Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 228

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 228
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 gross profits is primarily due to lower revenue and a higher cost of sales as a percentage of revenue, particularly within
the entertainment segment’s service revenues. Cost of sales as a percentage of total revenues increased to 69.8% for the three
months ended September 30, 2025, from 57% in the prior-year period, resulting in margin compression. We are pursuing a multi-pronged
margin-improvement plan for the Entertainment business—focused on right-sizing, pricing discipline, and mix optimization.

Selling,
General and Administrative Expenses

Selling,
general and administrative expenses were $2,493,357 and $9,122,273 for the three months ended September 30, 2025 and 2024, respectively,
a decrease of $6,628,916 (72.7%). The decrease was primarily driven by fewer new advertising sponsorships and reductions in headcount
within selling, general and administrative functions as the Company right-sized operations across all segments. Additionally, the prior-year
period included a goodwill and intangible asset impairment charge that did not recur, further contributing to the year-over-year decrease.
Our selling, general and administrative expenses as a percentage of sales decreased to 55% for the three months ended September 30, 2025
compared to 225% in the same period in 2024. The significant components of selling, general and administrative expenses are as follows:

    For the three months ended 

    September 30, 

    2025  
    2024 
  
    Research and development expense 
    $137,755  
    $210,818 
  
    Selling, advertising and promotional expense 
     110,006  
     414,727 
  
    General and administrative expense 
     2,245,596  
     3,666,728 
  
    Goodwill and intangible asset impairment charge 
     —  
     4,830,000 

    Total 
    $2,493,357  
    $9,122,273 

Research
and development expense. Our research and development expenses totaled $137,755 and $210,818 for the three months ended September
30, 2025 and 2024, respectively which represents a decrease of $73,063 (34.7%). The decrease in research and development expense reflects
a narrower project portfolio and a reallocation of resources toward sustaining engineering and targeted enhancements, including reductions
in