Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 244

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 244
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 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 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 a debt extinguishment. As a result, the Company recorded a loss of $68,827 on the extinguishment during
the nine months ended September 30, 2024.

Change
in Fair Value of Derivative Liabilities

The
change in fair value of the warrant derivative liabilities for the nine months ended September 30, 2025 and 2024, respectively totaled
a gain of $3,373,919 during the nine months ended September 30, 2025 as compared to a gain of $2,178,965 during the nine months ended
September 30, 2024. The Company has issued various detachable warrants in connection with capital raises during 2024 and 2025 that were
required to be treated as warrant derivative liabilities. Warrant derivative liabilities are required to be marked-to-market at each
balance sheet date with the change in fair value recorded as a gain or loss in the Condensed Statement of Operations. The gain recorded
in the nine months ended September 30, 2025 reflects the large decline in the closing market value of our common stock at September 30,
2025 when compared to December 31, 2024 closing market values.

Gain
on Extinguishment of Liabilities

The
Company recorded a gain on the extinguishment of liabilities for the nine months ended September 30, 2025 and 2024 of $2,243,991, and
$691,730, 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 nine months ended September 30, 2025 utilizing funds generated by the closing
of the February 2025 public equity offering on February 13, 2025.

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