Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 141

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 8
Chunk 141
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 completing our 2023 annual impairment test, no
events or changes in circumstances were noted that required an interim goodwill impairment test until the fiscal third quarter of 2024,
when events occurred that we considered triggering events.

During the third fiscal
quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in demand for our
services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease in our
stock price. Therefore, we performed an interim impairment test as of September 30, 2024. Refer to Note 4. Goodwill and Other
Intangible Assets for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value
measurements. The Company also assessed potential impairments of its long-lived assets as of December 31, 2024 and concluded that
there was no additional impairment as compared to its September 30, 2024 interim assessment. After completing our annual impairment
test as of December 31, 2024, no events or changes in circumstances were noted that triggered the requirement for an interim
goodwill impairment test for the fiscal first and second quarters of 2025.

Intangible assets include
deferred patent costs, license agreements, trademarks and trade names. Legal expenses incurred in preparation of patent application have
been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not
granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned
the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments
to obtain exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs
over their estimated useful life on a straight-line method.

Fair value of assets and liabilities acquired
in business combinations: 

The Company allocates the
amount it pays for each acquisition to the assets acquired and liabilities assumed based on their fair values at the date of acquisition,
including identifiable intangible assets which arise from a contractual or legal right or are separable from goodwill. The Company bases
the fair value of identifiable intangible assets acquired in a business combination on detailed valuations that use information and assumptions
provided by management to valuation specialists, which consider management’s best estimates of inputs and assumptions that a market
participant would use. The Company allocates any excess purchase price that exceeds the fair value of the