Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 310

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 2
Chunk 310
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 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 unit based on discounted cash flows. This analysis requires significant judgments,
including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation
of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of
our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.
The weighted average cost of capital used in our most recent impairment test ranged from 20.9% to 32.5%. We also applied a market approach,
which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple,
to apply to the operating results of the reporting units. The primary market multiples used are revenue and earnings before interest,
taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test,
for all of the reporting units.

The
combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of Common Stock on the
date of valuation, while considering a reasonable control premium. We consider a reporting unit’s fair value to be substantially
in excess of the reporting unit’s carrying value at a 25% premium or greater. Based on our most recent impairment test, the video
solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and
entertainment segments were determined to be impaired.

We
held goodwill of $5,480,966 as of September 30, 2024, related to businesses within our revenue cycle management segment. We held goodwill
of $6,112,507 as of September 30, 2024, respectively, related to businesses within our entertainment segment. As a result of our September
30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and the entertainment reporting
units exceeded its estimated fair values. Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, related to the goodwill
carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of $307,000, related