Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 18

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 18
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 retains its association with a particular acquisition, and all of the activities within
a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.

Traditionally, goodwill impairment
testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying
amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the
reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment,
if any. Step two involves calculating an implied fair value of goodwill. The Company has adopted ASU 2017-04 which simplifies subsequent
goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the Company compares the fair value of a
reporting unit with its respective carrying value and recognizes an impairment charge for the amount by which the carrying amount exceeded
the reporting unit’s fair value.

The Company determines the fair
value of its reporting units using a weighting of the income and market valuation approaches. The income approach applies 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. Under the market approach,
we estimate the fair value based on multiples of comparable public companies and precedent transactions. Significant estimates in the
income and market approach include: future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free
debt-free net working capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate, selection of
guideline public companies and revenue market multiples.

Long-lived and Other Intangible
Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC
360, Accounting for the Impairment or Disposal of Long-lived Assets. An impairment review is performed whenever events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable. The Company groups its assets at the lowest level for which identifiable
cash flows are largely independent of