Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 109

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 1
Chunk 109
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64% for the six months ended June 30, 2024.

56

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 six 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 $2,107,401 for the six months ended June 30, 2025, compared to $1,766,821 for the six months ended June 30, 2024. Cost of
service revenues as a percentage of service revenues for the entertainment segment increased to 81% for the six months ended June 30,
2025 as compared to 73% for the six months ended June 30, 2024.

Gross Profit

Overall gross profit for the
six 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:

    Six months ended June 30, 

    2025  
    2024 
  
    Gross Profit: 

    Video Solutions 
    $926,539  
    $853,534 
  
    Revenue Cycle Management 
     1,016,726  
     1.065,137 
  
    Entertainment 
     (974,391) 
     (154,841)
  
    Total Gross Profit 
    $968,874  
    $1,763,830 

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 90% for the six months
ended June 30, 2025 from 84% for the six 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 as compared to the 2024 Festival.

Selling,