Company: DGLY
Filing Date: 2025-01-24
Form Type: S-1
Source: 0001493152-25-003451
Chunk: 153

Company: DIGITAL ALLY, INC.
Filing Date: 2025-01-24
Form: S-1
Chunk 153
---
 that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill, Indefinite Life Intangibles and Other Intangibles Impairment Assessments – Entertainment/Ticketing Reporting Unit – Refer to Notes 1, 8 and 22 to the consolidated financial statements

Critical Audit Matter Description

As described in Note 22 to the consolidated financial statements, the Company’s goodwill and indefinite life intangible asset balance was $5,886,547 and $600,000, respectively as of December 31, 2023. The Company also has amortizable identifiable intangible assets of $5,600,000 and $600,000 which are being amortized over 5 years and 4 years, respectively, and are related to the Entertainment/Ticketing reporting unit. Management tests these assets annually for impairment or more frequently when potential impairment triggering events are present. Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying value. Management uses a market approach to estimate the fair value of its reporting unit. The key assumptions and estimates utilized in the market approach primarily include market multiples, peer group and comparable transaction selection and selection of relevant financial matrices for concluding the fair value of reporting unit, and future levels of revenue growth.

The principal considerations for our determination that performing procedures relating to the goodwill and intangible asset impairment assessments of the Entertainment/Ticketing reporting unit is a critical audit matter because (i) the significant judgment used by management when determining the fair value estimates of the reporting units; (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the significant assumptions used in management’s fair value estimates; and (iii) the audit effort involved in the use of professionals with specialized skill and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion