Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 199

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 199
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 be concluded and what the ultimate results will be.

The
agreement provides the Company with comprehensive rights to Redwood’s technologies, brands, trademarks, manufacturing processes,
vendor relationships, and additional assets. The two key products, TBX-Free and TBX Vape-Free, are designed to address significant health
concerns. TBX-Free targets traditional cigarette smokers, while TBX Vape-Free is the first-of-its-kind oral thin-film solution specifically
designed for vape users, addressing a critical gap in addiction treatment options.

The
Company paid $50,000 on July 8, 2025 to enter into the global Master Distribution Agreement with Redwood which included warrants to acquire
a minority ownership position in Redwood for a period of 5 years. The Company’s CEO and CFO are minority beneficial shareholders
of Redwood. There have been no other transactions during the three and nine months ended September 30, 2025, between the Company and
Redwood.

NOTE
14. GAIN ON EXTINGUISHMENT OF LIABILITIES

The
Company recorded gains on the extinguishment of liabilities for the three months ended September 30, 2025 and 2024 of $13,275, and $9,385,
respectively, and $2,243,991, and $691,730 for the nine months ended September 30, 2025 and 2024, respectively. The gains reflect income
related to the video solutions and 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. The discount received was recognized as a gain on extinguishment of liabilities in the condensed consolidated statement of
operations for the three and nine months ended September 30, 2024.

The
gain on extinguishment of liabilities was $691,730 for the nine months ended September 30, 2024, reflects income related to the entertainment
segment’s ability to negotiate down payables and other contract obligations 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 condensed consolidated statement of operations for the nine months ended September 30,
2024.

NOTE
15. NET LOSS PER SHARE

The
calculations of the weighted average number of