Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 115

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 8
Chunk 115
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 of September 30, 2024 and concluded that there was an impairment
which was recorded during the year ended December 31, 2024. Subsequent to completing our 2023 annual impairment test, no events or changes
in circumstances were noted that required an interim goodwill impairment test until the fiscal third quarter of 2024, when events occurred
that we considered triggering events.

    12

During the third fiscal quarter
of 2024, management determined that triggering events had occurred resulting from the additional decline in demand for our services, prolonged
economic uncertainty, 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 September 30, 2024. Refer to Note 4. Goodwill and Other Intangible Assets for additional
details on the interim impairment test, valuation methodologies, and inputs used in the fair value measurements. The Company also assessed
potential impairments of its long-lived assets as of December 31, 2024 and concluded that there was no additional impairment as compared
to its September 30, 2024 interim assessment. Subsequent to completing our annual impairment test as of December 31, 2024, no events or
changes in circumstances were noted that triggered the requirement for an interim goodwill impairment test for the fiscal first quarter
of 2025.

Intangible assets include deferred
patent costs, license agreements, trademarks and trade names. Legal expenses incurred in preparation of patent application have been deferred
and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not granted will
be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned the exclusive
rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments to obtain exclusive
rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs over their estimated
useful life on a straight-line method.

Fair value of assets and liabilities acquired in
business combinations: 

The Company allocates the amount
it pays for each acquisition to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including
identifiable intangible assets which arise from a contractual or legal right or are separable from goodwill. The Company bases the fair
value of identifiable intangible assets acquired in a business combination on detailed valuations that use information and assumptions
provided by