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Wednesday, 11/08/2017 7:10:04 AM

Wednesday, November 08, 2017 7:10:04 AM

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NEWS!! Digital Ally (DGLY) Says It's Exploring Strategic Alternatives



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.”




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