Company: DGLY
Filing Date: 2025-02-06
Form Type: S-1/A
Source: 0001493152-25-005144
Chunk: 218

Company: DIGITAL ALLY, INC.
Filing Date: 2025-02-06
Form: S-1/A
Chunk 218
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 of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value.

2023 Purchase Warrants

On April 5, 2023, the Company issued warrants to purchase a total of 1,125,000shares of Common Stock. The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore, the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.

The Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the warrant derivative liabilities as of their date of issuance and as of December 31, 2023:

|                                          |     | Issuance date assumptions |             |   |     | December 31, 2023 assumptions |             |   |
|:-----------------------------------------|:----|:--------------------------|------------:|:--|:----|:------------------------------|------------:|:--|
| Volatility - range                       |     |                           |       106.0 | % |     | $                             |       105.4 | % |
| Risk-free rate                           |     |                           |        3.36 | % |     |                               |        3.84 | % |
| Dividend                                 |     |                           |           0 | % |     |                               |           0 | % |
| Remaining contractual term               |     |                           |   5.0 years |   |     |                               |   4.3 years |   |
| Exercise price                           |     |                           | 5.50 – 7.50 |   |     |                               | 5.50 –