Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 307

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 2
Chunk 307
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 obsolete inventory items.
The amount of the reserve is equal to the difference between the cost of the inventory and the estimated market value based upon assumptions
about future demand and market conditions. On a quarterly basis, management performs an analysis of the underlying inventory to identify
reserves needed for 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 September 30, 2025 and December 31, 2024:

    September 30, 2025  
    December 31, 2024 
  
    Raw material and component parts– video solutions segment 
    $2,833,268  
    $2,589,804 
  
    Work-in-process– video solutions segment 
     49,400  
     4,906 
  
    Finished goods – video solutions segment 
     1,071,682  
     1,655,317 
  
    Finished goods – entertainment segment 
     435,077  
     505,694 
  
    Subtotal 
     4,389,427  
     4,755,721 
  
    Reserve for excess and obsolete inventory– video solutions segment 
     (1,659,289) 
     (2,037,252)
  
    Reserve for excess and obsolete inventory – entertainment segment 
     (107,596) 
     (132,403)
  
    Total inventories 
    $2,622,542  
    $2,586,066 

54

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 September 30, 2025, compared to 46% of the gross inventory balance at December 31, 2024. We had
$1,766,885 and $2,169,655 in reserves for obsolete and excess inventories at September 30, 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