3SOF

Thank Goodness David Sold WCG a long time ago!! Its halted due to being raided by govt. officals and they say the stock may open at less than $40.  I never owned it, I just remembered the symbol being on the main at one point and just saw the news on T.V.  I hope no one here owns it.

TRCR had great earnings....I missed it though I got to stingy early this morning with my limit order and it never hit at 16.60

AXYS looks really good too.

Quote from: mbaugh on October 25, 2007, 10:21:18 AM
Thank Goodness David Sold WCG a long time ago!! Its halted due to being raided by govt. officals and they say the stock may open at less than $40.  I never owned it, I just remembered the symbol being on the main at one point and just saw the news on T.V.  I hope no one here owns it.

Yes, WCG, which seemed to be a rock solid $4 B plus market cap company in the health care sector, down 60% today, due to a police investigation into the company's headquarters.

Quote from: BigSully1 on October 25, 2007, 09:47:45 AM
I have many stocks in the sector. AXYS hit a record high, but showing some resistance at the $34.00 area (2000) high.

Hi BigSully1, tell me something if you may: How many stocks do you normally have, or how many stocks do you think it is appropriate to have at any given time?

I know the value of diversification, but I also know it is much harder to decouple from the general market return if one holds, say, 100 different stocks. I also once read a study showing 15 different holdings is the ideal number for an individual investor portfolio so I stick with that rule.

What are your thoughts on this issue, when you have some time?

Thanks

Ramsburg told me we can have as many different holdings as we wish, we just need to decrease the weight of the current holdings to buy more. But I'm still not sure, and have received a couple of messages saying 15 is enough, so I would like to take some more opinions on this diversification/money management issue.

David,

  I like the diversification, but you're right - too many stocks weigh the return down. Also, you become more resilient to change because one day one stock counterweighs the other. I have 2 friends, both of whom invested into only 1-3 stocks.

1) MTL - Russian steel and mining company. As you can guess, the friend is Russian. He bought in February at $25, this year. I asked you to look at the stock and you had a positive opinion of it, but we did not go further. It is at $83 now and the friend has added to the position all the way to $50. So, his annual return so far beats mine (which is about 3SOF) by a lot. And he only has 2 more holdings, hence not much to annalyze.

2) A couple of years ago, another friend invested in GSG - gold company, which does not exist now. He anticipated gold prices go up and hence held the stock for more than a year. Made 150%. He put 50% money there. That year, I made about 2% with a lot more headache of following many investments.

  My opinion, the investment must be balanced. You got too many - you work hard, but return is so-so. You got few, the risk is much higher. I suggest you stick with 15, but also introduce a "favorability" factor = "projected rate of return" / "risk factor 1 to10". This way, investors with small portfolios, like myself, can choose which stocks to pick from the set.

  If you go with more picks, you'll have more work to do and we'll have a harder time to follow and choose. Frankly, stocks with good potential, like CIMT have also higher risk. Compare it with PCU, a copper miner, and you got a clear winner in terms of a selection, i.e. PCU. CIMT may naver materialize, companies like MTL make huge profits today and are growing.

Thanks,
berloga

WOW BigSully1!
AXYS blew your resistance at $34! lol

Tech. it looked ready to roll. Sorry I did not check it closer. A jewel right before my eyes.

Wide diversification is only required when investors do not understand what they are doing.
Warren Buffett

You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.
Warren Buffett
                                Some good advice fromm someone who should knows.

Hey here's more.      "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."
Warren Buffett quote

Similar Quotes. 
Add to Chapter...       
 

      "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
Warren Buffett quote

Similar Quotes. 
Add to Chapter...       
 

      "Time is the friend of the wonderful company, the enemy of the mediocre."
Warren Buffett

David, I guess I am probably in the minority. The reason I proposed to increase the holding# is based on my risk tolerance level. I think a portfolio with only 15 stocks is too volatile.

In hinder sight, everyone can say that as long as the portfolio grows nicely, volatility is a necessary evil. But as you can recall, several times when the portfolio dropped 3-4% in one day, people began to scream. On two occasions this year you yourself began to doubt the health of this bull market, was it 100% really based on reasonable thinking? Did high volatility never get into the way of your "firm hand"? What I am trying to say is that we are all humans, high volatility will break people's nerve at some point and cause irrational decisions.

Well, I respect your decision and if you stick with 15 stocks I am ok too.

Quote from: David Randolph on October 25, 2007, 11:51:50 AM
Ramsburg told me we can have as many different holdings as we wish, we just need to decrease the weight of the current holdings to buy more. But I'm still not sure, and have received a couple of messages saying 15 is enough, so I would like to take some more opinions on this diversification/money management issue.

"the greater the risk, the greater the reward"

If you want more reward...such as the 30%/yr...volatility just may be something we'll have to stomach. Of course, we could just use the short-term as a 10-15 position holdings while leaving the main with 15+. But I see this as decreasing the 30%/yr potential of the main's portfolio. Looks like David's achieving the 30%/yr goal so why change what's working?

Some of us I know already have to pick and choose the 10 due to lack of funds to diversify.

However...the more positions David invests...the more some of us can choose from.

If you want to maintain that 30%/yr goal...i'd say stick to what you're doing now. At the same time, it would be nice to have more positions to choose from. I guess it's give and take depending on David's goals...30%/yr or more opportunities for us to choose from...

Quote from: David Randolph on October 25, 2007, 11:51:50 AM

Quote from: BigSully1 on October 25, 2007, 09:47:45 AM
I have many stocks in the sector. AXYS hit a record high, but showing some resistance at the $34.00 area (2000) high.

Hi BigSully1, tell me something if you may: How many stocks do you normally have, or how many stocks do you think it is appropriate to have at any given time?

I know the value of diversification, but I also know it is much harder to decouple from the general market return if one holds, say, 100 different stocks. I also once read a study showing 15 different holdings is the ideal number for an individual investor portfolio so I stick with that rule.

What are your thoughts on this issue, when you have some time?

Thanks

Ramsburg told me we can have as many different holdings as we wish, we just need to decrease the weight of the current holdings to buy more. But I'm still not sure, and have received a couple of messages saying 15 is enough, so I would like to take some more opinions on this diversification/money management issue.

The number of holdings I keep, most people would find inappropriate, unmanageable, maybe even ridiculous. I probably gain about 25 or so net holdings, meant for LT, on average per year.

I try to keep around 30% of total portfolio in what I consider as intermediate and active and mostly liquid account, consisting of new purchases and ST holdings, and sometimes shorts, hedges, PM's, or cash. Of this 35%, I never commit more than 8% and as little as 1/4% of the 30% to any one holding. While in this intermediate state, I decide how much, if any, will go into LT, eventually, even if only a thousand or few hundred shares.

My LT portfolio doesn't get near as much  monitoring, in fact many of them are only only evaluated and possibly adjusted quarterly or semi-annually.

David, everyones situation is different, especially on taxes and size,  but theres no way I  could classify a portfolio of only 15 mostly ultra tiny companies as a LT and diversified portfolio,  15 might be very ample for a very actively managed, monitored and traded account, which is part of a bigger account, though.

Obviously you are very actively monitoring and managing, but my feeling is that you will still have much more than 90% annual turnover without ever intending to do so. I think you would be better off building (eventually) between 40 to 50, most with maybe a liitle larger market cap, stop monitoring and commenting daily on each holding,  only on significant developments or ER's and instead concentrate on finding ever new and better prospects, leaving daily comments on noise to other posters, if you really intend to have a longer term portfolio. Maybe develop a watch or want list of solid prospects that can be alerted to when circumstances present.

For those using only a non-taxable account or are otherwise unconcerned about taxes, I say do what ever you can to maximaze your gains, hopefully eventually circumstances will become such that you will end up more tax conscious and LT oriented.

I'm happier than a pig in poop, if I can gain on average  28-30% annually AND the majority of those gains remain unrealized and tax-deferred, or tax reduced. I think Buffet once said something like "The best investments are those that you never sell."

So I guess it all comes down to what you really want (and what your subscribers really want).  As of now, I still see your portfolio as a trading portfolio that is very actively monitored and managed, but not so actively traded.

David,

I know I dont post often but for what its worth I like the idea of having a watch list of stocks but I would be thrilled if you kept your porfolio to a limit of 15 stocks with the intention of holding them long term

Thanks

Jim

P.S.   I am thrilled with the job you have done this year and on a side note I enjoy both your work with this porfolio and your life and investment views.  I feel like I am definitely a part of a great site and that is largely due to my view that you are not only talented at this process but also because I believe you to be a genuinely good person.   Keep up the great work

QuoteDavid, I guess I am probably in the minority. The reason I proposed to increase the holding# is based on my risk tolerance level. I think a portfolio with only 15 stocks is too volatile.

In hinder sight, everyone can say that as long as the portfolio grows nicely, volatility is a necessary evil. But as you can recall, several times when the portfolio dropped 3-4% in one day, people began to scream. On two occasions this year you yourself began to doubt the health of this bull market, was it 100% really based on reasonable thinking? Did high volatility never get into the way of your "firm hand"? What I am trying to say is that we are all humans, high volatility will break people's nerve at some point and cause irrational decisions.

Hi realcoolhead, I think the volatility comes more from holding stocks with a high beta than from a lack of appropriate diversification. I don't think volatility would be reduced if I were to hold 20 different holdings, instead of 15, if the additional 5 holdings were also young and growing small caps. Only if I held more mature companies, or much larger companies, would volatility be reduced. But that would also lower the long term return of the portfolio.

QuoteWell, I respect your decision and if you stick with 15 stocks I am ok too.

Thanks, it is still an open debate

Quote from: kpunarc on October 25, 2007, 07:46:38 PM
"the greater the risk, the greater the reward"

If you want more reward...such as the 30%/yr...volatility just may be something we'll have to stomach. Of course, we could just use the short-term as a 10-15 position holdings while leaving the main with 15+. But I see this as decreasing the 30%/yr potential of the main's portfolio. Looks like David's achieving the 30%/yr goal so why change what's working?

Some of us I know already have to pick and choose the 10 due to lack of funds to diversify.

However...the more positions David invests...the more some of us can choose from.

If you want to maintain that 30%/yr goal...i'd say stick to what you're doing now. At the same time, it would be nice to have more positions to choose from. I guess it's give and take depending on David's goals...30%/yr or more opportunities for us to choose from...

30% average annual return is the long term goal of the Main Portfolio. The idea is for 3 SOF's subscribers to invest in the Main Portfolio like they would do in a mutual fund, buying the 15 stocks, not picking between them. But I get your point ... most newsletter services have a recommended list of 100 or more stocks, and then it is the subscribers' job to pick the right ones to own. We wanted to go further and pick the stocks ourselves, so that everybody could follow the strategy, even if he doesn't know anything about the stock market or doesn't have any time to study stocks.

QuoteThe number of holdings I keep, most people would find inappropriate, unmanageable, maybe even ridiculous. I probably gain about 25 or so net holdings, meant for LT, on average per year.

I try to keep around 30% of total portfolio in what I consider as intermediate and active and mostly liquid account, consisting of new purchases and ST holdings, and sometimes shorts, hedges, PM's, or cash. Of this 35%, I never commit more than 8% and as little as 1/4% of the 30% to any one holding. While in this intermediate state, I decide how much, if any, will go into LT, eventually, even if only a thousand or few hundred shares.

My LT portfolio doesn't get near as much  monitoring, in fact many of them are only only evaluated and possibly adjusted quarterly or semi-annually.

I see you're very flexible BigSully1. I wonder how do you keep discipline, having so many different strategies and time frames. Do you know, before buying, if it is a trade or a long term investment? And don't you ever get confused, say, sell a long term investment because "it got over-extended", and hold a "trade" for the long term because "this stock broke down, but it has long term value, so I'll hold it?"

You see, I also used to have this, let me call it, "I want it all" attitude, but over time and with this job's help I saw that I had too much confusion in my head, I couldn't be coherent in my strategy and analytical method if I couldn't choose to be a trader or an investor. I decided to be an investor, because the tools investors use make so much more sense, they're based in the real economic world, and if a company grows revenues and profits per share, the stock will necessarily rise. The trader's tools, namely technical analysis, in my view, don't work over the long term, at least not in individual stocks, which move more in tandem with the intrinsic company's fundamentals. I think technical analysis works better when analyzing currencies, interest rates or even the general market, where "fundamentals" are much more controversial.  Technical analysis is more "macro", fundamental analysis is more "micro". Since, when studying stocks we're essentially looking at one company and its own merits and problems, I think fundamental analysis is much more appropriate. And fundamental analysis is a long term tool, because many times the market takes time to react to fundamental developments, and it also takes time to make the necessary move to accurately reflect a change in fundamentals.

QuoteObviously you are very actively monitoring and managing, but my feeling is that you will still have much more than 90% annual turnover without ever intending to do so. I think you would be better off building (eventually) between 40 to 50, most with maybe a liitle larger market cap, stop monitoring and commenting daily on each holding,  only on significant developments or ER's and instead concentrate on finding ever new and better prospects, leaving daily comments on noise to other posters, if you really intend to have a longer term portfolio. Maybe develop a watch or want list of solid prospects that can be alerted to when circumstances present.

Well, I wouldn't own 40-50 stocks because I don't think such diversification is needed. I want the best of the best stocks, and not just "this is a good stock, so I'll buy it". On the daily writing suggestion, I can't do that, you see, over the last 36 hours there wasn't even one single post in this message board. If I didn't write daily, there would be very little to read and people would get bored. Also I believe the daily updates make people more comfortable owning the stocks recommended, they know that whatever happens to their stock, I'll write something.

QuoteFor those using only a non-taxable account or are otherwise unconcerned about taxes, I say do what ever you can to maximaze your gains, hopefully eventually circumstances will become such that you will end up more tax conscious and LT oriented.

I'm happier than a pig in poop, if I can gain on average  28-30% annually AND the majority of those gains remain unrealized and tax-deferred, or tax reduced. I think Buffet once said something like "The best investments are those that you never sell."

So I guess it all comes down to what you really want (and what your subscribers really want).  As of now, I still see your portfolio as a trading portfolio that is very actively monitored and managed, but not so actively traded.

Yes, taxes are painful, especially if one is a US citizen.

I consider the Main Portfolio a long term investment and the biggest mistakes I made this year, especially over the past 6 months or so, was selling stocks. I'm very confident now that when I pick a stock and own it for more than a couple of weeks, it really means the stock is very attractive and it will probably double over the next 12 months. Of course, sometimes I'm wrong or it takes longer than 12 months, but in the majority of cases, I believe I'm right. Or better, now I know, much better than I did one year ago, how to pick stocks for the long term, because I've learned how to use the right tools to do this. But I still have a lot to learn and I'm excited about what lies ahead.

QuoteAs of now, I still see your portfolio as a trading portfolio that is very actively monitored and managed, but not so actively traded.

Why a "trading portfolio" instead of an "investment portfolio"? Because companies are small?

Yukiii used to write similar comments and I disagreed with him. All big companies were small one day. I don't get the point of, instead of catching them early in the growth process, waiting for companies to be in the middle or so of their run, and then invest in them.

If I buy a company for $50 M and it gets to $5 B, I get 100 bags of profit. If instead I disregard small companies, and wait for this one to get to $500 M before investing in it, when it gets to $5 B market cap I've earned just 10 bags. And, if there were already clues a micro cap could someday be a $5 B market cap, why should I wait? I can always sell if the company gets out of line ...

Anyway, I see the attractiveness of an investment relative to the value given by its fundamentals and I believe there are a lot more pricing inefficiencies in the small cap world than in the larger caps market.

Quote from: jdmark23 on October 26, 2007, 01:49:45 PM
David,

I know I dont post often but for what its worth I like the idea of having a watch list of stocks but I would be thrilled if you kept your porfolio to a limit of 15 stocks with the intention of holding them long term

Thanks

Jim

P.S.   I am thrilled with the job you have done this year and on a side note I enjoy both your work with this porfolio and your life and investment views.  I feel like I am definitely a part of a great site and that is largely due to my view that you are not only talented at this process but also because I believe you to be a genuinely good person.   Keep up the great work

It is almost midnight here, my wife and kids are asleep ... I'll also go to bed now and will sleep better because of your kind words. Thanks Jim

I agree, it is the beta not the number of stocks that decides volatility. But more stocks give you a chance to diversify more in different sectors and stocks in different sectors may not behave in lockstep. Therefore even if all stocks in the portfolio have high beta, if some of them have low correlation or even negative correlation, the volatility will be reduced.

Quote from: David Randolph on November 03, 2007, 07:44:45 PM

Hi realcoolhead, I think the volatility comes more from holding stocks with a high beta than from a lack of appropriate diversification. I don't think volatility would be reduced if I were to hold 20 different holdings, instead of 15, if the additional 5 holdings were also young and growing small caps. Only if I held more mature companies, or much larger companies, would volatility be reduced. But that would also lower the long term return of the portfolio.

Bought this OTCBB today. Haven't researched it all thoroughly yet and will need to do so before making anymore substantial investment, but it's in a sector I  like and I really appreciated the ER that just came out on it yesterday. So I'm just going to make it real quick. Chart looks real nice too, I think.

DGLY.ob    Digital Ally Inc.


BUSINESS SUMMARY   
Digital Ally, Inc. engages in the design, development, manufacture, marketing, and sale of video surveillance products for law enforcement, homeland security, and commercial security applications. It primarily focuses on development of digital video imaging and storage products. The company's products include digital in-car video system and digital video flashlight. These products allow self-contained video and audio recording onto flash memory cards that are incorporated in the body of the flashlight. It also enables original equipment manufacturers in designing and manufacturing digital video subsystems to customer specifications. The company was founded in 2003 and is headquartered in Leawood, Kansas.

http://stockcharts.com/h-sc/ui?s=DGLY&p=D&yr=0&mn=5&dy=0&id=p66600901484

Here's the ER;

Digital Ally, Inc. Reports Record Third Quarter Sales and Earnings
Wednesday November 7, 8:30 am ET 
Basic E.P.S. of $0.06 in Third Quarter and $0.10 in Nine Months, Exclusive of Income Tax Benefits, Compared With Losses in Prior-Year Periods


OVERLAND PARK, Kan., Nov. 7 /PRNewswire-FirstCall/ -- Digital Ally, Inc. (OTC Bulletin Board: DGLY - News), which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial security applications, today announced record revenue and net income for the third quarter and first nine months of 2007. An investor conference call is scheduled for 11:00 a.m. EST today, November 7, 2007 (see details below).
ADVERTISEMENT


For the three months ended September 30, 2007, revenue increased 255% to approximately $5.1 million, when compared with revenue of approximately $1.4 million in the third quarter of 2006. Revenue in the most recent quarter increased 34% when compared with approximately $3.8 million in the second quarter of 2007 and continued a trend of impressive sequential growth in quarterly sales that began when Digital Ally commenced shipping its advanced digital surveillance products in March 2006.

Gross profits totaled $3,557,032 in the third quarter of 2007, and gross profit margin reached a record 69.7% of revenue. The Company reported net income of $2,973,562 in the quarter ended September 30, 2007, versus a net loss of ($1,240,663) in the third quarter of the previous year. Basic earnings per share of $0.21 in the quarter ended September 30, 2007, compared with a net loss of ($0.10) per share in the prior-year period. Diluted earnings per share totaled $0.18 in the quarter ended September 30, 2007, versus a net loss of ($0.10) per share in the third quarter of 2006. Net income for the three months ended September 30, 2007 included a $2,153,143 income tax benefit. This benefit resulted from the Company's reduction of its deferred tax valuation allowance due to the utilization of its net operating loss carryforward in the quarter and anticipated future usage of the carryforward because of its expected profitability, among other items. Excluding this income tax benefit, the Company would have reported record net income of $820,419, or $0.06 per basic and $0.05 per diluted share, for the quarter ended September 30, 2007.

The Company incurred non-cash stock compensation expense of $385,756 for the quarter ended September 30, 2007, compared with $744,832 in the prior-year quarter.

"I am very pleased to report that the sales and earnings momentum evident during the first half of 2007 was maintained, and in fact accelerated, during the third quarter, as our domestic and international orders from law enforcement agencies continued to expand," stated Stanton E. Ross, Chief Executive Officer of the Company. "Highlights of the third quarter included the development of several new features that enhance the functionality and utility of our DVM-500 Digital In-Car Video System Integrated into a Rearview Mirror. In July, we announced the availability of a wireless software file transfer feature that allows law enforcement officers to easily and inexpensively download video files from the DVM-500 to police headquarters or other remote locations. Shortly after the end of the third quarter, we introduced at the 114th Annual Association of Chiefs of Police (IACP) Conference in New Orleans our Live Streaming Video solution, which will allow the DVM-500 to transmit live video of field activities to headquarters and multiple other locations, while at the same time recording the video. At the IACP Conference, we also introduced our new VideoManager Server, which enhances the ability of authorized headquarters personnel to view, upload, playback, search and manage DVM-500 video files from any networked computer with proper access rights."

"While ramping up production at our Kansas City facilities has proven to be quite a challenge during this period of rapid sales growth, I am pleased with the progress we have made in this regard," continued Ross. "We shipped approximately 1,250 DVM-500 units, along with a modest number of Digital Video Flashlights (DVF), in the most recent quarter, which exceeded our expectations of just a few months earlier."

For the nine months ended September 30, 2007, the Company's revenue totaled approximately $12.4 million, compared with revenue of approximately $2.3 million in the first nine months of 2006. Gross profits totaled $8,271,618 in the first nine months of 2007, for a gross profit margin of 66.9% of revenue, compared with gross profits of $1,276,718 (56.2% of revenue) for the nine months ended September 30, 2006.

The Company reported net income of $3,539,584 for the nine months ended September 30, 2007, versus a net loss of ($3,196,034) in the corresponding period of the previous year. Basic earnings per share of $0.26 in the first nine months of 2007 compared with a net loss of ($0.25) per share in the year-earlier period. Diluted earnings per share totaled $0.23 in the nine months ended September 30, 2007, versus a net loss of ($0.25) per share in the first nine months of 2006. Net income for the nine months ended September 30, 2007 included a $2,153,143 income tax benefit. This benefit resulted from the Company's reduction of its deferred tax valuation allowance due to the utilization of its net operating loss carryforward in the period and anticipated future usage of the carryforward because of its expected profitability, among other items. Excluding this income tax benefit, the Company would have reported record net income of $1,386,441, or $0.10 per basic and $0.09 per diluted share, for the nine months ended September 30, 2007.

The Company incurred non-cash stock compensation expense of $1,294,278 for the nine months ended September 30, 2007, compared with $1,578,336 in the corresponding period of the previous year.

"From a balance sheet perspective, our financial condition continued to strengthen during the first nine months of 2007," observed Ross. "As of September 30, 2007, we had no debt outstanding and our shareholders' equity totaled approximately $7.5 million. By comparison, at the end of 2006, the Company had $1 million in outstanding debt and shareholders' equity of approximately $1.9 million."

The Company will host an investor conference call at 11:00 a.m. Eastern Time today, November 7, 2007, to discuss its third quarter and nine-month operating results and the outlook for the balance of 2007. Shareholders and other interested parties may participate in the conference call by dialing 866-406-5369 (international/local participants dial 973-582-2847) and referencing the ID code 9407945 a few minutes before 11:00 a.m. EST on November 7, 2007. A replay of the conference call will be available two hours after completion of the conference call from November 7, 2007 until November 14, 2007 by dialing 877-519-4471 (international/local participants dial 973-341-3080) and entering the conference ID 9407945.

About Digital Ally, Inc.

Digital Ally, Inc. develops, manufactures and markets advanced technology products for law enforcement, homeland security and commercial security applications. The Company's primary focus is the field of Digital Video Imaging and Storage. For additional information, visit http://www.digitalallyinc.com

The Company is headquartered in Overland Park, Kansas, and its shares are traded on the OTC Bulletin Board under the symbol "DGLY."

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are based largely on the expectations or forecasts 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 the control of management. Therefore, actual results could differ materially from the forward-looking statements contained in this press release. A wide variety of factors that may cause actual results to differ from the forward-looking statements include, but are not limited to, the following: the Company's ability to raise sufficient capital to continue to implement its business plan; its ability to have all of its product offerings perform as planned or advertised; whether there will be a commercial market, domestically and internationally, for one or more of its products; its ability to commercialize its products and production processes, including increasing its production capabilities to meet orders; its ability to continue increasing revenue and profits; whether the Company will be able to adapt its technology to new and different uses, including being able to introduce new products; competition from larger, more established companies with far greater economic and human resources; its ability to attract and retain customers and quality employees; its ability to obtain patent protection on any of its products and, if obtained, to defend such intellectual property rights; the effect of changing economic conditions; and changes in government regulations, tax rates and similar matters. These cautionary statements should not be construed as exhaustive or as any admission as to the adequacy of the Company's disclosures. The Company cannot always predict or determine after the fact what factors would cause actual results to differ materially from those indicated by the forward-looking statements or other statements. The reader should consider statements that include the words "believes," "expects," "anticipates," "intends," "estimates," "plans," "projects," or other expressions that are predictions of or indicate future events or trends, to be uncertain and forward-looking. The Company does not undertake to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.



                 For Additional Information, Please Contact:

                    Stanton E. Ross, CEO at (913) 814-7774
                                      or
RJ Falkner & Company, Inc., Investor Relations Counsel at (800) 377-9893 or

                       via email at [email protected]


                        (Financial Highlights Follow)



                              DIGITAL ALLY, INC.
                           CONDENSED BALANCE SHEETS
                   SEPTEMBER 30, 2007 AND DECEMBER 31, 2006

                                                  (Unaudited)      (Audited)
                                                  September 30,   December 31,
                                                      2007           2006

    Assets
    Current assets
      Cash                                          $199,295        $57,160
      Accounts receivable-trade                    2,804,758        977,826
      Accounts receivable-other                      168,491        225,716
      Inventories                                  2,230,995      1,526,222
      Prepaid expenses                               497,431        422,279
      Deferred taxes                               2,153,143             --
          Total current assets                     8,054,113      3,209,203
    Equipment                                        982,914        622,592
    Less accumulated depreciation                    240,256        114,851
                                                     742,658        507,741
    Other Assets                                     133,645         59,305
      Total Assets                                $8,930,416     $3,776,249
    Liabilities and Stockholders' Equity
    Current liabilities
      Note payable                                       $--       $500,000
      Line of credit                                      --        500,000
      Accounts payable                               901,044        651,902
      Accrued expenses                               495,582        180,573
      Customer deposits                               16,479         20,899
          Total current liabilities                1,413,105      1,853,374
    Unearned Income                                   13,322          5,248
    Commitments
    Stockholders' equity
      Common stock, $0.001 par value;
       75,000,000 shares authorized;
       Shares issued and outstanding:
       13,996,527 - 2007; 13,309,027 - 2006           13,997         13,309
      Additional paid in capital                  11,482,856      9,436,766
      Accumulated Deficit                         (3,992,864)    (7,532,448)
          Total Stockholders' Equity               7,503,989      1,917,627
        Total Liabilities and
         Stockholders' Equity                     $8,930,416     $3,776,249



                              DIGITAL ALLY, INC.
                      CONDENSED STATEMENTS OF OPERATIONS
                     FOR THE THREE MONTHS AND NINE MONTHS
                      ENDED SEPTEMBER 30, 2007 AND 2006

                               (Unaudited)                 (Unaudited)
                           Three Months Ended           Nine Months Ended
                       September 30, September 30, September 30, September 30,
                           2007          2006          2007          2006

    Revenue             $5,100,525    $1,434,573   $12,359,594    $2,272,017
    Cost of sales        1,543,493       610,854     4,087,976       995,299
      Gross profit       3,557,032       823,719     8,271,618     1,276,718
    Operating expenses   2,742,469     2,057,868     6,873,104     4,464,794
      Operating income
       (loss)              814,563    (1,234,149)    1,398,514    (3,188,076)
    Financial income
     (expense)
      Interest income        6,445         2,308        15,630        18,220
      Interest expense        (589)       (8,822)      (27,703)      (26,178)
                             5,856        (6,514)      (12,073)       (7,958)
      Income (Loss) before
       provision for income
       taxes (benefits)    820,419    (1,240,663)    1,386,441    (3,196,034)
    Income tax provision
     (benefits)         (2,153,143)           --    (2,153,143)           --
    Net income (loss)   $2,973,562   $(1,240,663)   $3,539,584   $(3,196,034)

    Net income (loss) per
     share information:
      Basic                  $0.21        $(0.10)        $0.26        $(0.25)
      Diluted                $0.18        $(0.10)        $0.23        $(0.25)

    Weighted average
     shares outstanding:
      Basic             13,963,820    12,669,805    13,637,108    12,669,805
      Diluted           16,087,850    12,669,805    15,141,322    12,669,805



                              DIGITAL ALLY, INC.
                      CONDENSED STATEMENT OF CASH FLOWS

                                                        (Unaudited)
                                                     Nine Months Ended
                                                 September 30, September 30,
                                                      2007          2006

    Cash Flows From Operating Activities
      Net income (loss)                           $3,539,584    $(3,196,034)
      Adjustments to reconcile net income
       (loss) to net cash flows (used in)
       operating activities
        Depreciation                                 125,405         52,804
        Stock option expense                       1,294,278      1,578,336
        Shares of common stock issued
         in lieu of cash compensation                 87,500        215,000
        Reserve for inventory obsolescence           185,394             --
        Reserve for bad debt allowance                27,646             --
        Deferred tax (benefits)                   (2,153,143)            --

      Change in assets and liabilities
      (Increase) decrease in
        Accounts receivable - trade               (1,854,578)      (817,336)
        Accounts receivable - other                   57,225       (127,931)
        Inventories                                 (890,167)      (662,553)
        Prepaid expenses                             (75,152)      (333,788)
        Other assets                                 (63,503)       (39,942)
      Increase (decrease) in
        Accounts payable                             249,142        323,151
        Accrued expenses                             315,009         67,999
        Customer deposits                             (4,420)          (576)
        Other liabilities                              8,074          6,362
      Net cash provided by (used in)
       operating activities                          848,294     (2,934,508)
    Cash Flows from Investing Activities
      Purchases of equipment                        (360,322)      (287,826)
      (Increase) in other assets - deposits          (10,837)            --
      Net cash (used in) investing activities       (371,159)      (287,826)
    Cash Flows from Financing Activities
      Principal payments on line of credit          (500,000)            --
      Proceeds from exercise of
       stock options and warrants                    165,000         50,000
      Proceeds from sale of common stock                  --      1,601,468
      Net cash provided by (used in)
       financing activities                         (335,000)     1,651,468
    Increase (decrease) in cash                      142,135     (1,570,866)
    Cash, beginning of period                         57,160      1,807,922
    Cash, end of period                             $199,295       $237,056
    Supplemental disclosures of
     cash flow information
      Cash payments for interest                     $27,703        $26,178
    Supplemental disclosures of non-cash
     investing and financing activities
    Common stock issued for settlements
     of note payable                                $500,000            $--


NOTE: FOR MORE DETAILED INFORMATION REFER TO THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 2007 FILED WITH THE SEC.


http://biz.yahoo.com/e/071107/dgly.ob10qsb.html