Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 236

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 2
Chunk 236
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 loss carryforwards in the future. Therefore, we may be required to increase our
valuation allowance in future periods should our assumptions regarding the generation of future taxable income not be realized.

Inflation and Seasonality

Inflation has not materially affected
us during the past fiscal year. We do not believe that our Video Solutions and Revenue Cycle Management segments business is seasonal
in nature, however; the Entertainment Segment is expected to generate higher revenues during the second half of the calendar year than
in the first half.

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Item 3. Quantitative and Qualitative Disclosures
about Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls
and Procedures

The Company maintains disclosure
controls and procedures, as such terms are defined in Rules 13a-15(e) under the Exchange Act. The Company, under the supervision and with
the participation of its management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the design and operation of such disclosure controls and procedures for this Report. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of
March 31, 2025 to provide reasonable assurance that material information required to be disclosed by the Company in this Report was recorded,
processed, summarized and communicated to the Company’s management as appropriate and within the time periods specified in SEC rules
and forms.

As part of our plan to remediate
our controls which were not effective, we are performing a full review of our internal control procedures. We have implemented, and plan
to continue to implement, new controls and new processes. We have hired and plan to continue to hire additional qualified personnel and
establish more robust processes to support our internal control over financial reporting, including clearly defined roles and responsibilities.
The Company anticipates time being required to complete the implementation and to assess and ensure the sustainability of these controls.
The effectiveness will not be considered remediated until the applicable controls operate for a sufficient period of time and management
has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control
over Financial Reporting

There have not been any changes in the Company’s
internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the
Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control