Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 46

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 46
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, 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 condensed consolidated statement of operations.

The pre-funded
warrants were all exercised within days of their issuance therefore their total fair value was estimated to be $1,803 at the time of
their exercise which remained the same as their fair value as of the date of issuance. The following are the assumptions used in
calculating the estimated fair value of the pre-funded warrants to purchase Common Stock which were effective and exercisable upon
issuance on February 13, 2025:

 SCHEDULE OF WARRANT MODIFICATION

    Pre funded warrants issuance date – February 13, 2025  assumptions 
  
    Volatility – range 
     110.1%
  
    Risk-free rate 
     4.27%
  
    Dividend 
     —%
  
    Remaining contractual term 
     0.03 years 
  
    Exercise price 
    $0.001 
  
    Common stock issuable under the warrants 
     4,907,500 

    29

During the three months ended
March 31, 2025, the pre-funded warrants to purchase 4.907,500 shares of Common Stock were fully exercised. In conjunction with the exercise
of the pre-funded warrants, the Company transitioned the related warrant derivative liability totaling $1,803 to equity as of their exercise
date. The warrant derivative liability related to the pre-funded warrants was $-0- as of March 31, 2025.

2024 Purchase Warrants

On June 25, 2024, the Company
issued Series A and prefunded warrants to purchase a total of 88,411 shares of Common Stock along with the sale of Common Stock. The
Company also issued Series B Warrants that will be issuable and exercisable at any time or times on or after the date that relevant stockholder approval
is obtained in addition to the Series A warrants that are not included in outstanding warrants until such time as relevant stockholder approval
is obtained. Both the Series A and Series B warrants have reset provisions that are activated upon the date relevant stockholder approval is obtained.
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