Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 257

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 257
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 multiple,
to apply to the operating results of the reporting units. The primary market multiples used are revenue and earnings before interest,
taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test,
for all of the reporting units.

The
combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of Common Stock on the
date of valuation, while considering a reasonable control premium. We consider a reporting unit’s fair value to be substantially
in excess of the reporting unit’s carrying value at a 25% premium or greater. Based on our most recent impairment test, the video
solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and
entertainment segments were determined to be impaired.

We
held goodwill of $5,480,966 as of September 30, 2024, related to businesses within our revenue cycle management segment. We held goodwill
of $6,112,507 as of September 30, 2024, respectively, related to businesses within our entertainment segment. As a result of our September
30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and the entertainment reporting
units exceeded its estimated fair values. Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, related to the goodwill
carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of $307,000, related to the goodwill
carrying balance for the entertainment segment, both of which was included in goodwill and intangible asset impairment charge on our
Condensed Consolidated Statements of Operations for the three months ended September 30, 2024. The goodwill impairment was primarily
driven by recent performance of the revenue cycle management and entertainment reporting units since our annual impairment testing date,
as well as a delay in the projected timing of recovery. The remaining balance for the goodwill carrying balance related to businesses
within our revenue cycle management segment and entertainment segment was $1,158,966 and $5,805,507, respectively as of September 30,
2025 and December 31, 2024.

Warranty
Reserves. Historically, we recorded an assurance-type warranty liability related to hardware sold. As we have transitioned to
a cloud-based, subscription model in which devices are typically provided as part of the service rather than sold, the volume of products