Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 245

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 8
Chunk 245
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 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
June 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, and plan
to continue to implement, new controls and new