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Vote Counting Discrepancy Questioned By Digital Ally’s Largest Shareholder

July 8, 2014

OPA LOCKA, Fla., July 8, 2014 /PRNewswire/ — Stephen Gans, the largest stockholder of Digital Ally, Inc. (NASDAQ: DGLY) (the “Company”), announced today that he has sent a letter to the members of the Company’s board of directors asking them to investigate the accuracy of the voting results the Company reported in its SEC Form 8-K filing on June 18, 2014 following the annual meeting of stockholders held on June 12, 2014. Mr. Gans had solicited proxies to vote against two of the Company’s proposals to be voted on at the annual meeting.

Mr. Gans took the step of writing to the board only after his requests for a reconciliation of an apparent vote discrepancy made to the Company’s inspector of elections for the annual meeting went unanswered. Prior to the stockholder meeting, Mr. Gans, who was a director of the Company at the time, asked that a truly independent and experienced inspector of elections be appointed for the meeting, as is customary in contested proxy solicitations, to give him and all stockholders assurance that the votes would be counted impartially and correctly. The Company refused to hire an experienced, independent party to count the votes, instead appointing its securities lawyer as inspector of elections. While the Company reported that the two contested proposals had failed, Mr. Gans believes, based on the tabulation of votes made by his proxy solicitor, that the number of shares voted against the proposals was materially underreported. Mr. Gans believes this discrepancy must be resolved quickly by the Company and that proper procedures be established, including the hiring of an independent, experienced inspector of elections, prior to the Company’s next stockholder meeting. The Company is obligated to seek again stockholder approval of one of the defeated proposals at a meeting to be held no later than September 30, 2014 pursuant to the terms of its recent $2 million debt financing with Hudson Bay Partners.

Commenting on the letter, Mr. Gans added “I appreciate that the inspector of elections used by the Company is its own lawyer and tabulating proxies is not his specialty, so I provided him with a detailed breakdown on what I suspect is the discrepancy to help him look into it. The Company’s refusal to hire an experienced, independent party to tabulate stockholder votes in a proxy contest and now its lack of response to my basic requests are troubling governance practices for a public company. We are going through this process to ensure that next time all stockholders have comfort that the votes will be tabulated correctly. “

The text of Mr. Gans’s letter follows.

Stephen Gans
14850 NW 44th Court
Opa Locka, Florida 33054

July 7, 2014

Board of Directors
Digital Ally, Inc.
9705 Loiret Blvd.
Lenexa, KS. 66219

Re: 2014 Annual Meeting Reported Vote Count

Dear Directors:

I am writing to ask that you investigate the accuracy of the tabulation of the number of shares voted (and how they were voted) on each proposal voted on at the annual meeting of stockholders of Digital Ally, Inc. (the “Company”) held on June 12, 2014. Based on the tabulation of votes conducted by my proxy solicitor, MacKenzie Partners, Inc (“MacKenzie”), I believe that the number of shares voted against proposals 2 and 4 at the annual meeting reported by the Company in the Form 8-K filed with the Securities and Exchange Commission (the SEC”) on June 18, 2014 is underreported by almost 100,000 shares for each proposal. On June 19, 2014 my counsel requested a detailed vote tally by holder/broker for the two proposals that were defeated from your securities lawyer and inspector of elections for the annual meeting. Although this information is routinely provided by independent inspectors of elections to either side in proxy contests, it has not been provided by your securities lawyer and inspector of elections. On June 27, 2014 my counsel notified your securities lawyer and inspector of elections of the vote discrepancy, provided MacKenzie’s calculation of the voting on proposals 2 and 4, requested a reconciliation of the differing vote totals and an amended 8-K filing if the reported vote count is wrong, and again requested a detailed vote tally for those two proposals. To date there has been no response from your securities lawyer and inspector of elections (or anyone from the Company) other than an email on June 20, 2014 referring my counsel to the June 18, 2014 8-K filing.

This situation is deeply troubling and demands your immediate attention. Prior to the meeting my counsel repeatedly requested, through your securities lawyer and inspector of elections, that the Company appoint an independent and experienced inspector of elections for the annual meeting since there was a proxy contest with respect to two of the Proposals. The Company’s failure to do so, and its failure to address the vote discrepancy pointed out to the inspector of elections more than a week ago, raise serious concerns about the manner in which the meeting was conducted and the correct vote count on each of the proposals. Further, the Company may be in violation of its obligation to update promptly its SEC filings upon learning of a material misstatement in a filing.

Proper procedures for the Company’s future stockholder meetings, including the hiring of an experienced, independent inspector of elections, must be established prior to the Company’s next stockholder meeting. I note that the terms of the Company’s debt financing with Hudson Bay Master Fund, Ltd. require another stockholder meeting on or before September 30, 2014. Failure to do so will raise serious questions about the fairness of the Company’s conduct of stockholder meetings, jeopardize the Company’s Nasdaq listing, possibly prompt an investigation by the SEC and create potential liability for the Company and its officers and directors.

I await your response.

Sincerely,

Stephen Gans

Contact:

Paul Schulman
MacKenzie Partners, Inc.
212 929 5500

SOURCE Stephen Gans


Source: PR Newswire



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