Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 134

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 134
---
 be recorded as an income tax benefit and, for some
portion related to deductions for stock option exercises, an increase in shareholders’ equity.

As
required by authoritative guidance, we have performed a comprehensive review of our portfolio of uncertain tax positions in accordance
with recognition standards established by the FASB, an uncertain tax position represents our expected treatment of a tax position taken
in a filed tax return or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for
financial reporting purposes. We have no recorded liability as of September 30, 2025 and December 31, 2024 representing uncertain tax
positions.

We
have generated substantial deferred income tax assets related to our operations primarily from the charge to compensation expense taken
for stock options, certain tax credit carryforwards and net operating loss carryforwards. For us to realize the income tax benefit of
these assets, we must generate sufficient taxable income in future periods when such deductions are allowed for income tax purposes.
In some cases where deferred taxes were the result of compensation expense recognized on stock options, our ability to realize the income
tax benefit of these assets is also dependent on our share price increasing to a point where these options have intrinsic value at least
equal to the grant date fair value and are exercised. In assessing whether a valuation allowance is needed in connection with our deferred
income tax assets, we have evaluated our ability to generate sufficient taxable income in future periods to utilize the benefit of the
deferred income tax assets. We continue to evaluate our ability to use recorded deferred income tax asset balances. If we fail to generate
taxable income for financial reporting in future years, no additional tax benefit would be recognized for those losses, since we will
not have accumulated enough positive evidence to support our ability to utilize net operating 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 revenue during the second half of the
calendar year than in the first half.

Item
3. Quantitative and Qualitative Disclosures about Market Risk.

Not
Applicable.

Item
4. Controls and Procedures.

Evaluation
of Disclosure Controls and Procedures

The