Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 151

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 8
Chunk 151
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 as of September 30,
2024 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 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.

    17

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