digital ally, inc. (dgly) - circuit board assembly

Washington, D. C. Securities and Exchange CommissionC. 20549Form10-K[X]
Annual Report under Article 13 or 15 (d)
Article 1934 of the Securities Trading Act for the 2018 fiscal year]
Transition Report under Section 13 or 15 (d)
1934 of the provisions of the Securities Trading Act on the period from transition.
Commissioner's File Number: 001-
33899 DigitalAlly, Inc. (
The exact name of the registrant specified in the articles of association)Nevada20-0064269(
State or other jurisdiction of company or organization)(I. R. S.
Employee Identification Number)9705 Loiret Avenue.
, Lenexa, KS66219 (
Main executive office address)(ZipCode)
Registered phone number including area code :(913)814-
7774 securities registered under article 12 (b)
Transaction Law: none.
Securities registered under article 12 (g)
Trading Law: Common stock, $0.
001 face value (Titleof class)(
Name of each exchange registered)
Check the mark if the registrant is a well
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Indicateby check whether the mark registrant has been submitted electronically and posted on its company website (if any), submitted and published in accordance with S-Regulation section 405thT (§ 232.
This Chapter 405)
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As the registrant is aware, it is not included here and will not be included in the explicit proxy or information statement referenced in Part 3 of this form 10
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As of June 30, 2018, total market value of common shares of companies held by non-companies
Related companies calculated by reference to closing price ($2. 35)
The second fiscal quarter recently completed by the registrant was $14,163,598.
As of March 29, 2019, the number of shares in our common stock issued was: 11,064,037 shares.
Reference: none. FORM10-
KDIGITALALLY, INC.
Tableof contentspagaretiitem1. December 31, 2018. Business s3item1a.
RiskFactors10Item1B.
UnresolvedStaff Comments10Item2.
Properties10Item3.
Legal proceedings.
Food Safety Information 5.
14 items 6 of the registrant's common stock, related shareholder matters and the market for the purchase of equity securities by the issuer.
SelectedFinancial Data15Item7.
Management Discussion and Analysis of operational financial status and results
Quantitative and qualitative disclosure of market risks.
39 items 9 of financial statements and supplementary data.
Changes and differences with accountants in accounting and financial disclosure
Other information.
Directors, executives and corporate governance
Chief executive.
Security ownership of certain beneficial owners, management and related shareholders.
40 related party transactions and director independence 14.
Major accounting fees and services
Schedule of exhibitors and financial statements 41 Annual Reports on Form 10
K contains forward-
A statement looking forward to the term is defined in Section 27A of the revised Securities Act and Section 21E of the revised Securities Trading Act of 1934.
In some cases, you can identify the forward
Use terms such as "possible", "should", "expected", "plan", "expected", "believe", "estimate", "forecast", "potential ""continue", "intend" and other variations of these or comparable words.
In addition, any statements involving other features of expectations, predictions or events, circumstances or trends, and statements that are not relevant to historical matters, are moving forward --
Look at the report. These forward-
Forward-looking statements are based primarily on our expectations or forecasts of future events and may be affected by inaccurate assumptions and by various business risks and known and unknown uncertainties, some of them are beyond our control.
Therefore, the actual results may differ significantly from the forward results
Forward-looking statements contained in this document, please do not rely too much on these forward-looking statements
Look at the report.
These statements are only to predict and contain known and unknown risks, uncertainties and other factors, including risks that may lead to actual results, levels of activity in us or our industry, performance or achievement that materially differs from any future result, activity level, performance or achievement expressed or implied by these forwarding-
Look at the report.
Although we believe that expectations are reflected in the future-
We cannot guarantee future results, level of activity, performance or achievement.
You shouldn't rely too much on these advances.
Forward-looking statements issued only on the date of publication of this report.
We do not undertake to update or amend any Forward Agreement unless required by law
Whether it is due to new information, future events or other reasons, it is hoped that these statements are in line with the actual results.
As the Digital Ally company mentioned in this year's report "digital ally", "company", "we" or "we"
Unless otherwise stated. PartIItem1. Business.
Overviewdigital produces digital video imaging and storage products for law enforcement, security and commercial applications.
Our current product is
Car digital video/audio recorder included in the rear-
Mirrors for law enforcement and commercial fleets;
A system that provides our law enforcement customers with audio/video surveillance from multiple vantage points and hands-on
Automatic activation of the body
Worn Camera and-
Video system for cars;
A miniature digital video recording system designed for personal bodies;
Cloud storage solutions including
Based on fleet management and driver monitoring/training applications.
In order to adapt our technology to other applications, we have a positive research and development plan.
We have the ability to integrate electronic, radio, computer, machinery and a wide range of electronic devices.
Media technology creates unique solutions to address the needs of a wide range of other industries and markets including public transport, school buses, taxis and the army.
We sell our products directly to law enforcement agencies and other security organizations as well as consumers and commercial fleet operators through domestic and third party sales
International Party distributors
We have several new products and derivatives in R & D and are expected to start commercial production in 2019.
In December 13, 2000, bharathistoryweas was registered as a Vegas Petra company in Nevada.
From that day until November 30, 2004, when we started our plan to merge with Digital Ally, Inc.
A company in Nevada, formerly known as the trophy Technology Company (
"Acquisition Company ")
We did not do anything, is a close-held company.
At the same time as the merger, we are called Digital Ally companies.
Established in May 16, 2003, the acquired company is engaged in the design, development, marketing and sales of bow huntingRelated products.
Its main product is a digital video recording system for the bow hunting industry.
The company changed its business plan in 2004 to use its digital video recording system for law enforcement and security markets.
We started-
Car Digital Video Rearview Mirror March 2006.
In 2008, we began trading on the NASDAQ Capital Market, with the trade symbol "dly ".
"Our business started at 9705 Loiret Avenue, 66219 renesa, Kansas.
Our phone number is913)814-7774.
Products produce and sell digital audio/video recording, storage and other products in law enforcement and commercial applications.
These product lines are mainly used for law enforcement and private security applications, both of which use our technical core competencies in digital video compression, recording and storage.
In 2011, we have introduced a number of derivative products that can be used as "event recorders" for taxi, limousine, ambulance and other commercial fleet vehicle applications, which greatly enriches our availability
Our commercial products are also
Many commercial applications such as airport parking service providers, cruise lines, education and NASCAR competitions.
We also intend to produce and sell other digital video products in the future that will continue to expand our business beyond traditional law enforcement, private security and commercial fleet applications.
We have developed and continue to develop local servers and cloud storage, archiving and search capabilities to provide customers with innovative, useful and secure ways to store and maintain audio/video data.
These products contain our standards.
Based on the digital compression capability, it is allowed to record important time periods on chips and boards that can be designed in small form and stored.
Our product portfolio is described below. In-
CarDigital video mirror system for law enforcement-DVM-800 and DVM-800 LiteIn-
The on-board video system for patrol cars has now become a necessity and has become a standard in general.
The current system is mainly a digital-based system, the camera is installed on the windshield, and the recording device is usually installed in the trunk, headline, dashboard, console under the car seat.
Most manufacturers have developed and fully transitioned to digital video, and some offer full HD levels of recording that are currently in stateof-
The art of the industry.
Our Digital Video Rearview mirror unit is a self
Built-in video recorder, microphone and digital storage system, integrated to the rear-
Rearview mirror with display, GPS and 900 MHz audio transceiver.
Our system is more compact and less eye-catching than our competitors, as it does not require recording equipment to be installed in other parts of the vehicle. Ourin-
The car Digital Video Rearview Mirror has the following features: ● wide-angle zoom color camera; ●standards-
Compression and recording based on video and audio;
● The system is hidden in the rearview mirror and replaced with the factory rearview mirror; ● Rear monitoring-
When not activated, the rearview mirror is invisible;
● Eliminate the analog tapes required for storage and directory;
● Easy to install on any vehicle;
● Ability to integrate with the body
Old camera including automatic camera
Activation of any system;
● Archive audio/video data to the cloud and computer (wirelessly)
Compress the flash memory or file server;
● 900 mhz audio transceiver with automatic activation function;
● Event tag positioning with integrated GPS;
● Playback using Windows Media Player;
● Wireless download option for storing video evidence;
● Owner's software protection chain;
Solid state memory with strong durability.
The company has announced that it is developing a new
Car digital video platform named EVO-
HD is scheduled to start during 2019. The EVO-
HD is the next generation system with multiple HD inputs
Built-in car camera solution system
Automatic in patentedVuLink
Activate technology. The EVO-
HD is built on a brand new and highly advanced technology platform that enables many new and revolutionary features, including automatic activation outside the car and body cameras.
No other supplier can provide built-in
Automatically.
Activate technology. The EVO-
HD will provide an easier to use, faster and more advanced video forensics and upload system for law enforcement officers.
Other functions include: ● remote cloud trigger function that allows the dispatcher to remotely start the recording;
● Play audio/video at the same time;
● Cloudconnection through the cellular modem; ●Nearreal-
Time mapping and system health monitoring●Body-
Built-in Camera Connection
Automatic activation technology;
Internal storage, up to 2 tb of external SDD storage. TheEVO-
HD is designed and built on a new, highly advanced technology platform that will become a new home platform
Automotive video solution products for law enforcement.
Innovative EVO-
HD technology will replace the currentcar mirror-
Basic System with customizable micro system
Installed on the vehicle while providing multiple hardware configurations to meet the various needs of law enforcement customers. The EVO-
HD can support up to four HD cameras, both with pre-
Guarantee of event and evidence capture (ECA)
Allow the agency to review the capacity of the entire shift.
The Internalcell modem will allow connections to the VuVault Cloud powered by Amazon Web Services (“AWS”)
, As well as real-time data at the scene. In-
Digital video "event recorder" system-DVM-
250 Plus provides commercial fleet and commercial fleet managers with digital video tools needed to improve driver safety, track assets in real time
While enabling fleet managers to operate fleetat at the best level, time and minimize the risk of liability for the company.
The products we sell are designed to address these commercial fleet markets through our DVM
250 Plus event recorder with full functionality and capabilities for all types of commercial fleets
Customizable, consistent with their specific application and inherent risks. The DVM-
The back is 250 plus-
The digital audio and video recording system based on the rearview mirror has many features of our DVM, but not all of them
800 lower prices for law enforcement mirror systems. The DVM-
250 for the purposes of evidence or training to capture "events" such as debris and unstable driving or other abnormal events.
These markets may find our products attractive in terms of functionality and cost compared to other suppliers.
Our marketing efforts have shown that this technology is being employed by commercial fleets, particularly ambulances and taxis. cab markets.
Digital provides a set of data management web-
Help fleet managers organize, archive and manage video and remote information processing information based on tools.
In the suite, there are powerful mapping and reporting tools that help optimize efficiency, provide excellent security training tools for the team, and ultimately deliver significant ROI to the organization. TheEVO-
The HD described above will also be a platform for a brand new family
Automotive video solutions for the commercial market.
Innovative EVO-
HD technology will replace the currentcar mirror-
System based on micro system can be customized
Installed on the vehicle while providing multiple hardware configurations to meet the various needs of its commercial customers.
In its commercial market applications, EVO-
HD supports up to four HD cameras, two with front facing cameras
Guarantee of event and evidence capture (ECA)
The ability to allow customers to view the entire shift.
Internal cellmodem will allow connection to FleetVU Manager cloud-
Business fleet tracking and monitoring system based on Amazon Web Services (“AWS”)
, And real-time metadata when in a field. MiniatureBody-
The old digital video system-the first vu HD for law enforcement and private security.
Car video system, but smaller, lighter, stronger and more waterproof --
Resistant to operation in harsh outdoor environments.
In addition to law enforcement and private security, these systems can also be used in many applications and are specifically designed to be clipped to individual pockets or other coats.
The unit is its own.
There is no need for an external battery or storage device.
The current system offered by competitors is digital-based, but it is often necessary to connect the battery pack and/or storage devices to the camera via wire or otherwise.
We believe that our first vu HD product is more suitable for potential users than its competitors because of its video quality, small size, shape and light weight.
Our first vu HD with our in-
Through our patented VuLink system, the car video system allows the automatic activation of both systems. Auto-
Activation and interconnect between In-
Automotive video systems and first vu HD body wear camera products-VuLink for law enforcement applications recognize the serious limitations of law enforcement camera technology, and we took the lead in developing the VuLink ecosystem to provide intuitive automation
The activation function and coordination between multiple recording devices.
US Patent and Trademark Office (the “USPTO”)
These pioneering efforts have been endorsed by granting us multiple patents that cover many features, such as the camera that automatically activates the officer when the light bar is activated or the data is activated
Recording devices such as smart weapons are activated.
In addition, the patent claims granted include automatic coordination between multiple installation devices.
Prior to the work, officials were forced to manually activate each device in response to an emergency, a requirement that not only reduced the usefulness of the existing camera system, but also diverted the attention of officials at critical moments.
Our first vu HD with our in-
Through our patented VuLink system, the car video system allows the automatic activation of both systems.
This feature is becoming the standard feature required by many legal bodies.
Unfortunately, some competitors have chosen to infringe our patents and develop products that offer the same or similar features as our VuLink system.
We have filed a lawsuit against two competitors, Axon shopises, Inc. (
"Axon", formerly famous Taser International Co. , Ltd. )
Video of Dba duty officer (“WatchGuard”)
This poses a challenge to their infringing products.
We believe that the outcome of these proceedings will largely determine the competitive environment of the body. worn and in-
The foreseeable future of the automotive video market.
We look forward to our products and their related patents being recognized by the industry as revolutionary and pioneering inventions. VuVault.
Netand FleetVU ManagerVuVault. netis a cost-
Efficient, fully scalable law enforcement cloud storage solution provided by Amazon Web Services, providing redundancy and security that meets redundant is standards-
Enhanced storage for all uploaded videos.
FleetVUManager is our website
Software based on commercial fleet tracking and monitoring, has and manages videos of events (such as accidents) that need attention taken by our video event data recorder.
This software solution is characterized by our cloud.
Web-based portals that leverage many of our VUVault features. NET law-
Execute cloud-
Storage-based solution.
Last year, we focused on research and development to meet the different needs of our customers, upgrade our existing products and start developing new products and product categories.
Our research and development efforts aim to maintain and enhance our competitive edge in the markets we open up and position us as a diversified market competition outside of law enforcement.
Our main markets are domestic and international law enforcement agencies.
In 2012, we expanded our reach by pursuing commercial fleet vehicles and the public transport market.
In the future, we may further expand or focus on private security, homeland security, public transportation, health care, general retail, education, general consumers and others as long as there are sufficient capital and market opportunities.
In this regard, we have installed several facilities involving private security on cruise ships and similar markets.
We think there are many potential private uses for our products.
We have entered the market for certain commercial fleet and ambulance service providers to confirm our DVM-
For us, the 250 Plus product and FleetVU Manager can be an important venue producer.
Law enforcement officials believe that law enforcement has recognized the valuable use of our various digital audio/video products in alcohol testing records.
Without some form of video or recording, court proceedings are usually made up of the Sword of the police against the suspect.
The record shows that where there is video evidence to support the police, the conviction rate has increased significantly.
Video evidence also helps protect the police department from trivial lawsuits.
The biggest source of police video evidence today is-car video.
Unfortunately, some police cars are still not in
Car videos, in which the camera usually points to the front rather than the side of the road where a wake-up test is performed. The in-
Car videos are often of little use for domestic violence investigations, burglary or theft investigations, phone calls or personal attacks that disrupt order.
In all of these cases, the first vu HD may provide documented evidence of the suspect's actions and response to police intervention.
In addition, there are very few video systems for motorcycle patrol officers.
Our first vu body camera is perfect for mobile applications as our digital video recording system, available for motorcycle police and water patrol.
Criminal investigations, including detailed photography, are often a large part of the Metropolitan Police force's budget.
The first vu may record a significant amount of such evidence at a lower cost for the collection, analysis and storage of data and evidence.
There are many potential applications for our digital audio/camera products.
We believe that other potential markets for our digital video system, including derivatives currently under development, include private investigators, SWAT team members, excessivethe-
Road truck transport fleet, airport safety, municipal fire department and the United StatesS. military.
Other potential commercial markets for our digital video system include stadiums and arenas.
Students believe that our products and products may benefit in kindergarten through the 12 th grade school system.
We are evaluating our entry into this potential market through several pilot tests.
Our initial findings on this market are mixed, but we believe this may represent a new addressable market for our future mobile audio/video recording products.
The recent tragic events in schools have increased the need to provide a "safer" environment for schools.
Thousands of private security agencies in the United States employ a large number of guards.
Police forces use video systems to justify the police's actions, but the private security sector generally does not have such tools.
We believe that for these companies, FirstVUHD is an excellent management tool to monitor the conduct and timing of the security round.
In addition to the first vuhd, the digital video security camera can also provide padding
When the guard has a large area to cover, or in an area that does not require all-weather monitoring.
Family and security markets in the United States, in addition to the governmentS.
In order to prevent possible terrorist attacks, large companies have invested a lot of money.
Public and private-
Counter-terrorism measures and the prevention of other forms of violence are costly.
These are the potential markets for our products.
We have signed a contract with the manufacturer to assemble the printed circuit board used in our products.
Professional Board manufacturers
It is suitable to assemble the circuit board still in our products.
Specialized board manufacturers can spread the wide range of capital equipment costs for board assembly across multiple projects and customers.
There is also a sufficient number of these manufacturers to support frequent upgrades to status-of-the-art equipment.
We have identified multiple suppliers that meet our quality, cost and performance standards.
We also use multiple power supplies for board components to ensure reliable power supplies over time.
We manufacture our component components using contract manufacturers and may end up using them for final assembly and testing.
Due to the complexity of our products, we believe it is important to maintain consistent quality of core knowledge producers and to limit the dissemination of sensitive intellectual property rights, and will continue this approach.
In addition, these technicians are valuable in our service and repair business and can support our growing installation customer base.
We also sign contracts with two manufacturers with production facilities in the Philippines and South Korea to produce our DVM-250Plus, DVM-800 and DVM-800 HD products.
These contracts typically involve secrecy and other matters, with no minimum purchase requirements and a specific purchase order is required to be accepted to support any product supply acquisition.
We are using additional contract manufacturers located in the US for these product lines to further reduce the risk of any supply disruption and ensure competitive prices.
We usually perform final assembly, testing and quality control functions for these products at Lenexa factory, Kansas.
We have an employee --
The direct sales team for domestic sales enables us to control and monitor independent distributors for their daily activities and international sales.
Our sales team is located in seven regions.
The direct regional sales team is supported by a team of five internal sales reps and one remote sales representative
Sales Specialist and pre-sales
Sales solution design team.
We also have a bidding expert to coordinate large bidding opportunities.
We believe in our employees.
Based on the model, we encourage our sales staff in lower performance areas to improve their efforts, thus improving their sales results.
Our executive team also provides important customer opportunities for sales agents by providing pricing strategies and customer presentation assistance.
To facilitate sales activities, our technical support staff can also provide customer presentations and product specifications to sales agents.
We use our direct sales force and international distributors to market our products.
Our main promotional activities include: ● participation in industrial trade shows and conferences;
Direct sales with industry strength-
Identify, visit and establish specific sales staff-
Maintain relationships with customers and target industries;
● Support our direct sales through a passive sales system including internal sales and e-commercecommerce;
● There are key Journal printing advertisements in the professional industry;
● Directmail activities for potential customers;
● Online advertising, including supporting search engines and websites, and registration with appropriate purchasing entities;
● In addition to the competition, our NASCAR relationship supports the development of new business opportunities between NASCAR sponsors and sponsors;
Industry PR-
Specific venues and general media to increase the visibility of our brands and products, including joining the appropriate trade organizations;
Trademark identification by trade names related to us and our products.
Competition in law enforcement and security surveillance markets is fierce.
Competitive factors in these industries include ease of use, quality, portability, versatility, reliability, accuracy, and cost.
In the law enforcement and monitoring market, all our products and the products we are developing have direct competitors of technology and products.
Many of these competitors have significant advantages over us, including more financial, technical, marketing and manufacturing resources, wider distribution channels, larger customer base and faster response times, to adapt to changes in new or emerging technologies and customer needs.
Our main competitors
Market for Automotive video systems includes L-3 Mobile-Vision, Inc.
Coban Technologies, Inc.
Panasonic guard, Kustom signal, Panasonic Systems Communications, international police technology
As well as many other competitors, they are in-
A video system for law enforcement agencies.
The main competitors of our bodies
The old camera market includes Axon, Reveal Media, WatchGuard and VieVU, Inc.
Acquired by Axon in 2018.
Our activity recorders in the public transport market face similar and intense competitive factors, as we do in the law enforcement and safety monitoring markets.
We will also compete with any company that produces monitoring equipment for commercial use.
We cannot guarantee that we can compete successfully in these markets.
In addition, there is no guarantee that new and existing companies will not enter the law enforcement and security monitoring market in the future.
The commercial fleet security and monitoring market is also very competitive.
Our DVM has direct competitors.
More than 250 "event recorders", several of which may have more financial, technical marketing and manufacturing resources than we do.
Our main competitors in the commercial fleet include Lytx, Inc. (
Before DriveCam, Inc. )
Intelligent Drive system.
Your ability to compete effectively will depend on the success of our protection of our proprietary technologies in the United States and abroad.
We have applied for patent protection in the US and some other countries to cover certain design aspects of our products.
Some of our patent applications are still under review by the US Patent and Trademark Office, so we have not yet obtained all the patents we apply for in the US.
In recent years, we have obtained several patents, including a patent on our VuLink product, which provides an automatic trigger for our bodies --
The old camera and our
Video system for cars
There is no guarantee that which or any patents related to our existing technology will be obtained from the United States or any foreign patent office.
In addition, there is no guarantee that we will obtain any patents in the future based on the sustainable development of our technology, or, our patent protection within and/or outside the United States is sufficient to prevent others from using our technology to develop or market competitive products, both legally and otherwise.
We have signed supply and distribution agreements with several companies that produce some of our products, including our vm-800 and DVM-800 HD products.
These supply and distribution agreements contain certain terms of secrecy that protect proprietary technology and the proprietary technology of third-party manufacturers.
In addition to seeking patent protection, we rely on trade secrets.
How technological advances are achieved and competitive.
While we have or intend to enter into NDA agreements with our employees, consultants and consultants, there is no guarantee that they will be complied, nor can we guarantee that we can effectively protect our rights to trade secrets and knowledge that have not been patented --how.
In addition, there is no guarantee that others will not independently develop basic and fairly proprietary information and technology, and will not acquire our trade secrets and knowledge. how.
Axon, our physical competitor.
The camera market requires the US Patent and Trademark Office to start“IPR”)of our U. S. Patent No. 8,781,292 (
"Patent 292 ").
The US Patent and Trademark Office approved the request and completed the review.
The USPTO has confirmed the validity of our "292" patent, which concerns our car
Activation technology for law enforcement agency cameras.
We have filed a lawsuit with the United States. S.
The Kansas district court filed a lawsuit against Axon alleging that Axon's body camera product line had infringed the patent intentionally.
On February 2, 2016, we received a notice that the US Patent and Trademark Office has issued another patent related to our car.
Activation technology of law enforcement cameras. U. S. Patent No. 9,253,452 (
"452Patent ")
It generally covers the automatic activation and coordination of multiple recording devices in response to trigger events, such as the activation of light bars on vehicles by law enforcement officers.
We have added Axon's deliberate infringement of the '452 'patent in the existing proceedings.
On December 2016 and January 2017, Axon filed two petitions for review by both parties (“IPR”)
Oppose the 452 patent.
US Patent and Trademark Office (“USPTO”)
Two requests from Axon were rejected.
Axon is now prohibited by law from filing any more IP applications for "452" patents.
The district court action in Kansas was temporarily suspended after filing an intellectual property petition.
However, on November 17, 2017, the Kansas federal district court rejected Axon's request to maintain the stay.
With that meaning, the trial will now begin on both sides.
Since the recovery of the lawsuit, the court has issued the construction order for claim (
Also called aMarkmanOrder)
In all disputes, it stood on the side of the company and denied Axon's attempt to limit the scope of the claim.
In accordance with the provisions of arkmanorder, the court set all remaining deadlines in the case.
The fact-finding concluded on October 8, 2018 and held its last pre-trial meeting on January 16, 2019.
The parties filed a motion for summary judgment on January 31, 2019.
The parties are waiting for a court decision on the motion for summary judgment.
Once the summary judgment matter is resolved, the court will set a trial date.
While the USPTO acknowledges the validity of the "292" patent and the "452" patent, AXON continues to disregard our federal-protected patent right to sell, sell and sell its Axon technology.
Therefore, we actively challenge Axon's infringement in the lawsuit against Axon, seeking money losses and permanent bans to prevent Axon from continuing to sell its Axon Signal technology.
OnMay 27,2016 we filed a lawsuit against WatchGuard alleging infringement of our "292" patent, "452" patent and "our patent number" patent9,325,950 (
"950 patent ")
VISTA Wifi and 4 re In-based WatchGuard-
Automotive product line.
We intend to actively challenge WatchGuard's infringement in a lawsuit against WatchGuard, seeking money loss and a permanent ban to prevent WatchGuard from continuing to sell its car
Activation technology embodied in the bodywornand in-
Video system for cars
The Uspto has granted multiple patents to the company, claiming to cover many features, such as automatically activating all deployed cameras for the activation of only one camera.
In addition, its patent claims include automatic coordination and digital sync between multiple recording devices.
Digital allies also have patent coverage for coordination between multiple nodes
Camera systems and officer's smartphones allow officers to assess on-site events more easily when or after the event.
The company's lawsuit says WatchGuard incorporated the patented technology into its VISTA Wifi and 4RE In-
Car product line without its permission.
Specifically, Digital Ally accused WatchGuard of infringing three patents: the '292 and '452 patents and the '950 patents.
"The company is actively challenging WatchGuard's infringement, seeking money loss and seeking a permanent ban to prevent WatchGuard from continuing to sell VISTA Wifi and 4RE In-
Use Digital Ally's own technology to compete with the car product line.
On May 8, 2017, the watch team submitted a petition to apply for "950" patent intellectual property rights.
The company will firmly oppose the petition.
Patent Trial Appeal Board, December 4, 2017 (“PTAB”)
WatchGuard's request for "intellectual property rights" of 950 patents was rejected.
The "292" patent was previously subject to the intellectual property procedure of the US Patent and Trademark Office, but in June 2018, the PTO found that the "292" patent was valid and rejected Axon's argument.
WatchGuard had previously agreed to be bound by axon's 'siprs, so WatchGuard is now prohibited by law from accepting any patents in respect of "950", "452" and "292"
Since Axon's '292 patent intellectual property failed, the court lifted the suspension and set a timetable for bringing the case to trial.
The exploration is underway and will end on May 2, 2019.
The two sides will then make expert reports and make summary judgments.
Trial date has not been determined.
We believe that the outcome of these infringement proceedings, in particular Axon litigation, will have a meaningful impact on the whole body
In the foreseeable future, the old camera market in the United States. The auto-
Activated technologies protected by our "292", "452" and "950" patents are rapidly becoming the standard within the industry, so if we succeed in challenging Axon and we believe, this will have a significant and positive impact on our future sources of income, although we cannot guarantee in this regard.
95 employees
Employee time as of December 31, 2018.
Our employees do not have any collective bargaining agreements and we have never experienced a shutdown.
We believe that our relationship with our employees is good. Item1A. RiskFactors. Notapplicable. Item1B.
Staff comments. None. Item2. Properties.
We entered a non-
Can be canceled, Long
Regular facility rentals starting in November 2012.
Our facilities, covering an area of about 33,776 square feet, are located at 9705 Loiret Avenue, 66219 Renesha, Kansas.
The lease will be terminated on April 1, 2020.
This month's rent ranges from $35,634 to $38,533. Item3.
Legal proceedings.
The company has been subjected to various legal proceedings due to normal operation.
Although, based on the information currently available, there is no guarantee that the management believes that the final result of each action is likely not to have a significant adverse effect on the consolidated financial statements of the company.
However, in some actions, adverse results may have a significant adverse effect on the company's financial results during the recording period.
The company owns the United StatesS. Patent No. 9,253,452 (
"452 patent ")
, It usually covers the automatic activation and coordination of multiple recording devices in response to trigger events, such as the activation of light bars on vehicles by law enforcement officers.
The company filed a lawsuit in the United States on January 15, 2016. S.
District Court of Kansas (Case No: 2:16-cv-02032)
AgainstAxon has accused Axon of intentionally infringing patents on its body camera product line and signal automatic equipment
Activate the product.
The company is seeking money losses and a permanent ban on Axon's infringement of the "452" patent.
In addition to the infringement claim, the company filed a claim alleging Axon conspiring to keep the company out of the market by engaging in improper, unethical and unfair competition.
The amended suit charged Axon with bribing officials and conspiring in other ways to ensure that no.
The bidding contract for its products violates state laws and federal antitrust laws.
The company's lawsuit also seeks monetary and injunctive relief for the alleged violations, including three times damages.
Axonfiled denied patent infringement charges in April 1, 2016.
In addition, Axon filed a motion on March 4, 2016 to dismiss all allegations in the complaint, which the company filed a revised complaint on March 18, 2016 to address the technical deficiencies in the complaint.
Digital amended its complaint, and Axon again moved to dismiss the allegations that it had bribed officials and otherwise colluded in refusing
In April 1, 2016, the bidding contract for its products violated the state law and the federal anti-monopoly law.
The formal discovery of patent-related claims began on April 12, 2016.
On January 2017, the court granted Axon's motion to dismiss the action in relation to its bribery of officials and otherwise colluding
Bidding contracts for its products violate national laws and federal antitrust laws.
On May 2, 2018, the Federal Circuit Court confirmed the district court's decision, and on October 1, the Supreme Court rejected Digital Ally's request for review.
On January 2017 and 2016, Axon submitted two petitions for review by both parties (“IPR”)
For '452patent.
US Patent and Trademark Office (“USPTO”)
Two requests from Axon were rejected.
Now Axon is excluded from making any more IP applications for the "452" patent.
The district court action in Kansas was temporarily suspended after filing an application for intellectual property.
However, on November 17, 2017, the Kansas federal district court rejected Axon's request to maintain the stay.
With this major ruling, the two sides will now begin their trial.
Since the recovery of the lawsuit, the court has issued the construction order for claim (
Also called aMarkmanOrder)
In all disputes, it stood on the side of the company and denied Axon's attempt to limit the scope of the claim.
In accordance with the provisions of arkmanorder, the court set all remaining deadlines in the case.
The fact-finding concluded on 2018 and held its last pre-trial meeting on January 16, 2019.
The parties filed a motion for summary judgment on January 31, 2019.
The parties are waiting for a court decision on the motion for summary judgment.
Once the summary judgment matter is resolved, the court will set the date of the trial.
WatchGuardOnMay 27, 2016 filed a lawsuit against WatchGuard ,(Case No. 2:16-cv-02349-JTM-JPO)
VISTA Wifi and 4RE In-based on watchguard-
Automotive product line.
The Uspto has granted multiple patents to the company, claiming to cover many features, such as automatically activating all deployed cameras for the activation of only one camera.
In addition, Digital Ally's patent claims include automatic coordination and Digital sync between multiple recording devices.
It also has patent coverage for coordination between multiple patents
Camera systems and officer's smartphones allow officials to assess events on site more easily when or after the event.
The company's lawsuit says WatchGuard incorporated the patented technology into its VISTA Wifi and 4RE In-
Car product line without its permission.
Specifically, Digital Ally accused WatchGuard of infringing three U. S. patents. S Patent No. 8,781,292 (
"Patent 292 ")
And 452 patents and the United StatesS. Patent No. 9,325,950 the (” ’950Patent”).
The company is actively challenging WatchGuard's infringement, seeking money loss and seeking a permanent ban to prevent WatchGuard from continuing to sell its VISTA Wifi and 4RE In-
Use Digital Ally's own technology to compete with the car product line.
On May 8, 2017, WatchGuard filed a petition for a "950" patent.
The company objected to the petition and, on December 4, 2017, the Patent Trial and Appeal Board (“PTAB”)
Rejected WatchGuard Video's request for intellectual property protection for "950" patents.
The litigation also relates to "292" patent and "452" patent "452" patent is for Axon of the same patent.
The "292" patent was previously subject to the intellectual property procedure of the U. S. Patent and Trademark Office, but on June 2018, the PTO rejected Axon's argument and did not invalidate the "292" patent.
WatchGuard previously agreed to be subject to Axon's intellectual property rights, so WatchGuard is now prohibited from accepting any further knowledge in respect of "950", "452" and "292" patents
Since axon' 292 patent intellectual property was overturned, the court canceled the stay and set a timetable for bringing the case to trial.
Discoveryis is in progress and will be closed on May 2, 2019.
The two sides will then proceed with expert reports and summary judgments.
No trial date is set. PGATour, Inc.
PGA Tour Limited 2019(the “PGA”)
Filed a lawsuit against the company in the Federal District Court of Kansas (Case No. 2:19-cv-0033-CM-KGG)
Alleged breach of contract, breach of implied covenant of goodwill and fair trade related to the network.
Sponsorship Agreement for tourism title ("Agreement ").
The contract was signed by both parties on 2015.
Under the agreement, Digital Ally will become a sponsor of ownership of the network and obtain certain names and other rights and benefits related to the network.
Com Tour 2015 to 2019 in exchange for paid travel annual travel sorship fees for digital allies.
The Pga claims that it complies with its duties as set out in the agreement, however, the company did not pay the sponsorship fees set out in the agreement.
According to the alliance, it did not receive $1,190,000 in arrears for the benefit and legal costs before and after the judgment of the interests and 2019mm tournamentsplus.
In the company's view, the PGA first violated the terms of the contract and therefore the company was no longer obliged to pay.
The company has not responded to the proceedings and has and will continue to discuss with the PGA the potential solution to the matter.
The Company believes that it has a valid legal defense of the lawsuit, involving the PGA's alleged breach of contract and false statements, before any payment breach claimed by the PGA.
If the parties fail to resolve the matter, the company intends to strongly defend in this proceeding and has accumulated the potential costs of defense and or resolution of the matter from December 31, 2018.
The general will inform us from time to time that we may be a party to the proceedings or are making a claim against us.
Until the summons and complaint are actually served on us, our policy is not to disclose the details of any claim or threat action.
After careful evaluation of the claim, assuming we determine that we are not at fault, or that we do not agree with the damages or relief requested, we strongly defend any action against us.
When a loss is considered a possible and reasonable valueable value, we record liability.
If the loss is deemed reasonable and possible, but not possible, we decide whether it is possible to provide an estimate of the amount of the claimed loss or the range of possible losses, if it is the disclosure material.
In assessing matters for accrual and disclosure purposes, we consider the availability of factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the possibility of our universal presence, and the severity of any potential loss.
Over time, we will re-evaluate and update the accrued items.
While the final solution is unknown, we do not expect these proceedings to have a separate or overall substantial adverse effect on our operating results, financial position or cash flow.
However, the outcome of any action is inherently uncertain and there is no guarantee of any costs, and the resolution of these matters may ultimately result in liability or damage that will be covered by our insurance, or will not exceed the amount confirmed or provided by the insurance underwriting, nor will it be financial or cash flow to our operating results. Item4.
Security information disclosure. Notapplicable. PARTIIItem5.
The market in which the registrant's common stock, related shareholder matters and the issuer purchase equity securities.
Market price our common stock began trading in the NASDAQ Capital Market on January 2, 2008 with the symbol "dly" and continues to do so.
From July 2007 until we were listed on the NASDAQ Capital Market, our common stock was traded on the OTC BulletinBoard, before which it was quoted in "Pink Sheets.
"The High/Low closing price of our common stock is as follows.
In addition, the following quotation reflects the international
Dealer offers with no retail mark-up, price cut or commission may not represent the actual transaction: $1 stQuarter 2 as of the end of December 31, 2018. 85$2. 002ndQuarter$2. 70$2. 303rdQuarter$4. 30$2. 104thQuarter$3. 10$2.
For the 31 years ended December 31, 2017, $5 per quarter. 75$4. 002ndQuarter$4. 26$3. 033rdQuarter$4. 20$2. 404thQuarter$2. 80$1.
In December 31, 2018, we had a record of about 107 ordinary shareholders.
So far, we have not announced or paid cash dividends for common stock.
Holders of our common stock will be entitled
When our board announces a cumulative dividend of common stock, it is up to the board to decide on its own.
We intend to retain all future earnings (if any) for our business and expect no cash dividends to be paid for the foreseeable future.
Any future decision to pay a cash dividend will be at the discretion of our board of directors, and will depend on our financial position, results of operations, capital requirements, general business conditions and other factors that our board may consider relevant.
The board of securities issued under the authorization of the equity compensation plan passed the 2005 stock option and the Restricted Stock Plan (2005 plan)
September 1, 2005.
2005 The plan authorizes us to retain 312,500 ordinary shares in the exercise of options and the award of restricted stock awards.
2005 The plan was terminated on 2015 and 4,616 shares were retained for awards currently unavailable.
The total number of outstanding and outstanding stock options granted under Plan 2005 as at December 31, 2018 amounted to 23,125.
On 2006, our board of directors passed the 2006 stock option and restricted stock program (2006 plan).
2006 The plan authorizes us to reserve 187,500 shares for its future grants.
2006 The plan was terminated on 2016 and 21,087 shares were retained for awards currently unavailable.
The total number of outstanding and outstanding stock options granted under Plan 2006 as at December 31, 2018 amounted to 46,387.
On 2007, our board of directors passed the 2007 stock option and restricted stock program (2007 plan).
2007 The plan authorizes us to reserve 187,500 shares for its future grants.
2007 The plan was terminated on 2017 and 82,151 shares were retained for awards currently unavailable.
The total number of outstanding and outstanding stock options granted under Plan 2007 as at December 31, 2018 amounted to 12,500.
2008, our board of directors approved the 2008 stock option and restricted stock program (2008 plan).
2008 The plan authorizes us to reserve 125,000 shares for its future grants.
2008 the plan was terminated on 2018 and 6,249 shares were retained for awards currently unavailable.
The total number of outstanding and outstanding stock options granted under Plan 2008 as at December 31, 2018 amounted to 32,250.
Our board of directors passed the 2011 stock option and restricted stock plan on the 18 th of 2011 (2011 plan).
2011 The plan authorizes us to reserve 62,500 shares for its future grants.
As of December 31, 2018, 726 shares were available for issuance under the 2011 plan.
Stock options granted under Plan 2011 have not been exercised and exceeded 9,750 shares as of December 31, 2018.
Our board of directors passed the 2013 stock option and restricted stock plan on the 22nd of 2013 (2013 plan).
The 2013 plan was revised in March 28, 2014 and November 14, 2014 to increase the number of shares authorized and retained under the 2013 plan to 300,000 shares.
As of December 31, 2018, 100 shares were available for issuance under the 2013 plan.
The total number of outstanding and outstanding stock options granted under Plan 2013 as at December 31, 2018 amounted to 20,000.
Our board of directors passed the 2015 stock option and restricted stock plan on the 27 th of 2015 (2015 plan).
The 2015 plan was revised in February 25, 2016 and May 31, 2017 to increase the number of shares authorized and retained under the 2015 plan to a total of 1,250,000 shares.
As of December 31, 2018, 37,100 shares were available for issuance under the revised plan 2015.
According to the stock options granted under Plan 2015, as of December 31, 2018, a total of 130,000 stock options have not been exercised and have not been fulfilled.
Our board of directors passed the 2018 stock option and restricted stock plan in 2018 (2018 plan).
2018 The plan authorizes us to reserve 1,000,000 shares for its future grants.
As at December 31, 2018, under plan 540,000, 2018 shares were available for distribution.
The total number of outstanding and outstanding stock options granted under plan 2018 as at December 31, 2018 amounted to 160,000.
2006 plan, 2007 plan, 2008 plan, 2011 plan, 2013 plan, 2015 plan, 2018 plan, plan and plan are called "plans ".
The plan authorizes us to give (i)
Incentive stock options to key employees (
Except plan 2007)
Purchase of shares of common and non-common stock
Eligible stock options for the purchase of shares of common stock and restricted stock awards, and (ii)to non-
Non-employee directors and consultants
Qualified stock options and restricted stocks.
Our board's compensation committee manages the plan, the conditions and limitations of the award by making a recommendation to the board or by making a decision on the person who should grant the option or restricted stock, and the amount, terms.
Incentive stock options are allowed under the scheme (
Except plan 2007), non-
Qualified stock options and restricted stock awards.
Incentive stock options granted under the plan must have a exercise price of at least 100% of the fair market value of common stock on the date of grant.
Grant incentive stock options to anyone who has all of our class shares or any parent or subsidiary with more than 10% joint voting rights upon grant, the exercise price must be at the date of grant at least 110% equal to the fair market price of common stock. Non-
The exercise price of the statutory stock option is determined by our compensation committee.
Under the scheme, the compensation board is also authorized to grant restricted stock awards.
Restricted stock awards are the title of common stock subject to transferability restrictions, the risk of confiscation and other restrictions, if certain termination of employment or services prior to the end of the limitation period set by the Compensation Commission, these risks may be confiscated.
We have submitted various registration statements on Form S.
8 and modifications to the previously submitted Form S-
The SEC registered a total of 3,425,000 shares, which were issued during the exercise of stock options for various stock option schemes. The following table lists certain information about the stock option scheme adopted by the company as of December 31, 2018: The number of securities to be issued when exercising outstanding options, warrants and rights (a)Weighted-
Average exercise price of outstanding options, warrants and rights (b)
Number of securities available for issuance in the future under the equity compensation plan (
Excluding securities reflected in the column (a))(c)
Equity Compensation Plan approved by Stock holder s421, $512 4.
34577,926 equity compensation plan not approved by the stock holder, $500 14. 12—
Planall plans434, 012 $4.
62577,926 sales of recently unregistered securities have not been issued in our Quarterly Report on Form 10 for unregistered securities reportedQ during2018. Item6.
Select financial data. Notapplicable. Item7.
Management Discussion and Analysis of Financial Position and operational results.
This report contains
Looking forward to the statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Trading Act of 1934.
Words such as "belief", "expectation", "expectation", "intention", "estimate", "possibility", "should", "possibility", "will, "Plan", "future", "continue" and other expressions that predict or indicate future events and trends unrelated to historical events
Look at the report. These forward-
Forward-looking statements are based on our expectations or predictions of future events, may be affected by inaccurate assumptions and may be affected by various business risks and known and unknown uncertainties, some of them are beyond our control.
Therefore, the actual result may be different from the forward result
Forward-looking statements contained in this document, reminding readers not to rely too much on this forward-looking --
Look at the report.
We have no obligation to update or modify any forwarding publicly-
Whether it's the result of new information, future events or other causes.
A wide range of factors may lead to or contribute to this discrepancy and may adversely affect income, profitability, cash flow and capital demand.
Can't guarantee moving forward
In fact, looking at the statements contained in this document will prove to be accurate.
Factors that may cause or cause significant differences between our actual results and the results discussed in this article, or factors that adversely affect our stock prices include but are not limited :(1)
Including losses in fiscal 2018 and fiscal 2017; (2)macro-
Economic risks from the impact of reduced legal budgets
Law enforcement community; (3)
In the current economic and competitive environment, our ability to increase revenue, increase profit margins and restore consistent profitability, including whether to resume delivery under AMR contracts; (4)
The operation of our developing markets and the uncertainty of the market's acceptance of our technologies and new products; (5)
Funding is provided by federal, state and local governments to facilitate the budget of law enforcement agencies, including the timing, amount and limits of such funding; (6)
We have the ability to offer new products such as EVO-scheduled for launch in 2019-
HD, have these new products run as planned or advertised, and whether they help to increase our revenue; (7)
Whether we can increase the domestic and international sales of our products in the future; (8)
We are able to maintain or expand the market share of our products in our competitive domestic and international markets, including increasing our international revenue; (9)
Our ability to produce products at cost
Effective ways; (10)
Competition from larger, more mature companies with a larger economy and human resources; (11)
Our ability to attract and retain outstanding employees; (12)
Dealing with relevant risks of government entities as clients; (13)
Due to our long sales cycle and potential for no return on revenue, we spend a lot of resources in our sales expectations; (14)
Impact of new products and rapid technological changes on China's market(15)
Our reliance on DVM sales800, DVM-
800 HD, first VUHD and DVM-250 products; (16)
If we are unable to compete in our market and restore profitability, shareholders may lose all or part of their investment; (17)
Defects in our products may damage our ability to sell our products and may also lead to litigation and other significant costs; (18)
Reliance on key personnel; (19)
Our dependence on third
Distributors and sales reps as part of our marketing capabilities; (20)
Our dependence on the product components of some manufacturers and suppliers, as well as our dependence on domestic and foreign manufacturers of certain products; (21)
Our ability to protect our know-how and information as trade secrets through patent protection technologies, as well as through other similar means; (22)
We can generate more revenue from cloud services; (23)
Risks associated with our licensing arrangements; (24)
Our revenue and operating performance may fluctuate unexpectedly every quarter; (25)
Some of our major shareholders, including the Alliance of directors and executives, have sufficient voice to make corporate governance decisions that may have a significant impact on US and other shareholders; (26)
The sale of our large number of common shares may have a restraining effect on the market price of the outstanding shares of our common shares; (27)
May issue ordinary shares subject to options and warrants that may dilute the interests of shareholders; (28)
We do not have a plan to pay dividends, nor do we have plans to pay dividends in the future; (29)
Selling a large number of shares of our common stock in the future may reduce the transaction price of our common stock, reduce our value and make it more difficult for us to raise funds; (30)
Additional Securities available to us for issuance, if issued, may adversely affect the rights of our holders of common stock; (31)
Due to a number of factors, including relatively limited public fluctuations, our stock prices may fluctuate highly; (32)
Whether the lawsuit against Axon and WatchGuard will achieve their expected goals and bring us an economic recovery; (33)
Whether the USPTO award will limit, eliminate or otherwise affect the conduct of Axon and WatchGuard against us, our products and our customers; (34)