DGLY Digital Ally Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 18, 2024 (July 13, 2024)

 

 

DIGITAL ALLY, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

Nevada		001-33899		20-0064269
(State or other Jurisdiction		(Commission		(IRS Employer
of Incorporation)		File Number)		Identification No.)

 

14001 Marshall Drive, Lenexa, KS 66215

(Address of Principal Executive Offices) (Zip Code)

 

(913) 814-7774

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common stock, $0.001 par value		DGLY		The Nasdaq Capital Market LLC

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

As previously disclosed, on March 1, 2024, Digital Ally, Inc. (the “Company”) entered into a Note Purchase Agreement (the “Agreement”), by and between the Company, Kustom Entertainment, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Kustom Entertainment” and, together with the Company, the “Borrowers”), and Mosh Man, LLC, a New Jersey limited liability company (the “Purchaser”), pursuant to which the Borrowers issued to the Purchaser a Senior Secured Promissory Note (the “Note”) with a principal amount of $1,425,000.

 

On July 13, 2024, the Company entered into a Letter Agreement (the “Letter Agreement”), by and between the Company, Kustom Entertainment and the Purchaser, increasing automatically the principal amount of the Note from $1,425,000 to $1,725,000; provided, however, that if the Borrowers repay the Note in full on or before August 15, 2024, then the principal amount of the Note shall be reduced automatically by $100,000. Pursuant to the Letter Agreement, the Borrowers’ failure to adhere to Sections 3.2(d)(iii) (the “Section 3.2(d)(iii) Failure”) and Section 3.3(a) (the “Section 3.3(a) Failure”) of the Purchase Agreement shall not constitute Events of Default, as defined in the Purchase Agreement; provided, however, that if the Borrowers shall be in breach or default under the Letter Agreement or otherwise fail to satisfy their obligations thereunder, the Section 3.2(d)(iii) Failure and Section 3.3(a) Failure shall each automatically constitute an Event of Default under the Purchase Agreement. Pursuant to the Letter Agreement, the Company agreed to make a cash payment to the Purchaser in the amount of $150,000 on or before July 26, 2024. The Company also agreed to sell or enter into a firm commitment to sell the office building owned by the Company and located at 14001 Marshall Drive, Lenexa, Kansas 66215 (the “Company Office Building”) and pay to the Purchaser: (i) $325,000, if the Company sells or enters into a firm commitment to sell the Company Office Building on or before August 7, 2024; or (ii) $400,000, if the Company sells or enters into a firm commitment to sell the Company Office Building after August 7, 2024. Pursuant to the Letter Agreement, the Company’s failure to sell or enter into a firm commitment to sell the Company Office Building prior to September 1, 2024 shall constitute an Event of Default, as defined in the Purchase Agreement, under the Purchase Agreement. The Company shall pay to the Purchaser $100,000 per month until the Note is repaid in full, with the first such payment occurring on August 12, 2024, and each subsequent payment occurring on the 12th calendar day of each month thereafter. Pursuant to the Letter Agreement, the Purchaser shall be a party to any and every flow of funds when there is an extraordinary receipt of capital by the Company. The Company shall pay to the Purchaser a penalty payment of $200,000 within five Business Days, as defined in the Purchase Agreement, if the Company fails to make the Purchaser a party to any flow of funds in respect of an extraordinary receipt of capital by the Company.

 

Except as stated above, the Letter Agreement does not result in any other substantive changes to the Agreement.

 

A copy of the Letter Agreement is filed with this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference, and the foregoing description of the Letter Agreement is qualified in its entirety by reference thereto.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information included in Item 1.01 of this Form 8-K is hereby incorporated by reference into this Item 2.03.

 

Item 9.01 Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit No.		Description
10.1		Letter Agreement.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: July 18, 2024

 

	Digital Ally, Inc.
	By:	/s/ Stanton E. Ross
	Name:	Stanton E. Ross
	Title:	Chairman and Chief Executive Officer

 

 

 

Exhibit 10.1

 

July 13, 2024

 

Mosh Man, LLC

173 Spring Ridge Drive

Berkely Heights, NJ 07922

Attention: Benjamin Zucker

 

Re:	Modification of Note Purchase Agreement

 

Dear Sirs:

 

Reference is made to that certain (a) Note Purchase Agreement (as modified from time to time, the “Purchase Agreement”), dated as of March 1, 2024, between Digital Ally, Inc. (the “Company”), Kustom Entertainment, Inc. (“Kustom Entertainment” and, together with the Company, the “Borrowers”), and Mosh Man, LLC (the “Purchaser”), and (b) Senior Secured Promissory Note issued pursuant to the Purchase Agreement (the “Note”). Capitalized terms used but not defined herein shall have the meanings given to them in the Purchase Agreement.

 

This letter agreement (this “Letter Agreement”) confirms our recent discussions about, among other matters, the following modifications to the Purchase Agreement and Note.

 

	(1)	The Borrowers’ failure to prepay to the Purchaser, pursuant to Section 3.2(d)(iii) of the Purchase Agreement (the “Section 3.2(d) Failure”), an amount equal to 50% of the outstanding principal amount of the Note within five (5) Business Days of the Company’s receipt of approximately $2.9 million in proceeds from the sale of Capital Stock in a private placement transaction that closed on June 25, 2024 shall not constitute an Event of Default under the Purchase Agreement; provided, however, that if the Borrowers shall be in breach or default under this Letter Agreement or otherwise fail to satisfy their obligations hereunder, the Section 3.2(d) Failure shall automatically constitute an Event of Default under the Purchase Agreement.
	(2)	The Borrowers’ failure to make payment to the Purchaser on July 1, 2024, pursuant to Section 3.3(a) of the Purchase Agreement (the “Section 3.3(a) Failure”), shall not constitute an Event of Default under the Purchase Agreement; provided, however, that if the Borrowers shall be in breach or default under this Letter Agreement or otherwise fail to satisfy their obligations hereunder, the Section 3.3(a) Failure shall automatically constitute an Event of Default under the Purchase Agreement
	(3)	The Company shall make a cash payment to the Purchaser in the amount of $150,000.00 on or before July 26, 2024.

 

 

	(4)	The principal amount of the Note shall be $1,725,000.00; provided, however, that if the Borrowers repay the Note in full on or before August 15, 2024, then the principal amount of the Note shall be reduced by $100,000.00.
	(5)	The Company shall sell or enter into a firm commitment to sell the office building owned by the Company and located at 14001 Marshall Drive, Lenexa, Kansas 66215 (the “Company Office Building”) and pay to the Purchaser: (i) $325,000.00 if the Company sells or enters into a firm commitment to sell the Company Office Building on or before August 7, 2024; or (ii) $400,000.00 if the Company sells or enters into a firm commitment to sell the Company Office Building after August 7, 2024. The Company’s failure to sell or enter into a firm commitment to sell the Company Office Building prior to September 1, 2024 shall constitute an Event of Default under the Purchase Agreement.
	(6)	The Company shall pay to the Purchaser $100,000.00 per month until the Note is repaid in full, with the first such payment occurring on August 12, 2024 and each subsequent payment occurring on the 12th calendar day of each month thereafter.
	(7)	The Purchaser shall be a party to any and every flow of funds when there is an extraordinary receipt of capital by the Company, including the Country Stampede’s vendor remitting payment to the Company for its share of food, beverage and merchandise from the Country Stampede event and the proposed sale of the Company Office Building. For the avoidance of doubt, the Purchaser shall not be a party to any flow of funds in respect of receipt of ordinary revenue by the Company. The Company shall pay to the Purchaser a penalty payment of $200,000.00 within five (5) Business Days if the Company fails to make the Purchaser a party to any flow of funds in respect of an extraordinary receipt of capital by the Company.

 

The execution, delivery and effectiveness of this Letter Agreement shall not, except as expressly provided herein, waive, amend or modify any other provision of the Purchase Agreement or the Note.

 

Nothing stated herein is intended as, nor should it be deemed to constitute, a waiver or relinquishment of any of Purchaser’s rights or remedies, whether legal or equitable, all of which are hereby expressly reserved.

 

All communications and notices hereunder shall be given as provided in the Note Purchase Agreement. This Letter Agreement (a) shall be governed by and construed in accordance with the law of the State of Nevada, (b) is for the exclusive benefit of the parties hereto and beneficiaries of the Purchase Agreement and Note and, together with the other Purchase Agreement and the Note, constitutes the entire agreement of such parties, superseding all prior agreements among them, with respect to the subject matter hereof, (c) may be modified, waived or assigned only in writing and only to the extent such modification, waiver or assignment would be permitted under the Purchase Agreement and Note (and any attempt to assign this Letter Agreement without such writing shall be null and void), (d) is a negotiated document, entered into freely among the parties upon advice of their own counsel, and it should not be construed against any of its drafters and (e) shall survive the satisfaction or discharge of the amounts owing under the Purchase Agreement and the Note. The fact that any term or provision of this Letter Agreement is held invalid, illegal or unenforceable as to any person in any situation in any jurisdiction shall not affect the validity, enforceability or legality of the remaining terms or provisions hereof or the validity, enforceability or legality of such offending term or provision in any other situation or jurisdiction or as applied to any person.

 

Kindly confirm your agreement with the above by signing in the space indicated below and by PDFing a partially executed copy of this Letter Agreement to the undersigned, and which may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.

 

	Very truly yours,
	DIGITAL ALLY, INC.
	By:	/s/ Stanton E. Ross
	Name:	Stanton E. Ross
	Title:	Chief Executive Officer
	KUSTOM ENTERTAINMENT, INC.
	By:	/s/ Stanton E. Ross
	Name:	Stanton E. Ross
	Title:	Chief Executive Officer

 

AGREED AND ACCEPTED:
MOSH MAN, LLC
By:	/s/ Benjamin Zucker
Name:	Benjamin Zucker
Title:	Managing Member

 

 

v3.24.2

Cover	Jul. 18, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 18, 2024
Entity File Number	001-33899
Entity Registrant Name	DIGITAL ALLY, INC.
Entity Central Index Key	0001342958
Entity Tax Identification Number	20-0064269
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	14001 Marshall Drive
Entity Address, City or Town	Lenexa
Entity Address, State or Province	KS
Entity Address, Postal Zip Code	66215
City Area Code	(913)
Local Phone Number	814-7774
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, $0.001 par value
Trading Symbol	DGLY
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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