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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.
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 |
|
|
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