Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 96

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 96
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 excess and obsolescence. Management uses its best judgment to estimate appropriate reserves based on this analysis. In addition,
we adjust the carrying value of inventory if the current market value of that inventory is below its cost.

Inventories consisted of the following
at March 31, 2025 and December 31, 2024:

    March
31,
                                                                               2025  
    December
                                            31,
                                                                                2024 
  
    Raw material and component parts– video solutions segment 
    $2,590,526  
    $2,589,804 
  
    Work-in-process– video solutions segment 
     71,592  
     4,906 
  
    Finished goods – video solutions segment 
     1,301,474  
     1,655,317 
  
    Finished goods – entertainment segment 
     174,061  
     505,694 
  
    Subtotal 
     4,137,653  
     4,755,721 
  
    Reserve for excess and obsolete inventory– video solutions segment 
     (1,600,459) 
     (2,037,252)
  
    Reserve for excess and obsolete inventory – entertainment segment 
     (48,083) 
     (132,403)
  
    Total inventories 
    $2,489,111  
    $2,586,066 

We balance the need to maintain
strategic inventory levels to ensure competitive delivery performance to our customers against the risk of inventory obsolescence due
to changing technology and customer requirements. As reflected above, our inventory reserves represented 40% of the gross inventory balance
at March 31, 2025, compared to 46% of the gross inventory balance at December 31, 2024. We had $1,648,542 and $2,169,655 in reserves for
obsolete and excess inventories at March 31, 2025 and December 31, 2024, respectively. The decrease in the inventory reserve is primarily
due to the reduction in finished goods and movement of excess inventory. Additionally, the Company determined a reasonable reserve for
inventory held at the ticket operating segment, in which some inventory items sell below cost or go unsold, thus having to be fully written-off
following the event date. We believe the reserves are appropriate given our inventory levels as of March 31, 2025.

If actual future demand or market