XML 30 R19.htm IDEA: XBRL DOCUMENT v3.25.3
RELATED PARTY TRANSACTIONS
 9 Months Ended
Sep. 30, 2025
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 13. RELATED PARTY TRANSACTIONS

 

Transactions with Managing Member of Nobility Healthcare

 

The Company accrued reimbursable expenses payable to Nobility, LLC totaling $42,082 and $245,716 as of September 30, 2025 and December 31, 2024, respectively. Total management fees accrued and payable in accordance with the operating agreement totaled $20,933 and $38,625 as of September 30, 2025 and December 31, 2024, respectively. The company recorded management fee expense of $30,255 and $22,403 for the nine months ended September 30, 2025 and 2024, respectively.

 

Transactions with Related Party of TicketSmarter

 

On September 22, 2023, a trust, the beneficiaries of which are an officer of TicketSmarter’s and his spouse, made a loan in the amount of $2,325,000 to TicketSmarter to support TicketSmarter’s operations. On October 2, 2023 an additional $375,000 was advanced to Ticketsmarter. The transaction was recorded as a related party note payable (the “TicketSmarter Related Party Note”). The TicketSmarter Related Party Note bears interest of 13.25% per annum with repayment beginning January 2, 2024. As of December 31, 2024 the entire TicketSmarter Related Party note balance totaled $2,700,000, and was classified as current, with an accrued interest balance of $488,711. The use of proceeds of the TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted rate, the discount received to resolve such outstanding payables is recognized as a gain on extinguishment of liabilities on the condensed consolidated statement of operations. Additionally, these negotiations relieved TicketSmarter of numerous future obligations following fiscal year 2023.

 

On August 19, 2024, the parties agreed to amend the note whereby the repayment dates were extended to begin on January 2, 2025 and continue at $54,000 for 50 consecutive weeks plus interest. The parties did not change any other provisions or terms of the note. The amendment was determined to be a modification of the note rather than an extinguishment and reissuance of a new note. Payments totaling $22,000 have been made through September 30, 2025.

 

On March 20, 2025, the parties agreed to a second modification of the TicketSmarter Related Party Note. The modification eliminated all accrued interest totaling $582,203 as of the date of the second modification, reduced the interest rate from 13.25% per annum to 8% per annum, and extended and reduced the repayment amount from $54,000 per week to $11,000 per week beginning April 1, 2025. The modification was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable – related party of $1,249,372 during the three months ended March 31, 2025. At the time of the modification, management considered the officer’s lack Company-wide policy making authority and de-minimis beneficial ownership in the Company to determine that in its estimation the officer did not act in his capacity as an equity holder in the Company when negotiating the March 20, 2025 debt modification.

 

On June 4, 2025, the parties agreed to a third modification of the TicketSmarter Related Party Note. The modification reduced the outstanding principal amount from $2,678,000 to $2,000,000, eliminated all accrued interest totaling $43,515 as of the date of the third modification, the interest rate remained at 8% per annum, and extended and reduced the repayment amount from $11,000 per week to $9,600 per week beginning January 1, 2026. The modification was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable – related party of $622,622 during the three and nine months ended September 30, 2025.

 

At the time of the June 4, 2025 modification, management considered the repetitive nature of the modifications as an indication that the Officer was acting more in his capacity as an equity holder than as a creditor. In addition, management reconsidered the accounting treatment for the March 20, 2025 modification and changed its estimate whereby, the officer was more likely than not acting in his capacity as an equity holder in the Company when negotiating the March 20, 2025 debt modification, as well. As a result, the Company determined to treat the $622,622 gain on the June 4, 2025 modification as a deemed contribution of capital rather than a gain recognized in the condensed consolidated statement of operations. In addition, the Company reconsidered the accounting treatment for the $1,249,372 gain on the March 20, 2025 modification and determined to treat it as a deemed contribution of capital rather than a gain recognized in the condensed consolidated statement of operations. Therefore the $1,249,372 gain on the March 20, 2025 modification was reversed during the quarter ended June 30, 2025 and recorded as a deemed contribution of capital rather than a gain recognized in the condensed consolidated statement of operations.

 

 

Company Related Party Note

 

On August 22, 2024, Digital Ally’s Chief Executive Officer, made a loan in the amount of $100,000 to the Company to support its operations. In addition, on October 24, 2024, Digital Ally’s Chief Executive Officer, made an additional loan in the amount of $40,000 to the Company to support its operations. These transactions were recorded as related party notes payable (the “Company Related Party Notes”). The Company Related Party Notes bear interest at prime rate (8.00% as of September 30, 2025 and December 31, 2024) per annum with repayment due on demand. The Company paid off the Company Related Party Notes in full during the nine months ended September 30, 2025. As of December 31, 2024, the entire Company Related Party note of $140,000, is classified as current, with an accrued interest balance of $3,465. The Company Related Party Notes balance is $-0- and $140,000 and an accrued interest balance of $-0- and $3,465 as of September 30, 2025 and December 31, 2024, respectively.

 

Master Distribution Agreement

 

On June 11, 2025 the Company entered into an exclusive global Master Distribution Agreement with Redwood Scientific Technologies, (“Redwood”) granting the Company the rights to distribute Redwood’s nicotine cessation products, including TBX-Free and TBX Vape-Free. This strategic partnership positions Digital Ally as the commercialization partner for products aimed at helping Americans overcome addiction to cigarettes and vape 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 nine months ended September 30, 2025, between the Company and Redwood.