Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 102

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 102
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 ended September 30, 2025 as compared to 58.4% for the three months ended September 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
September 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 $1,111,577 for the three months ended September 30, 2025, compared to $559,143 for the three months
ended September 30, 2024. Cost of service revenues as a percentage of service revenues for the entertainment segment increased to 85.8%
for the three months ended September 30, 2025 as compared to 74.0% for the three months ended September 30, 2024.

Gross
Profit

Overall
gross profit for the three months ended September 30, 2025 and 2024 was $1,371,575 and $1,739,974, respectively, a decrease of $368,399
(21.2%). Gross profit by operating segment was as follows:

    Three months ended September 30, 

    2025  
    2024 
  
    Gross Profit: 

    Video Solutions 
    $670,949  
    $769,063 
  
    Revenue Cycle Management 
     510,953  
     666,723 
  
    Entertainment 
     189,673  
     304,188 
  
    Total Gross Profit 
    $1,371,575  
    $1,739,974 

42

The
decrease in 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,