Digital Ally Inc. (NASDAQ: DGLY) has proven yet again to be a wild small-cap (make that micro-cap) stock that has garnered massive attention of the low-priced stock traders. It actually appears to have more share trading volume than it has in its total shares outstanding. This is a classic case of a stock being news-flow driven, and this instance is being prompted in part by the riots and protests in Ferguson, Mo.

Digital Ally makes advanced video surveillance products for law enforcement, homeland security and commercial applications. The company issued a press release on Wednesday signaling that inquiries regarding the company’s FirstVU HD Body Camera have increased dramatically during the past week — in response to civil unrest in Ferguson. The company went on to say:

Some state governments are considering legislation that would require all law enforcement vehicles and officers to be equipped with some sort of audio/video recording capabilities.

24/7 Wall St. would make a public service reminder that increased inquiries does not automatically mean there were increased sales. Still, guessing where this one goes in a day, week or month is not the point here. We took a look at Digital Ally’s past to see what we could take away for today, tomorrow, next week, next month or even next year. Unfortunately, this company is so small and has one of those volatile histories that the story could go either way.

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If you go back in the past, Digital Ally had an eight-for-one reverse stock split in August of 2012, when the share prices rose as high as $11.93. According to the company, it enacted this split to stay above the minimum closing bid price for Nasdaq. This increase did not last long as shares fell back to the $3 to $4 range.

Shares rose to a high of $17.47 in September of 2013. However, the price fell back to the $9 range by late October. Digital Ally shares then slid from the $8 to $9 range, starting in late March, with shares sliding to less than $4 by June. But then came news in July that a patent was approved, sending shares to above $9, before sliding back down all the way to under $4, before the news flow sent shares much higher this week.

And now in the past two days, we have shares rising on Tuesday to $7.08 on almost 2.8 million shares, followed by the stock closing Wednesday at $5.79 on 8.76 million shares. It seems safe to say that Digital Ally’s rise of more than 30% to $7.60 in midday trading on over 5.1 million shares (as of 1:10 p.m.) on Thursday is more than a bit puzzling.

The company released its earnings in August, showing revenues of $3.4 million, which represents a decline of 32% from the previous year. Despite these numbers, the stock took a large uptick to $8.83 in light of the Ferguson protests.

And if you look back at the most recent financial comparison, the company said:

When the FirstVU HD and VuLink are combined with the Company’s flagship DVM-800 In-Car Video System, which was introduced to the market in December 2013 and accounted for 36% of Digital Ally’s revenue in the second quarter of 2014, the Company believes it offers the most cost-effective audio/video evidence collection system available in the marketplace today.

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In the company’s recent earnings announcement from August 14, the company even said:

Our operating results for the second quarter of 2014 were penalized by a continuation of the difficult budgetary environment that continues to impact law enforcement agencies throughout the U.S., along with transition from our legacy in-car video systems to our new flagship DVM-800 product, which has been enthusiastically received by customers.

We would point out that Digital Ally is not just a small cap stock. It is a micro-cap one by all definitions, with what Yahoo! Finance represents as a market cap of $17.5 million and what Google Finance lists at $17.2 million. Google shows only 2.3 million shares are outstanding here.

24/7 Wall St. would offer a serious warning here. Literally one bit of news can send a stock this small into the stratosphere. At the same time, one bit of negative news can send it to the garbage pile.

There are effectively no analysts covering the company. Its sales in 2013 were $17.8 million, up only about $200,000 from 2013 and lower than in 2011. Maybe the new systems will bring in more revenues ahead, and maybe this stock is the next law enforcement or homeland security gold mine. We still cannot help but to remind readers that an instance of “increased inquiries” does not automatically mean increased sales immediately.

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