Company: DGLY
Filing Date: 2025-05-02
Form Type: 424B3
Source: 0001641172-25-008437
Chunk: 132

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-02
Form: 424B3
Chunk 132
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term and bears interest at a rate of 3.00%
per annum. Quarterly principal and interest payments are deferred for seven months and are due in equal quarterly installments on the
tenth business day of each quarter. The principal amount of the February Contingent Payment Note is subject to an earn-out adjustment,
being the difference between $440,000
(the “February Projected Revenue”) and the cash basis revenue (the “February Measurement Period Revenue”) collected
by the February Sellers in its normal course of business from the clients existing on February 1, 2022, during the period from May 1,
2022 through April 30, 2023 (the “February Measurement Period”) measured on a quarterly basis and annualized as of the relevant
period. If the February Measurement Period Revenue is less than the February Projected Revenue, such amount will be subtracted from the
principal balance of this February Contingent Payment Note on a dollar-for-dollar basis. If the February Measurement Period Revenue is
more than the February Projected Revenue, such amount will be added to the principal balance of this February Contingent Payment Note
on a dollar-for-dollar basis. In no event will the principal balance of this February Contingent Payment Note become a negative number.
The maximum downward earn-out adjustment to the principal balance will be a reduction to zero. There are no limits to the increases to
the principal balance of the February Contingent Payment Note as a result of the earn-out adjustments.

The February Contingent
Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability is recorded
as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition. Management
has recorded the contingent consideration promissory note at its estimated fair value of $105,000 at the acquisition date. The estimated
fair value of the February Contingent Note at December 31, 2023 is $-0-, representing a decrease in its estimated fair value of $4,347
as compared to its estimated fair value as of December 31, 2022, of which $1,584 represents payments made during the year ended December
31, 2023. Therefore, the Company recorded a gain of $2,763 in the Consolidated Statements of Operations for the year ended December 31,
2023.

| F-25 |

2023 Commercial Extension of Credit

On February 23, 2023, the Company