Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 94

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 1
Chunk 94
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 stable at 62% for the three months ended June 30, 2025 as compared to 62% for the three months ended June 30, 2024.

The increase in entertainment
operating segment cost of service revenues is due to management right sizing the business working towards profitability. The entertainment
segment terminated several unprofitable sponsorships which required termination payments during the three months ended June 30, 2025,
that is expected to lead to improvements in costs of service revenues during the remainder of 2025. The entertainment segment cost of
service revenue was $1,094,131 for the three months ended June 30, 2025, compared to $652,273 for the three months ended June 30, 2024.
Cost of service revenues as a percentage of service revenues for the entertainment segment increased to 98% for the three months ended
June 30, 2025 as compared to 74% for the three months ended June 30, 2024.

Gross Profit

Overall gross profit for the
three months ended June 30, 2025 and 2024 was $(632,625) and $242,392, respectively, a decrease of $875,017 (361%). Gross profit by operating
segment was as follows:

    Three months ended June 30, 

    2025  
    2024 
  
    Gross Profit: 

    Video Solutions 
    $370,777  
    $287,840 
  
    Revenue Cycle Management 
     549,063  
     601,406 
  
    Entertainment 
     (1,552,465) 
     (646,854)
  
    Total Gross Profit 
    $(632,625) 
    $242,392 

The decrease in gross profits
is primarily due to a deterioration in our cost of sales as a percentage of sales particularly in our entertainment segment service product
and service revenues. The primary reason is the larger negative margins generated by our 2025 Country Stampede Music Festival as compared
to the 2024 Festival. There was an overall increase in the cost of sales as a percentage of overall revenues to 111% for the three months
ended June 30, 2025 from 96% for the three months ended June 30, 2024. The primary reason for the overall negative gross margins in 2025
is the larger negative margins generated by our 2025 Country Stampede Music Festival