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

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 25
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 operating income within the condensed consolidated statements of operations.

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 that because the terms of the various warrants issued
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 significant changes in the value of the derivatives and resulting gains and losses on
our condensed consolidated statement of operations.

Segment
Reporting

The
accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial
statements and requires selected information of those segments to be presented in the condensed consolidated financial statements. Operating
segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation
by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how
to allocate resources and assess performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management,
and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture
the Company’s corporate administrative activities, is also to be reported in the segment information. Therefore, its operations
are eliminated in consolidation and is not considered a separate business segment for financial reporting purposes.

The
Company adopted ASU 2023-07 in 2024 and applied the amendment retrospectively to all periods presented in the Company’s condensed
consolidated financial statements. See Note 17, Operating Segments, for more information.

Non-Controlling
Interests

Non-controlling
interests in the Company’s Condensed Consolidated Financial Statements represent the interest in subsidiaries held by venture partners.
The venture partners hold noncontrolling interests in the Company’s consolidated subsidiary