Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 161

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 8
Chunk 161
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 damage or relief demanded, we vigorously defend any lawsuit filed
against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible
but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for
the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such
as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing,
the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time.

On May 31, 2022, the Company
filed a lawsuit against Culp McAuley, Inc. (“Culp McAuley”) and four individuals (Brandon Culp, Campbell McAuley, Mark Depew
and Larry Roberts) (collectively the “defendants”) in the United States District Court for the District of Kansas, seeking
monetary damages and injunctive relief based on certain conduct by the defendants. On July 18, 2022, Culp McAuley filed its Answer to
the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages. On August
8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and
any and all liability.

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On December 20, 2022, the
Company filed a motion for leave to file a second amended complaint to add additional claims against the defendants to avoid fraudulent
transfers, to pierce the corporate veil of Culp McAuley, and for remedies related to the claims for fraudulent transfers and piercing
the corporate veil. On December 22, 2022, the Court issued an Order granting the Company’s motion for leave to file a second amended
complaint, which was filed with the Court on December 27, 2022. Because Culp McAuley’s original counsel withdrew, Culp McAuley was
ordered to obtain new counsel on or before December 2, 2022. On December 5, 2022, the Court ordered that Culp McAuley show cause in writing
by December 21, 2022, why the Court should not direct the Clerk to enter default against it. On December 22, 2022,