Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 97

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 97
---
conditions are less favorable than those projected by management or significant engineering changes to our products that are not anticipated
and appropriately managed, additional inventory write-downs may be required in excess of the inventory reserves already established.

57

Goodwill and other intangible
assets. When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed on the date of
acquisition, which may include a significant amount of intangible assets such as customer relationships, software and content, as well
as goodwill. When determining the fair values of the acquired intangible assets, we consider, among other factors, analyses of historical
financial performance and an estimate of the future performance of the acquired business. The fair values of the acquired intangible assets
are primarily calculated using an income approach that relies on discounted cash flows. This method starts with a forecast of the expected
future net cash flows for the asset and then adjusts the forecast to present value by applying a discount rate that reflects the risk
factors associated with the cash flow streams. We consider this approach to be the most appropriate valuation technique because the inherent
value of an acquired intangible asset is its ability to generate future income. In a typical acquisition, we engage a third-party valuation
expert to assist us with the fair value analyses for acquired intangible assets.

Determining the fair values of
acquired intangible assets requires us to exercise significant judgment. We select reasonable estimates and assumptions based on evaluating
a number of factors, including, but not limited to, marketplace participants, consumer awareness and brand history. Additionally, there
are significant judgments inherent in discounted cash flows such as estimating the amount and timing of projected future cash flows, the
selection of discount rates, hypothetical royalty rates and contributory asset capital charges. Specifically, the selected discount rates
are intended to reflect the risk inherent in the projected future cash flows generated by the underlying acquired intangible assets.

Determining an acquired intangible
asset’s useful life also requires significant judgment and is based on evaluating a number of factors, including, but not limited
to, the expected use of the asset, historical client retention rates, consumer awareness and trade name history, as well as any contractual
provisions that could limit or extend an asset’s useful life.

The Company’s goodwill is
evaluated in accordance with FASB ASC Topic 350, which requires goodwill to be assessed for impairment at least annually and whenever
events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. In addition,