Company: DGLY
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001641172-25-011765
Chunk: 191

Company: DIGITAL ALLY, INC.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 8
Chunk 191
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bad debts have been negligible since we commenced deliveries during 2006.

For our entertainment segment,
our customers are mainly online visitors that pay at the time of the transaction, and we collect the service fees charged with the transaction.
Thus, leading to minimal risk for uncollectible accounts, to which we then consider a specific reserve for bad debts based on their individual
circumstances. As we continue to learn more about the collectability related to this recent acquisition, we will track historical bad
debts and continue to assess appropriate reserves.

For our revenue cycle management
segment, our customers are mainly medium to large healthcare organizations that are charged monthly upon the execution of our services.
Being these customers are healthcare organizations with minimal risk for uncollectible accounts, we consider a specific reserve for bad
debts based on their individual circumstances. As we continue to learn more about the collectability related to this recently added segment,
we will track historical bad debts and continue to assess appropriate reserves.

Allowance for Excess and
Obsolete Inventory. We record valuation reserves on our inventory for estimated excess or 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 March 31, 2025 and December 31, 2024:

    March
31,
                                                                               2025  
    December
                                            31,
                                                                                2024 
  
    Raw material and component parts– video solutions segment 
    $2,590,526  
    $2,589,804 
  
    Work-in-process– video solutions segment 
     71,592  
     4,906 
  
    Finished goods – video solutions segment 
     1,301,474  
     1,655,317 
  
    Finished goods – entertainment segment 
     174,061  
     505,694 
  
    Subtotal 
     4,137,653  
     4,755,721 
  
    Reserve for excess and obsolete inventory– video solutions segment 
     (1,600,459)