For Immediate Release

OVERLAND PARK, Kansas (March 28, 2012)
– Digital Ally, Inc. (Nasdaq: DGLY), which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial applications, today announced its operating results for the fourth quarter and year ended December 31, 2011. An investor conference call is scheduled for 11:15 a.m. EDT today, March 28, 2012 (see details below).

For the twelve months ended December 31, 2011, the Company’s revenue declined 22% to approximately $19.6 million, compared with revenue of approximately $25.2 million in the previous year, reflecting lower domestic sales that were partially offset by higher international sales. The decline in 2011 revenue was due in part to challenging economic conditions in the United States, which have negatively impacted state, county and municipal government spending. The average order size decreased from approximately $5,600 in 2010 to $3,400 in 2011, reflecting a reduction in full fleet in-car video system deployments by budget-constrained law enforcement agencies and the fact that new products introduced in 2010 and 2011 (FirstVU, Laser Ally, Thermal Ally, DVM-250, DVM-100 and DVM-400) have lower average selling prices than the Company’s DVM-500 Plus and DVM-750 digital video mirror lines. Repair orders at lower average invoice amounts have also increased as the Company’s installed base continues to come off of warranty.

Gross profits declined 28% to $8,771,930 (44.8% of total revenue) in the year ended December 31, 2011, compared with $12,127,249 (48.1% of total revenue) in the previous year. The reduction in gross profit margins reflects the higher manufacturing overhead rates due to a decline in revenue, an upgrade in wireless transfer modules (WTMs) for many existing and new customers, and higher labor, overhead and material costs associated with the replacement of older printed circuit boards with newly revised circuit boards. Management successfully implemented a plan to reduce overall inventory balances, which decreased total inventory by $3.4 million, or 34%, during 2011. However, the reduction in production rates that was necessary to achieve this goal had a corresponding negative effect on overhead rates. While these factors negatively impacted gross margins, the Company believe that better supply sourcing, overhead cost reductions, a more favorable sales mix as newer and higher-margin products gain traction, and reductions in inventory levels should benefit gross profit margins when revenue levels improve.

Selling, General and Administrative (“SG&A”) expenses declined 22% to $12,396,731 (63.3% of revenue) in the year ended December 31, 2011, when compared with $15,921,062 (63.2% of revenue) in 2010. The overall decline in SG&A expenses reflects the success of the Company’s cost containment initiative that commenced in the first quarter of 2011 and which has reduced the Company’s quarterly SG&A expenses by approximately $1 million. This is consistent with the Company’s previously stated goal to reduce SG&A expenses by approximately $4 million on an annualized basis. Management is continuing its SG&A cost reduction and containment initiative during 2012.

The following information was filed by Digital Ally Inc (DGLY) on Wednesday, March 28, 2012 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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