Digital Ally, Inc. announced that it has entered into a securities purchase agreement with certain investors to issue senior secured convertible notes for aggregate gross proceeds of $2,700,000 on April 5, 2023. The principal amount of the notes is $3,000,000 issued at a 10% discount. No interest accrues under the notes.

The notes will be maturity on January 5, 2024. The warrants are exercisable for an aggregate 1,125,000 shares comprised of 375,000 warrants at an exercise price of $5.5 per share of the company’s common stock, 375,000 warrants at an exercise price of $6.5 per share of common stock, and 375,000 warrants at an exercise price of $7.5 per share of common stock. Subject to certain conditions, within 18 months from the effectiveness date and while the notes remain outstanding, the purchasers have the right to require the company to consummate a second closing of up to an additional $3,000,0000 of notes and warrants on the same terms and conditions as the first closing.

The notes are convertible into shares of common stock at the election of the purchasers at any time at a fixed conversion price of $5 per share of common stock. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of common stock, or securities convertible, exercisable or exchangeable for, common stock at a price below the then-applicable conversion price. Subject to certain conditions, including certain equity conditions, the company may redeem some or all the then outstanding principal amount of the note for cash in an amount equal to 110% of the outstanding principal amount of the notes.

The company is relying on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Act and by Rule 506 of Regulation D, and in reliance on similar exemptions under applicable state laws. The notes, the warrants and underlying shares of common stock contain restrictive legends preventing the sale, transfer, or other disposition of such securities, unless registered under the securities act, or pursuant to an exemption therefrom.