This conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words believe, expect, anticipate, intend, estimate, may, should, could, will, plan, future, continue and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecast of future events, can be affected by inaccurate assumptions and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. Digital Ally will undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. Good day, and thank you for standing by. Welcome to the 2021 Fourth Quarter and Year-End Operating Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your speaker today, Mr. Stan Ross. Please go ahead. Stanton E. Ross: Thank you. Thanks, everybody, for joining us today. With me is Tom Heckman, the company's CFO. Tom will do an in-depth review of our numbers for both the year-end and fourth quarter. But first of all, I'd like to just sit there and sort of reflect back on what we've been able to accomplish in 2021. I mean, as you all know, in 2020, it was a tough year for a lot of people. We ended up with revenues right around $10.5 million. And then to sit there and have -- make the transition that we did with the capital that came in early in 2021, the acquisitions that we were capable of doing throughout the year and end up completing a pretty strong 2021 with revenues now at $21.4 million. So more than a double that was able to be retained. And not only that, we've given guidance that we believe in 2022, we will do in excess of $50 million in revenue. So just excited about what our employees and the company has accomplished over the last, let's call it, 18 months and really excited about what 2022 and the future has for us. So I'll let Tom go ahead and get into the numbers, and then we'll do a little Q&A afterwards. Tom?

Thanks, Stan, and welcome, everyone. I appreciate you joining us today. I do want to tell you that we did get the 10-K filed last Friday, a little later than normal but within the extension period. And I think as we go through the 10-K and certainly the highlights, you'll understand the complexity and the changes that happened during the year that made the 10-K a little more complex and the complexion pretty detailed. So in any event, as Stan mentioned, we went into 2021 having suffered through 2020 and all the COVID uncertainties and that. And the Board and Stan and I got together, and we decided that we needed to make some changes, transform the business to where it's not as dependent upon the law enforcement -- the video segment, and in particular, the law enforcement channel because it has proven to be difficult to measure and break into certain areas of it and that. So we wanted to expand beyond the traditional law enforcement and video segment and into some newer areas that we felt we had some level of expertise and understanding. But in order to accomplish that, first and foremost, we had to raise the capital necessary to do that. And early in 2021, I think it was both in January, maybe early February, the capital markets were very favorable for raising money, especially for us, given our plan to expand into new business lines. So we were able to raise a substantial amount of money in January, $66.6 million in 2 registered direct offerings, roughly about $3 a share each in those offerings. So first and foremost, we raised a capital necessary to expand our platform and expand our business to achieve the strategy that we had undertaken for 2021. The second piece was, well, we had to do some acquisitions and change the business to where it was not dependent on the law enforcement area. The first thing we did was we formed Digital Ally Healthcare. We are a majority owner, 51%, with another group that has vast experience in medical billing industry and had a fairly good business going -- a private business but had a good business going, but they needed the capital to expand their roll-up strategy. That fit what we were looking for. And so we invested in Digital Ally Healthcare. We have a preferred return there as well as 51% ownership of the joint venture. And it has undertaken a roll-up strategy in the medical billing industry. The medical billing industry, as we've described before, is very fragmented, and there's a lot of so-called mom and pops that are trying to transition or retire or get out of the business for whatever reason. So we -- this group that we included in Digital Ally Healthcare had developed kind of a template that they've gone around and used to acquire businesses. The basic tenet of that is pay roughly 1x annual revenues and 3x annual EBITDA. And that template has proven to be very effective and appealing to acquisition targets. So during 2021, we completed 2 acquisitions in the medical billing space, total of $4.3 million paid for those 2 acquisitions, and then we'll go over the results of that a little later here. The second acquisition that we did or the area of acquisition was a company called TicketSmarter.com. It is a primary and brokered online ticketing service similar to -- I think everybody is -- probably use Ticketmaster or Vivid Tickets or SeatGeek. It's very similar to that. But they do have a little bit of a business winkle in how they approach the market and do sponsorships and so on and so forth. As you might expect, 2020 was a very difficult year for TicketSmarter. Up until that point, they were a very solid business, a private company, very solid business, growing year in, year out, doing very good numbers, so to speak. But 2020 hit with COVID, most -- all the events were canceled, gatherings were restricted, if not banned. 2020 was a very devastating year for TicketSmarter as a private company. So Stan and I met with the principals in the business whom Stan has known for quite some time, and we were able to negotiate a fairly lucrative acquisition, actually, for both sides. We provided the capital necessary to get back on the feet and get moving again to TicketSmarter and then we've got attractive purchase price. So we acquired TicketSmarter stock and cash of $9.4 million on September 1, 2021. So roughly 4 months left in the year. There was also an earnout -- a potential earnout of $4.3 million. It was a short-term earnout to be determined on annual EBITDA for 2021. And if you remember, the Omicron variant hit during that time period, November, December of 2021, many of the states went back into lockdowns and gatherings were restricted, masks were enforced and all that. So the fourth quarter of 2021 is -- let me back up. The fourth quarter is normally the largest quarter for ticketing business. It's the holidays, it's a bull season, it's football and what have you. So the earnout was heavily weighted towards that last quarter of revenues. And lo and behold the Omicron variant hit, it impacted the revenues and bottom line dramatically and to the point where the earnout was not owned, it was written off to 0. So we, in fact, bought TicketSmarter for a total of $9.2 million in cash and stock. None of the earnout was earned because of the variant that hit during that time. Unfortunate for the sellers, fortunate for us, obviously. So we paid a total of $9.4 million. But if you look at what TicketSmarter did for us on a combined or a consolidated basis from the time of acquisition to 12/31, it generated $10.7 million in revenue. It had a net operating income of $235,000 and EBITDA of $662,000. So if you annualize those and understand I'm not saying that, that's how you do it, but if you annualize those 2 figures, we paid $9.4 million for an annualized revenue of roughly $40 million, very good metrics there. The annualized EBITDA would be a little over 3x annualized EBITDA for what was actually earned. And remember, it was negatively impacted by COVID. So Stan and I think the Board are very happy with that acquisition. We have a good strong management team in place there. They're -- they've got great plans and operating strategies for 2022 and beyond. Hopefully, we don't have a recurrence of the COVID variant or anything like that, that impacts our business dramatically in 2022 and beyond. But we're very happy with that business acquisition. If you look at the total operating results, and we have segment information in the 10-K for everyone that wants to look at it. But our net revenues more than doubled year-over-year. But looking at it, the ticketing segment, the TicketSmarter segment generated 50% of our revenues on an annual basis, even though it was only part of the consolidated group for 4 months in 2021, but it contributed 50% of revenues. The revenue cycle management or the medical billing segment generated 8% of the revenues. And I think the acquisitions were in the first and second quarter of 2021. And then the video solutions which is our legacy business, both commercial and law video plus the Shield products line, generated 42% of consolidated revenue. So we've transformed the business significantly from a revenue standpoint. Now let's look at gross margin by segment. The video solutions segment generated gross margins of 22%. That was a little decrease because of some write-downs we took in some excess inventory and such. We believe that will bounce back in 2022 and beyond to some more -- some larger gross margins. But it was 22% in 2021. The revenue cycle management gross margins were 32%, and the ticketing segment, our TicketSmarter was 29% gross margin. So we've spread our risk. We've got -- we've been able to expand the business into some different areas that hopefully stabilize our business and give us some predictable growth and revenues in the future. If you look at SG&A expense, it increased $8.7 million or 74% year-over-year. Much of that is -- well, a lot of it is attributable to the acquisitions and the SG&A that's attended to those acquisitions. But also, there was some onetime or nonrecurring SG&A costs because of the requirement to write off all the due diligence, legal, accounting, SEC reporting, all those costs for acquisitions or expense, rather, capitalized part of the acquisition. So there was some onetime costs in there. One of the big drivers though in SG&A is the insurance expenses that we've experienced. I think a lot of companies have experienced increases in general liability, D&O and related areas because of the COVID concerns and that and everything that's going on there, but it really, really hit us hard in 2021. We're looking at ways to minimize and manage that expense, including potentially using a captive insurance company and that. So we're managing that part of the business, that cost because it has gone up tremendously and does impact our overall earnings. If you look at nonoperating income, we reported a total of $40.3 million of nonoperating income in 2021 versus $5 million in 2020. Looking at what caused that, there's $36.6 million of income from the change in fair market value of the detachable warrants. That is derivative accounting treatment that the SEC requires us to follow. And basically, if a warrant can be cash settled rather than settled in stock outside of our control, then they require you to book it as a liability and the changes go through the P&L. That's what happened there, $36.6 million. It is likely a nonrecurring charge, although we do still have those warrant derivatives on the books. The second piece of it is $3.7 million, which is a change in fair market value of the earnout agreements. We previously talked about the earnout that was zeroed out with TicketSmarter. That was the largest piece of that. But also the medical billing acquisitions, there is an earnout agreement piece to that as well, roughly 20%, 25% of the purchase price's medical billing practices are attributable to earnout agreements. And there was some smaller changes in fair market value there, but the largest one was the change in the TicketSmarter earnout agreement. Just remember that these are nonrecurring -- likely nonrecurring. So next year, that number could be the opposite way by $30 million or so. It's just very unpredictable and nonrecurring. Other items of interest in 2021. In December, the Board authorized the repurchase of up to $10 million of common stock on the market in open transactions. If you remember, we raised capital earlier in the year, roughly $3 per share. We looked at the decline in market price, and the Board reacted and instituted this repurchase plan. As of 12/31/2021, we have repurchased a total of 2.1 million shares of our common stock at an average price of $1.07, roughly $1.07. So just remember, we are not committed to this plan on an ongoing basis, and it can be stopped at any time. So that was one big item in 2021. We have done -- since the end of the year, we've done 3 more medical billing acquisitions totaling $7.2 million. Two of those are already closed, the 2 smaller ones. The larger one should close on/or around May 31. So we're remaining very active in the medical billing acquisition side. Obviously, our acquisition template is working and very attractive to the targets out there. I would also add that one of the acquisitions was that of a dental billing company rather than a medical billing company, which is a different avenue for our subsidiary. And we believe it's a growing piece of the business. The dental billing practice seems to be growing at a pretty good clip, and we're pleased with that acquisition. We're continue -- Stan may or may not have some information for you, but we continue to look at other business acquisitions and other lines, and we're looking for accretive acquisitions, obviously, that fit with the rest of the companies and our long-term strategy of building shareholder value here. Just a quick look at the balance sheet. Our balance sheet remains very strong. At the end of the year, we had $32 million in cash, $33 million in positive working capital and $56 million in stockholders' equity. So we still have a very strong balance sheet in order to continue our transformation of the company. With that, I will turn it back to Stan. Stanton E. Ross: Thanks, Tom. Yes. Again, that's very great and thorough, I guess, recap of where we've been and where we're headed in regards to 2022. A couple of things I will add before we go to the -- open it up for Q&A is just a little bit on -- let's talk about the legacy business, our video solutions side of things. We're excited about 2022 because of the launch of a couple of new products. We've got our next-generation body camera that we announced and has been very well received. We're seeing probably some of the best responses in the body camera side of our business that we've seen in years. It is really a next generation. We feel very, very confident that it has all the features that law enforcement is now looking for to keep both sides safe. And so it's been very well received, and the orders are starting to show that along with the subscription agreement that we're allowed to offer our agencies in regards to a 3-, 4-, 5-year plan. So that's worked out on the financial side really well. We also have a new device for the commercial market that's an in-car system that has a lot of features. And with some of our partnerships that we have been able to establish over the last year or 18 months, we're seeing a lot of traction there as well. So I think you're going to see the legacy business continue to thrive. It's going to definitely continue to grow, and we're going to see some things that are pretty exciting come out of that based upon what we've developed over the last couple of years and now is into the marketplace. Tom touched on the medical billing side of things. And again, that template just is working, no need to sit there and try to get too crazy around it. Let it keep acting the way it is and functioning the way it is and looking for opportunities there. So real excited about that. And then TicketSmarter, a little excited about the strategy here. We've been able to go from, let's call it, being a secondary ticket agency to where we've been able to utilize contacts, capital and move into more of a primary ticketing agency as well. And where we're doing this is we are actually getting the exclusive naming rights and ticketing rights to stadiums, whether it be stadiums or ballparks or amphitheaters to where all the acts that would be going through there would be ticketed by TicketSmarter. And not only that, if TicketSmarter should so choose, they actually could assist in bringing acts to those particular venues, which would again help their -- increase their overall, I want to say, top line and bottom line because they would have a lot more control over that. So real excited about the companies that we have within Digital Ally right now and also very encouraged by the opportunities that we have in front of us, especially with the capital positions that we have and access to the capital. So at this time, let's go ahead and open it up for Q&A, please.

[Operator Instructions] We do have a question from Ben Piggott from E.F. Hutton.

This is [ Mike ] on for Ben. Congrats on a good strong finish to the year there. I know the integration was probably a lot of work and a bit of a headache. So congrats on getting everything out. Just a couple of questions. First one, just wanted to -- Stan kind of touched on it at the end here, but I just kind of wanted to talk about the partnerships a little bit more. I mean you announced some really interesting and exciting partnerships, iHeartRadio, Sinclair Broadcast Group and then the future [ Legends Group ]. Maybe just tell us a little bit more detail about what the plan is here, what your expectations are from these? Stanton E. Ross: Yes. So I'm glad you brought that up. I mean the partnerships that we've been able to do on the TicketSmarter side of things with iHeart and Sinclair has really, really allowed a lot more traffic to come to TicketSmarter's platform. We're actually out there and there'll be an article that may be about a concert -- upcoming concert or a sporting event. And then right to the side of that or even in the body of that article, there will be a TicketSmarter icon that they could see there and hit, and it will take them straight to TicketSmarter's platform so that they can buy tickets from TicketSmarter right there? And you got to realize, they've got collectively -- I'm going to say between the 3 big ones with the Sinclair, USA TODAY, iHeart, they probably have north of 500 million annual visitors to their sites. So just their entertainment and sports site. So by half of these partnerships and us -- TicketSmarter being right there alongside of them, it has dramatically increased the amount of eyes on TicketSmarter and the visitors that we're having to that platform. When we acquired TicketSmarter and Tom may have to help me here, but I'm not too sure they had less than 1 million organic visitors coming on a monthly basis. And I think we're well in excess 4 million, maybe 5 million visitors today. And that's continuing to grow. As you know, these partnerships were just recently announced. So they're starting to pay some really good dividends.

Yes, really nice guys. It seems like that will be a significant tailwind for this business. And I guess just as kind of a follow-up, more so kind of on the balance sheet. You have a pretty fortified balance sheet, as Tom kind of discussed, a lot of cash, little debt. You have these 3 different business segments. You recently announced the share repurchase. Just maybe tell me a little bit about how you're thinking about the balance sheet, kind of what your priorities are for allocating capital as we move on to 2022, 2023 because there's obviously a few different avenues you can go here. Stanton E. Ross: Yes. I mean right now, we're going to probably continue not to get too outside of our -- over our skis right now. We are very comfortable with the 3 -- let's call it, the core businesses that we have, and we want them to mature a little bit more and keep developing. But that being said, if we do find opportunities that fall within the template, we'd be able to clearly allocate capital for those acquisitions and growth. I think we're at a point right now that we need to let a little time pass in regards to allowing TicketSmarter to mature. And again, as Tom mentioned, fourth quarter is most likely the strongest quarter for ticketing and first quarter is probably one of the weaker. But as we go into late spring, summer, fall, I mean that things start to happen, all the big festivals that are going on, you got all sorts of baseball. There's just a lot going on. So we'll probably continue to do what we can to help and mature the core businesses. But we are looking at a couple of offshoots that may make a little sense to bring into the fold. And Tom, do you care to elaborate on?

Yes. I would just echo the fact that we're looking for businesses that can integrate well and we can show some synergies with the businesses we have. We're -- I don't think we're really going to go out there and do some way out of our trajectory. We want to stay in our lane, what we do well and what -- and potentially businesses that can be additive and accretive to the other businesses that we have. The TicketSmarter platform is very, very intriguing. There's a lot of offshoots to that. There's a lot of events out there. There's -- gosh, it's got Broadway ticketing and it's got baseball, football, the sports and such. So there's certainly a lot of ancillary businesses around TicketSmarter that might make sense to us. But again, we don't have anything out there in terms of any firm commitments at this time.

That's really it for me for now. Again, congratulations on a strong finish to the year here, looking forward to kind of lots and things unfold over the next year. Stanton E. Ross: One of the things I'll just add to that last little comment from Tom is you've got to sit there and look at this. I mean, again, we just knocked out $21.4 million for 2021, and we're not backing off of our guidance of $50 million for 2022. And we believe that, that number is obtainable with just the core businesses we have. So we're excited about what this really could grow into over the next -- definitely this year and beyond. So thanks again for your questions, [ Mike ].

[Operator Instructions] Next one on the queue is Bryan Lubitz from Aegis Capital.

Congrats on the quarter. All right. So guys, numbers across the board, I mean, they just look great. A couple of things that I looked at. Obviously, your employees, you've increased to 146. Do you guys anticipate that you're going to be doing more hiring in the future? Stanton E. Ross: I think so. I mean, again, as we continue to develop these core businesses, I clearly can see us needing to be out there trying to find talent. And we brought on a few additional key personnel, I would say, over the last 90 days that I'm really excited about in regards to the -- I guess they're somewhat upper management and the bigger picture because it's just something that -- this thing is going from like $10 million to $50 million in 2 years. It's a lot to get your arms around. And -- but we don't want to stop there. So we got some very talented people that we brought on board over the last 90 days that I believe are going to help us for many years going forward.

Yes. Bryan, I would add that if you look at the 3 segments that we're in, the video solutions segment, probably, we'll be hiring because I think we're going to see a rebound in revenues. We've got the subscription plans out there and we got the new products, the body-worn cameras that I think will help both law and commercial. And so that will lead to more hiring. The revenue cycle management segment, though, is kind of interesting. We use all contract help overseas. So if you look down in the dungeons here, we probably got 400 or 500 people overseas that are doing these medical billings, but they don't show up. We don't have the liability of that. We just pay them a contract rate. So that revenue cycle management business can grow exponentially and not really add a lot of new people because it's just management level integration people at the subsidiary level. The ticketing segment is interesting. They did $10.7 million in revenue in 4 months' time in 2021. They've got roughly 15, 16 employees that are doing that kind of revenue. So it's a very, very high leverage business in terms of that because it is online, obviously, and mostly technology. But that ticketing side can go up significantly and not really add that many head count, and we'll be particular about the head count that we do add at TicketSmarter. So...

Okay. So what I'm getting at, and obviously, that's high leverage, so it's good because the site hits compared to when you guys took over have gone up dramatically. One of the things that I noticed recently as you guys have been rolling out the new website is that, finally, pretty much we've given the cameras away, at least to the police officers, with their credit, cameras on their desk and they're paying $41 a month with the subscription program. Are we looking to get that word out via marketing? Or how are we going to get that out there? Because obviously, you guys have a Twitter feed and you have Kansas lockdowns for a lack of a better term. But how are we going to get you guys to really monetize that you are doing something like that and get the word, I guess, in terms of marketing out to the rest of the street because, again, I know it's long-winded, but you guys are going from year-over-year numbers of $10 million to $21 million. You're going quarter-over-quarter more than double. You're going with assets up to $83 million at the end of 2021. And at the end of 2020, your assets were $20 million, yet the stock was $4. And today, we're a 1/4 of it. So none of it makes sense if you're looking at numbers-wise. The only thing I can fathom up is that not enough people know about you. Stanton E. Ross: Bryan, we agree. I mean, obviously, that's one of the reasons we jumped in and started doing the buyback. We just felt like the Street is not comprehending really what's going on there. I will tell you that we just recently did bring on an outside investor relations firm. And we wanted to wait and make sure before we brought them on that we had our year-end numbers out there, we had -- basically, the story more defined so that it can be talked about and the word can be spread and people still are not confused. I mean we've made that transition. And so I think you'll see a much more aggressive PR campaign not only us talking about our products with now having the next-generation body camera out there in our commercial division out there but also on the stock side of things with our Investor Relations. As you know, we do work for NASCAR, and we have an association with Indy. And a lot of these events will allow me to go maybe a day early and meet with brokers in different firms and tell the story. So you're going to see a lot more of me being able to spend time towards, let's say, the stock side of things because of the personnel that we brought in that now have a pretty good understanding of the vision that we're -- the direction we're heading that they can take the reins there and allow me to get back in and come out to New York and see you and your shop and others and start telling the story because we agree with you. That's why we went out and bought all that stock back.

Okay. Speaking of the buyback. Tom, you mentioned earlier, 2.1 million shares was bought back. As of what date was that bought back? Was that as of December 31? Because I thought I saw 1.7 million.

No, it was -- at December 31, it was 2.163 million shares which is back into the plan.

And in the last quarter, do you guys think you knocked down more of that? Stanton E. Ross: I'm sure we did. We don't know what that number is or haven't reported that number yet.

Yes. We did have a subsequent event in the financials. So other than that, we haven't reported on the amount of buybacks for the quarter. Stanton E. Ross: And we're good 15% -- we're about 1/3 of the way through as far as needing to report our first quarter. So -- and I anticipate we'll be on time there and be able to report and give that number out when we do our first quarter call.

You guys are retiring those shares? Stanton E. Ross: Yes.

Yes.

Okay. All right. And then the last thing for me. So obviously, again, numbers look great on a year-over-year up over 100%, your PE multiple at 2x earnings. I mean average company S&P is 25%, I think, NASDAQ may be even higher, and you guys are at 2x earnings. A lot of that, I'm assuming, is coming from the major revenue coming from the tickets. Obviously, you guys have -- you've gone out there with the hospitality part of it, with the hospital billing part. And then you have the other segments with the Shields, et cetera. Are you guys going to look to rebrand in the future as a part of your marketing program? Stanton E. Ross: I mean, Bryan, that's something that's definitely been talked about. I think when the time is right, it would make sense to do that. You almost have to because we are going to see a tremendous amount of the revenue side coming from our nontraditional business. So there's a good chance that, that transition or rebranding will need to occur.

And there are no further questions on the queue. I'll now turn the call over back to the presenters. Stanton E. Ross: Again, thanks, everybody, for attending. Thanks for the questions. Really excited about 2022. The fact that the company has really been able to reinvent itself, I would say, in some fashions but excited what we have in front of us. And as Tom mentioned, the 10-K is on file. And if you do have any further questions, feel free to give us a call here at the office. Thanks, everybody.

This concludes today's conference call. Thank you for participating. You may now disconnect.