$DGLY Exploring Strategic Alternatives

Roth Capital Partners Engaged to Assist in the Process

Lenexa, KS, Nov. 08, 2017 — Digital Ally, Inc. (NASDAQ: DGLY) today announced that its Board of Directors has initiated a process to explore a full range of strategic alternatives to best position the Company for the future including, but not limited to, monetizing its patent portfolio and related patent infringement litigation against Axon Enterprise, Inc. (“Axon,” formerly known as TASER International, Inc.) and Enforcement Video, LLC d/b/a WatchGuard Video (“WatchGuard”), the sale of the Company as a whole, or the sale of select properties or groups of properties or individual businesses. The result of the strategic review may also include the continued implementation of the Company’s business plan.  The Company has retained Roth Capital Partners LLC (“Roth”) to assist in this process. There can be no assurance a transaction will result from this process and the Company does not intend to disclose additional details unless and until it has entered into a specific transaction.

The Company has recently received several unsolicited inquiries from parties involving a variety of alternatives including, but not limited to, 1) seeking distribution and/or licensing rights to the Company’s patented VuLink® auto-activation technology, 2) seeking distribution and/or licensing rights to the Company’s suite of patents other than the VuLink; 3) full sale of the Company; and 4) partial sale of its law enforcement or commercial divisions.  In addition, the Company has recently entered into an exclusive distribution agreement with VieVU, LLC regarding the Company’s patented VuLink product line. The Company believes the unsolicited inquiries are being driven by the recent and important wins it received in the U.S. Patent Office (the “Patent Office”) that confirm the validity of our VuLink and related auto-activation technologies.  Digital’s Board of Directors and management engaged Roth to ensure that the Company and its shareholders consider all reasonable alternatives to maximize shareholder value, given the multiple inquiries.

On July 6, 2017, the Patent Office denied Axon’s petition for inter partes review (“IPR”) of Digital’s Patent No. 9,253,452 (the “’452 Patent”). And on August 3, 2017, the Patent Office denied Axon’s final petition for IPR of the ‘452 Patent. This was Axon’s final attempt to invalidate the ‘452 Patent before the Patent Office.

With the Patent Office determining that Axon failed to demonstrate even a reasonable likelihood of invalidating the ‘452 Patent in its IPR petition, an IPR status update was submitted to the District Court of Kansas. The Court can now decide whether to maintain the stay of the litigation that was implemented pending the results of the IPR petitions. The Company believes that there will be no reason to maintain the stay and, if lifted, it will request an expedited schedule for trial.

On May 27, 2016, Digital filed a complaint against WatchGuard in the U.S. District Court for the District of Kansas alleging patent infringement based on WatchGuard’s VISTA Wifi and 4RE In-Car product lines. In May 2016, WatchGuard filed an IPR petition with the Patent Office challenging the validity of the ‘950 Patent and filed a motion to stay litigation, pending at least a preliminary decision from the PTAB regarding the IPR petition filed challenging the ‘950 Patent and four additional IPR petitions filed by Axon challenging the ‘292 Patent and the ‘452 Patent. In doing so, WatchGuard agreed to be bound by the Patent Office’s decision in connection with the four IPR petitions filed by Axon against the ‘292 Patent and the ‘452 Patent. A compromise was subsequently reached under which the court stayed the case, and ordered the parties to submit a report by January 5, 2018 notifying the court about the status of the pending IPR petitions. The Patent Office subsequently denied institution of all of Axon’s IPR petitions against the ‘452 Patent, which means these requests will not proceed. The Company expects Patent Office to render its decision in the near future regarding  whether it will grant institution of WatchGuard’s IPR regarding the ‘950 Patent.

“We are excited to pursue the cases and now focus on the significant damages associated with Axon’s infringement of the ‘452 Patent,” said Digital’s CEO, Stanton E. Ross. “With the defeat of Axon’s IPRs for the ‘452 Patent, we will request an expedited path to trial where a jury can assess Axon’s willful infringement of the ‘452 Patent and award Digital Ally appropriate damages. We also seeking the Court to enjoin all further sales of Axon’s non-SPPM Signal technology.”

About Digital Ally
Digital Ally®, headquartered in Lenexa, KS, specializes in the design and manufacturing of the highest quality video recording equipment and video analytic software. Digital Ally pushes the boundaries of technology in industries such as law enforcement, emergency management, commercial fleets, and consumer use. Digital Ally’s complete product solutions include in-car and body cameras, cloud and local management software, and automatic recording technology. These products work seamlessly together and are simple to install and operate. Digital Ally products are sold by domestic direct sales representatives and international distributors worldwide.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are based largely on the expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond the control of management. Therefore, actual results could differ materially from the forward-looking statements contained in this press release. A wide variety of factors that may cause actual results to differ from the forward-looking statements include, but are not limited to, the following: whether a transaction will result from the initiative with Roth Capital Partners; whether the Company will achieve positive outcomes in its patent litigation with various parties, including Axon Enterprise, Inc. and WatchGuard; whether the Patent Office rulings will curtail, eliminate or otherwise have an effect on the actions of Axon, WatchGuard and other parties respecting the Company, its products and customers; competition from larger, more established companies with far greater economic and human resources; its ability to attract and retain customers and quality employees; the effect of changing economic conditions; and changes in government regulations, tax rates and similar matters. These cautionary statements should not be construed as exhaustive or as any admission as to the adequacy of the Company’s disclosures. The Company cannot predict or determine after the fact what factors would cause actual results to differ materially from those indicated by the forward-looking statements or other statements. The reader should consider statements that include the words “believes”, “expects”, “anticipates”, “intends”, “estimates”, “plans”, “projects”, “should”, or other expressions that are predictions of or indicate future events or trends, to be uncertain and forward-looking. The Company does not undertake to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. Additional information respecting factors that could materially affect the Company and its operations are contained in its annual report on Form 10-K for the year ended December 31, 2016 and quarterly report on Form 10-Q for the three and six months ended June 30, 2017, as filed with the Securities and Exchange Commission.

 

Contact Information
Stanton Ross, CEO
Tom Heckman, CFO
Digital Ally, Inc
913-814-7774

info@digitalallyinc.com