Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 168

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 168
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of the Company’s common stock during the three-trading-day valuation period following each ELOC Purchase Notice. Each purchase
is subject to specified volume and timing restrictions, including that an ELOC Purchase Notice may not be delivered within twenty-four
(24) hours of a prior purchase.

The
ELOC Investor may not beneficially own more than 4.99% of the Company’s outstanding common stock at any time. Under Nasdaq Capital
Market rules, the Company may not issue to the ELOC Investor a number of shares exceeding 19.99% of the Company’s outstanding common
stock as of the execution date (the “Exchange Cap”) unless shareholder approval is obtained or certain pricing exceptions
are met.

As
consideration for the ELOC Investor’s commitment, the Company agreed to pay a 3% commitment fee, payable through a combination
of (i) shares of common stock valued based on the five-day VWAP following the effectiveness of the resale registration statement and
(ii) cash funded from up to 30% of proceeds from future financings, including drawdowns under the ELOC facility. The Company also reimbursed
the investor $30,000 for legal expenses.

The
ELOC Purchase Agreement includes customary restrictions on entering into other variable-rate transactions during its 36-month term and
prohibits the investor from engaging in short sales or hedging transactions involving the Company’s common stock. The facility
may be terminated upon the earlier of (i) the first day of the month following the 36-month anniversary of the Closing Date, (ii) the
aggregate purchase price of $25 million having been reached, or (iii) other termination events specified in the agreement. The Company
may also terminate the facility at any time after commencement upon five (5) trading days’ written notice.

As
of September 30, 2025, the Company has not received shareholder approval of the transactions, nor has the underlying Registration Statement
been declared effective and therefore the Company has not sold any shares under the ELOC facility. The Company will record the related
commitment fee and transaction costs as deferred equity issuance costs within Additional Paid-In Capital, to be amortized against proceeds
from future ELOC drawdowns at such time as the Company has received shareholder approval of the transactions and the underlying Registration
Statement has been declared effective. The Company intends to use any future proceeds from sales under the ELOC facility for general
corporate and working capital purposes.

NOTE
6. FAIR VALUE