What changed in this filing

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Item 1. Business

2022-04-15 compared with 2021-03-31 · 540 added, 502 removed, 28 unchanged (97% of the section changed)

We produce digital video

imaging, storage products and disinfectant and related safety products for use in law enforcement, security and commercial applications.

Our current products include, in-car digital video/audio recorders contained in a rear-view mirror for use in law enforcement

and commercial fleets;

a system that provides its law enforcement customers with audio/video surveillance from multiple vantage

points and hands-free automatic activation of body-worn cameras and in-car video systems;

a miniature digital video system designed

to be worn on an individual’s body;

and cloud storage solutions.

Additionally, the Company has recently added two new lines

of branded products:

(1) the ThermoVu™

which is a line of self-contained temperature monitoring stations that provides alerts

and controls facility access when an individual’s temperature exceeds a pre-set threshold and (2) our Shield™

disinfectants

and cleansers which are for use against viruses and bacteria.

The Company began offering its Shield™

disinfectants

and cleansers to its law enforcement and commercial customers late in the second quarter of 2020.

We have active research

and development programs to adapt our technologies to other applications.

We can integrate electronic, radio, computer, mechanical,

and multi-media technologies to create unique solutions to address needs in a variety of other industries and markets, including

mass transit, school bus, taxicab and the military.

We sell our products to law enforcement agencies, private security customers

and organizations and consumer and commercial fleet operators through direct sales domestically and third-party distributors internationally.

were incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc.

From that date until November 30, 2004, when we entered

into a Plan of Merger with Digital Ally, Inc., a Nevada corporation which was formerly known as Trophy Tech Corporation (the “Acquired

Company”), we had not conducted any operations and were a closely-held company.

In conjunction with the merger, we were

renamed Digital Ally, Inc.

From that date until November 30, 2004, when we entered into a

Plan of Merger with Digital Ally, Inc., a Nevada corporation which was formerly known as Trophy Tech Corporation (the “Acquired

Company”), we had not conducted any operations and were a closely-held company.

In conjunction with the merger, we were renamed

Digital Ally, Inc.

January 2, 2008, we commenced trading on the Nasdaq Capital Market under the symbol “DGLY.” We conduct our business from

14001 Marshall Drive, Lenexa, Kansas 66215.

Our telephone number is (913) 814-7774.

Our website address is www.digitalallyinc.com.

The contents of, or information

accessible through, our website are not part of this Annual Report on Form 10-K.

We make our filings with the SEC, including our Annual

Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as beneficial

ownership filings available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish

such reports to, the SEC.

Acquired Company, which was incorporated on May 16, 2003, engaged in the design, development, marketing and sale of bow hunting-related

Its principal product was a digital video recording system for use in the bow hunting industry.

We changed its business

plan in 2004 to adapt its digital video recording system for use in the law enforcement and security markets.

We began shipments

of our in-car digital video rear view mirror in March 2006.

January 2, 2008, we commenced trading on the Nasdaq Capital Market under the symbol “DGLY.”

We conduct our

business from 15612 College Blvd, Lenexa, Kansas 66219.

Our telephone number is (913) 814-7774.

COVID-19 pandemic represents a fluid situation that presents a wide range of potential impacts of varying durations for different

global geographies, including locations where we have offices, employees, customers, vendors and other suppliers and business

We changed its business plan

in 2004 to adapt its digital video recording system for use in the law enforcement and security markets.

We began shipments of our in-car

digital video rear view mirror in March 2006.

Over the years, the Company developed additional products and services that complemented

its core digital video recording systems and broadened the scope of products and services available to its customers including an expansion

beyond the traditional law enforcement channel to include commercial users.

Company has recently expanded beyond its legacy business digital video recording system for use in the law enforcement and security markets

to two new reportable operating segments.

Currently, the Company’s reportable operating segments are:

1) the Video Solutions Segment,

2) the Revenue Cycle Management Segment and 3) the Ticketing Segment.

The Video Solutions Segment is our legacy business that produces

digital video imaging, storage products, disinfectant and related safety products for use in law enforcement, security and commercial

applications.

This segment includes both service and product revenues through our subscription models offering cloud and warranty solutions,

and hardware sales for video and health safety solutions.

The Revenue Cycle Management Segment provides working capital and back-office

services to a variety of healthcare organizations throughout the country, as a monthly service fee.

The Ticketing Segment acts as an

intermediary between ticket buyers and sellers within our secondary ticketing platform, Ticketsmarter.com, and we also acquire tickets

from primary sellers to then sell through various platforms.

The following table sets forth the Company’s total revenue and the

revenue derived from each reportable operating segment:

Years Ended December 31,

Net Revenues:

Video Solutions

Revenue Cycle Management

Total Net Revenues

information regarding each reportable operating segment is also included in Note 21 entitled Segment Data of “Notes to Consolidated

Financial Statements”.

Solutions Operating Segment

Within the Video Solutions

reportable operating segment we supply technology-based products utilizing our portable digital video and audio recording capabilities

for the law enforcement and security industries and for the commercial fleet and mass transit markets.

We have the ability to integrate

electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our customers’ requests.

Our products include:

the EVO-HD, DVM-800 and DVM-800 Lite, which are in-car digital video systems for law enforcement and

commercial markets;

the FirstVu body-worn camera line, consisting of the FirstVu Pro, FirstVu II, and the FirstVu HD;

our patented and revolutionary VuLink product, which integrates our body-worn cameras with our in-car systems by

providing hands-free automatic activation for both law enforcement and commercial markets;

the FLT-250, DVM-250, and DVM-250 Plus,

which are our commercial line of digital video mirrors that serve as “event recorders” for the commercial fleet and mass

transit markets;

FleetVu, EVO Web, and VuVault are our cloud-based evidence management systems.

We further diversified

and broadened our product offerings in 2020, by introducing two new lines of branded products:

(1) the ThermoVu®

which is a line of self-contained temperature monitoring stations that provides alerts and controls facility access when an individual’s

temperature exceeds a pre-set threshold and (2) our Shield™ disinfectants and cleansers which are for use against viruses and bacteria.

We began offering our Shield™ disinfectants and cleansers to our law enforcement and commercial customers late in the second quarter

Cycle Management Operating Segment

entered the revenue cycle management operating segment late in the second quarter of 2021 with the formation of our wholly owned

subsidiary, Digital Ally Healthcare, Inc.

and its majority-owned subsidiary Nobility Healthcare, LLC (“Nobility Healthcare”).

Nobility Healthcare completed its first acquisition on June 30, 2021, when it acquired a private medical billing company, and a second

acquisition on August 31, 2021 upon the completion of its acquisition of another private medical billing company, in which we will assist

in providing working capital and back-office services to healthcare organizations throughout the country.

Our assistance consists of

insurance and benefit verification, medical treatment documentation and coding, and collections.

Through our expertise and experience

in this field, we maximize our customers’ service revenues collected, leading to substantial improvements in their operating

margins and cash flows.

plan to continue growing our revenue cycle management operating segment primarily through a roll-up strategy.

Our revenue cycle management

operating segment’s acquisition targets include the approximate 6,000 medical billing companies in the United States, most of which

are relatively small and closely-held private concerns.

Each year a portion of these company owners sell because they want to retire

or exit the business for other pursuits.

The revenue cycle management market is quite fragmented with the largest companies having less

than an estimated 5% of the total market.

The Company formed the revenue cycle management operating segment and will provide the capital

to make acquisitions and pursue the revenue cycle management company roll-up strategy.

completion of the acquisitions our revenue cycle management operating segment processes and submits the medical reimbursement claims

of its physician clients to commercial health insurance companies and Medicare/Medicaid for the services the physicians have rendered

to their patients so they can receive payments.

Our revenue cycle management operating segment receives a percentage of the cash collected

for its service fees.

The revenue cycle management agreements with physician clients generally renew automatically on an annual basis.

Operating Segment

entered into the ticketing operating segment through the formation of our wholly owned subsidiary, TicketSmarter, Inc.

(“TicketSmarter”)

and its completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC, on September 1, 2021.

TicketSmarter provides ticket sales,

partnerships, and mainly, ticket resale services through its online ticketing marketplace for live events, TicketSmarter.com.

TicketSmarter offers tickets for over 125,000 live events through its platform, for a wide range of events, including concerts, sporting

events, theatres, and performing arts, throughout the country.

TicketSmarter

has grown rapidly since its launch in early 2019, and currently boasts more than 48 million tickets for sale over 125,000 live events,

primarily serving the North American market.

It has built its brand with a number of high-profile partnerships, which include being the

official ticket resale partner of Rose Bowl Stadium in California and the title sponsor of the TicketSmarter Birmingham Bowl.

the official ticket resale partner of more than 35 collegiate conferences and 250 individual universities.

Goody Tickets was launched

as a ticket brokerage nearly a decade earlier in Overland Park, Kansas, where it has remained.

Company plans to grow the Ticketing operating segment through organic growth of its existing business lines.

The Company will also provide

the working capital necessary to expand its sponsorships and partnerships with other sporting teams and other entertainment venues and

organizations,

– 19 Pandemic

COVID-19 pandemic represents a fluid situation that presents a wide range of potential impacts of varying durations for different global

geographies, including locations where the Company has offices, employees, customers, vendors and other suppliers and business partners.

most US-based businesses, the COVID-19 pandemic and efforts to mitigate the same began to have impacts on our business in March 2020.

By that time, much of our first fiscal quarter was completed.

During the remainder of the year ended December 31, 2020,

we observed recent decreases in demand from certain customers, including primarily our law-enforcement and commercial customers.

the fact that our products are sold through a variety of distribution channels, we expect our sales will experience more volatility

as a result of the changing and less predictable operational needs of many customers as a result of the COVID-19 pandemic.

are aware that many companies, including many of our suppliers and customers, are reporting or predicting negative impacts from

COVID-19 on future operating results.

Although we observed significant declines in demand for our products from certain customers

during the year ended December 31, 2020, we believe that it remains too early for us to know the exact impact COVID-19 will have

on the long-term demand for our products.

We also cannot be certain how demand may shift over time as the impacts of the COVID-19

pandemic may go through several phases of varying severity and duration.

light of broader macro-economic risks and already known impacts on certain industries that use our products and services, we have

taken, and continue to take targeted steps to lower our operating expenses because of the COVID-19 pandemic.

We continue to monitor

the impacts of COVID-19 on our operations closely and this situation could change based on a significant number of factors that

are not entirely within our control and are discussed in this and other sections of this Annual Report on Form 10-K.

expect there to be material changes to our assets on our balance sheet or our ability to timely account for those assets.

in connection with the preparation of this Annual Report on Form 10-K, we reviewed the potential impacts of the COVID-19 pandemic

on goodwill and intangible assets and have determined there to be no material impact at this time.

We have also reviewed the potential

impacts on future risks to the business as it relates to collections, returns and other business-related items.

date, travel restrictions and border closures have not materially impacted our ability to obtain inventory or manufacture or deliver

products or services to customers.

However, if such restrictions become more severe, they could negatively impact those activities

in a way that would harm our business over the long term.

Travel restrictions impacting people can restrain our ability to assist

our customers and distributors as well as impact our ability to develop new distribution channels, but at present we do not expect

these restrictions on personal travel to be material to our business operations or financial results.

We have taken steps to restrain

and monitor our operating expenses and therefore we do not expect any such impacts to materially change the relationship between

costs and revenues.

most companies, we have taken a range of actions with respect to how we operate to assure we comply with government restrictions

and guidelines as well as best practices to protect the health and well-being of our employees and our ability to continue operating

our business effectively.

To date, we have been able to operate our business effectively using these measures and to maintain

internal controls as documented and posted.

We also have not experienced challenges in maintaining business continuity and

do not expect to incur material expenditures to do so.

However, the impacts of COVID-19 and efforts to mitigate the same have

remained unpredictable and it remains possible that challenges may arise in the future.

actions we have taken so far during the COVID-19 pandemic include, but are not limited to:

all employees who can work from home to work from home;

our IT networking capability to best assure employees can work effectively outside the office;

employees who must perform essential functions in one of our offices:

employees maintain a distance of at least six feet from

other employees whenever possible;

employees work in dedicated shifts to lower the risk all

employees who perform similar tasks might become infected by COVID-19;

employees stay segregated from other employees in the office

with whom they require no interaction;

employees to wear masks while they are in the office whenever

currently believe revenue for the year ending December 31, 2021 may decline year over year due to the conditions noted.

2020, we implemented a COVID-19 mitigation plan designed to further reduce our operating expenses during the pandemic.

taken to date include work hour and salary reductions for senior management.

These cost reductions are in addition to the significant

restructuring actions we initiated in the first quarter of 2020.

Based on our current cash position, our projected cash flow from

operations and our cost reduction and cost containment efforts to date, we believe that we will have sufficient capital and or

have access to sufficient capital through public and private equity and debt offerings to sustain operations for a period of one

year following the date of this filing.

If business interruptions resulting from the COVID-19 pandemic were to be prolonged or

expanded in scope, our business, financial condition, results of operations and cash flows would be negatively impacted.

continue to actively monitor this situation and will implement actions necessary to maintain business continuity.

We supply technology-based

products utilizing our portable digital video and audio recording capabilities for the law enforcement and security industries

and for the commercial fleet and mass transit markets.

We have the ability to integrate electronic, radio, computer, mechanical,

and multi-media technologies to create positive solutions to our customers’

Since that time, the COVID-19 pandemic has dramatically impacted the global health and economic environment, including millions of

confirmed cases, business slowdowns or shutdowns, labor shortages, supply chain challenges, changes in government spending and requirements,

regulatory challenges, inflationary pressures and market volatility.

We operate within the complex

integrated global supply chain for both vendors and customers.

As the COVID-19 pandemic dissipates at varying times and rates in different

regions around the world, there could be a prolonged negative impact on these global supply chains.

Our ability to continue operations

at specific facilities will be impacted by the interdependencies of the various participants of these global supply chains, which are

largely beyond our direct control.

A prolonged shut down of these global supply chains could have a material adverse effect on our business,

results of operations, cash flows and financial condition.

If our suppliers have increased

challenges with their workforce (including as a result of illness, absenteeism, reactions to health and safety or government requirements),

facility closures, timely access to necessary components, materials and other supplies at reasonable prices, access to capital, and access

to fundamental support services (such as shipping and transportation), they may be unable to provide the agreed-upon goods and services

in a timely, compliant and cost-effective manner.

We have incurred and may in the future incur additional costs and delays in our business

resulting from the COVID-19 pandemic, including as a result of higher prices, schedule delays or the need to identify and develop alternative

In some instances, we may be unable to identify and develop alternative suppliers, incurring additional liabilities under

our current contracts and hampering new ones.

Our customers have experienced, and may continue to experience, disruptions in their operations

and supply chains as a result of the COVID-19 pandemic, which can result in delayed, reduced, or canceled orders, or collection risks,

and which may adversely affect our results of operations.

Similarly, current, and future restrictions or disruptions of transportation,

such as reduced availability of air transport, port closures or delays, and increased border controls, delays or closures, can also impact

our ability to meet demand and could materially adversely affect us.

spread of COVID-19 caused us to modify our business practices (including employee travel, employee work locations, cancellation of physical

participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required

by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers.

Although we managed to continue most of our operations, the future course of the COVID-19 pandemic is uncertain and we cannot assure

that this global pandemic, including its economic impact, will not have a material adverse impact on our business, financial position,

results of operations and/or cash flows.

Video Operating Segment Products and Services

our video operating segment we supply technology-based products utilizing our portable digital video and audio recording

capabilities for the law enforcement and security industries and for the commercial fleet and mass transit markets.

ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our

customers’ requests.

Our products include:

and DVM-800 Lite, which are in-car digital video mirror systems for law enforcement;

the FirstVU and the FirstVU HD, which

are body-worn cameras;

our patented and revolutionary VuLink product, which integrates our body-worn cameras with our in-car

systems by providing hands-free automatic activation for both law enforcement and commercial markets;

the DVM-250 and DVM-250

Plus, which are our commercial line of digital video mirrors that serve as “event recorders”

for the commercial

fleet and mass transit markets;

the EVO-HD, DVM-800 and DVM-800 Lite, which are in-car digital video systems for

law enforcement and commercial markets;

the FirstVu body-worn camera line, consisting of the FirstVu Pro, FirstVu, and the FirstVu

our patented and revolutionary VuLink product integrates our body-worn cameras with our in-car systems by providing hands-free

automatic activation for both law enforcement and commercial markets;

the FLT-250, DVM-250, and DVM-250 Plus, which are our

commercial line of digital video mirrors that serve as “event recorders” for the commercial fleet and mass transit

and FleetVu and VuLink, which are our cloud-based evidence management systems.

We introduced

the EVO-HD product in the second quarter of 2019 and began full-scale deliveries in the third quarter 2019, which continued into

The EVO-HD is designed and built on a new and highly advanced technology platform that will become the platform for a new

family of in-car video solution products for the law enforcement and commercial markets.

We believe that the launch of these new

products will help to reinvigorate our in-car and body-worn systems revenues while diversifying and broadening the market for

our product offerings.

Additionally, we introduced two new lines of branded products:

(1) the ThermoVu™

which is a line

of self-contained temperature monitoring stations that provides alerts and controls facility access when an individual’s

temperature exceeds a pre-set threshold and (2) our Shield™

disinfectants and cleansers which are for use against viruses

and bacteria.

We began offering our Shield™

disinfectants and cleansers to our law enforcement and

commercial customers late in the second quarter of 2020.

The following describes our product portfolio.

Digital Video Mirror System for law enforcement –

EVO-HD, DVM-800 and DVM-800 Lite

In-car video systems for

patrol cars are now a necessity and have generally become standard.

Current systems are primarily digital based systems with cameras

mounted on the windshield and the recording device generally in the trunk, headliner, dashboard, console or under the seat of

Most manufacturers have developed and transitioned completely to digital video, and some have offered full high definition

(“HD”) level recordings, which is currently state-of-art for the industry.

digital video rear-view mirror unit is a self-contained video recorder, microphone and digital storage system that is integrated

into a rear-view mirror, with a monitor, global positioning system (“GPS”) and 900 megahertz (“MHz”) audio

Our system is more compact and unobtrusive than certain of our competitors because it requires no recording equipment

to be located in other parts of the vehicle.

in-car digital video rear-view mirror has the following features:

angle zoom color camera;

standards-based

video and audio compression and recording;

is concealed in the rear-view mirror, replacing factory rear-view mirror;

in rear-view mirror is invisible when not activated;

installed in any vehicle;

to integrate with body-worn cameras including auto-activation of either system;

audio/video data to the cloud, computers (wirelessly) and compact flash memory, or file servers;

MHz audio transceiver with automatic activation;

exact location of incident with integrated GPS;

using Windows Media Player;

wireless download of stored video evidence;

software protects the chain of custody;

to rugged and durable solid-state memory.

The Company launched

its in-car digital video platform under the name EVO-HD during the second quarter of 2019.

The EVO-HD is a next generation

system that offers a multiple HD in-car camera solution system with built-in patented VuLink auto-activation technology.

is built on a new and highly advanced technology platform that enables many new and revolutionary features, including auto

activation beyond the car and body camera.

We believe that no other provider can offer built-in patented VuLink auto-activation

The EVO-HD provides law enforcement officers with an easier to use, faster and more advanced system for capturing

video evidence and uploading than the Company’s competitors.

Additional features include:

remote cloud trigger feature that allows dispatchers to remotely start recordings;

audio/video play back;

connectivity via cell modem, including the planned deployment of the new 5G network;

real-time mapping and system health monitoring;

connectivity with built-in auto activation technology;

gigabyte internal storage and, up to 2 terabyte external solid-state drive storage.

The EVO-HD is designed

and built on a new and highly advanced technology platform that is expected to become the platform for a new family of

in-car video solution products for law enforcement.

The innovative EVO-HD technology replaces the current in-car mirror-based

systems with a miniaturized system that can be custom-mounted in the vehicle while offering numerous hardware configurations to

meet the varied needs and requirements of our law enforcement customers.

The EVO-HD can support up to four HD cameras,

with two cameras having pre-event and evidence capture assurance (“ECA”) capabilities to allow agencies to review

entire shifts.

An internal cell modem will allow for connectivity to the VuVault.net cloud, powered by Amazon Web Services (“AWS”)

and real time metadata when in the field.

Digital Video “Event Recorder”

System –

DVM-250 Plus for Commercial Fleets

Digital Ally provides

commercial fleets and commercial fleet managers with the digital video tools that they need to increase driver safety,

track assets in real-time and minimize the company’s liability risk while enabling fleet managers to operate the fleet at

an optimal level.

We market a product designed to address these commercial fleet markets with our DVM-250 Plus event recorders

that provide various types of commercial fleets with features and capabilities that are fully-customizable and

consistent with their specific application and inherent risks.

The DVM-250 Plus is a rear-view mirror based digital audio

and video recording system with many, but not all, of the features of our DVM-800 law enforcement mirror systems, which

we sell at a lower price point.

The DVM-250 Plus is designed to capture events, such as wrecks and erratic driving or other

abnormal occurrences, for evidentiary or training purposes.

The commercial fleet markets may find our units attractive from both

a feature and a cost perspective compared to other providers.

We believe that, due to our marketing efforts, commercial

fleets are adopting this technology, and in particular, the ambulance and taxi-cab markets.

Digital Ally offers a

suite of data management web-based tools to assist fleet managers in the organization, archival, and management of videos and

telematics information.

We further diversified and broadened our

product offerings in 2020, by introducing two new lines of branded products:

(1) the ThermoVu® which is a line of self-contained

temperature monitoring stations that provides alerts and controls facility access when an individual’s temperature exceeds a

pre-set threshold and (2) our Shield™ disinfectants and cleansers which are for use against viruses and bacteria.

offering our Shield™ disinfectants and cleansers to our law enforcement and commercial customers late in the second quarter of

We have recently entered the revenue

cycle management business late in the second quarter of 2021 with the formation of our wholly owned subsidiary,

Digital Ally Healthcare, Inc.

and its majority-owned subsidiary Nobility Healthcare.

Nobility Healthcare completed its first acquisition on June 30, 2021, when it acquired a private medical billing company, and a

second acquisition on August 31, 2021, upon the completion of its acquisition of another private medical billing company, in which

we will assist in providing working capital and back-office services to healthcare organizations throughout the country.

Additionally, through the formation of our wholly owned subsidiary, TicketSmarter and its

completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC, on September 1, 2021, we have entered into the online ticketing

marketplace for live events, through the online platform TicketSmarter.com.

Digital Video Mirror System for Law Enforcement – EVO-HD, DVM-800 and DVM-800 Lite

video systems for patrol cars are a necessity and have generally become standard.

Current systems are primarily digital based systems

with cameras mounted on the windshield and the recording device generally in the trunk, headliner, dashboard, console or under the seat

of the vehicle.

Company launched its in-car digital video platform under the name EVO-HD during the second quarter of 2019.

The EVO-HD is a revolutionary

in-car system that delivers versatility and reliability for law enforcement.

With built-in, patented auto-activation technology, EVO-HD

captures multiple recording angles in sync from a FirstVu PRO or FirstVu HD body-worn camera and up to four HD in-car cameras –

all from a single trigger.

The EVO-HD maximizes space and offers top-end reliability when paired with remote service capabilities.

An internal cell modem will allow for connectivity to the VuVault.net cloud, powered by Amazon Web Services (“AWS”) and real

time metadata when in the field.

Company offers the DVM-800, a continuation in the

family of highly successful digital video mirrored (DVM) systems developed by the Company.

The DVM-800 is a time-tested, compact,

powerful and easy-to-use solution designed for law enforcement.

The DVM-800 system has built-in road and driver facing

cameras and can record up to two external HD cameras.

The DVM-800 is compatible with the patented VuLink® auto-activation technology

and can be paired with a FirstVu HD body-worn camera.

Company also offers the DVM-800 Lite, an entry level system is a self-contained video recorder, microphone and digital storage

system that is integrated into a rear-view mirror and is designed for law enforcement.

The system can record up to two internal HD cameras.

Digital Video “Event Recorder” System – DVM-250 Plus and FLT-250 for Commercial Fleets

Ally provides commercial fleets and commercial fleet managers with the digital video tools that they need to increase driver safety,

track assets in real-time and minimize the company’s liability risk while enabling fleet managers to operate the fleet at an optimal

We market a product designed to address these commercial fleet markets with our DVM-250 Plus and FLT-250 event recorders that

provide various types of commercial fleets with features and capabilities that are fully-customizable and consistent with their specific

application and inherent risks.

DVM-250 Plus is a part of the DVM family and is designed for commercial fleets featuring built-in digital audio

and video recording technology and other features to provide commercial fleet managers unmatched driver and asset management –

all while delivering the return on investment that matters most:

the safety and security of drivers and passengers.

The DVM-250 Plus

is designed to capture events, such as wrecks and erratic driving or other abnormal occurrences, for evidentiary or training purposes.

The commercial fleet markets may find our units attractive from both a feature and a cost perspective compared to other providers.

to our marketing efforts, commercial fleets are beginning to adopt this technology, and in particular, the ambulance and taxi-cab

the first quarter of 2021, Digital Ally released the FLT-250, offering the same great features of the DVM-250 Plus in a new compact,

non-mirrored form factor that allows for multiple mounting options in any vehicle type for commercial fleets.

We believe that, due to

non-mirror-based aspect of this product, the FLT-250 will become more attractive for our potential customers, as it

is a much simpler plug and play option compared to mirror-based products.

Ally offers a suite of data management web-based tools to assist fleet managers in the organization, archival, and management of videos

and telematics information.

Within the suite, there are powerful mapping and reporting tools that are intended to optimize efficiency,

serve as training tools for teams on safety, and, ultimately, generate a significant return on investment for the organization.

The Company’s

management expects EVO-HD to become the platform for a new family of in-car video solution products for the commercial

The innovative EVO-HD technology is expected to replace the current in-car mirror-based systems with a miniaturized

system that can be custom-mounted in the vehicle, while offering numerous hardware configurations to meet the varied needs

and requirements of the Company’s commercial customers.

In its commercial market application, the EVO-HD can support

up to four HD cameras, with two cameras having pre-event and ECA capabilities to allow customers to review entire shifts.

cell modem will allow for connectivity to the FleetVU Manager cloud-based system for commercial fleet tracking and monitoring,

which is powered by AWS and real time metadata when in the field.

Body-Worn Digital Video System –

FirstVU HD for law enforcement and private security

system is also a derivative of our in-car video systems, but is much smaller and lighter and more rugged and water-resistant to

handle a hostile outdoor environment.

These systems can be used in many applications in addition to law enforcement and private

security and are designed specifically to be clipped to an individual’s pocket or other outer clothing.

The unit is self-contained

and requires no external battery or storage devices.

Current systems offered by competitors are digital based, but generally require

a battery pack and/or storage device to be connected to the camera by wire or other means.

We believe that our FirstVU HD product

is more desirable for potential users than our competitors’

offerings because of its video quality, small size, shape and

lightweight characteristics .

Our FirstVU HD integrates with our in-car video systems through our patented VuLink system

allowing for automatic activation of both systems.

Company’s management expects EVO-HD to become the platform for a new family of in-car video solution products for the commercial

The innovative EVO-HD technology is expected to replace the current in-car mirror-based systems with a miniaturized system that

can be custom-mounted in the vehicle, while offering numerous hardware configurations to meet the varied needs and requirements of the

Company’s commercial customers.

In its commercial market application, the EVO-HD can support up to four HD cameras, with two cameras

having pre-event and ECA capabilities to allow customers to review entire shifts.

An internal cell modem will allow for connectivity

to the FleetVu Manager cloud-based system for commercial fleet tracking and monitoring, which is powered by AWS and real time metadata

when in the field.

Body-Worn Digital Video System – FirstVu Pro, FirstVu II, and FirstVu HD for Law Enforcement and Private Security

2021, Digital Ally launched two next generation body-worn cameras and docking stations, refreshing the Company’s complete

ecosystem of evidence recording devices.

The latest body worn camera launched by the Company is the FirstVu Pro, the Company’s

flagship product in its family of next generation of technology.

The light weight, one-piece unit captures full HD video and audio, while

offering industry leading features such as live streaming, a full-color touchscreen display, an advanced image sensor with IR

LEDs, proprietary image distortion reduction, IP67 rated resisting dust & wind and is water submersible for 30 minutes at a depth

It is also MIL-STD-810G compliant capable of handling drops, shock, and vibration;

and will function flawlessly

in a wide temperature range.

addition to the FirstVu Pro, Digital Ally also added the FirstVu II to its family of next generation technology.

II is a one-piece device offering industry leading technology such as an articulating camera head, a full-color display, an advanced

image sensor, and GPS.

It can be used in law enforcement, private and event security and commercial segments.

Ally still carries the FirstVu HD, the two-piece body-worn camera which allows for multiple mounting options while minimizing

space and weight.

It can be used in law enforcement, private and event security and commercial segments.

This system is also a

derivative of our in-car video systems, but is much smaller and lighter and more rugged and water-resistant to handle a hostile outdoor

The FirstVu HD can be used in many applications in addition to law enforcement and private security and is

designed specifically to be clipped to an individual’s pocket or other outer clothing.

The unit is self-contained and requires

no external battery or storage devices.

Our FirstVU HD integrates with our in-car video systems through our patented VuLink system allowing

for automatic activation of both systems.

the newly introduced body-worn cameras, Digital Ally also introduced two new QuickVu docking stations compatible with the FirstVu PRO

and FirstVu II body-worn cameras.

The QuickVu docking stations provide a comprehensive and elegant solution for storing and charging

body cameras while uploading video evidence to the cloud.

QuickVu also allows for rapid reviewing of footage right from the interactive

touchscreen display, and is available in eight or twenty-four individual docking bays.

For docking with the FirstVu HD body-worn

cameras, Digital Ally offers a 12-bay docking station and Mini-Docks.

The 12-bay docking station includes a 1TB local memory hard

drive which simultaneously upload 4 hours of video from 12 FirstVu HD cameras within a 15-minute shift change and push configuration

The Mini-Dock is a single unit, portable smart dock that uploads video evidence to VuVault from a FirstVu HD body camera.

Auto-activation

and Interconnectivity between in-car video systems and FirstVU HD body worn camera products –

VuLink for law enforcement

a critical limitation in law enforcement camera technology, we pioneered the development of our VuLink ecosystem that provides

intuitive auto-activation functionality as well as coordination between multiple recording devices.

The United States Patent and

Trademark Office (the “USPTO”) has recognized these pioneering efforts by granting us multiple patents with claims

covering numerous features, such as automatically activating an officer’s cameras when the light bar is activated or when

a data-recording device such as a smart weapon is activated.

Additionally, the awarded patent claims cover automatic coordination

between multiple recording devices.

Prior to this work, officers were forced to manually activate each device while responding

to emergency scenarios, a requirement that both decreased the usefulness of the existing camera systems and diverted officers’

attention during critical moments.

Our FirstVU HD integrates with our in-car video systems through our patented VuLink system

allowing for automatic activation of both systems.

and FleetVU Manager

is a cost-effective, fully expandable, law enforcement cloud storage solution powered by AWS that provides redundant and security-enhanced

storage of all uploaded videos that comply with the United States Federal Bureau of Investigation’s Criminal Justice Information

Services Division requirements.

Manager is our web-based software for commercial fleet tracking and monitoring that features and manages video captured by our

video event data recorders of incidents requiring attention, such as accidents.

This software solution features our cloud-based

web portal that utilizes many of the features of our VuVault.net law-enforcement cloud-based storage solution.

and Shield Disinfectants

is a non-contact temperature-screening instrument that measures temperature through the wrist and controls entry to facilities

when temperature measurements exceed pre-determined parameters.

ThermoVu has optional features such as facial recognition to improve

facility security by restricting access based on temperature and/or facial recognition reasons.

ThermoVu provides an instant pass/fail

audible tone with its temperature display and controls access to facilities based on such results.

Disinfectants and Cleansers consists of a disinfectant and cleanser line, which is for use against viruses and bacteria, that

is less harsh than many of the traditional products now widely distributed.

Shield Disinfectants and Cleansers is offered in a

variety of sizes and quantities.

Company has also begun distributing other personal protective equipment and supplies such as masks and gloves to supplement

its Shield brand of products to health care workers as well as other consumers.

During the last year,

we focused our research and development efforts to meet the varying needs of our customers, enhance our existing products and

commence development of new products and product categories.

Our research and development efforts are intended to maintain and

enhance our competitiveness in the market niche we have carved out, as well as positioning us to compete in diverse markets outside

of law enforcement.

In December 2019, we announced a partnership with Pivot International for design and manufacture of a new

and innovative Breathalyzer Device utilizing our recently issued patent.

With this new technology,

when an officer is conducting a field sobriety test and the breathalyzer is activated, the digital video recording device will

automatically start a recording, later embedding the meta-data captured onto the recorded video.

(the “‘732 Patent’”) was granted by the U.S.

Patent Office in August 2019 and is an expansion of our

patented VuLink automatic activation technology.

and Industry Overview

Historically,

our primary market has been domestic and international law enforcement agencies.

In 2012, we expanded our scope by pursuing the

commercial fleet vehicle and mass transit markets.

Recently, we have expanded into event security services whereby we provide

the hardware and software to supplement private security for NASCAR races, football and other sporting events, concerts and events

where people gather.

In the future, given sufficient capital and market opportunity, we may further expand or focus on private

security, homeland security, mass transit, healthcare, general retail, educational, general consumer and other commercial markets.

In that regard, we have several installations involving private security on cruise ships and similar markets.

Our view is there

are many potential private uses of our product offerings.

We have sales in the commercial fleet and the ambulance service provider

market, confirming that our DVM-250 Plus product and FleetVU Manager can become a significant revenue producer for us.

believe that law enforcement already recognizes a valuable use of our various digital audio/video products for the recording of

roadside sobriety tests.

Without some form of video or audio recording, court proceedings usually consist of the police officer’s

word against that of the suspect.

Records show that conviction rates increase substantially where there is video evidence to back

up officer testimony.

Video evidence also helps to protect police departments against frivolous lawsuits.

An important source of

police video evidence today is in-car video.

Some police cars still do not have in-car video, and in those that do, the

camera usually points forward rather than to the side of the road where the sobriety test takes place.

The in-car video is typically

of little use for domestic violence investigations, burglary or theft investigations, disorderly conduct calls or physical assaults.

In virtually all of these cases, the FirstVU HD may provide recorded evidence of the suspect’s actions and reactions to

police intervention.

Additionally,

motorcycle patrolmen rarely have video systems.

Our FirstVU body camera is well suited as a mobile application of our digital

video recording system that can be used by motorcycle police and water patrol.

scene investigations, including detailed photography, are typically a large part of the budgets of metropolitan police forces.

The FirstVU may record a significant portion of such evidence at a much lower cost for gathering, analyzing and storing data and

and Other Markets

are numerous potential applications for our digital audio/video camera products.

We believe that other potential markets for our

digital video systems, including the derivatives currently being developed, include private investigators, SWAT team members,

over-the-road trucking fleets, airport security, municipal fire departments, and the U.S.

Other potential commercial

markets for our digital video systems include sporting venues and arenas.

believe our products and offerings may be of benefit in kindergarten through twelve grade school systems.

We are assessing our

entry into this potential market through several pilot tests.

Preliminary results of our exploration of this market have been

mixed, but we believe it may represent a new addressable market for our mobile audio/video recording products in the future.

tragic events at schools have heightened the need for providing a “safer”

environment in general for schools.

Additionally,

we believe this market would heavily utilize our new ThermoVu and Shield lines as the economy continues to deal with the Covid-19

Security Companies

are thousands of private security agencies in the United States employing a large number of guards.

Police forces use video systems

for proof of correct conduct by officers, but private security services usually have no such tool.

We believe that the FirstVU

HD is an excellent management tool for these companies to monitor conduct and timing of security rounds.

In addition to the FirstVU

HD, the digital video security camera can provide fill-in security when guards have large areas to cover or in areas that do not

have to be monitored around the clock.

we have expanded into event security services whereby we provide the hardware and software to supplement private security for

NASCAR races, football and other sporting events, concerts and similar events where people gather.

In this regard, we have obtained

new customers including the Kansas City Chiefs, Met-Life Stadium, NASCAR and a number of other customers who have a need for event

security for specific dates rather than 100% of the time.

Additionally, we believe this market would heavily utilize our new

ThermoVu and Shield lines as the economy continues to deal with the Covid-19 pandemic.

We believe that this area will be a productive

source of future revenues.

Security Market

addition to the government, U.S.

corporations are spending heavily for protection against potential terrorist attacks.

Public and private-sector outlays for antiterrorism measures and for protection against other forms of violence are significant.

These are potential markets for our products.

Manufacturing

have entered into contracts with manufacturers for the assembly of the printed circuit boards used in our products.

circuit board manufacturers are well-suited to the assembly of circuit boards with the complexity found in our products.

board manufacturers can spread the extensive capital equipment costs of circuit board assembly among multiple projects and customers.

Such manufacturers also have the volume to enable the frequent upgrade to state-of-the-art equipment.

We have identified multiple

suppliers who meet our quality, cost, and performance criteria.

We also use more than one source for circuit board assembly to

ensure a reliable supply over time.

We use contract manufacturers to manufacture our component subassemblies and may eventually

use them to perform final assembly and testing.

Due to the complexity of our products, we believe that it is important to maintain

a core of knowledgeable production personnel for consistent quality and to limit the dissemination of sensitive intellectual property,

and we expect to continue this practice.

In addition, such technicians are valuable in our service and repair business

to support our growing installed customer base.

also contract with two manufacturers that have manufacturing facilities in the Philippines and South Korea to produce our DVM-250

Plus, DVM-800 and DVM-800 HD products.

The contracts are general in nature addressing confidentiality and other matters, have

no minimum purchase requirements and require the acceptance of specific purchase orders to support any product supply acquisitions.

We are using additional contract manufacturers based in the United States for these product lines to further mitigate any supply

disruption risk and ensure competitive pricing.

We typically perform final assembly, testing and quality control functions for

these products in our Lenexa, Kansas facility.

and Marketing

have an employee-based, direct sales force for domestic selling efforts that enables us to control and monitor its daily activities

and independent distributors for international sales.

Our sales force is organized in seven territories.

The direct territory

sales team is supported by a team of five inside sales representatives, a tele-sales specialist and a pre-sales solution design

We also have a bid specialist to coordinate large bid opportunities.

We believe our employee-based model encourages our

sales personnel in lower performing territories to improve their efforts and, consequently, their sales results.

Our executive

team also supports sales agents with significant customer opportunities by providing pricing strategies and customer presentation

Our technical support personnel may also provide sales agents with customer presentations and product specifications

in order to facilitate sales activities.

use our direct sales force and international distributors to market our products.

Our key promotional activities include:

at industry trade shows and conventions;

sales, with a force of industry-specific sales individuals who identify, call upon and build on-going relationships with key

purchasers and targeted industries;

of our direct sales with passive sales systems, including inside sales and e-commerce;

advertising in journals with specialized industry focus;

mail campaigns targeted to potential customers;

advertising, including supportive search engines and website and registration with appropriate sourcing entities;

NASCAR relationship is supportive of developing new business opportunities by and between the sponsors at NASCAR sponsored

events in addition to the races;

relations, industry-specific venues, as well as general media, to create awareness of our brand and our products, including

membership in appropriate trade organizations;

identification through trade names associated with us and our products.

The law enforcement and

security surveillance markets are extremely competitive.

Competitive factors in these industries include ease of use, quality,

portability, versatility, reliability, accuracy and cost.

There are direct competitors with technology and products in the law

enforcement and surveillance markets for all of our products, including those that are in development.

of these competitors have significant advantages over us, including greater financial, technical, marketing and manufacturing

resources, more extensive distribution channels, larger customer bases and faster response times to adapt new or emerging technologies

and changes in customer requirements.

Our primary competitors in the in-car video systems market include L-3 Mobile-Vision, Inc.,

Coban Technologies, Inc., Enforcement Video, LLC d/b/a WatchGuard Video (“WatchGuard”), Kustom Signals,

Panasonic System Communications Company, International Police Technologies, Inc.

and a number of other competitors who sell, or

may in the future sell, in-car video systems to law enforcement agencies.

Our primary competitors in the body-worn camera market

include Axon Enterprises, Inc.

(“Axon”), Reveal Media, WatchGuard, and VieVU, Inc., which was acquired by Axon

We face similar and intense competitive factors for our event recorders in the mass transit markets as we do in the law

enforcement and security surveillance markets.

We will also compete with any company making surveillance devices for commercial

and Interconnectivity Between In-car Video Systems and Body-worn Camera Products – VuLink for Law Enforcement

a critical limitation in law enforcement camera technology, we pioneered the development of our VuLink ecosystem that provides intuitive

auto-activation functionality as well as coordination between multiple recording devices.

The United States Patent and Trademark Office

(the “USPTO”) has recognized these pioneering efforts by granting us multiple patents with claims covering a variety of triggers,

incuding emergency lights and sirens, extreme acceleration or braking, g-force or any 12-volt relay.

Additionally, the awarded patent

claims cover automatic coordination between multiple recording devices.

Prior to our VuLink ecosystem, officers had to

manually activate each device while responding to emergency scenarios, a requirement that both decreased the usefulness of the existing

camera systems and diverted officers’ attention during critical moments.

Web and FleetVu Manager

Web is a web-based software, powered by and hosted on the AWS GovCloud platform, that enables police departments and security

agencies to manage digital video evidence quickly and easily.

EVO Web is capable of playing back, reviewing, downloading, archiving,

unit configuration and management, running customizable reports and maintaining a chain of custody logs.

AWS is the most

secure cloud platform on the market with features that go beyond simply storing and reviewing video evidence.

AWS GovCloud platform

is trusted by the Department of Justice, Defense Digital Services for the US Air Force, U.S.

Department of Treasury, U.S.

of Homeland Security.

Our products that are compatible with EVO Web include:

FirstVu Pro, FirstVu II, FirstVu HD, QuickVu,

EVO-HD, DVM-800 and DVM-800 Lite.

Manager is a web-based software that provides commercial fleet managers with the tools to increase driver safety, track assets in real-time

and minimize their companies’ liability risks.

FleetVu Manager is able to generate driver reports, identify at risk

behaviors before an incident takes place, and enable commercial fleet managers to manage the entire fleet through a single, easy

to use platform.

Our products compatible with FleetVu Manager include:

DVM-250 and FLT-250.

Heath Protection Products

Company’s Shield TM brand, offers a variety of products to help keep you safe, including;

Shield Cleansers, ThermoVu,

Shield Electrostatic Sprayer, Shied Disinfectant, and a variety of personal protection equipment including masks, gloves and sanitizer

Cleansers is a full line of safe and effective hypochlorous acid (HOCl) based products - and is free of toxic bleach, ammonia,

methanol, ethanol, and alcohol ingredients.

Shield Disinfectant is EPA approved and has shown effectiveness against SARS-COV-2, the virus

that causes the novel COVID-19 disease.

Other products in the Shield brand include animal wellness products, wound care, and household

cleaning solutions.

is a non-contact temperature-screening instrument that measures temperature through the wrist and controls entry to facilities when temperature

measurements exceed pre-determined parameters.

ThermoVu has optional features such as facial recognition to improve facility security

by restricting access based on temperature and/or facial recognition reasons.

ThermoVu provides an instant pass/fail audible tone with

its temperature display and controls access to facilities based on such results.

Electrostatic Sprayer is a compact and lightweight disinfecting sprayer utilizing electrostatic induction.

The charged particles repel

each other and affix to surfaces more evenly, eliminating large droplets for better disinfecting coverage.

It is ideal for use

in office buildings, schools, and other populated areas.

Company has been distributing other personal protective equipment and supplies, since the second quarter of 2021, such

as masks and gloves to supplement its Shield brand of products to health care workers as well as other consumers, consisting of vinyl

and nitrile gloves, level 3 and N95 NIOSH certified face masks, and disposable wipes.

Revenue Management Operating Segment Products and Services

our revenue cycle management segment, we provide assistance in providing working capital and back-office services to healthcare organizations

throughout the country.

Our RCM operating segment services consist of insurance and benefit verification, medical treatment documentation

and coding, and collections.

Through our expertise and experience in this field, we maximize our customers’ service revenues collected,

leading to substantial improvements in their operating margins and cash flows.

We generally receive a service fee based on a percentage

of the service revenues collected by our customers.

Ticketing Operating Segment Products and Services

our ticketing segment, we provide customers with access to the online live event ticketing marketplace through our

online platform - TicketSmarter.com .

Offering over 48 million tickets for sale for over 125,000 live events TicketSmarter is a

national ticket marketplace offering tickets for live events featuring sports, concerts and theatre.

TicketSmarter is the official ticket

resale partner of more than 35 collegiate conferences, over 300 universities, and hundreds of events and venues.

ticketing operating segment primarily receives compensation for its services generally determined as a percentage of the face-value of

the tickets being purchased.

Our ticketing operating segment also provides customers with access to tickets which it has purchased or

received in return for its sponsorship or partnership from the venue, event or owner.

and Industry Overview – Video Solutions Operating Segment

video solutions segment has historically had a primary market of domestic and international law enforcement agencies.

We have since expanded

our scope by pursuing the commercial fleet vehicle and mass transit markets.

Additionally, we have expanded into event security services

where we provide the hardware and software to supplement private security for NASCAR races, football and other sporting events, concerts

and other events where people gather.

We continue to further expand our focus on private security, homeland security, mass transit, healthcare,

general retail, educational, general consumer and other commercial markets.

In that regard, we have several installations involving private

security on cruise ships and similar markets.

We believe there are many potential private uses of our product offerings.

to have sales in the commercial fleet and ambulance service provider market, confirming that our DVM-250 Plus and FLT-250 products and

FleetVu Manager can become a significant revenue producer for us.

Additionally, our body-worn cameras have applications

in law enforcement, along with private and event security, as well as commercial segments.

With the recent acquisitions we completed

in 2021, we hope to utilize the connections we now have to live events, stadiums, and arenas, as well as new medical connections.

and Industry Overview – Revenue Cycle Management Operating Segment

revenue cycle management segment consists of end-to-end revenue cycle management services that focuses on claim reimbursement billing,

verification, and related services to medical providers throughout the country.

We offer agreements with customers in which we provide

our services and bill the customers monthly for our services.

The healthcare industry in the United States represents a strong portion

of the United States’ economy, offering a robust market for these services.

Our current market includes many diverse specialties,

including radiology, oncology, orthopedics, pediatrics, internal medicine, and cariology.

We continue to investigate

ways to expand our market reach, although can make no assurances in that regard.

and Industry Overview – Ticketing Operating Segment

ticketing segment refers to the sale of event tickets primarily through our online and mobile platforms.

We will buy inventory of event

ticket to then sell tickets through various platforms, including our own.

Our resale services refer to the sale of tickets by a holder,

who originally obtained the tickets directly from a venue or entity, through our platform in which we then collect services fees on the

This is commonly referred to as secondary ticketing.

We work directly with consumers looking to buy or sell event tickets

for particular shows, concerts, games, and other events, allowing a simple and effective platform to move tickets.

We also currently

partner with more than 35 collegiate conferences, over 300 universities, and hundreds of events and venues.

- Video Solutions Operating Segment

video solutions segment, consisting of law enforcement and security surveillance markets, is extremely competitive.

Competitive factors

in these industries include ease of use, quality, portability, versatility, reliability, accuracy and cost.

There are direct competitors

with technology and products in the law enforcement and surveillance markets for all of our products, including those that are in development.

Many of these competitors have significant advantages over us, including greater financial, technical, marketing and manufacturing resources,

more extensive distribution channels, larger customer bases and faster response times to adapt new or emerging technologies and changes

in customer requirements.

Our primary competitors in the in-car video systems market include L-3 Mobile-Vision, Inc., Coban Technologies,

Inc., Enforcement Video, LLC d/b/a WatchGuard Video (“WatchGuard”), Kustom Signals, Panasonic System Communications Company,

International Police Technologies, Inc.

and a number of other competitors who sell, or may in the future sell, in-car video systems to

law enforcement agencies.

Our primary competitors in the body-worn camera market include Axon Enterprises, Inc.

Reveal Media, WatchGuard, and VieVU, Inc., which was acquired by Axon in 2018.

We face similar and intense competitive factors for our

event recorders in the commercial fleet and private security markets as we do in the law enforcement and security surveillance

There can be no assurance that we will be able to compete successfully in these markets.

1 unchanged sentence

that new and existing companies will not enter the law enforcement and security surveillance markets in the future.

commercial fleet security and surveillance markets likewise are also very competitive.

There are direct competitors for our DVM-250

Plus “event recorders,”

which may have greater financial, technical marketing, and manufacturing resources

Our primary competitors in the commercial fleet sector include Lytx, Inc.

(previously DriveCam, Inc.) and SmartDrive

ability to compete effectively will depend on our success in protecting our proprietary technology, both in the United States

We have filed for patent protection in the United States and certain other countries to cover certain design aspects

of our products.

of our patent applications are still under review by the USPTO and, therefore, we have not yet been issued all the patents that

we applied for in the United States.

We were issued several patents in recent years, including a patent on our VuLink product

that provides automatic triggering of our body-worn camera and our in-car video systems.

No assurance can be given which, or any,

of the patents relating to our existing technology will be issued from the United States or any foreign patent offices.

Additionally,

no assurance can be given that we will receive any patents in the future based on our continued development of our technology,

or that our patent protection within and/or outside of the United States will be sufficient to deter others, legally or otherwise,

from developing or marketing competitive products utilizing our technologies.

have entered into supply and distribution agreements with several companies that produce certain of our products, including our

DVM-250 and DVM-800 products.

These supply and distribution agreements contain certain confidentiality provisions that protect

our proprietary technology, as well as that of the third-party manufacturers.

addition to seeking patent protection, we rely on trade secrets, know-how and continuing technological advancement to seek to

achieve and thereafter maintain a competitive advantage.

Although we have entered into or intend to enter into confidentiality

and invention agreements with our employees, consultants and advisors, no assurance can be given that such agreements will be

honored or that we will be able to effectively protect our rights to our unpatented trade secrets and know-how.

Moreover, no assurance

can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise

gain access to our trade secrets and know-how.

of December 31, 2020, Digital Ally had approximately full-time 86 employees spread throughout the country, representing

The commercial fleet

security and surveillance markets likewise are also very competitive.

There are direct competitors for our FLT-250 and DVM-250

Plus “event recorders,” which may have greater financial, technical marketing, and manufacturing resources than we do.

primary competitors in the commercial fleet sector include Lytx, Inc.

(previously DriveCam, Inc.) and SmartDrive Systems, among others.

Competition – Revenue Cycle Management

Operating Segment

revenue cycle management segment is a highly competitive market that is only intensifying as the market continues to grow.

We face competition

from a variety of sources, including internal revenue cycle management departments within healthcare organizations, as these organizations

are beginning to make internal investments in these departments to keep these services in house.

Additionally, other revenue cycle management

providers exist and offer similar services through software vendors, traditional consultants, and information technology sources.

Competition – Ticketing Operating

ticketing segment faces robust competition from several sources throughout the industry.

As the online and mobile ticketing market continues

to increase, it has allowed for more technology-based companies to offer ticketing services and systems.

The online environment consists

of numerous other websites and platforms for all markets.

With the market continuing to grow, resale marketplaces and websites can reach

a vastly larger audience with more convenient access to tickets for a wide variety of events.

We continue to build our brand and recognition,

through the numerous partnerships and sponsorships throughout the country, in attempt to become a preferred platform for consumers.

Reinsurance Ltd.

December 2021, the Company formed a wholly-owned subsidiary, Worldwide Reinsurance Ltd.

(“Worldwide Re”), a Bermuda incorporated

captive insurance company that will provide primarily liability insurance coverage to the Company for which insurance may not be currently

available or economically feasible in today’s insurance marketplace.

Re is subject to capital and other regulatory requirements imposed by the Bermuda Monetary Authority (“BMA”).

Although these

capital requirements are generally less constraining than U.S.

capital requirements, failure to satisfy these requirements could result

in regulatory actions from the BMA or loss of or modification of Worldwide Re’s Class 1 insurer license, which could adversely

impact our ability to support our insurance needs and to grow this business into another line of business for our holding company.

date, our captive’s relatively immature claims history limits the predictive value of estimating the costs of incurred and future

Accordingly, the captive could continue to incur significant fluctuations in financial results as the captive provides insurance

coverage to Digital Ally and its affiliated businesses and seeks to expand beyond our affiliated companies to offer coverage for third

Property – Video Solutions Operating Segment

video solutions operating segment’s ability to compete effectively will depend on our success in protecting our proprietary

technology, both in the United States and abroad.

We have filed for patent protection in the United States and certain other countries

to cover certain design aspects of our products.

of our patent applications are still under review by the USPTO and, therefore, we have not yet been issued all the patents that we applied

for in the United States.

We were issued several patents in recent years, including a patent on our VuLink product that provides automatic

triggering of our body-worn camera and our in-car video systems.

No assurance can be given which, or any, of the patents relating to

our existing technology will be issued from the United States or any foreign patent offices.

Additionally, no assurance can be given

that we will receive any patents in the future based on our continued development of our technology, or that our patent protection within

and/or outside of the United States will be sufficient to deter others, legally or otherwise, from developing or marketing competitive

products utilizing our technologies.

have entered into supply and distribution agreements with several companies that produce certain of our products, including our DVM-250

and DVM-800 products.

These supply and distribution agreements contain certain confidentiality provisions that protect our proprietary

technology, as well as that of the third-party manufacturers.

addition to seeking patent protection, we rely on trade secrets, know-how and continuing technological advancement to seek to achieve

and thereafter maintain a competitive advantage.

Although we have entered into or intend to enter into confidentiality and invention

agreements with our employees, consultants and advisors, no assurance can be given that such agreements will be honored or that we will

be able to effectively protect our rights to our unpatented trade secrets and know-how.

Moreover, no assurance can be given that others

will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade

secrets and know-how.

Property – Revenue Cycle Management Operating Segment

revenue cycle management’s operating segment’s ability to compete effectively primarily depends on our trade secrets and

know-how and does not depend heavily on any proprietary technology or patents.

Property – Ticketing Operating Segment

ticketing operating segment’s ability to compete effectively primarily depends on our trade secrets and know-how and does not depend

heavily on any proprietary technology or patents.

of December 31, 2021, Digital Ally, and its subsidiaries, had approximately full-time 146 employees spread throughout the country, representing

the core values and objectives of the Company.

Our employees are our most important assets and they set the foundation for our

ability to achieve our strategic objectives.

All of our employees contribute to Digital Ally’s success and, in particular,

the employees in our manufacturing, sales, research and development, and quality assurance departments are instrumental

in driving operational execution and strong financial performance, advancing innovation and maintaining a strong quality and compliance

These employees are spread amongst our operating segments as follows:

Employee headcount:

Video Solutions

Revenue Cycle Management [1]

Total Employee Headcount

Our revenue cycle management operating segment has no direct employees.

Nobility Healthcare, LLC, our minority interest partner provides

all human capital resources to manage and operate the Company’s revenue cycle management operating segment.

Our employees are our most important assets and they set the foundation for our ability

to achieve our strategic objectives.

All of our employees contribute to Digital Ally’s success and, in particular, the employees

in our manufacturing, sales, research and development, and quality assurance departments are instrumental in driving operational execution

and strong financial performance, advancing innovation and maintaining a strong quality and compliance program.

employees are not covered by any collective bargaining agreement, and we have never experienced a work stoppage.

We strive to create

a culture and work environment that enables us to attract, train, promote, and retain a diverse group of talented employees who

together can help us gain a competitive advantage.

Our key programs and initiatives that are focused to attract, develop and retain

our diverse workforce include:

a culture and work environment that enables us to attract, train, promote, and retain a diverse group of talented employees who together

can help us gain a competitive advantage.

Our key programs and initiatives that are focused to attract, develop and retain our diverse

workforce include:

Programs and Employee Benefits:

the main objective of Digital Ally’s compensation program is to provide a compensation

package that will attract, retain, motivate and reward superior employees who must operate in a highly competitive and technologically

challenging environment.

We seek to do this by linking annual changes in compensation to overall Company performance, as well

as each individual’s contribution to the results achieved.

The emphasis on overall Company performance is intended to

align the employee’s financial interests with the interests of shareholders.

Digital Ally also seeks fairness in total

compensation with reference to external comparisons, internal comparisons and the relationship between management and non-management

remuneration.

The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.

the main objective of Digital Ally’s compensation program is to provide a compensation package

that will attract, retain, motivate and reward superior employees who must operate in a highly competitive and technologically challenging

We seek to do this by linking annual changes in compensation to overall Company performance, as well as each individual’s

contribution to the results achieved.

The emphasis on overall Company performance is intended to align the employee’s financial

interests with the interests of shareholders.

Digital Ally also seeks fairness in total compensation with reference to external comparisons,

internal comparisons and the relationship between management and non-management remuneration.

The structure of our compensation programs

balances incentive earnings for both short-term and long-term performance.

Specifically:

provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and

geographic location.

align our executives’

long-term equity compensation with our shareholders’

interests by linking realizable pay

with stock performance.

provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic

align our executives’ long-term equity compensation with our shareholders’ interests by linking realizable pay with stock

increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented

through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion.

employees are eligible for health insurance, paid and unpaid leaves, short-term disability, worker’s compensation, long-term

disability, a retirement plan and life and disability/accident coverage.

We also offer a variety of voluntary benefits that

allow employees to select the options that meet their needs.

We also offer a variety of voluntary benefits that allow

employees to select the options that meet their needs.

Health and Safety:

the health and safety of our employees are top priorities, which was emphasized this year

amidst the global COVID-10 pandemic.

Digital Ally is committed to operating in a safe, secure and responsible manner for the

benefit of its employees, customers and communities Digital Ally serves.

Our safety focus is evident in our response to the

COVID-19 pandemic:

the health and safety of our employees are top priorities, which was emphasized this year amidst the global COVID-19

Digital Ally is committed to operating in a safe, secure and responsible manner for the benefit of its employees, customers

and communities Digital Ally serves.

Our safety focus is evident in our response to the COVID-19 pandemic:

work from home flexibility;

4 unchanged sentences

protocols to address actual and suspected COVID-19 cases and potential exposure;

masks to be worn in all locations.

by-laws require that a quorum, generally consisting of a majority of the outstanding shares of voting stock, be represented in person,

by telephone or by proxy in order to transact business at a meeting of our stockholders.

Failure to meet a quorum or obtain stockholder

approval can prevent us from taking certain actions that may be in the best interest of the Company and our stockholders.

substantial majority of our shares of Common Stock are held by retail investors, and it may be difficult to communicate with the beneficial

holders of those shares to obtain votes.

In 2021, we were unable to obtain a quorum at four scheduled special meetings and annual meetings,

which we believe hindered our ability to elect directors and increase the number of authorized shares.

Obtaining a quorum at future stockholder

meetings and obtaining necessary stockholder approvals will depend in part upon the willingness of an extensive number of smaller stockholders

to continue participating in such meetings, and we cannot be assured that participation in the past will continue in the future.

result, we may be unable to obtain a quorum at future annual or special meetings of stockholders or obtain stockholder approval of proposals

if we obtain a quorum at our stockholder meetings, we may not obtain enough votes to approve matters to be resolved upon at those meetings.

For example, a proposal to ratify our selection of RBSM, LLP as the Company’s independent registered public accountants for the

fiscal year ending December 31, 2021, failed to receive sufficient votes to pass at the 2021 annual meeting of our stockholders.

broker-dealers may only vote shares absent direction from the beneficial owner on certain specified “routine” matters, such

as the ratification of our auditors.

If our stockholders do not instruct their brokers on how to vote their shares on “non-routine”

matters, then we may not obtain the necessary number of votes for approval.

Any future revisions to SEC or Nasdaq rules that further

limit matters for which broker discretionary voting is allowed may further harm our ability to obtain a quorum and stockholder approval

of certain matters.

Therefore, it is possible that even if we are able to obtain a quorum for our meetings of stockholders, we still

may not receive enough votes to approve proxy proposals presented at such meetings and, depending on the proposal in question, including

if a proposal is submitted to our stockholders to increase the number of authorized shares of Common Stock or Preferred Stock, such failure

could have a material adverse effect on us.

Staff Comments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business