Item
1.01 Entry into a Material Definitive Agreement.
On
March 3, 2020, Digital Ally, Inc. (the “Company”) consummated an underwritten public offering (the “Offering”)
of 2,521,740 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 February 27, 2020 (the “Underwriting
Agreement”), between the Company and Aegis Capital Corp. (the “Underwriters”).
The
Firm Shares were sold at a public offering price of $1.15 per share. The Company has granted the Underwriters a 45-day option
to purchase up to an additional 378,261 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 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 (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 February 27, 2020 (the “Prospectus
Supplement”). The legal opinion and consent of Sullivan and Worcester LLP 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. In addition,
the Company has agreed to pay the Underwriters (a) a non-accountable expense reimbursement of 1% of the gross proceeds received
at the closing of the Offering (the “Non-Accountable Expense Reimbursement”) and (b) “road show” expenses,
diligence fees and the fees and expenses of the Underwriters’ legal counsel not to exceed $50,000.
Under
the Underwriting Agreement, pursuant to certain “lock-up” agreements (the “Lock-Up Agreements”) and subject
to certain exclusions as set forth therein, (a) the Company has agreed, subject to certain exceptions, not to, for a period of
45 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, and (b) the Company’s executive officers and directors, as of the pricing
date of the Offering, have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant
any option for the sale of or otherwise dispose of any securities of the Company without the prior written consent of the Underwriters,
for a period of 45 days from the date of the offering.
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 $2.9 million.
The net proceeds to the Company from the Offering, after deducting underwriting discounts
and commissions and the Non-Accountable Expense Reimbursement, 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 $2.67 million.
A
copy of the Underwriting Agreement is filed as Exhibit 1.1 to this Current Report on Form 8-K, and the description of the terms
of the Underwriting Agreement is qualified in its entirety by reference to such exhibit. A copy of the form of Lock-Up Agreement
is filed as Exhibit 10.1 to this Current Report on Form 8-K, and the description of the terms of the Lock-Up Agreement is qualified
in its entirety by reference to such exhibit.