Company: DGLY
Filing Date: 2025-02-14
Form Type: 424B4
Source: 0001493152-25-006704
Chunk: 86

Company: DIGITAL ALLY, INC.
Filing Date: 2025-02-14
Form: 424B4
Chunk 86
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 |           3,533,839 |   |     |   |          4,623,489 |   |
| Finished goods - entertainment segment                             |     |   |             364,641 |   |     |   |            699,204 |   |
| Subtotal                                                           |     |   |           6,548,108 |   |     |   |          8,387,742 |   |
| Reserve for excess and obsolete inventory- video solutions segment |     |   |          (4,144,749 | ) |     |   |         (4,355,666 | ) |
| Reserve for excess and obsolete inventory - entertainment segment  |     |   |             (78,241 | ) |     |   |           (186,795 | ) |
| Total inventories                                                  |     | $ |           2,325,118 |   |     | $ |          3,845,281 |   |

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 65% of the gross inventory balance at September 30, 2024, compared to 54% of the gross inventory balance at December 31, 2023. We had $4,222,990 and $4,542,461 in reserves for obsolete and excess inventories at September 30, 2024 and December 31, 2023, 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 September 30, 2024.

If actual future demand or market conditions are less favorable than those projected by management or significant engineering changes to our products that are not anticipated and appropriately managed, additional inventory write-downs may be required in excess of the inventory reserves already established.

Goodwill and other intangible assets.When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed on the date of acquisition, which may include a significant amount of intangible assets such as customer relationships, software and content, as well as goodwill. When determining the fair values of the acquired