Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 313

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 2
Chunk 313
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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
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 September 30, 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