Item 1.01.
Entry into a Material Definitive Agreement.
On
September 26, 2018, Digital Ally, Inc. (“Digital Ally” or the “Company”) entered into an underwriting
agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC, as the representative of the underwriters
(the “Representative”) and sole book-running manager, pursuant to which the Company agreed to sell to the Underwriters
(as defined below) in a firm commitment underwritten public offering (the “Offering”) an aggregate of 2,400,000 shares
(the “Firm Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”)
at a public price of $3.05 per share. The Company granted the Underwriters (as defined below) a forty-five (45)-day option to
purchase up to an additional 360,000 shares (the “Option Shares”; and together with the Firm Shares, the “Shares”)
of Common Stock to cover over-allotments, if any. Aegis Capital Corp. (“Aegis”; and together with the Representative,
the “Underwriters”) is a co-manager for the Offering.
The
net proceeds to the Company from the Offering are expected to be approximately $6.75 million before the over-allotment option,
after deducting underwriting discounts and commissions and estimated expenses payable by the Company. The transactions contemplated
by the Underwriting Agreement are expected to close on September 28, 2018, subject to customary closing conditions.
The
Offering was registered and the Shares will be 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 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 preliminary prospectus supplement dated September 25, 2018 (the “Prospectus Supplement”).
The legal opinion and consent of Robinson Brog Leinwand Greene Genovese & Gluck P.C. addressing the validity of the Common
Stock 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 will receive discounts and commissions of seven percent (7%) of the gross cash proceeds received by the Company from
the sale of the Shares in the Offering, and up to $50,000 for its out of pocket expenses, which includes fees of counsel to the
Underwriters, subject to compliance with FINRA Rule 5110(f)(2)(D). After deducting the Underwriters’ discounts and commissions
and our estimated offering expenses, we expect the net proceeds from the Offering to be approximately $
6.75
million. The Company
intends to use the net proceeds for working capital and general
caproate purposes.
Under
the Underwriting Agreement the Company agreed not to contract to issue or announce the issuance or proposed issuance of any Common
Stock or Common Stock equivalents for sixty (60) days following the closing of the Offering, subject to certain exclusions as
set forth therein. The Company’s executive officers and directors have entered into sixty (60)-day Lock-Up Agreements with
the Representative pursuant to which they have agreed not to sell, transfer, assign or otherwise dispose of the shares of the
Company’s common stock owned by them, subject to certain exclusions as set forth therein.
A
copy of the Underwriting Agreement is filed as Exhibit 1.1 to this Current Report on Form 8-K and is incorporated into this Item
1.01 by reference. A copy of the form of Lock-Up Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K and is
incorporated into this Item 1.01 by reference. The Underwriting Agreement has been included to provide investors and security
holders with information regarding its terms. It is not intended to provide any other factual information about the Company. The
representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of such agreement
and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed
upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection
with the execution of the Underwriting Agreement. The representations and warranties may have been made for the purposes of allocating
contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards
of materiality applicable to the contracting parties that differ from those applicable to investors. The foregoing description
of the terms of the Underwriting Agreement does not purport to be complete and is qualified in its entirety by reference to the
Underwriting Agreement. Investors should review that document as well as the Registration Statement and Prospectus Supplement
for a complete understanding of the terms and conditions associated with the Offering.
This
Current Report contains forward-looking statements that involve risk and uncertainties, such as statements related to the amount
of net proceeds expected from the Offering. The risks and uncertainties involved include various risks detailed in the Company’s
SEC filings from time to time.