Company: DGLY
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021680
Chunk: 254

Company: DIGITAL ALLY, INC.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 8
Chunk 254
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906 
  
    Finished goods – video solutions segment 
     1,071,682  
     1,655,317 
  
    Finished goods – entertainment segment 
     435,077  
     505,694 
  
    Subtotal 
     4,389,427  
     4,755,721 
  
    Reserve for excess and obsolete inventory– video solutions segment 
     (1,659,289) 
     (2,037,252)
  
    Reserve for excess and obsolete inventory – entertainment segment 
     (107,596) 
     (132,403)
  
    Total inventories 
    $2,622,542  
    $2,586,066 

54

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 September 30, 2025, compared to 46% of the gross inventory balance at December 31, 2024. We had
$1,766,885 and $2,169,655 in reserves for obsolete and excess inventories at September 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 September 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 acquired intangible assets, we consider, among other factors, analyses
of historical financial performance and an estimate of the future performance of the acquired business. The fair