it. It seems like a...

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [33]

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Yes. And quite frankly, at this point, this late stage, I am not sure that they can amend their complaint or their defenses to the matter. In fact, that's one of the things that's -- has to be ruled upon by the district court judge yet is whether they can even open their defenses and add something to it. And I can't even remember what they are trying to add at this point. But I think it's doubtful that they can even add that as a defense in this matter because I guess they just prepped it up. And again, their defenses have been disappearing with each court order and motion denied on their behalf. So obviously, they are going back to the well to try and to figure something new or something different out. But I'm not sure it's going to work with this judge and jury.

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Unidentified Participant, [34]

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That's kind of what myself and a bunch of others have been able to do out on due diligence and come up to an agreement about that or what we potentially think is the reason for their Slate analysis or dissent at this late in the game. But I would like to kind of have one more question, if I may. Last year around October time frame, I think you guys had filed a specific form that typically seems -- I'm sorry, I forget the name of the form, but it basically talks about the lack of needing to further dilute, if you will, the number of shares. I think it's -- your know what, Tom -- I'm talking about, Tom?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [35]

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I'm not sure that I do. Now you may be referring to the registered direct offering we did back in -- what we did, we used an S -- if I recall right, an S-3, which was a shelf statement, and we registered those shares off-the-shelf, if I recall right. That may be what you're looking at. But we've not authorized more shares since the last annual meeting. I think there was an approval going from $25 million to $50 million in [authorized]. So we certainly haven't issued that many, right.

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Unidentified Participant, [36]

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I think typically -- when such kind of a form has been filed in the past, it seems to indicate that there is a very close proximity of the company getting either bought out or taken over. So anything -- I know we have already talking about potential settlements and stuff like that, but anything you can comment on that front?

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [37]

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Yes. I think I know what you're referring to now. We had asked the shareholders to approve blank check preferred stock at the last annual meeting, which was overwhelmingly approved by the shareholders. But unfortunately, for a change in capital structure like that, you have to not only have a majority of yes votes at the annual meeting, it has to be a majority of all shareholders. So even though the -- I can't remember how many shares were present or accounted for at this annual shareholders meeting, we did not meet that quorum to make that kind of change in capital structure. So unfortunately, that blank check preferreds issuance or authorization did not happen. Now you're very correct that most people use blank check preferred in cases of unwanted takeovers and defense of tender offers and such that would -- may or may not come into play here. The board has again authorized us to put that on the proxy. So we're hoping to get that approved this year. It gives us a much better defense for a tender and a negotiating of potential buyout, if one would ever to come upon us. And hopefully, maybe I'm marketing this, but, hopefully, shareholders will take a good look at that and approve that at the annual meeting like they did last year. But hopefully, we reach the quorum that we need to get that capital change effected.

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Unidentified Participant, [38]

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All right. One last question regarding some time lines on either the WatchGuard case or the Axon case. I know earlier I think Stan had mentioned about 3 to 4 quarters. I mean is that the kind of time line we should be anticipating for some kind of a resolution potential, at least for either one?

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [39]

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Yes, so here is what I think is going to happen. I think you're going to see some rulings come down any day. I mean you can have some of these rulings occur later today even. We just don't know what the time line is there. An actual court date, again, I think we're all sort of anticipating that, over the next couple quarters, we're going to see the rulings. And that will really size up what kind of damages, what kind of defense, and they will throw out a court date, which we think probably will be in the fourth quarter.

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Unidentified Participant, [40]

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Okay. That's on the Axon side or on the...

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [41]

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Again that other court is pretty fast. I would probably say you got a shot at both of them being in the fourth quarter.

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Operator [42]

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Your next question is from (inaudible).

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Thomas J. Heckman, Digital Ally, Inc. - CFO, VP, Treasurer & Secretary [43]

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Darla, it sound like he may have dropped off.

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Operator [44]

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At this time, we have no further questions.

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Stanton E. Ross, Digital Ally, Inc. - Chairman, CEO & President [45]

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Fantastic. Well, listen, thanks, everybody, for calling in and spending the time with us today. And hopefully, we answered the questions that you had. If we did miss out on something, feel free to give us a call here at the office. Thank you.

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Operator [46]

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This concludes Digital Ally 2018 Fourth Quarter Results Conference Call. You may now disconnect.