Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 13

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 13
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 Bermuda. It will provide primarily liability insurance coverage to
the Company for which insurance may not be currently available or economically feasible in today’s insurance marketplace. The Company
formed Kustom 440, Inc. in 2022 to create unique entertainment experiences directly for consumers.

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’ ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products,
each of which is distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether
the price is subject to refunds or adjustment to determine the net consideration to which it expects to be entitled. As the Company’s
standard payment terms are generally less than one year for product sales (although some subscriptions for services may reach out 3-5
years), it has elected the practical expedient under ASC 606-10-32-18 to not