Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 184

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 8
Chunk 184
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 The amendment was determined to be a modification
of the note rather than an extinguishment and reissuance of a new note. Payments totalling $22,000 have been made through June 30, 2025.

On March 20, 2025, the
parties agreed to a second modification of the TicketSmarter Related Party Note. The modification eliminated all accrued interest
totaling $582,203
as of the date of the second modification, reduced the interest rate from 13.25%
per annum to 8%
per annum, and extended and reduced the repayment amount from $54,000
per week to $11,000
per week beginning April 1, 2025. The modification was deemed to be an extinguishment of debt resulting in a gain on
extinguishment of note payable – related party of $1,249,372
during the three months ended March 31, 2025. At the time of the modification, management considered the officer’s lack Company-wide policy making authority
and de-minimis beneficial ownership in the Company to determine that in its estimation the officer did not act in his capacity as an equity
holder in the Company when negotiating the March 20, 2025 debt modification.

On June 4, 2025, the parties
agreed to a third modification of the TicketSmarter Related Party Note. The modification reduced the outstanding principal amount from
$2,678,000 to $2,000,000, eliminated all accrued interest totaling $43,515 as of the date of the third modification, the interest rate
remained at 8% per annum, and extended and reduced the repayment amount from $11,000 per week to $9,600 per week beginning January 1, 2026.
The modification was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable – related party
of $622,622 during the three and six months ended June 30, 2025.

    35

At the time of the June
4, 2025 modification, management considered the repetitive nature of the modifications as an indication that the Officer was acting
more in his capacity as an equity holder than as a creditor. In addition, management reconsidered the accounting treatment for the
March 20, 2025 modification and changed its estimate whereby, the officer was more likely than not acting in his capacity as an
equity holder in the Company when negotiating the March