Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 98

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 98
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 an impairment evaluation
of our amortizable intangible assets may also be performed if events or circumstances indicate potential impairment. Among the factors
that could trigger an impairment review are current operating results that do not align with our annual plan or historical performance;
changes in our strategic plans or the use of our assets; restructuring changes or other changes in our business segments; competitive
pressures and changes in the general economy or in the markets in which we operate; and a significant decline in our stock price and our
market capitalization relative to our net book value.

When performing our annual assessment
of the recoverability of goodwill, we initially perform a qualitative analysis evaluating whether any events or circumstances occurred
or exist that provide evidence that it is more likely than not that the fair value of any of our reporting units is less than the related
carrying amount. If we do not believe that it is more likely than not that the fair value of any of our reporting units is less than the
related carrying amount, then no quantitative impairment test is performed. However, if the results of our qualitative assessment indicate
that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then we perform a
two-step quantitative impairment test.

Evaluating the recoverability
of goodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of
our estimates are subject to uncertainty. Among the factors that we consider in our qualitative assessment are general economic conditions
and the competitive environment; actual and projected reporting unit financial performance; forward-looking business measurements; and
external market assessments. To determine the fair values of our reporting units for a quantitative analysis, we typically utilize detailed
financial projections, which include significant variables, such as projected rates of revenue growth, profitability and cash flows, as
well as assumptions regarding discount rates, the Company’s weighted average cost of capital and other data.

58

We performed an impairment test
as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the
additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when
and as expected and a further decrease in our stock price. Therefore, we performed an impairment test for our reporting units with remaining
goodwill.

The fair value of each reporting
unit was estimated using a weighting of the income and market valuation approaches. The income approach applied a fair value methodology
to each reporting