Digital Ally Continues to Expand Beyond Law Enforcement

Digital Ally (NASDAQ: DGLY), which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial applications, signed a multiyear partnership with NASCAR in February this year.

As part of the deal, DGLY installed its camera technology in the Monster Energy NASCAR Cup Series garage this season.

“NASCAR takes seriously its role in providing a safe environment for its fans and competitors, and this partnership with Digital Ally is the next step in that commitment,” said Scott Miller, NASCAR Senior Vice President, Competition.

According to DGLY management, it expects “some very big things, revenue-wise, in the future from the partnership.”

On its Q1 earnings call, DGLY’s CFO, Thomas Heckman, noted that the potential deals that the company expects from this relationship will be with companies “that everybody knows, everybody sees, or everyday names in everybody's life in the US.”

Rideshare Operator Signed Deal with DGLY in May

Kansas City-based zTrip, a provider of taxi and rideshare services in 18 US cities, upgraded its first 450 vehicles with DGLY’s FleetVu Manager cloud-based system, in a deal announced in mid-May.

FleetVu enables commercial operators to easily monitor their fleet of vehicles and driver performance.

The cloud-based service add powerful real-time options for zTrip and other commercial customers, including asset tracking and mapping, as well as customizable real-time alerts, such as collisions, geo fences and speeding.

Users can store and manage video, remotely update firmware and wireless configurations, while using features such as mapping, reporting and creating driver score cards.

A mobile application mobile allows drivers to perform pre- and post-inspections of their vehicle, and instantly sends alerts via SMS or email to fleet managers if there is a breakdown, maintenance request, or any issue with that vehicle. As a result, the system may be instrumental in reducing accident, fraud, and litigation risks.

While the initial order under the deal covered 450 vehicles, zTrip currently manages a fleet of 5,000 vehicles across the US and has plans to expand to 30 US and 16 international cities by the end of 2018.

Commenting on the relationship, zTrip CEO Bill George stated, “Digital Ally has been a good partner, and we're looking forward to a significant expansion of our long-term relationship. Our passengers and drivers can be assured that their safety is our number one priority and with the adoption of the FleetVu cloud-based manager we are taking substantial steps to demonstrate the same.”

Strong Foundation in Law Enforcement

Over the past 10 years, DGLY has shipped 93,500 units of its products worldwide, and more than 8,000 (out of 18,500 total) law enforcement agencies in the US are now using DGLY products.

While up against some large players in this market, DGLY has a distinct competitive advantage with its patented auto-activation technology for body cameras.

For a variety of reasons, police body cams have seen widespread adoption across the US and other major markets. Yet one of the biggest flaws in actual use is that most body cams need to be activated by the user. This has led to a long string of cases where body cams were worn, but not turned on when needed.

The industry heavyweight, Axon Enterprises (NASDAQ: AAXN), formerly known as Taser International, debuted its “Signal Unit” product in 2016 to address this problem.

The Axon Signal Unit is an automatic recording product designed to be installed in a police cruiser. It can turn on an officer’s body camera in many circumstances, such as when the cruiser’s light bar is engaged, when its crash sensors are activated, when it reaches a certain speed, when its front and rear doors are opened, or when nearby dashboard cameras or body cameras are switched on.

While this is a great step forward for transparency and accountability, and AAXN continues to see growing demand for the technology, trouble is on the horizon for the market leader.

Through a string of recent court victories, DGLY has basically proven its the rightful developer and owner of the innovative automatic recording technology.

DGLY’s lawsuit, filed in the United States District Court of Kansas, accuses AAXN of willfully infringing DGLY’s U.S. Patent No. 9,253,452 (the “’452 Patent”).

As of early June 2018, AAXN had exhausted its final appeal in its effort to “prove” DGLY’s patent was “invalid.”

It’s expected this will now lead to either a settlement or court awarded judgment. In either case, it could mean hundreds of millions of dollars for DGLY. As DGLY alleges AAXN’s infringement has been willful, any damages awarded by a jury could be tripled. Plus, the company is likely to get what could be a large share of future sales of the infringing products.

At this point it’s mostly a matter of when, not if.

Growing Interest from Wall Street

Several equities research analysts recently issued reports on DGLY shares. 

ValuEngine upgraded Digital Ally from a "sell" rating to a "hold" rating in a research note in early May. 

Zacks Investment Research upgraded Digital Ally from a "sell" rating to a "hold" in February.

LA-based Westpark Capital gives the stock a $6 price target, and Maxim Group set a $4.00 price objective on the stock with its most recent “hold” rating issued in April.

Bottom line consensus? Investors that own the stock at recent prices could see triple-digit gains ahead.

With any growth, domestically or internationally, from law enforcement or commercial accounts, the price could go even higher.

Add in the potential positive price shocks from a windfall gain from its patent litigation, DGLY could be one of your biggest winners in 2018.

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Digital Ally, Inc. (DGLY) is a client of RedChip Companies, Inc. DGLY agreed to pay RedChip Companies, Inc., a monthly cash fee for four (4) months of RedChip investor awareness services.

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