Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 197

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 197
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 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.

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 modification was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable –
related party of $622,622 during the three and nine months ended September 30, 2025.

At
the time of the June 4, 2025 modification, management considered the repetitive nature of the modifications as an indication that the
Officer was acting more in his capacity as an equity holder than as a creditor. In addition, management reconsidered the accounting treatment
for the March 20, 2025 modification and changed its estimate whereby, the officer was more likely than not acting in his capacity as
an equity holder in the Company when negotiating the March 20, 2025 debt modification, as well. As a result, the Company determined to
treat the $622,622 gain on the June 4, 2025 modification as a deemed contribution of capital rather than a gain recognized in the condensed
consolidated statement of operations. In addition, the Company reconsidered the accounting treatment for the $1,249,372 gain