Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 116

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 8
Chunk 116
---
 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 net tangible and identifiable
intangible assets acquired to goodwill. The use of alternative valuation assumptions, including estimated growth rates, cash flows, discount
rates and estimated useful lives could result in different purchase price allocations and amortization expense in current and future periods.
Transaction costs associated with these acquisitions are expensed as incurred through selling, general and administrative expense on the
condensed consolidated statement of operations. In those circumstances where an acquisition involves a contingent consideration arrangement,
the Company recognizes a liability equal to the fair value of the contingent payments expected to be made as of the acquisition date.
The Company re-measures this liability each reporting period and records changes in the fair value through operating income within the
condensed consolidated statements of operations.

Warrant Derivative Liabilities:

In accordance with FASB ASC 815-40,
Derivatives and Hedging: Contracts in an Entities Own Equity, entities must consider whether to classify contracts that may be settled
in its own stock, such as warrants to purchase shares of Common Stock, as equity of the entity or as an asset or liability. If an event
that is not within the entity’s control could require net cash settlement, then the contract should be classified as an asset or
a liability rather than as equity. We have determined that because the terms of the various warrants issued and remain outstanding, include
a provision that entitles all the warrant holders to receive cash for their warrants in the event of a qualifying cash tender offer, while
only certain of the holders of the underlying shares of Common Stock would be entitled to cash, our warrants should be classified as liability
measured at fair value, with changes in fair value each period reported in earnings. Volatility in the price of our Common Stock may result
in significant changes in the value of the derivatives and resulting gains and losses on our condensed consolidated statement of operations.

Segment Reporting

The accounting guidance on Segment
Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected
information of those segments to be presented in the condensed consolidated financial statements. Operating segments are identified as
components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision
maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess
performance. The Company’s three operating segments are