Company: DGLY
Filing Date: 2025-05-02
Form Type: 424B3
Source: 0001641172-25-008437
Chunk: 148

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-02
Form: 424B3
Chunk 148
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 available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company incurred operating losses in 2024 and 2023 and it continues to be in a three-year cumulative loss position at December 31, 2024 and 2023. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it determined to increase our valuation allowance by $4,680,000 but continue to fully reserve its deferred tax assets at December 31, 2024. The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’ equity.

As of December 31, 2024, the Company had the following Federal net operating loss carry-forwards available to offset future taxable income:

SCHEDULE OF FEDERAL NET OPERATING LOSS CARRY FORWARDS

| Tax years generated:                                |     | Amount |             |
|:----------------------------------------------------|:----|:-------|------------:|
| 2017 and before                                     |     | $      |  49,459,000 |
| 2018 and after                                      |     |        | 109,821,000 |
| Federal net operating loss carry-forwards available |     | $      | 159,280,000 |

Such tax net operating loss carry-forwards expire between 2025 and 2043 relative to Federal net operating loss carry-forwards generated in tax years 2017 and prior. Federal net operating loss carry-forwards generated in tax years 2018 and after cannot be carried back to prior years and have an indefinite life since the enactment of the Tax Cuts and Jobs Act of 2017. The Tax Cuts and Jobs Act of 2017 further provides for an annual limitation on usage equivalent to 80% of taxable income. In addition, the Company had research and development tax credit carry-forwards totaling $1,742,000available as of December 31, 2024, which expire between