Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 41

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 41
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 entered into a Securities Purchase Agreement with an institutional investor (the “Purchaser”),
pursuant to which the Company issued Senior Secured Convertible Notes (the “September 2025 Notes”)with an aggregate original
principal amount of $806,451 and detachable common stock purchase warrants to purchase 476,569 shares of the Company’s common stock
at an exercise price of $2.124 per share. The September 2025 Notes were issued at a 7% original issue discount, providing gross proceeds
of $750,000, and bear interest at 8% per annum.

The
September 2025 Notes are convertible at the investor’s option at any time at a conversion price equal to a 10% discount to the
five-day volume-weighted average price (VWAP) preceding conversion, subject to customary anti-dilution and price-based adjustment provisions.
The Company may, subject to certain conditions, redeem all or a portion of the Notes at 110% of the outstanding principal amount. A second
closing of $250,000 in additional September 2025 Notes and Detachable Warrants may occur upon the effectiveness of a resale registration
statement.

The
September 2025 Notes are senior secured obligations, ranking senior to all existing and future indebtedness of the Company, except for
specified subsidiaries that provide either a second-priority or no security interest. The Notes are secured by substantially all of the
Company’s assets and guaranteed by certain subsidiaries. In connection with the transaction, the Company also entered into a Registration
Rights Agreement and a Leak-Out Agreement with customary terms and conditions.

The
Company allocated the proceeds between the debt and equity components of the September 2025 Notes based on their relative fair values,
recorded a debt discount for the value of the warrants, conversion feature, and original issue discount, and recognized a derivative
liability for the variable conversion feature. The debt discount will be amortized to interest expense over the term of the September
2025 Notes using the effective-interest method, and the derivative liability will be remeasured at each reporting date, with changes
in fair value recognized in earnings.

    17

The
net proceeds of the private placement on September 15, 2025 was $610,000 (after $140,000 deduction for the costs of the offering). The
Company allocated the net proceeds from the private placement of the September 2025 Notes and the detachable warrants based upon their
relative fair values as of the date