Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 297

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 2
Chunk 297
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 2025 and 2024, respectively. The large
decrease is attributable to the Company paying off most of its interest-bearing debt in late 2024 and early 2025 including the $3.6 million
senior secured promissory notes that were paid off with proceeds from the February 2025 public equity offering.

Other
income (expense)

Other
income (expense) increased to $252,603 for the nine months ended September 30, 2025, from $66,966 during the nine months ended September
30, 2024, which reflects weather insurance proceeds that we received in 2025 related to the 2025 Country Stampede.

Loss
on Extinguishment of debt

On
March 1, 2024, the Company obtained a short-term merchant advance for its entertainment segment, which totaled $1,000,000, from a single
lender to fund operations. The Company modified/amended the underlying loan agreement twice during the nine months ended September 30,
2024. The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss during the nine months ended
September 30, 2024.

During
the nine months ended September 30, 2024, the Company refinanced its merchant advance loan for its video segment and determined the refinancing
of the debt should be treated as a debt extinguishment. As a result, the Company recorded a loss of $68,827 on the extinguishment during
the nine months ended September 30, 2024.

Change
in Fair Value of Derivative Liabilities

The
change in fair value of the warrant derivative liabilities for the nine months ended September 30, 2025 and 2024, respectively totaled
a gain of $3,373,919 during the nine months ended September 30, 2025 as compared to a gain of $2,178,965 during the nine months ended
September 30, 2024. The Company has issued various detachable warrants in connection with capital raises during 2024 and 2025 that were
required to be treated as warrant derivative liabilities. Warrant derivative liabilities are required to be marked-to-market at each
balance sheet date with the change in fair value recorded as a gain or loss in the Condensed Statement of Operations. The gain recorded
in the nine months ended September 30, 2025 reflects the large decline in the closing market value of our common stock