Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 93

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 93
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Critical Accounting Estimates

Our significant accounting policies
are summarized in Note 1, “Nature of Business and Summary of Significant Accounting Policies,” to our condensed consolidated
financial statements. While the selection and application of any accounting policy may involve some level of subjective judgments and
estimates, we believe the following accounting policies and estimates are the most critical to our financial statements, potentially involve
the most subjective judgments in their selection and application, and are the most susceptible to uncertainties and changing conditions:

    ●
    Revenue Recognition / Allowance for Doubtful Accounts;

    ●
    Allowance for Excess and Obsolete Inventory;

    ●
    Goodwill and other intangible assets;

    ●
    Warranty Reserves;

    ●
    Fair value of assets and liabilities acquired in business combinations;

    ●
    Fair value of warrant derivative liabilities;

    ●
    Stock-based Compensation Expense; and

    ●
    Accounting for Income Taxes.

Revenue Recognition / Allowances
for Doubtful Accounts. Revenue is recognized for the shipment of products or delivery of service when all five of the following
conditions are met:

    (i)
    Identify the contract with the customer;

    (ii)
    Identify the performance obligations in the contract;

    (iii)
    Determine the transaction price;

    (iv)
    Allocate the transaction price to the performance obligations in the contract; and

    (v)
    Recognize revenue when a performance obligation is satisfied.

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We consider the terms and conditions
of the contract and our customary business practices in identifying our contracts under ASC 606. We determine we have a contract when
the customer order is approved, we can identify each party’s rights regarding the services to be transferred, we can identify the
payment terms for the services, we have determined the customer has the ability and intent to pay and the contract has commercial substance.
At contract inception we evaluate whether the contract includes more than one performance obligation. We apply judgment in determining
the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment
experience or, in the case of a new customer, credit and financial information pertaining to the customer.

Performance obligations promised
in a contract are identified based on the services and the products that will be transferred to the customer that are both capable of
being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily
available from third parties or from us, and are distinct in the