Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 99

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 1
Chunk 99
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 2024, respectively totaled a gain of $857,189 during the
three months ended June 30, 2025 as compared to a loss of $2,818 during the three months ended June 30, 2024. The Company has issued various
detachable warrants in connection with capital raises during 2024 and 2025 that were required to be treated as warrant derivative liabilities.
Warrant derivative liabilities are required to be marked-to-market at each balance sheet date with the change in fair value recorded as
a gain or loss in the Condensed Statement of Operations. The gain recorded in the three months ended June 30, 2025 reflects the large
decline in the closing market value of our common stock at June 30, 2025 when compared to March 31, 2025 closing market values.

Gain on Extinguishment of Liabilities

The Company recorded a gain
on the extinguishment of liabilities for the three months ended June 30, 2025 and 2024 of $10,619, and $—, respectively. The gains
reflect income related to the entertainment segment’s ability to negotiate down payables and other contract obligations during the
three months ended June 30, 2025 utilizing funds generated by the closing of the February 2025 public equity offering on February 13,
2025.

Loss before Income Tax Benefit

As a result of the
above, we reported a net loss before income tax benefit of $(4,489,204) and $(5,010,551) for the three months ended June
30, 2025 and 2024, respectively, an improvement of $521,347 (10.4%).

Income Tax Benefit

We recorded an income tax
benefit of $-0- for the three months ended June 30, 2025 and 2024, respectively. The effective tax rate for both 2025 and 2024 varied
from the expected statutory rate due to our continuing to provide a 100% valuation allowance on net deferred tax assets. We determined
that it was appropriate to continue the full valuation allowance on net deferred tax assets as of June 30, 2025 and December 31, 2024
primarily because of the recurring operating losses.

We have further determined
to continue providing a full valuation reserve on our net deferred tax assets as of June 30, 2025.

We had approximately
$156,019 of federal net operating loss carryforwards and