Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 230

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 230
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 three months ended September 30, 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
of 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 $217,136 for the three months ended September 30, 2025 from $8,920 for the comparable 2024 period, primarily
due to weather insurance proceeds that we received related to the 2025 Country Stampede music festival.

43

Loss
on Extinguishment of debt

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

Change
in Fair Value of Derivative Liabilities

The
change in fair value of the warrant derivative liabilities for the three months ended September 30, 2025 and 2024, respectively totaled
a gain of $839 during the three months ended September 30, 2025 as compared to a gain of $2,530,675 during the three 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 three
months ended September 30, 2025 reflects relatively minor fair value changes resulting from reduced stock price volatility and fewer
warrants outstanding during the period.

Gain
on Extinguishment of Liabilities

The
Company recorded a gain on the extinguishment of liabilities for the three months ended September 30, 2025 and 2024 of $13,275, and $9,385,
respectively. The gains reflect income related to the entertainment segment’s ability to negotiate down payables and other contract