Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 183

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 8
Chunk 183
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fair value at their issuance date and at each reporting date, with any subsequent changes reported in the condensed consolidated statement
of operations as the change in fair value of warrant derivative liabilities. The warrants were approved by shareholders at the Company’s
annual meeting on December 17, 2024, which triggered the reset provisions which resulted in an increase in the estimated fair value of
the Series A and Series B warrants. The holders fully exercised their Series B warrants during the three months ended March 31, 2025 which
caused a deterioration in the market value of the Company’s Common Stock which resulted in a large decrease in the estimated fair
value of the remaining Class A warrants resulting in the gain from the change in fair value of warrant derivative liabilities in the condensed
consolidated statement of operations for the three months ended March 31, 2025.

51

During 2023, the Company issued
detachable warrants to purchase a total of 56,250 shares of Common Stock in association with the two secured convertible notes. The
underlying warrant terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain
circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated
fair value at their issuance date and at each reporting date with any subsequent changes reported in the condensed consolidated statement
of operations as the change in fair value of warrant derivative liabilities. The increase in the estimated fair value of the 2023 warrants
resulted in a loss from the change in fair value of warrant derivative liabilities in the condensed consolidated statement of operations
for the three months ended March 31, 2025.

Loss on Sale of Property, Plant and Equipment

The Company reported a loss on
sale of property, plant and equipment of $-0- and $41,661 during the three months ended March 31, 2025, and 2024, respectively.

Income (loss) before Income Tax Benefit

As a result of the above, we reported
net income (loss) before income tax benefit of $4,267,082 and $(3,943,268) for the three months ended March 31, 2025 and 2024, respectively,
an improvement of $8,210,350 (208%).

Income Tax Benefit

We recorded an income tax benefit
of $-0- for the three months ended March 31, 2025 and 2024, respectively. The effective tax