Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 256

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 256
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 that it is more likely than not that the fair value of any of our reporting
units is less than the related carrying amount. If we do not believe that it is more likely than not that the fair value of any of our
reporting units is less than the related carrying amount, then no quantitative impairment test is performed. However, if the results
of our qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective
carrying amount, then we perform a two-step quantitative impairment test.

Evaluating
the recoverability of goodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision
and reliability of our estimates are subject to uncertainty. Among the factors that we consider in our qualitative assessment are general
economic conditions and the competitive environment; actual and projected reporting unit financial performance; forward-looking business
measurements; and external market assessments. To determine the fair values of our reporting units for a quantitative analysis, we typically
utilize detailed financial projections, which include significant variables, such as projected rates of revenue growth, profitability
and cash flows, as well as assumptions regarding discount rates, the Company’s weighted average cost of capital and other data.

We
performed an impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event
had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off
transaction did not occur when and as expected and a further decrease in our 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