Material Agreement (Form 8-K)

Item 1.01 Entry into a Material Definitive Agreement

Senior Secured Convertible Note Financing

On December 19, 2025, Digital Ally, Inc. (the "Company") entered into and consummated the subsequent closing (the "Subsequent Closing") of the transactions contemplated by a Securities Purchase Agreement, dated as of September 15, 2025 (the "Purchase Agreement"), between the Company and a certain investor (the "Purchaser"). As previously disclosed, the Company completed an initial closing of the transactions on September 15, 2025 (the "Initial Closing").

At the Subsequent Closing, the Company issued and sold to the Purchaser certain Senior Secured Convertible Notes in the aggregate original principal amount of $267,500 (the "Notes") and warrants (the "Warrants"). The Purchase Agreement provided for seven percent (7%) original interest discount resulting in gross proceeds to the Company of $250,000. Interest on the note is eight percent (8%). The Warrants are exercisable for an aggregate 147,128 shares at an exercise price of $2.124 per share of the Company's common stock, par value $0.001 per share (the "Common Stock"). Subject to applicable limitations as set forth in the Purchase Agreement, the Warrants have an initial exercise date of December 19, 2025, and a termination date on the five-year anniversary of the initial exercise date. Other than as described above, the Notes and the Warrants were issued to the Purchaser on the same terms as the Notes and the Warrants in the Initial Closing.

In connection with the Subsequent Closing, the Company has set aside an amount equal to three percent (3%) of the gross proceeds received by the Company from such Subsequent Closing in an escrow account. This arrangement is intended solely to facilitate ongoing negotiations regarding a potential fee arrangement with a certain third party. Notwithstanding the foregoing, the establishment and maintenance of such escrow shall not be construed, deemed, or otherwise interpreted as an admission of liability by the Company under any circumstances.

The Notes are convertible into shares of Common Stock at the election of the Purchaser at any time at a conversion price at a ten percent (10%) discount to the volume weighted average price in the five (5) day period prior to the date of the Initial Closing (the "Conversion Price") per share of Common Stock. The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject to certain exceptions). Subject to certain conditions, including certain equity conditions, the Company may redeem some or all of the then outstanding principal amount of the Note for cash in an amount equal to one hundred ten percent (110%) of the outstanding principal amount of the Notes.

The Notes rank senior to all outstanding and future indebtedness of the Company and its subsidiaries, other than (i) TicketSmarter, Inc., which shall grant a second priority security interest, and (ii) Digital Ally Healthcare, Inc. and Nobility Healthcare, LLC, each of which shall not grant a security interest, and are secured by substantially all of the Company's assets, as evidenced by (i) a Security Agreement entered into at the Initial Closing, (ii) a Trademark Security Agreement entered into at the Initial Closing, (iii) a Patent Security Agreement entered into at the Initial Closing, and (iv) a Guaranty executed by all direct and indirect subsidiaries of the Company, other than Digital Ally Healthcare, Inc. and Nobility Healthcare, LLC, pursuant to which each of them has agreed to guaranty the obligations of the Company under the Notes.

The foregoing summaries provide only a brief description of the Notes, the Warrants, and the Purchase Agreement. The summaries do not purport to be complete and are qualified in their entireties by the full text of such documents, copies of which are attached as Exhibits 4.1, 4.2, and 10.1, respectively, and incorporated herein by reference.