Item
1.01 Entry into a Material Definitive Agreement.
On
June 4, 2020, Digital Ally, Inc. (the “Company”) consummated an underwritten public offering (the “Offering”)
of 3,090,909 shares (the “Firm Shares”) of common stock, par value $0.001 per share, of the Company (the “Common
Stock”). The Offering was conducted pursuant to an underwriting agreement, dated June 2, 2020 (the “Underwriting Agreement”),
between the Company and Aegis Capital Corp., as representative (the “Representative”) of the underwriters (the “Underwriters”).
The
Firm Shares were sold at a public offering price of $1.65 per share. The Company has granted the Underwriters a 45-day option
to purchase up to an additional 463,636 additional shares of Common Stock at the public offering price, less underwriting discounts
and commissions, to cover over-allotments, if any (the “Option Shares” and together with the Firm Shares, the “Shares”).
The
Offering was registered and the Shares were issued pursuant to the Company’s effective shelf registration statement on Form
S-3 (File No. 333-225227) (the “Registration Statement”), which was initially filed with the Securities and Exchange
Commission (the “SEC”) on May 25, 2018, and was declared effective on June 6, 2018, and the related base prospectus
included in the Registration Statement, as supplemented by the prospectus supplement dated June 2, 2020 (the “Prospectus
Supplement”). The legal opinion and consent of Sullivan and Worcester LLP addressing the validity of the Common Stock sold
in the Offering is filed as Exhibit 5.1 hereto and is incorporated into the Registration Statement.
The
Underwriting Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing,
indemnification obligations of the Company and the Underwriters, including for liabilities under the Securities Act of 1933, as
amended, other obligations of the parties and termination provisions.
The
Underwriters purchased the Firm Shares from the Company at a price of $1.5345 per share, representing a seven percent (7%) discount
from the public offering price. In addition,
the Company agreed to pay the Underwriters all expenses relating to the Offering, including “road show” expenses,
diligence fees and the fees and expenses of the Underwriters’ legal counsel not to exceed $30,000.
Under
the Underwriting Agreement, pursuant to a certain “lock-up” agreement and subject to certain exclusions as set forth
therein, the Company has agreed, without first obtaining the written consent of the Representative and subject to certain exceptions,
not to, for a period of 21 days from the date of the pricing of the Offering, (1) offer, sell or otherwise transfer or dispose
of, directly or indirectly, any shares of capital stock of the Company, or (2) file or caused to be filed any registration statement
with the SEC relating to the offering of any shares of the Company’s capital stock or any securities convertible into or
exercisable or exchangeable for shares of the Company’s capital stock. Notwithstanding the foregoing, in the event the closing
price of the Common Stock as reported on The Nasdaq Capital Market for three (3) consecutive trading days is at least 25% above
the public offering price of the Firm Shares, such lock-up period shall be terminated.
The
gross proceeds to the Company from the Offering, before deducting underwriting discounts and commissions and other estimated Offering
expenses, and assuming the Underwriters do not exercise their option to purchase the Option Shares, are approximately $5.1 million.
The net proceeds to the Company from the Offering, after deducting underwriting discounts
and commissions, but before deducting other expenses in connection with the Offering, and
assuming the Underwriters do not exercise their option to purchase the Option Shares, are
approximately $4.74 million.
The
foregoing description of the terms of the Underwriting Agreement does not purport to be complete and is subject to, and qualified
in its entirety by reference to the Underwriting Agreement, which is filed as Exhibit 1.1 to this Current Report on Form 8-K,
and is incorporated herein by reference.