Company: DGLY
Filing Date: 2025-02-14
Form Type: 424B4
Source: 0001493152-25-006704
Chunk: 64

Company: DIGITAL ALLY, INC.
Filing Date: 2025-02-14
Form: 424B4
Chunk 64
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 Common Stock in association with the two secured convertible notes previously described. The Company issued an additional 1,195,219 warrants in June 2024. The underlying warrant agreement terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain circumstances. 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 condensed consolidated statement of operations as the change in fair value of warrant derivative liabilities. The change in fair value of the warrant derivative liabilities from December 31, 2023, to September 30, 2024, totaled $2,178,965 which was recognized as income during the nine months ended September 30, 2024.

Gain on Extinguishment of Liabilities

The Company recorded a gain on the extinguishment of liabilities for the nine months ended September 30, 2024 of $682,345, which reflects income related to the video segment’s ability to negotiate down payables and contract liabilities during the period. In addition, the Company negotiated a termination of its lease on its former headquarters which resulted in a gain of $9,385 on the termination during the nine months ended September 30, 2024.

The gain on extinguishment of liabilities was $507,304 for the nine months ended September 30, 2023, which reflects income related to the entertainment segment’s ability to negotiate down payables and contract liabilities during the period. The Company utilized funds from the related party note payable to resolve numerous outstanding payables at a discounted rate, the discount received was recognized as a gain on extinguishment of liabilities in the statement of operations for the nine months ended September 30, 2023.

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Loss on Extinguishment of Debt

On March 1, 2024, the Company obtained a short-term merchant advance for its entertainment segment, which totaled $1,000,000, from a single lender to fund operations. The Company modified/amended the underlying loan agreement twice during the nine 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 and nine months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company refinanced its merchant advance loan for its video segment and determined the refinancing of the debt should be treated as