Company: DGLY
Filing Date: 2025-02-06
Form Type: S-1/A
Source: 0001493152-25-005144
Chunk: 67

Company: DIGITAL ALLY, INC.
Filing Date: 2025-02-06
Form: S-1/A
Chunk 67
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expense)

Other income (expense) decreased to $66,966 for the nine months ended September 30, 2024, from $76,180 during the nine months ended September 30, 2023, which reflects income related to a warehouse lease within the corporate headquarters which ceased in 2024 upon the sale of the building.

Change in Fair Value of Derivative Liabilities

During the second quarter of 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 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, totalled $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 totalled $