Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 186

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 8
Chunk 186
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devices. Redwood is preparing to validate the efficacy of these products as it prepares to submit its products for clinical trials utilizing
a double-blind, randomized scientific study to support the efficacy of such products No sales or marketing of the product will occur until
the clinical study concludes and the efficacy is evaluated and confirmed. There can be no assurance whether and when the clinical study will 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 six months ended June 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 June 30, 2025 and 2024 of $10,619, and $-0-, respectively, and $2,230,716,
and $682,345 for the six months ended June 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 June 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 six
months ended June 30, 2024.

The gain on extinguishment
of liabilities was $682,345 for the six months ended June 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