Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 220

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 2
Chunk 220
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 to $11,000 per week beginning April 1, 2025. The modification was deemed to be an extinguishment
of debt resulting in a gain of $1,249,372 during the three months ended March 31, 2025.

Gain on Extinguishment of Liabilities

The Company
recorded a gain on the extinguishment of liabilities for the three months ended March 31, 2025 and 2024 of $2,220,097, and $682,345,
respectively. The gains reflect income related to the video solutions and entertainment segment’s ability to negotiate down
payables and other contract obligations during the three months ended March 31, 2025 utilizing funds generated by the closing of the
February 2025 public equity offering on February 13, 2025.

The gain on
extinguishment of liabilities was $682,345 for the three months ended March 31, 2024, which reflects income related to the
entertainment segment’s ability to negotiate down payables and other contract obligations during the period. The Company
utilized funds from the related party note payable to resolve numerous outstanding payables at a discounted rate, the discount
received was recognized as a gain on extinguishment of liabilities in the condensed consolidated statement of operations for the
three months ended March 31, 2024.

Gain on disposal of intangibles

Gain on disposal of intangibles
decreased to $-0- for the three months ended March 31, 2025, from $5,582 during the three months ended March 31, 2024.

Change in Fair Value of Derivative Liabilities

The change in fair value of the
warrant derivative liabilities for the three months ended March 31, 2025 and 2024, respectively totaled a gain of $2,515,891 during the
three months ended March 31, 2025 as compared to a loss of $348,891 during the three months ended March 31, 2024.

During 2024, the Company issued
Series A and Series B detachable warrants in conjunction with its June 2024 capital raise. The underlying warrant terms under both of
the Series A and Series B warrants provide for net cash settlement outside the control of the Company in the event of tender offers under
certain circumstances and requires reset provisions which were triggered upon the approval the warrant issuances by the Company’s
shareholders. As such, the Company