Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 24

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 24
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, and inputs used in the fair value measurements.
The Company also assessed potential impairments of its long-lived assets as of December 31, 2024 and concluded that there was no additional
impairment as compared to its September 30, 2024 interim assessment. After completing our annual impairment test as of December 31, 2024,
no events or changes in circumstances were noted that triggered the requirement for an interim goodwill impairment test for the nine months ended September 30, 2025.

    10

Intangible
assets include deferred patent costs, license agreements, trademarks and trade names. Legal expenses incurred in preparation of patent
application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications
that are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which
it has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require
upfront payments to obtain exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes
such costs over their estimated useful life on a straight-line method.

Fair
value of assets and liabilities acquired in business combinations:

The
Company allocates the amount it pays for each acquisition to the assets acquired and liabilities assumed based on their fair values at
the date of acquisition, including identifiable intangible assets which arise from a contractual or legal right or are separable from
goodwill. The Company bases the fair value of identifiable intangible assets acquired in a business combination on detailed valuations
that use information and assumptions provided by management to valuation specialists, which consider management’s best estimates
of inputs and assumptions that a market participant would use. The Company allocates any excess purchase price that exceeds the fair
value of the net tangible and identifiable intangible assets acquired to goodwill. The use of alternative valuation assumptions, including
estimated growth rates, cash flows, discount rates and estimated useful lives could result in different purchase price allocations and
amortization expenses in current and future periods. Transaction costs associated with these acquisitions are expensed as incurred through
selling, general and administrative expenses on the condensed consolidated statement of operations. In those circumstances where an acquisition
involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the contingent payments
expected to be made as of the acquisition date. The Company re-measures this liability for each reporting period and records changes
in the fair value through