Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 215

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 8
Chunk 215
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. On October 2, 2023 an additional $375,000 was advanced to Ticketsmarter which increased the loan
balance to $2,700,000. The use of proceeds of the TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted
rate, the discount received is recognized as a gain on extinguishment of liabilities on the condensed consolidated statement of operations.
Additionally, these negotiations relieved TicketSmarter of numerous future obligations following fiscal year 2023.

On August 19, 2024, the parties
agreed to amend the note whereby the repayment dates were extended to begin on January 2, 2025 and continue at $54,000 for 50 consecutive
weeks plus interest. The parties did not change any other provisions or terms of the note. The amendment was determined to be a modification
of the note rather than an extinguishment and reissuance of a new note.

On March 20, 2025, the parties agreed to a second modification of the TicketSmarter Related Party Note. The modification
eliminated all accrued interest totaling $582,203 as of the date of the second modification, reduced the interest rate from 13.25% per
annum to 8% per annum, and extended and reduced the repayment amount from $54,000 per week to $11,000 per week beginning April 1, 2025.
The modification was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable – related party
of $1,249,372 during the three months ended March 31, 2025. At the time of the modification, management considered the officer’s
lack Company-wide policy making authority and de-minimis beneficial ownership in the Company to determine that in its estimation the officer
did not act in his capacity as an equity holder in the Company when negotiating the March 20, 2025 debt modification.

50

On June 4, 2025, the parties agreed
to a third modification of the TicketSmarter Related Party Note. The modification reduced the outstanding principal amount from $2,678,000
to $2,000,000, eliminated all accrued interest totaling $43,515 as of the date of the third modification, the interest rate remained at
8% per annum, and extended and reduced the repayment amount from $11,000 per week to $9,600 per week beginning January 1, 2026. The