Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 17

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 17
---
 as of December 31, 2024 has been derived from the audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

For
further information, refer to the audited consolidated financial statements and footnotes included in the Company’s annual report
on Form 10-K for the year ended December 31, 2024.

Basis
of Consolidation:

The
accompanying condensed consolidated financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries,
Digital Ally International, Inc., Digital Ally Healthcare, LLC, TicketSmarter, Inc., Kustom Entertainment, Inc., Kustom 440, Inc., and
its majority-owned subsidiary Nobility Healthcare, LLC. All intercompany balances and transactions have been eliminated during consolidation.

Fair
Value of Financial Instruments:

The
carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated
notes payable approximate fair value because of the short-term nature of these items.

Revenue
Recognition:

The
Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers, and all
related appropriate guidance. The Company recognizes revenue under the core principle to depict the transfer of control to its customers
in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company applies
the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract,
(3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize
revenue when a performance obligation is satisfied.

The
Company has two different revenue streams, product and service, represented through its three segments. The Company reports all revenues
on a gross basis, other than service revenues from the Company’s entertainment and revenue cycle management segments, Revenues
generated by all segments are reported net of sales taxes.

Video
Solutions

The
Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the
customer. In situations where sales are to a distributor, the Company has concluded its contracts are with the distributor as the Company
holds a contract bearing enforceable rights and obligations only with the distributor. As part of its consideration for the contract,
the Company evaluates certain factors including the customers’