Company: DGLY
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001641172-25-024667
Chunk: 292

Company: DIGITAL ALLY, INC.
Filing Date: 2025-08-18
Form: 10-Q
Item: Part I, Item 2
Chunk 292
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641,465  
    $2,589,804 
  
    Work-in-process– video solutions segment 
     61,831  
     4,906 
  
    Finished goods – video solutions segment 
     1,125,339  
     1,655,317 
  
    Finished goods – entertainment segment 
     299,165  
     505,694 
  
    Subtotal 
     4,127,800  
     4,755,721 
  
    Reserve for excess and obsolete inventory– video solutions segment 
     (1,559,160) 
     (2,037,252)
  
    Reserve for excess and obsolete inventory – entertainment segment 
     (102,534) 
     (132,403)
  
    Total inventories 
    $2,466,106  
    $2,586,066 

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 June 30, 2025, compared to 46% of the gross inventory balance at December 31, 2024. We had $1,661,694 and $2,169,655 in reserves for
obsolete and excess inventories at June 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 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 June 30, 2025.

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