Business Context and Reporting Period
This Form 8-K is filed by Digital Ally, Inc. (trading symbol: DGLY) on October 28, 2024, reporting events occurring on October 22, 2024. The filing concerns a triggering event related to a Senior Secured Promissory Note involving the Company and its wholly-owned subsidiary, Kustom Entertainment, Inc.
Key Financial Metrics and Obligations
- Outstanding Debt: Approximately $1,600,000 under the Amended Note.
- Defaulted Payment: A $100,000 payment due on October 10, 2024, was not made.
- Liquidity Status: The filing does not provide specific cash flow, revenue, or liquidity metrics beyond the debt obligation details.
- Collateral: The Note is secured by a Security Agreement, with the lender intending to conduct a public sale of collateral.
Material Changes and Events
On October 22, 2024, the Company received a Default and Reservation Letter from Softforge Innovation, LLC (administrative agent). The letter declared the Company in default due to the missed $100,000 payment, accelerated all principal and interest payments, and demanded a lockbox control agreement within ten business days. Subsequently, on October 24, 2024, the Company received notice of an intended public sale of collateral scheduled for November 5, 2024.
Management Commentary, Risks, and Contingencies
Management disputes the claims made in the Default Notice and the Sale Notice. The Company has demanded that Softforge rescind the Sale Notice and cancel the public sale. Digital Ally, Inc. intends to vigorously defend its rights, including seeking injunctive relief and damages against Softforge. The primary risk is the potential loss of collateral and the acceleration of the full debt obligation.
Investor Verification Checklist
- Verify the current status of the $100,000 payment dispute and whether the default has been cured.
- Confirm if the public sale of collateral scheduled for November 5, 2024, has been stayed or cancelled.
- Review the terms of the Amended and Restated Promissory Note dated September 25, 2024, to understand the full scope of the $1,600,000 obligation.
- Monitor for any subsequent filings regarding injunctive relief or litigation outcomes.