Company: DGLY
Filing Date: 2025-01-24
Form Type: S-1
Source: 0001493152-25-003451
Chunk: 170

Company: DIGITAL ALLY, INC.
Filing Date: 2025-01-24
Form: S-1
Chunk 170
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 Consolidated Statements of Operations.

The Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Operations. There was nointerest expense related to the underpayment of estimated taxes during the years ended December 31, 2023 and 2022. There were nopenalties in 2023 and 2022.

The Company is subject to taxation in the United States and various states. As of December 31, 2023, the Company’s tax returns filed for 2020, 2021 and 2022 and to be filed for 2023 are subject to examination by the relevant taxing authorities. With a few exceptions, as of December 31, 2023, the Company is no longer subject to Federal, state, or local examinations by tax authorities for taxable years prior to 2020.

Research and Development Expenses:

The Company expenses all research and development costs as incurred, which is generally incurred by the video solutions segment. Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Costs incurred subsequent to achievement of technological feasibility were not significant, and software development costs were expensed as incurred during 2023 and 2022.

| F-15 |

Warrant Derivative Liabilities:

In accordance with FASB ASC 815-40, Derivatives and Hedging: Contracts in an Entities Own Equity, entities must consider whether to classify contracts that may be settled in its own stock, such as warrants to purchase shares of Common Stock, as equity of the entity or as an asset or liability. If an event that is not within the entity’s control could require net cash settlement, then the contract should be classified as an asset or a liability rather than as equity. We have determined because the terms of the warrants issued during the first quarter of 2021, and remain outstanding, include a provision that entitles all the warrant holders to receive cash for their warrants in the event of a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled to cash, our warrants should be classified as liability measured at fair value, with changes in fair value each period reported in earnings. Volatility in the price of our common stock may result in