Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 105

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 105
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5 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
obligations during the three months ended September 30, 2025 utilizing funds generated by the closing of the February 2025 public equity
offering on February 13, 2025.

Gain
on Sale of Property, Plant and Equipment

During
the three months ended September 30, 2024, the Company sold its building for $5,900,000 less closing costs of $7,194. The carrying amount
of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $431,183 in the Consolidated
Statement of Operation during the three