Company: DGLY
Filing Date: 2025-01-24
Form Type: S-1
Source: 0001493152-25-003451
Chunk: 196

Company: DIGITAL ALLY, INC.
Filing Date: 2025-01-24
Form: S-1
Chunk 196
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 ) |     |      |    (165,000 |   |
| Domestic international sales company             |     |      |    (155,000 | ) |     |      |    (145,000 | ) |
| Total deferred tax liabilities                   |     |      |    (875,000 | ) |     |      |    (310,000 | ) |
| Net deferred tax assets (liability)              |     | $    |           — |   |     | $    |           — |   |

The valuation allowance on deferred tax assets totaled $ 41,610,000and $ 34,200,000as of December 31, 2023, and 2022, respectively. The Company records the benefit it will derive in future accounting periods from tax losses and credits and deductible temporary differences as “deferred tax assets.” In accordance with ASC 740, “Income Taxes,” the Company records a valuation allowance to reduce the carrying value of our deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company incurred operating losses in 2023 and 2022 and it continues to be in a three-year cumulative loss position at December 31, 2023 and 2022. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it determined to increase our valuation allowance by $ 7,870,000but continue to fully reserve its deferred tax assets at December 31, 2023. The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’ equity.

As of December 31, 2023, the Company had available approximately $ 140,940,000of Federal net operating loss carry-forwards available to offset future taxable income generated. Such tax net operating loss carry-forwards expire between 2025 and 2043, with $ 91,352,000of the tax net operating