Material Agreement Form 8 K

Item 1.01 Entry Into a Material Definitive Agreement.

Securities Purchase Agreement

On November 6, 2024, Digital Ally, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with certain institutional investors (the "Purchasers"), pursuant to which the Company has agreed to issue and sell to such Purchasers, in a private placement transaction, (i) senior secured promissory notes in aggregate principal amount of $3,600,000 (the "Notes"), and (ii) 808,377 shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), for aggregate gross proceeds of approximately $3.0 million, before deducting placement agent fees and other offering expenses payable by the Company (such transaction, the "Private Placement"). The Private Placement closed on November 7, 2024 (the "Closing Date").

Pursuant to the Securities Purchase Agreement, the Company is required to use approximately $2,015,623 of the net proceeds from the Private Placement to pay, in full, all liabilities, obligations and indebtedness owing by the Company and its subsidiary, Kustom Entertainment, Inc. (the "Borrowers"), to Mosh Man, LLC (the "Lender"), in respect of that certain promissory note and note purchase agreement and related documents by and among the Borrowers and the Lender (collectively, the "Mosh Man Note").

The Company's full repayment of the outstanding obligations under the Mosh Man Note will effectively terminate the public sale process of the collateral securing the Borrowers' obligations thereunder, which sale process was disclosed by the Company in a Current Report on Form 8-K filed by the Company on October 28, 2024 and again November 4, 2024.

The Company anticipates that the remaining net proceeds from the Private Placement after repayment of the Mosh Man Note, and after deducting placement agent fees and other offering expenses, will meet the Company's capital needs for approximately three months, subsequent to which the Company anticipates that it will need to raise additional funds to implement its business plan and to service its ongoing operations. The Company also anticipates pursuing the sale of its video solutions business in the short term.

Pursuant to the Securities Purchase Agreement, the Company shall file within 30 days of the Closing Date a registration statement with the U.S. Securities and Exchange Commission ("SEC") for a public offering, and use its reasonable best efforts to pursue and consummate a financing transaction within 90 days of the Closing Date. The proceeds of the public offering shall be used as set forth in the registration statement, including the repayment of the principal amounts of the Notes. The Company shall also file within 30 days of the Closing Date a registration statement on Form S-1 (or other appropriate form if the Company is not then S-1 eligible) providing for the resale by the Purchasers of the Shares issued under the Securities Purchase Agreement. The Company shall use commercially reasonable efforts to cause such registration statement to become effective within 60 days following the filing thereof and to keep such registration statement effective at all times until no Purchaser owns any Shares.

Furthermore, pursuant to the Securities Purchase Agreement, within five (5) days of the signing the Securities Purchase Agreement, (i) the Company's board of directors shall approve an amendment to the Company's bylaws setting the quorum required for a special meeting of stockholders to one-third of all stockholders entitled to vote at such special meeting and (ii) the Company shall file with the SEC a preliminary proxy statement on Schedule 14A announcing a meeting of stockholders for the purpose of approving the Series A and Series B warrants issued by the Company on June 25, 2024.

Senior Secured Promissory Notes

The Notes will mature ninety (90) days following their issuance date (the "Maturity Date"), and shall accrue no interest unless and until an Event of Default (as defined in the Notes) has occurred, in which case interest shall accrue at a rate of 14% per annum during the pendency of such Event of Default. In addition, upon customary Events of Default, the Purchasers may require the Company to redeem all or any portion of the Notes in cash with 125% redemption premium. The Purchasers may also require the Company to redeem all or any portion of the Notes in cash upon a Change of Control, as defined in the Notes, at the prices set forth therein. Upon a Bankruptcy Event of Default (as defined in the Notes), the Company shall immediately pay to the Purchasers an amount in cash representing 100% of all outstanding principal, accrued and unpaid interest, if any, in addition to any and all other amounts due under the Notes, without the requirement for any notice or demand or other action by the Purchaser or any other person.

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