Company: DGLY
Filing Date: 2025-05-02
Form Type: 424B3
Source: 0001641172-25-008437
Chunk: 43

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-02
Form: 424B3
Chunk 43
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 Debt

The Company recognized a loss on conversion of convertible debt of $-0- and $1,112,705 during the years ended December 31, 2024 and 2023, respectively. This is in connection with the convertible notes issued during the year ended December 31, 2023, and the related conversion from debt to equity and cash settlement of the convertible debt during the 2023 period.

Loss on Disposal of Intangible assets

During the year ended December
31, 2024, the Company’s video solutions segment disposed of its personal protection product line which held various EPA licenses
resulting in a loss on disposal of intangible assets $125,561. This loss was offset by a gain on disposal of certain personal seat licenses
by the Company’s entertainment segment which resulted in a gain of $5,582 during the year ended December 31, 2024.

Change in Fair Value of Derivative Liabilities

The change in fair value of the
warrant derivative liabilities for the years ended December 31, 2024 and 2023, respectively totaled a loss of $1,240,407 during the year
ended December 31, 2024 as compared to a gain of $1,846,642 during the year ended December 31, 2023.

During 2024, the Company issued
Series A and Series B detachable warrants in conjunction with its June 2024 capital raise. The underlying warrant terms under both of
the Series A and Series B warrants provide for net cash settlement outside the control of the Company in the event of tender offers under
certain circumstances and requires reset provisions which were triggered upon the approval the warrant issuances by the Company’s
shareholders. As such, the Company is required to treat these warrants as derivative liabilities, which are valued at their estimated fair
value at their issuance date and at each reporting date, with any subsequent changes reported in the consolidated statement of operations
as the change in fair value of warrant derivative liabilities. The warrants were approved by shareholders at the Company’s annual
meeting on December 17, 2024, which triggered the reset provisions which resulted in an increase in the estimated fair value of the Series
A and Series B warrants.

During 2023, the Company issued detachable warrants to purchase a total of 1,125,000 shares of Common Stock in association with the two secured convertible notes. The Company issued an additional 1,195,219 warrants in June 2024