Company: DGLY
Filing Date: 2025-01-24
Form Type: S-1
Source: 0001493152-25-003451
Chunk: 268

Company: DIGITAL ALLY, INC.
Filing Date: 2025-01-24
Form: S-1
Chunk 268
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, the fact that 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 the 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 21% 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.

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 20%
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 and December 31, 2023, related to businesses within our revenue cycle management segment. We held goodwill
of $6,112,507 and $5,886,548 as of September 30, 2024 and December 31, 2023, 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