What changed in this filing

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Item 9A. Controls and Procedures

2022-04-15 compared with 2021-03-31 · 2111 added, 1272 removed, 890 unchanged (79% of the section changed)

1 unchanged sentence

Regarding the Effectiveness of Disclosure Controls and Procedures

the supervision and with the participation of our management, including our principal executive officer and principal financial

officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures

to provide reasonable assurance of achieving the control objectives, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange

Based on their evaluation as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K,

our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective

at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the

Exchange Act, including this Annual Report on Form 10-K, was recorded, processed, summarized and reported within

the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our

principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s

the supervision and with the participation of our management, including our principal executive officer and principal financial officer,

we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures to provide reasonable

assurance of achieving the control objectives, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.

Based on their evaluation

as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal

financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level to ensure that

the information required to be disclosed in reports filed or submitted under the Exchange Act, including this Annual Report on Form 10-K,

was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated

and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely

decisions regarding required disclosure.

Report on Internal Control Over Financial Reporting

management is responsible for establishing and maintaining adequate internal control over financial reporting.

Our internal control

over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes

those policies and procedures that:

to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of

Our internal control over

financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies

and procedures that:

to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance

with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with

authorizations of our management and directors;

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets

that could have a material effect on the financial statements.

with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations

of our management and directors;

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that

could have a material effect on the financial statements.

internal control systems, no matter how well designed, have inherent limitations.

Therefore, even those systems determined to

be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of any

evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in

conditions or that the degree of compliance with the policies or procedures may deteriorate.

connection with the filing of this Annual Report on Form 10-K, our management assessed the effectiveness of our internal control

over financial reporting as of December 31, 2020.

In making this assessment, our management used the criteria set forth by 2013

Internal Control –

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment using the framework in 2013 Internal Control –

Integrated Framework , management believes

that, as of December 31, 2020, our internal control over financial reporting is effective.

Therefore, even those systems determined to be effective

can provide only reasonable assurance with respect to financial statement preparation and presentation.

Because of its inherent limitations,

internal control over financial reporting may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to

future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance

with the policies or procedures may deteriorate.

Securities and Exchange Commission guidance allows companies to exclude acquisitions from management’s report on internal control

over financial reporting for the first year after the acquisition.

In September 2021, we acquired TicketSmarter, LLC and Goody Tickets,

LLC (see Item 8.

Financial Statements and Supplementary Data—Note 20—TicketSmarter Acquisition).

Due to the timing of the

transaction, management has excluded TicketSmarter from our annual evaluation of internal control over financial reporting.

The preliminary

total assets, excluding goodwill and identifiable intangible assets, for TicketSmarter represent approximately 14.8% to our consolidated

assets as of December 31, 2021.

The preliminary total revenue of this acquisition represents less than 50.0% of our consolidated revenues

for the year ended December 31, 2021.

connection with the filing of this Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over

financial reporting as of December 31, 2021.

In making this assessment, our management used the criteria set forth by 2013 Internal

Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

assessment using the framework in 2013 Internal Control – Integrated Framework , management believes that, as of December

31, 2021, our internal control over financial reporting is effective.

in Internal Control Over Financial Reporting

have been no changes in our internal control over financial reporting during the year ended December 31, 2020, that have materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

are in the process of integrating our recent acquisitions, which were acquired at numerous dates throughout 2021, into our overall internal

control over financial reporting process.

Other than this integration, there

have been no changes in our internal control over financial reporting during the year ended December 31, 2021, that have materially affected,

or are reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material

impact to our internal controls over financial reporting resulting from the fact that employees are working remotely due to the global

COVID-19 pandemic.

We are continually monitoring and assessing the impact of the global COVID-19 pandemic on our internal controls to

minimize the affect on their design and operating effectiveness.

Disclosure Regarding

Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Executive Officers and Corporate Governance.

with respect to our directors and executive officers is incorporated herein by reference to our definitive proxy statement, which

we expect to file no later than 120 days after December 31, 2020 (our “2021 Proxy Statement”).

with respect to compliance with Section 16(a) of the Exchange Act, is incorporated herein by reference

to our 2021 Proxy Statement.

with respect to our code of business conduct and ethics is incorporated herein by reference to our 2021 Proxy Statement.

with respect to our corporate governance disclosures is incorporated herein by reference to our 2021 Proxy Statement.

information required by Item 10 is incorporated

herein by reference to our definitive proxy statement, which we expect to file no later than 120 days after December 31, 2021 (our “2022

Proxy Statement”).

Compensation.

with respect to the compensation of our executive officers and our directors is incorporated herein by reference to our 2021 Proxy

information required by Item is incorporated herein by reference to our 2022 Proxy Statement.

Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

with respect to security ownership of certain beneficial owners and management and related stockholder matters, is incorporated

information required by Item 12 is incorporated

herein by reference to our 2022 Proxy Statement.

1 unchanged sentence

Relationships and Related Transactions, and Director Independence.

with respect to certain relationships and related transactions, and director independence is incorporated herein by reference

to our 2021 Proxy Statement.

Accounting Fees and Services.

with respect to the fees paid to and services provided by our principal accountants is incorporated herein by reference to our

2021 Proxy Statement.

information required by Item 13 is incorporated

herein by reference to our 2022 Proxy Statement.

Accountant Fees and Services.

information required by Item 14 is incorporated herein by reference to our 2022 Proxy Statement.

and Financial Statement Schedules.

1 unchanged sentence

Financial Statements :

consolidated financial statements required to be included in Part II, Item 8, Financial Statements and Supplementary Data,

begin on Page F-1 and are submitted as a separate section of this Annual Report on Form 10-K.

consolidated financial statements required to be included in Part II, Item 8, Financial Statements and Supplementary Data, begin

on Page F-1 and are submitted as a separate section of this Annual Report on Form 10-K.

Statement Schedules :

schedules are omitted because they are not applicable or are not required, or because the required information is included

in the consolidated financial statements or notes in this Annual Report on Form 10-K.

schedules are omitted because they are not applicable or are not required, or because the required information is included in the

consolidated financial statements or notes in this Annual Report on Form 10-K.

Plan of Merger among Vegas Petra, Inc., a Nevada corporation, and Digital Ally, Inc., a Nevada corporation, and its stockholders, dated November 30, 2004.

3 unchanged sentences

Certificate of Amendment of Digital Ally, Inc., dated July 27, 2018.

Certificate of Amendment to Articles of Incorporation filed with the Nevada Secretary of State on September 25, 2020.

Amended and Restated Bylaws of Digital Ally, Inc.

12 unchanged sentences

Form of Series C Common Stock Purchase Warrant.

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

Form of Common Stock Purchase Warrant (Exchange Warrant)

Form of Common Stock Purchase Warrant (Replacement Original Warrant)

Opinion of Quarles & Brady, LLP

30 unchanged sentences

Form of Securities Purchase Agreement, dated as of January 27, 2021, by and between the Company and the Investors.

Commercial Real Estate Sales Contract, dated February 24, 2021, between the Company and DDG Holding, LLC.

Form of Operating Agreement of Nobility Healthcare, LLC, dated June 1, 2021

Warrant Exchange Agreement, dated August 19, 2021, by and among the Company and the warrant holders who are signatories thereto.

Unit Purchase Agreement, dated September 2, 2021

Code of Ethics and Code of Conduct.

16 unchanged sentences

Taxonomy Presentation Linkbase **

The XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed”

of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that Section and shall

not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except

as shall be expressly set forth by specific reference in such filing or document.

as an exhibit to the Company’s Form SB-2, filed October 16, 2006, No.

as an exhibit to the Company’s Annual Report on Form 10KSB for the Year ended December 31, 2007.

as an exhibit to the Company’s Current Report on Form 8-K dated November 20, 2009.

as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2009.

as an exhibit to the Company’s Form 8-K filed August 30, 2012.

as an exhibit to the Company’s October 2006 Form SB-2.

as an exhibit to the Company’s Form 8-K filed July 17, 2015

as an exhibit to the Company’s Form S-8, filed October 23, 2007, No.

as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2009.

as an exhibit to the Company’s Form 8-K filed June 1, 2011.

as an exhibit to the Company’s Form S-8 filed May 23, 2016.

as an exhibit to the Company’s Form S-8 filed January 3, 2017.

as an exhibit to the Company’s Form 8-K filed August 25, 2017.

as an exhibit to the Company’s Form 8-K filed April 4, 2018.

as an exhibit to the Company’s Form 8-K filed August 2, 2018.

as an exhibit to the Company’s Registration Statement on Form S-8 filed August 20, 2018.

as an Exhibit 5.1 to the October 2006 Form SB-2.

as an exhibit to the Company’s Form 8-K filed August 5, 2019.

as an exhibit to the Company’s Form 8-K filed December 10, 2007.

as an exhibit to the Company’s Registration Statement on Form S-1/A filed February 7, 2020.

as an exhibit to the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2020.

Filed as an exhibit to the Company’s Form 8-K filed

April 8, 2020.

Filed as an exhibit to the Company’s Form 8-K filed

January 12, 2021.

Filed as an exhibit to the Company’s Form 8-K filed

January 28, 2021.

financial statement schedules have been provided because the information is not required or is shown either in the financial

statements or the notes thereto.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

Cover Page Interactive Data File (embedded within the Inline XBRL document)

The XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed” for purposes of

Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that Section and shall not be incorporated

by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth

by specific reference in such filing or document.

Filed as an exhibit to

the Company’s Form SB-2, filed October 16, 2006, No.

Filed as an exhibit to

the Company’s Annual Report on Form 10KSB for the Year ended December 31, 2007.

Filed as an exhibit to

the Company’s Current Report on Form 8-K dated November 20, 2009.

Filed as an exhibit to

the Company’s Annual Report on Form 10K for the Year ended December 31, 2009.

Filed as an exhibit to

the Company’s Form 8-K filed August 30, 2012.

Filed as an exhibit to

the Company’s October 2006 Form SB-2.

Filed as an exhibit to

the Company’s Form 8-K filed July 17, 2015

Filed as an exhibit to

the Company’s Form S-8, filed October 23, 2007, No.

Filed as an exhibit to

the Company’s Annual Report on Form 10K for the Year ended December 31, 2009.

Filed as an exhibit to

the Company’s Form 8-K filed June 1, 2011.

Filed as an exhibit to

the Company’s Form S-8 filed May 23, 2016.

Filed as an exhibit to

the Company’s Form S-8 filed January 3, 2017.

Filed as an exhibit to

the Company’s Form 8-K filed August 25, 2017.

Filed as an exhibit to

the Company’s Form 8-K filed April 4, 2018.

Filed as an exhibit to

the Company’s Form 8-K filed August 2, 2018.

Filed as an exhibit to

the Company’s Registration Statement on Form S-8 filed August 20, 2018.

Filed as an Exhibit 5.1

to the October 2006 Form SB-2.

Filed as an exhibit to

the Company’s Form 8-K filed August 5, 2019.

Filed as an exhibit to

the Company’s Form 8-K filed December 10, 2007.

Filed as an exhibit to

the Company’s Registration Statement on Form S-1/A filed February 7, 2020.

Filed as an exhibit to

the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2020.

Filed as an exhibit to

the Company’s Form 8-K filed April 8, 2020.

Filed as an exhibit to

the Company’s Form 8-K filed January 12, 2021.

Filed as an exhibit to

the Company’s Form 8-K filed January 28, 2021.

Filed as an exhibit

to the Company’s Annual Report on Form 10-K for the Year ended December 31, 2020.

Filed as an exhibit

to the Company’s Form 8-K filed April 16, 2021.

Filed as an exhibit

to the Company’s Form 8-K filed May 3, 2021.

Filed as an exhibit

to the Company’s Form 8-K filed June 9, 2021.

Filed as an exhibit

to the Company’s Form 8-K filed August 19, 2021.

Filed as an exhibit

to the Company’s Form 8-K filed September 9, 2021.

financial statement schedules have been provided because the information is not required or is shown either in the financial statements

or the notes thereto.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized.

Nevada corporation

and Chief Executive Officer

April 15, 2022

person whose signature appears below authorizes Stanton E.

Ross to execute in the name of each such person who is then an officer

or director of the registrant, and to file, any amendments to this Annual Report on Form 10-K necessary or advisable to enable

the registrant to comply with the Securities Exchange Act of 1934 and any rules, regulations and requirements of the Securities

and Exchange Commission in respect thereof, which amendments may make such changes in such Report as such attorney-in-fact may

deem appropriate.

to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by following persons

Ross to execute in the name of each such person who is then an officer or

director of the registrant, and to file, any amendments to this Annual Report on Form 10-K necessary or advisable to enable the registrant

to comply with the Securities Exchange Act of 1934 and any rules, regulations and requirements of the Securities and Exchange Commission

in respect thereof, which amendments may make such changes in such Report as such attorney-in-fact may deem appropriate.

to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons

on behalf of the Registrant and in the capacities and on the dates indicated.

3 unchanged sentences

Hutchins, Director

Hoffmann, III

April 15, 2022

Hoffmann, III, Director

Heckman, Chief Financial Officer, Secretary, Treasurer and

2 unchanged sentences

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

of Independent Registered Public Accounting Firm (PCAOB ID No:

Financial Statements:

Consolidated Balance Sheets –

December 31, 2020 and 2019

Consolidated Balance Sheets – December 31, 2021 and 2020

Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Stockholders’

Equity (Deficit) for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020

3 unchanged sentences

on the Financial Statement

We have audited the accompanying consolidated

balance sheets of Digital Ally, Inc.

and its subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated

statements of operations, stockholders’

equity (deficit) and cash flows for each of the

two years in period ended December 31, 2020, and the related notes (collectively referred to as the financial statement).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two

years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in

the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s financial statements based on our audits.

We are a public accounting firm registered with

the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company

in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

have audited the accompanying consolidated balance sheets of Digital Ally, Inc.

and its subsidiaries (the Company) as of December 31,

2021 and 2020, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the

years in the two year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2021 and 2020, and the results of its operations and its cash flow for each of the years in the two year period ended December 31,

2021, in conformity with accounting principles generally accepted in the United States of America.

financial statement are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to

error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit

committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any

way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters

below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they

Value of Inventories –

Notes 1 and 4 to the consolidated financial statements

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

and Other Intangibles arising from the acquisition of TicketSmarter – Refer to Notes 1 and 20 to the consolidated financial

Audit Matter Description

As disclosed in Note 1 and 4 to the consolidated

financial statements, inventories consist of various components, work-in-process and finished goods, and are carried at the lower

of cost or net realizable value, with cost determined by standard cost methods, which approximate the first-in, first-out method.

disclosed in Note 1, Goodwill arises in connection with acquisitions.

The excess purchase price over the fair value of net tangible assets

and identifiable intangible assets acquired is recorded as goodwill.

disclosed in Note 20, on September 1, 2021, the Company completed an acquisition referred to as the TicketSmarter Acquisition in

accordance with the stock purchase agreement.

The consideration included an initial payment through a combination of cash and common

In addition to the Initial Payment Amount, the Company agreed to issue an earn-out agreement to the selling stockholders in

the contingent amount of $4,244,400 that is subject to an earn-out adjustment based on actual EBITDA achieved in 2021.

gave a fair value of approximately $3,700,000 to the earn-out on the date of acquisition which is considered a contingent liability.

However, following the completion of 2021, it was determined that the actual EBITDA threshold for any earn-out adjustment to be paid

was not met, therefore, the contingent earn-out is reduced to zero resulting in a gain related to this revaluation is recorded in

the Company’s consolidated statements of operations for the year ended December 31, 2021.

Auditing the accounting for the

acquisition was complex due to the significant estimation uncertainty in determining the fair values of identified intangible

assets, which consisted of Sponsorship agreement network of $5,600,000, Trademarks of $600,000, Search engine optimization/content

of $600,000 and Goodwill of $5,675,280.

the significant judgments made by management to estimate the earn-out as well as intangible assets acquired with the TicketSmarter Acquisition,

performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required a high degree of

auditor judgment and an increased effort, including the need to involve our fair value specialists.

the Critical Audit Matter Was Addressed in the Audit

utilized personnel with specialized knowledge and skill in valuation to assist in;

a) assessing the appropriateness and relative

weighting of valuation methodology for the various intangible assets, including the With-and-Without Method, Cost to Replace, Relief

from Royalty and Monte Carlo Simulation, b) evaluating the reasonableness of the growth rates, percent of revenues lost without existing

agreements, discount rate used in the income approach, c) evaluating the reasonableness of the assumptions and estimates used in

the various valuation methodologies.

the reasonableness of management’s significant estimates and assumptions including revenue growth rates and EBITDA margins,

discount rates and futures market conditions.

if there have been events and circumstances that might indicate Goodwill has been impaired.

and assessed the appropriateness of adjustments to Goodwill, Other Intangibles and other Assets and Liabilities acquired based on

changes to their estimated fair values.

of Inventories – Refer to Notes 1 and 4 to the consolidated financial statements

Audit Matter Description

for the video solutions segment are held at the lower of cost or net realizable value, with cost determined by standard cost methods,

which approximate the first-in, first-out method.

Inventory costs include material, labor and manufacturing overhead.

Management has established inventory reserves based on estimates

of excess and/or obsolete inventories.

We identified the inventory reserve for

certain inventory products as a critical audit matter because of the significant estimates and the assumptions management makes

to evaluate their ability to move inventories which have been slow moving during the year.

This required a high degree of subjective

and complex auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness

of related assumptions, as well as the viability of management’s plans to sell this inventory, to evaluate whether inventory

reserves for certain inventory products were appropriately recorded as of December 31, 2020.

How the Critical

Audit Matter Was Addressed in the Audit

Our audit procedures related to the inventory

reserve for certain inventory products included the following, among others:

for the ticketing segment are held at the lower of cost or net realizable value, and written-off after the event has occurred.

tickets for the ticketing segment are carried at the lower of cost or net realizable value, and fully written off at the time the event

occurs if the ticket is unsold and remaining in inventory.

Management has established inventory reserves based on estimates of excess

and/or obsolete current and non-current inventory.

Manufacturing

inventory for the video solutions segment is reviewed for obsolescence and excess quantities on a quarterly basis, based on estimated

future use of quantities on hand, which is determined based on past usage, planned changes to products and known trends in markets and

Changes in support plans or technology could have a significant impact on obsolescence.

these service parts age over the related product group’s post-production service life, the Company reduces the net carrying value

of its repairable spare part inventory on the consolidated balance sheet to account for the excess that builds over the service life.

The post-production service life of systems is generally seven to twelve years and, at the end of twelve years, the carrying value for

these parts in consolidated balance sheet is reduced to zero.

The Company also perform periodic monitoring of its installed base for

premature end of service life events and expense, through cost of sales, the remaining net carrying value of any related spare parts

inventory in the period incurred.

December 31, 2021, the Company recorded a reserve for excess and obsolete inventory in the video solutions segment of $3,353,458 and

a reserve for the ticketing segment of $561,631.

Given the judgments made by management, a high degree of subjective and complex auditor

judgment was required to evaluate the estimates and assumptions related to the reserve for excess and obsolete inventory.

the Critical Audit Matter Was Addressed in the Audit

audit procedures related to the inventory reserve for the video solutions segment included the following, among others:

We evaluated the appropriateness

and consistency of management’s methods and assumptions used in developing their estimate of the inventory reserves.

● We evaluated the reasonableness

of management’s plans and strategies to sell certain inventory products deemed to be slow moving and which are already partially

● We performed analysis over key

product metrics, inventory turnover, and margins, to identify and evaluate slow-moving inventory categories, negative margins,

and consistency of management’s methods and assumptions used in developing their estimate of the inventory reserves.

We performed analysis

over key product metrics, inventory turnover, and margins, to identify and evaluate slow-moving inventory categories, negative margins,

or other trends which may indicate a requirement to reserve.

have served as the Company’s auditor since 2019.

audit procedures related to the inventory reserve for ticketing segment included the following, among others:

We evaluated the appropriateness

and consistency of management’s methods and assumptions used in developing their estimate of the inventory reserves.

We tested the reasonableness

of the reserve for events which have not occurred by analyzing historical activity prior to the acquisition and during the period

ended December 31, 2021.

Additionally, we analyzed activity subsequent to the balance sheet date for events that have already occurred

to determine the amount written down to net realizable value on the date of the event.

have served as the Company’s auditor since 2019.

ID Number 587

BALANCE SHEETS

1 unchanged sentence

Current assets:

Cash and cash

Accounts receivable-trade,

less allowance for doubtful accounts

of $123,224 –

2020 and $123,224 –

Other Receivables (including $500,000 due from Related Parties

2020 and $0 –

Cash and cash equivalents

Accounts receivable-trade, less allowance for doubtful accounts of $ 113,234 – 2021 and $ 123,224 – 2020

Other Receivables (including $ 158,384

due from related parties – 2021 and $ 500,000

– 2020, refer to Note 17)

Inventories, net

Income tax refund receivable,

current assets

Furniture, fixtures and equipment, net

Intangible assets, net

Prepaid expenses

Total current assets

Property, plant, and equipment, net

Goodwill and other intangible assets, net

Operating lease right of use assets, net

Liabilities and Stockholders’

Equity (Deficit)

Liabilities and Equity

Current liabilities:

1 unchanged sentence

Accrued expenses

Current portion of operating

lease obligations

Current portion of operating lease obligations

Contract liabilities – current

Unsecured promissory note

payable, net of unamortized discount of $0 and $66,061, respectively

Secured convertible notes

at fair value –

current portion

Subordinated notes payable

current portion

taxes payable

current liabilities

Debt obligations – current

Warrant derivative liabilities

Income taxes payable

Total current liabilities

Long-term liabilities:

Proceeds investment agreement,

at fair value

Subordinated notes payable

Operating lease obligation,

liabilities-long term

Debt obligations – long term

Operating lease obligation – long term

Contract liabilities – long term

Total liabilities

Commitments and contingencies

Stockholders’

Equity (Deficit):

Common stock, $0.001 par value;

and 50,000,000 shares authorized, respectively;

Common stock, $ 0.001

100,000,000 shares authorized;

shares issued:

26,834,709 –

2020 and 12,079,095 –

2021 and 26,834,709 – 2020

Additional paid in capital

Treasury stock, at cost

(63,518 shares)

( 2,157,225 )

Noncontrolling interest in consolidated subsidiary

Accumulated deficit

( 68,670,497 )

stockholders’

equity (deficit)

liabilities and stockholders’

equity (deficit)

( 90,014,500 )

Total liabilities and equity

Notes to Consolidated Financial Statements.

2 unchanged sentences

31, 2021 AND 2020

Service and other

Total revenue

Cost of revenue:

Service and other

Total cost of revenue

Selling, general and administrative expenses:

Research and development

Selling, advertising and

promotional expense

General and administrative

litigation settlement

Total selling, general

and administrative expenses

Research and development expense

Selling, advertising and promotional expense

General and administrative expense

Total selling, general and administrative expenses

Operating loss

( 14,760,910 )

( 7,663,651 )

Other income (expense):

1 unchanged sentence

Interest expense

Change in fair value of secured convertible

Change in fair value of proceeds investment

Change in fair value of secured convertible notes

( 1,300,252 )

Change in fair value of proceeds investment agreement

Change in fair value of short-term investments

Change in fair value of warrant derivative liabilities

Change in fair value of contingent consideration promissory notes and earn-out agreements

Warrant modification expense

Gain on the extinguishment of debt

Secured convertible

notes issuance expense

Secured convertible notes issuance expense

Total other income (expense)

Loss before income tax expense (benefit)

Income (loss) before income tax expense (benefit)

( 2,625,881 )

Income tax expense (benefit)

Net income (loss)

( 2,625,881 )

Net income attributable to noncontrolling interests of consolidated subsidiary

Net income (loss) attributable to common stockholders

$ ( 2,625,881 )

Net loss per share information:

Net income (loss) per share attributable to common information:

Weighted average shares outstanding:

Notes to Consolidated Financial Statements.

STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

STATEMENTS OF EQUITY (DEFICIT)

ENDED DECEMBER 31, 2021 AND 2020

Noncontrolling

Balance, December 31, 2019

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Restricted common stock forfeitures

Issuance of common stock upon conversion of

secured convertible notes and interest

Issuance of common stock In connection with

issuance of secured convertible notes

Issuance of common stock purchase warrants

in connection with issuance of secured convertible debentures

Issuance of common stock upon exercise of warrants

Issuance of common stock purchase warrants

in connection with issuance of unsecured promissory note payable

Issuance of common stock upon conversion of secured convertible notes and interest

Issuance of common stock through underwritten public offering at $ 1.15 per share (net of offering expenses and underwriters’ discount)

Issuance of common stock through underwritten public offering at $ 1.65 per share (net of offering expenses and underwriters’ discount)

Issuance of common stock through underwritten public offering at $ 2.15 per share (net of offering expenses and underwriters’ discount)

Issuance of common stock upon exercise of common stock purchase warrants

Issuance of common stock purchase warrants in connection with issuance of secured convertible notes

Issuance of common stock upon exercise of stock options

Issuance of common stock for services rendered

Issuance of common stock purchase warrants in connection with issuance of unsecured promissory note payable

Issuance of common stock through registered direct offering at $3.095 per share and accompanying warrants (net of offering expenses and

placement agent discount)

Issuance of common stock through registered direct offering at $3.095 per share and accompanying warrants (net of offering expenses and

placement agent discount), shares

Exercise of pre-funded common stock purchase warrants at $3.095 per share

Exercise of pre-funded common stock purchase warrants at $3.095 per share, shares

Exercise of pre-funded common stock purchase warrants at $2.80 per share

Exercise of pre-funded common stock purchase warrants at $2.80 per share, shares

Issuance of pre-funded common stock purchase warrants in connection with the registered direct offerings

Issuance of common stock purchase warrants at exercise price of $3.25 per share in connection with the registered direct offerings

Issuance of common stock as consideration for acquisition

Issuance of common stock as consideration for acquisition, shares

Repurchase and cancellation of common stock

Repurchase and cancellation of common stock, shares

Cancellation of treasury stock

Cancellation of treasury stock, shares

( 2,625,881 )

2 unchanged sentences

( 2,157,225 )

( 90,014,500 )

Stock-based compensation

1 unchanged sentence

Restricted common stock forfeitures

Issuance of common stock upon conversion of

secured convertible notes and interest

Issuance of common stock through underwritten

public offering at $1.15 per share (net of offering expenses and underwriters’

Issuance of common stock through underwritten

public offering at $1.65 per share (net of offering expenses and underwriters’

Issuance of common stock through underwritten

public offering at $2.15 per share (net of offering expenses and underwriters’

Issuance of common stock upon exercise of common

stock purchase warrants

Issuance of common stock purchase warrants

in connection with issuance of secured convertible notes

Issuance of common stock upon exercise of stock

Issuance of common stock for services rendered

Issuance of common stock purchase warrants

in connection with issuance of unsecured promissory note payable

Balance, December 31, 2020

Issuance of common stock through registered direct offering at $ 3.095 per share and accompanying warrants (net of offering expenses and placement agent discount)

Issuance of common stock through registered direct offering at $ 2.80 per share and accompanying warrants (net of offering expenses and placement agent discount)

Exercise of pre-funded common stock purchase warrants at $ 3.095 per share

Exercise of pre-funded common stock purchase warrants at $ 2.80 per share

Issuance of pre-funded common stock purchase warrants in connection with the registered direct offerings

( 1,817,548 )

Issuance of common stock purchase warrants at exercise price of $ 3.25 per share in connection with the registered direct offerings

( 49,398,510 )

Issuance of common stock as consideration for acquisition

Repurchase and cancellation of common stock

Cancellation of treasury stock

( 2,157,161 )

Net income (loss)

Balance, December 31, 2021

$ 124,426,379

$ ( 68,670,497 )

Notes to Consolidated Financial Statements.

2 unchanged sentences

Cash Flows from Operating Activities:

$ (2,625,881 )

Net income (loss)

$ ( 2,625,881 )

Adjustments to reconcile

net loss to net cash flows used in operating activities:

Depreciation and

Adjustments to reconcile net income (loss) to net cash

flows used in operating activities:

Depreciation and amortization

Stock based compensation

Issuance of common

stock for services

Amortization of

debt discount

Provision for doubtful

accounts receivable

Interest paid through

issuance of common stock

Gain on extinguishment

Secured convertible

debentures issuance expense

Change in fair value

of secured convertible debentures

Change in fair value

of proceeds investment agreement

Provision for inventory

Change in operating

assets and liabilities:

(Increase) decrease

Accounts receivable

other (including related party)

Issuance of common stock for services

Amortization of debt discount

Provision for doubtful accounts receivable

Interest paid through issuance of common stock

Gain on extinguishment of debt

( 1,417,413 )

Secured convertible debentures issuance expense

Change in fair value of secured convertible debentures

Change in fair value of proceeds investment agreement

( 5,250,000 )

Change in fair value of contingent consideration promissory notes and earn-out

Change in fair value of warrant derivative liability

Warrant modification expense

Provision for inventory obsolescence

Change in operating assets and liabilities:

(Increase) decrease in:

Accounts receivable – trade

Accounts receivable – other (including related party)

( 1,015,191 )

( 1,431,080 )

( 3,197,552 )

Prepaid expenses

Income tax refund

Operating lease

right of use assets

Increase (decrease)

( 3,839,458 )

( 1,649,603 )

Income tax refund receivable

Operating lease right of use assets

Increase (decrease) in:

Accounts payable

( 1,907,608 )

( 1,195,310 )

Accrued expenses

Income taxes payable

Operating lease

cash used in operating activities

Operating lease obligations

Contract liabilities

Net cash used in operating activities

( 17,825,108 )

( 13,274,715 )

Cash Flows from Investing Activities:

Purchases of furniture,

fixtures and equipment

Additions to intangible

of notes receivable

cash used in investing activities

Purchases of property, plant and equipment

( 6,428,225 )

Additions to intangible assets

( 1,189,132 )

Cash paid for acquisition of Medical Billing Company

Cash paid for acquisition of TicketSmarter

Repayment (issuance) of notes receivable

Net cash used in investing activities

( 19,124,379 )

( 1,499,189 )

Cash Flows from Financing Activities:

Proceeds from unsecured

promissory note payable, related party

Proceeds from unsecured

promissory note payable

Proceeds from PPP/EIDL

Repayment of proceeds

investment agreement

Proceeds from issuance

of common stock and warrants, net of issuance costs

Proceeds from secured

convertible debentures

Secured convertible

debenture issuance expense

Principal payments

on related party note payable

Principal payment

on unsecured notes payable

Principal payment

on secured convertible debentures

Proceeds from issuance

of common stock upon exercise of warrants

Proceeds from exercising

stock options

Net cash (used

in) provided by financing activities

Net increase (decrease) in cash and

cash equivalents

equivalents, beginning of year

Cash, cash equivalents,

Supplemental disclosures of cash flow

payments for interest

payments for income taxes

Supplemental disclosures of non-cash

investing and financing activities:

common stock grant

common stock forfeitures

of Adoption of ASC 842 - obtaining right of use asset for lease liability

allocated to common stock purchase warrants in connection with proceeds from secured convertible debentures

of common stock upon conversion of secured convertible notes

of common stock related to the issuance of secured convertible notes

allocated to common stock purchase warrants in connection with issuance of unsecured promissory note payable

Proceeds from issuance of common stock upon exercise of pre-funded warrants

Net proceeds from sale of common stock in registered direct offerings

Repurchase and cancellation of common stock

Proceeds from unsecured promissory note payable, related party

Proceeds from unsecured promissory note payable

Proceeds from PPP/EIDL Loans

Repayment of proceeds investment agreement

( 1,250,000 )

Proceeds from issuance of common stock and warrants, net of issuance costs

Proceeds from secured convertible debentures

Secured convertible debenture issuance expense

Principal payments on related party note payable

Principal payment on unsecured notes payable

Principal payment on secured convertible debentures

Proceeds from issuance of common stock upon exercise of warrants

Proceeds from exercising stock options

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash, cash equivalents, beginning of year

Cash, cash equivalents, end of year

Supplemental disclosures of cash flow information:

Cash payments for interest

Cash payments for income taxes

Supplemental disclosures of non-cash investing and financing activities:

Restricted common stock grant

Restricted common stock forfeitures

Amounts allocated to common stock purchase warrants in connection with proceeds from secured convertible debentures

Issuance of common stock upon conversion of secured

convertible notes

Issuance of contingent consideration earn-out agreement

for business acquisitions

Issuance of contingent consideration promissory note for

business acquisitions

Assets acquired in business acquisitions

Identifiable intangible assets acquired in business acquisitions

acquired in business acquisitions

Liabilities assumed in business acquisitions

Common stock issued as consideration for business acquisitions

Amounts allocated to initial measurement of warrant derivative

liabilities in connection to the warrants and pre-funded warrants

Cancellation of treasury stock

Notes to Consolidated Financial Statements.

1 unchanged sentence

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(with its wholly-owned subsidiaries, Digital Ally International, Inc.

and Shield Products, LLC collectively, “Digital

“Digital,”

and the “Company”) produces digital video imaging, storage products and disinfectant

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

The Company’s products include,

among others;

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.

The Company has recently added two new lines of branded products:

ThermoVu™

line, 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) the Shield™

disinfectant and cleanser

line, which is for use against viruses and bacteria and which we began offering to the Company’s law enforcement and commercial

customers beginning late in the second quarter of 2020.

Both product lines are manufactured by third parties.

the Company has active research and development programs to adapt its technologies to other applications.

It 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.

The Company sells its 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.

Company was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc.

of Business :

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

and had no operations until 2004.

1 unchanged sentence

entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital

following is a summary of the Company’s Significant Accounting Policies:

business of Digital Ally, Inc.

(with its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally

Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., and its majority-owned subsidiary Nobility Healthcare, LLC, collectively,

“Digital Ally,” “Digital,” and the “Company”) is divided into three reportable operating segments:

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.

Ticketing Segment we act 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 accounting guidance on Segment Reporting

establishes standards for reporting information regarding operating segments in annual financial statements and requires selected

information of those segments to be presented in financial statements.

Such required segment information is included in Note 21.

Company also formed Worldwide Reinsurance Ltd., during 2021 which is a captive insurance company incorporated during 2021 and domiciled

This wholly-owned subsidiary 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.

following is a summary of the Company’s Significant Accounting Policies:

of Consolidation :

accompanying financial statements include the consolidated accounts of Digital Ally and its wholly-owned subsidiaries, Digital Ally International,

and Shield Products, LLC.

accompanying financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries, Digital Ally International,

Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc, and Worldwide Reinsurance, Ltd.

and its majority-owned

subsidiary Nobility Healthcare, LLC.

All intercompany balances and transactions have been eliminated during consolidation.

2 unchanged sentences

The Company formed

Shield Products, LLC in May 2020 to facilitate the sales of its Shield™

line of disinfectant/cleanser products and ThermoVu™

Shield Products, LLC in May 2020 to facilitate the sales of its Shield™ line of disinfectant/cleanser products and ThermoVu®

line of temperature monitoring equipment.

The Company formed Nobility Healthcare, LLC in June 2021 to facilitate the operations of its

revenue cycle management solutions and back-office services for healthcare organizations.

Lastly, the Company formed TicketSmarter, Inc.

upon its acquisition of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate the global ticketing operations.

The Company formed

Worldwide Reinsurance Ltd., which is a captive insurance company incorporated during 2021 and domiciled in Bermuda.

It 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.

Value of Financial Instruments :

3 unchanged sentences

debentures and proceeds investment agreement on a fair value basis.

Recognition :

Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers , and all

7 unchanged sentences

revenue when a performance obligation is satisfied.

Company has two different revenue streams, product and service, represented through its three segments.

The Company reports all revenues

on a gross basis, other than service revenues from the Company’s ticketing and revenue cycle management segments, Revenues generated

by all segments are reported net of sales taxes.

Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the

2 unchanged sentences

As part of part of its consideration for the contract,

the Company evaluates certain factors including the customers’

ability to pay (or credit risk).

the Company evaluates certain factors including the customers’ ability to pay (or credit risk).

For each contract, the Company

3 unchanged sentences

it expects to be entitled.

As the Company’s standard payment terms are less than one year, it has elected the practical expedient

under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

5 unchanged sentences

Revenue is recognized when control of the product is transferred to the customer (i.e.

when the Company’s performance

obligations is satisfied), which typically occurs at shipment.

5 unchanged sentences

product sales when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than

Company sells its products and services to law enforcement and commercial customers in the following manner:

to domestic customers are made direct to the end customer (typically a law enforcement agency or a commercial customer) through its

sales force, which is composed of its employees.

Revenue is recorded when the product is shipped to the end customer.

to international customers are made through independent distributors who purchase products from the Company at a wholesale price

and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price.

The distributor retains

the margin as its compensation for its role in the transaction.

The distributor generally maintains product inventory, customer receivables

and all related risks and rewards of ownership.

Accordingly, upon application of steps one through five above, revenue is recorded

when the product is shipped to the distributor consistent with the terms of the distribution agreement.

parts and services for domestic and international customers are generally handled by its inside customer service employees.

is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer.

taxes collected on products sold are excluded from revenues and are reported as accrued expenses in the accompanying balance sheets until

payments are remitted.

and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue.

6 unchanged sentences

criteria have been met.

with some of the Company’s customers contain multiple performance obligations that are distinct and accounted for separately.

transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”).

Company determined SSP for all the performance obligations using observable inputs, such as standalone sales and historical pricing.

SSP is consistent with the Company’s overall pricing objectives, taking into consideration the type of service being provided.

SSP also reflects the amount the Company would charge for the performance obligation if it were sold separately in a standalone sale.

Multiple performance obligations consist of product, software, cloud subscriptions and extended warranties.

Company’s multiple performance obligations may include future in-car or body-worn camera devices to be delivered at defined points

within a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year

contract to future deliverables using management’s best estimate of selling price.

Cycle Management

Company reports revenue cycle management revenues on a net basis, as its primary source of revenue is its end-to end service fees

which is generally determined as a percentage of the invoice amounts collected.

These service fees are reported as revenue monthly

upon completion of the Company’s performance obligation to provide the agreed upon service.

Company reports ticketing revenue on a gross or net basis based on management’s assessment of whether the Company is acting as

a principal or agent in the transaction.

The determination is based upon the evaluation of control over the event ticket, including the

right to sell the ticket, prior to its transfer to the ticket buyer.

Company sells tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to

the buyer upon confirmation of the order.

The Company acts as the principal in these transactions as the ticket is owned by the Company

at the time of sale, therefore controlling the ticket prior to transferring to the customer.

In these transactions, revenue is recorded

on a gross basis based on the value of the ticket and is recognized when an order is confirmed.

Payment is typically due upon delivery

of the ticket.

Company also acts as an intermediary between buyers and sellers through the online secondary marketplace.

Revenues derived from this

marketplace primarily consist of service fees from ticketing operations, and consists of one primary performance obligation, which is

facilitating the transaction between the buyer and seller, being satisfied at the time the order has been confirmed.

As the Company does

not control the ticket prior to the transfer, the Company acts as an agent in these transactions.

Revenue is recognized on a net basis,

net of the amount due to the seller when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per

the seller’s listing.

Payment is due at the time of sale.

liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately

2 unchanged sentences

prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied.

During the year ended December 31, 2020, the Company recognized revenue of $1.6 million related to its contract liabilities at January

Total contract liabilities consist of the following:

During the year ended December 31, 2021, the Company recognized revenue of $ 1.7 million related to its contract liabilities.

Contract liabilities consist of deferred revenue and include payments received

4 unchanged sentences

Total contract liabilities consist of the following:

OF CONTRACT LIABILITIES

December 31, 2021

December 31, 2020

Additions/Reclass

Recognized Revenue

December 31, 2021

Contract liabilities, current

Contract liabilities,

Total contract liabilities

returns and allowances aggregated $26,069 and $134,825 for the years ended December 31, 2020 and 2019, respectively.

Obligations for

estimated sales returns and allowances are recognized at the time of sales on an accrual basis.

The accrual is determined based upon

historical return rates adjusted for known changes in key variables affecting these return rates.

for the years ended December 31, 2020 and 2019 were derived from the following sources:

ended December 31,

Shield disinfectants/sanitizers

Repair and service

Cloud service revenue

Accessories and other

Contract liabilities, non-current

December 31, 2020

December 31, 2019

Additions/Reclass

Recognized Revenue

December 31, 2020

Contract liabilities, current

Contract liabilities, non-current

returns and allowances aggregated $ 45,298

for the years ended December 31, 2021 and 2020,

respectively.

Obligations for estimated sales returns and allowances are recognized at the time of sales on an accrual basis.

is determined based upon historical return rates adjusted for known changes in key variables affecting these return rates.

of Estimates :

7 unchanged sentences

value of warrants, options, proceeds investment agreement and convertible debt, the recognition of revenue, inventory valuation reserve,

the valuation allowance for deferred tax assets and other legal claims and contingencies.

The results of any changes in accounting estimates

are reflected in the financial statements in the period in which the changes become evident.

Estimates and assumptions are reviewed periodically,

and the effects of revisions are reflected in the period that they are determined to be necessary.

fair value of assets and liabilities acquired in a business combination, incremental borrowing rate on leases, the valuation allowance

for deferred tax assets and other legal claims and contingencies.

The results of any changes in accounting estimates are reflected in

the financial statements in the period in which the changes become evident.

Estimates and assumptions are reviewed periodically, and

the effects of revisions are reflected in the period that they are determined to be necessary.

and cash equivalents :

and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less.

and cash equivalents that are restricted as to withdrawal or use under the terms of the secured convertible debentures are presented

as restricted cash separate from cash and cash equivalents on the accompanying balance sheet.

The following table shows the Company’s cash and cash equivalents by significant investment category as of December 31, 2021 and

OF SHORT TERM INVESTMENTS

December 31, 2021

Demand deposits

Short-term investments with original maturities of 90 days or less (Level 1) (1) :

Money market funds

December 31, 2020

Demand deposits

Short-term investments with original maturities of 90 days or less (Level 1) (1) :

Money market funds

Level 1 fair value estimates

are based on quoted prices in active markets for identical assets.

Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that

at times may be in excess of the federally insured limit of $ 250,000

The Company minimizes this risk by

placing its cash deposits with numerous major financial institutions.

At December 31, 2021 and 2020, the uninsured balance amounted to

$ 29,836,142 and

$ 3,653,192 ,

respectively.

receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding

1 unchanged sentence

The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables

and considering a customer’s financial condition, credit history, and current economic conditions.

Trade receivables are written

off when deemed uncollectible.

and considering a customer’s financial condition, credit history, and current economic conditions.

receivables are written off when deemed uncollectible.

Recoveries of trade receivables previously written off are recorded when received.

trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days

A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days

beyond terms.

No interest is charged on overdue trade receivables.

consist of electronic parts, circuitry boards, camera parts and ancillary parts (collectively, “components”), work-in-process

and finished goods, and are carried at the lower of cost or market, with cost determined by standard cost methods, which approximate

the first-in, first-out method.

Inventory costs include material, labor and manufacturing overhead.

Service inventories that exceed the

estimated requirements for the next 12 months based on recent usage levels are reported as other long-term assets.

Management has established

inventory reserves based on estimates of excess and/or obsolete current and non-current inventory.

Manufacturing

inventory is reviewed for obsolescence and excess quantities on a quarterly basis, based on estimated future use of quantities on hand,

which is determined based on past usage, planned changes to products and known trends in markets and technology.

Changes in support plans

or technology could have a significant impact on obsolescence.

support our world-wide service operations, we maintain service spare parts inventory, which consists of both consumable and repairable

Consumable service spare parts are used within our service business to replace worn or damaged parts in a system during

a service call and are generally classified in current inventory as our stock of this inventory turns relatively quickly.

there has been no recent usage for a consumable service spare part, but the part is still necessary to support systems under service

contracts, the part is considered to be non-current and included within non-current inventories within our consolidated balance sheet.

Consumables are charged to cost of goods sold when issued during the service call.

these service parts age over the related product group’s post-production service life, we reduce the net carrying value of our

repairable spare part inventory on the consolidated balance sheet to account for the excess that builds over the service life.

The post-production

service life of our systems is generally seven to twelve years and, at the end of twelve years, the carrying value for these parts in

our consolidated balance sheet is reduced to zero.

We also perform periodic monitoring of our installed base for premature end of service

life events and expense, through cost of sales, the remaining net carrying value of any related spare parts inventory in the period incurred.

fixtures and equipment:

fixtures and equipment is stated at cost net of accumulated depreciation.

Additions and improvements are capitalized while ordinary maintenance

and repair expenditures are charged to expense as incurred.

Depreciation is recorded by the straight-line method over the estimated useful

life of the asset, which ranges from three to ten years.

Amortization expense on capitalized leases is included with depreciation expense.

The cost and accumulated depreciation related to assets sold or retired are removed from the accounts and any gain or loss is credited

or charged to income.

and Other Intangibles :

- In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations , using the acquisition

method of accounting.

The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired

is recorded as goodwill.

In accordance with ASC 350, Intangibles - Goodwill and Other , the Company assesses goodwill for impairment

annually as of December 31, and more frequently if events and circumstances indicate that goodwill might be impaired.

impairment testing is performed at the reporting unit level.

Goodwill is assigned to reporting units at the date the goodwill is initially

Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and

all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.

Traditionally,

goodwill impairment testing is a two-step process.

Step one involves comparing the fair value of the reporting units to its carrying

If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there

is no impairment.

If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to

measure the amount of impairment, if any.

Step two involves calculating an implied fair value of goodwill.

The Company has adopted ASU

2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test.

As a result, the

Company compares the fair value of a reporting unit with its respective carrying value and recognized an impairment charge for the amount

by which the carrying amount exceeded the reporting unit’s fair value.

Company determines the fair value of its reporting units using an income approach.

Under the income approach, the Company determined

fair value based on estimated discounted future cash flows of each reporting unit.

Determining the fair value of a reporting unit is

judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins,

discount rates and future market conditions, among others.

and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with

the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets .

An impairment review is performed whenever

events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.

The Company groups its assets

at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities.

The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level.

considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating

significant changes in the manner of use of the acquired assets or the strategy for the overall business;

and significant negative

industry or economic trends.

When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or

more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use

of the asset and its eventual disposition.

If the sum of the expected future undiscounted cash flows and eventual disposition is less

than the carrying amount of the asset, the Company recognizes an impairment loss.

An impairment loss is reflected as the amount by which

the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows,

if fair value is not available.

The Company assessed potential impairments of its long-lived assets as of December 31, 2021 and concluded

that there was no impairment.

assets include deferred patent costs and license agreements.

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estimated useful life on a straight-line method.

Inventories :

for the video solutions segment consist of electronic parts, circuitry boards, camera parts and ancillary parts (collectively,

“components”), work-in-process and finished goods.

Finished goods that are manufactured and assembled by the Company

are carried at the lower of cost or market, with cost determined by standard cost methods, which approximate the first-in, first-out

Inventories for the ticketing segment consists of tickets to live events purchased, which are held at the lower of

cost or net realizable value, and written-off after the event has occurred.

Inventory costs include material, labor and manufacturing

Event tickets for the ticketing segment are carried at the lower of cost or net realizable value, and

fully written off at the time the event occurs if the ticket is unsold and remaining in inventory.

Management has established inventory

reserves based on estimates of excess and/or obsolete current and non-current inventory.

Manufacturing

inventory for the video solutions segment is reviewed for obsolescence and excess quantities on a quarterly basis, based on estimated

future use of quantities on hand, which is determined based on past usage, planned changes to products and known trends in markets and

Changes in support plans or technology could have a significant impact on obsolescence.

support our world-wide service operations for the video solutions segment, we maintain service spare parts inventory, which consists

of both consumable and repairable spare parts.

Consumable service spare parts are used within our service business to replace worn or

damaged parts in a system during a service call and are generally classified in current inventory as our stock of this inventory turns

relatively quickly.

However, if there has been no recent usage for a consumable service spare part, but the part is still necessary to

support systems under service contracts, the part is considered to be non-current and included within non-current inventories within

our consolidated balance sheet.

Consumables are charged to cost of goods sold when issued during the service call.

these service parts age over the related product group’s post-production service life, we reduce the net carrying value of our

repairable spare part inventory on the consolidated balance sheet to account for the excess that builds over the service life.

The post-production

service life of our systems is generally seven to twelve years and, at the end of twelve years, the carrying value for these parts in

our consolidated balance sheet is reduced to zero.

We also perform periodic monitoring of our installed base for premature end of service

life events and expense, through cost of sales, the remaining net carrying value of any related spare parts inventory in the period incurred.

plant and equipment:

Property, plant and equipment

is stated at cost net of accumulated depreciation.

Additions and improvements are capitalized while ordinary maintenance and repair expenditures

are charged to expense as incurred.

Depreciation is recorded by the straight-line method over the estimated useful life of the asset,

which ranges from three to thirty years, other than the infinite useful life of land.

Amortization expense on capitalized

leases is included with depreciation expense.

The cost and accumulated depreciation related to assets sold or retired are removed from

the accounts and any gain or loss is credited or charged to income.

Company determines if an arrangement contains a lease at inception.

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Finance leases would be included in

furniture, fixtures and equipment, net and long-term debt and finance lease obligations on the balance sheet.

The Company had operating

leases for copiers and its office and warehouse space at December 31, 2020 but no financing leases.

property, plant and equipment, net and long-term debt and finance lease obligations on the balance sheet.

The Company had

operating leases for copiers and its office and warehouse space at December 31, 2021 but no financing leases.

assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement

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recognized for short term leases.

convertible debentures:

Company has elected to record its debentures at fair value.

Accordingly, the debentures are marked-to-market at each reporting date with

the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations.

All issuance costs related to the debentures

were expensed as incurred in the Consolidated Statement of Operations.

investment agreement :

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costs related to the senior convertible notes were expensed as incurred in the Consolidated Statement of Operations.

assets such as furniture, fixtures and equipment and purchased intangible assets subject to amortization are reviewed for impairment

assets such as property, plant and equipment and purchased intangible assets subject to amortization are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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as considered necessary.

Company’s products carry explicit product warranties that extend up to two years from the date of shipment.

The Company records

a provision for estimated warranty costs based upon historical warranty loss experience and periodically adjusts these provisions to

reflect actual experience.

Company’s video solutions segment products carry explicit product warranties that extend up to two years from the date of

The Company records a provision for estimated warranty costs based upon historical warranty loss experience and periodically

adjusts these provisions to reflect actual experience.

Accrued warranty costs are included in accrued expenses.

Extended warranties are offered on selected products

and when a customer purchases an extended warranty the associated proceeds are treated as contract liabilities and recognized over the

term of the extended warranty.

Extended warranties are

offered on selected products and when a customer purchases an extended warranty the associated proceeds are treated as contract liabilities

and recognized over the term of the extended warranty.

and Handling Costs :

and handling costs for outbound sales orders totaled $74,721 and $65,312 for the years ended December 31, 2020 and 2019, respectively.

Such costs are included in general and administrative expenses in the Consolidated Statements of Operations.

expense includes costs related to trade shows and conventions, promotional material and supplies, and media costs.

Advertising costs

are expensed in the period in which they are incurred.

The Company incurred total advertising expense of approximately $990,975 and $1,019,707

for the years ended December 31, 2020 and 2019, respectively.

Such costs are included in selling, advertising and promotional expenses

in the Consolidated Statements of Operations.

and handling costs video solutions segment for outbound sales orders totaled $ 79,763

for the years ended December 31, 2021 and 2020,

respectively.

Such costs are included in selling, general and administrative expenses in the Consolidated Statements of Operations.

expense video solutions segment and ticketing segments includes costs related to trade shows and conventions, promotional material

and supplies, and media costs.

Advertising costs are expensed in the period in which they are incurred.

The Company incurred total advertising

expense of approximately $ 4,110,032 and

$ 990,975 for

the years ended December 31, 2021 and 2020, respectively.

Such costs are included in selling, advertising and promotional expenses in

the Consolidated Statements of Operations.

taxes are provided for by the liability method in which deferred tax assets are recognized for deductible temporary differences and operating

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Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

740 - Income Taxes that provides a framework for accounting for uncertainty in income taxes and provided a comprehensive model to

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These periodic adjustments may have a material impact on its Consolidated Statements of Operations.

Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense

in the Consolidated Statements of Operations.

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Company is subject to taxation in the United States and various states.

As of December 31, 2020, the Company’s tax returns filed

As of December 31, 2021, the Company’s tax returns filed

for 2018, 2019 and 2020 and to be filed for 2021 are subject to examination by the relevant taxing authorities.

With few exceptions,

as of December 31, 2020, the Company is no longer subject to Federal, state, or local examinations by tax authorities for years before

as of December 31, 2021, the Company is no longer subject to Federal, state, or local examinations by tax authorities for taxable

years prior to 2018.

and Development Expenses :

Company expenses all research and development costs as incurred.

Development costs of computer software to be sold, leased, or otherwise

marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when

a product is available for general release to customers.

In most instances, the Company’s products are released soon after technological

feasibility has been established.

Costs incurred subsequent to achievement of technological feasibility were not significant, and software

development costs were expensed as incurred during 2020 and 2019.

Company expenses all research and development costs as incurred, which is generally incurred by the video solutions segment.

costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological

feasibility has been established and ending when a product is available for general release to customers.

In most instances, the Company’s

products are released soon after technological feasibility has been established.

Costs incurred subsequent to achievement of technological

feasibility were not significant, and software development costs were expensed as incurred during 2021 and 2020.

Issuance of Debt Instruments with Detachable

Stock Purchase Warrants

Company has common stock purchase warrants outstanding that are accounted for as equity based on their relative fair value and are not

subject to re-measurement.

Proceeds from the issuance

of a debt instrument with stock purchase warrants (detachable call options) are allocated to the two elements based on the relative fair

values of the debt instrument without the warrants and of the warrants themselves at time of issuance.

The portion of the proceeds so

allocated to the warrants are recorded as additional paid-in capital.

The remainder of the proceeds are allocated to the debt instrument

portion of the transaction.

Such issuances generally result in a discount (or, occasionally, a reduced premium) relative to the debt

instrument, which is amortized to interest expense using the effective interest rate method.

Warrant Derivative Liabilities:

In accordance with FASB ASC

815-40, Derivatives and Hedging:

Contracts in an Entities Own Equity, entities must consider whether to classify contracts that may be

settled in its own stock, such as warrants to purchase shares of Common Stock, as equity of the entity or as an asset or liability.

an event that is not within the entity’s control could require net cash settlement, then the contract should be classified as an

asset or a liability rather than as equity.

We have determined because the terms of the warrants issued during the first quarter of 2021,

and remain outstanding, include a provision that entitles all the warrant holders to receive cash for their warrants in the event of

a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled to cash,

our warrants should be classified as liability measured at fair value, with changes in fair value each period reported in earnings.

in the price of our common stock may result in significant changes in the value of the derivatives and resulting gains and losses on

our statement of operations.

Compensation :

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term is determined using the contractual term and vesting period of the award;

volatility of award grants made in the Company’s plan is measured using the weighted average of historical daily changes in

the market price of the Company’s common stock over the period equal to the expected term of the award;

volatility of award grants made in the Company’s plan is measured using the weighted average of historical daily changes in

the market price of the Company’s common stock over the period equal to the expected term of the award;

dividend rate is determined based on expected dividends to be declared;

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are accounted for as they occur.

Company has determined that its operations are comprised of one reportable segment:

the sale of digital audio and video recording and

speed detection devices.

For the year ended December 31, 2020 and 2019, sales by geographic area were as follows:

ended December 31,

Sales by geographic area:

United States of America

to customers outside of the United States are denominated in U.S.

All Company assets are physically located within the United

Reclassification

of Prior Year Presentation

prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on

the reported results of operations.

accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial

statements and requires selected information of those segments to be presented in financial statements.

Operating segments are identified

as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision

maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess

The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Ticketing, each of which

has specific personnel responsible for that business and reports to the CODM.

Corporate expenses capture the Company’s corporate

administrative activities, is also to be reported in the segment information.

The Company’s captive insurance subsidiary provides

services to the Company’s other business segments and not to outside customers;

however, had no activity in 2021.

Therefore, its operations are eliminated in consolidation

and is not considered a separate business segment for financial reporting purposes.

Consideration

circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities

from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of

the acquisition date.

The Company remeasures this liability each reporting period and records changes in the fair value through the consolidated

statement of operations.

and Cancellation of Shares

time to time, the Company’s Board of Directors (the “Board”) may authorize share repurchases of common stock.

repurchased under Board authorizations are held in treasury for general corporate purposes and cancelled when it is determined appropriate

by management.

The Company accounts for repurchases of common stock under the cost method.

Shares repurchased and cancelled during the

period were recorded as a reduction to stockholders’ (deficit) equity.

See further discussion of the Company’s share repurchase

program in Note 15–Stockholders’ Equity.

Non-Controlling

Non-controlling

interests in the Company’s Consolidated Financial Statements represents the interest in subsidiaries held by venture partners.

The venture partners hold noncontrolling interests in the Company’s consolidated subsidiary Nobility Healthcare, LLC.

Company consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share

of each subsidiary’s results of operations are deducted and reported as net income attributable to noncontrolling interest in the

Consolidated Statements of Operations.

Accounting Standards

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the calculation when the contract includes an option of cash or share settlement.

2020-06 is effective for fiscal years beginning after December 15, 2021 with early adoption permitted for fiscal years beginning

after December 15, 2020.

Based on a preliminary analysis, the Company does not expect the adoption of this new accounting standard will

have a significant impact on the Company’s financial position and results of operations.

2020-06 is effective for fiscal years beginning

after December 15, 2021 with early adoption permitted for fiscal years beginning after December 15, 2020.

Based on a preliminary analysis,

the Company does not expect the adoption of this new accounting standard will have a significant impact on the Company’s financial

position and results of operations.

2020, FASB issued ASU No.

2020-01 which represents a consensus of the Emerging Issues Task Force and it clarifies certain items related

to ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial

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method or fair value option.

2020-01 is effective

for fiscal years beginning after December 15, 2020 with early adoption permitted.

Based on a preliminary analysis, the Company does not

expect the adoption of this new accounting standard will have a significant impact on the Company’s financial position and results

of operations.

2020-01 is effective for fiscal years beginning after December 15, 2020 with early adoption permitted.

The Company adopted this update for the quarter ended March 31, 2021, with no material effect on the financials.

December 2019, the FASB issued ASU No.

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amendment also improves consistent application and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The adoption of this standard did not have a significant impact on the Company’s financial position and results of operations.

February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases (“Topic 842”).

requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to

today’s accounting.

Lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use

asset for the right to use the underlying asset for the lease term.

The lease liability is measured at the present value of the lease

payments over the lease term.

The right-of-use asset is measured at the lease liability amount, adjusted for lease prepayments, lease

incentives received and the lessee’s initial direct costs.

The standard is effective for public business entities for annual reporting

periods beginning after December 15, 2018, and interim periods within that reporting period, which is the first quarter of 2019 for the

Company adopted the new guidance on January 1, 2019 using the optional transitional method and elected to use the package of three practical

expedients which allows the Company not to reassess whether contracts are or contain leases, lease classification and whether initial

direct costs qualify for capitalization.

The Company has completed its assessment of the impact of the standard and determined that the

only lease that the Company held was an operating lease for its office and warehouse space.

Upon adoption of the standard, the Company

recorded Right of Use (ROU) assets of approximately $501,000 and lease liabilities of approximately $582,000 related to it office and

warehouse space operating leases.

The Company also removed deferred rent of approximately $81,000 when adopting the new guidance.

financial liabilities measured using the fair value option in ASC 825, ASU 2016-01, Financial Instruments —

Overall (Subtopic 825-10):

The adoption of this standard did not have a significant impact on the Company’s financial position and results of operations.

financial liabilities measured using the fair value option in ASC 825, ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities, issued in January 2016, requires entities to recognize the

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Based on discussions with our valuation expert and knowledge of the Company there

was no change in valuation caused by a change in the Company’s credit risk during the period ending December 31, 2020.

2018-09, Codification improvements, clarifies the accounting for a debt extinguishment when the fair value option is elected.

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beginning in 2021.

Early adoption is permitted for any fiscal year or interim period for which an entity’s financial statements

have not yet been issued or have not been made available to be issued.

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Based on discussions with our valuation expert and knowledge of the Company there was no change in valuation caused

by a change in the Company’s credit risk during the period ending December 31, 2020.

Since there is no change accounted for as

a change in Credit Risk (included in other comprehensive income/loss) there is no impact to the Company’s financial statements

from this new guidance.

June 2016, the FASB issued ASU 2016-13, “Financial Instruments –

Credit Losses”

to improve information on credit losses

June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to improve information on credit losses

for financial assets and net investment in leases that are not accounted for at fair value through net income.

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FASB issued ASU No.

2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives

and Hedging, and Topic 825, Financial Instruments”

2019-05, “Financial Instruments-Credit Losses (Topic 326):

Targeted Transition Relief”

which provided additional implementation guidance on the previously issued ASU.

2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives

and Hedging, and Topic 825, Financial Instruments” and ASU No.

2019-05, “Financial Instruments-Credit Losses (Topic 326):

Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU.

In November 2019, the

FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic

which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined

FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic

842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined

by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal

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The Company will continue to evaluate the effect

of adopting ASU 2016-13 will have on the Company’s consolidated financial statements.

August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No.

of adopting ASU 2016-13 will have on the Company’s consolidated financial statements.

August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , to improve the effectiveness of disclosures.

The amendments remove, modify, and add certain disclosure requirements in Topic 820, “Fair Value Measurement.”

The amendments

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , to improve the effectiveness of disclosures.

The amendments remove, modify, and add certain disclosure requirements in Topic 820, “Fair Value Measurement.” The amendments

on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3

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The amendments are effective for fiscal years beginning after December 15, 2019.

adoption is permitted, including adoption in an interim period.

Furthermore, an entity is permitted to early adopt any removed or modified

disclosures upon issuance of the update and delay adoption of the additional disclosures until their effective date.

The Company is currently

evaluating the effects the adoption of ASU 2018-13 will have on the disclosures.

Company adopted this standard in the first quarter of fiscal 2020.

The impact of the adoption of ASU 2018-13 is further described in

Note 9 , “ Fair Value Measurement ,” to our consolidating financial statements.

August 2018, the FASB issued ASU No.

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before shipment or backing by an irrevocable letter or credit.

The Company performs ongoing credit evaluations of its customers’

financial condition and maintains an allowance for estimated losses.

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receivable are presented net of an allowance for doubtful accounts.

The allowance for doubtful accounts totaled $123,224 as of December

31, 2020 and $123,224 as of December 31, 2019.

Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts

that at times may be in excess of the federally insured limit of $250,000 per bank.

The Company minimizes this risk by placing

its cash deposits with major financial institutions.

The allowance for doubtful accounts totaled $ 113,234

as of December 31, 2021 and $ 123,224

as of December 31, 2020.

Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that

at times may be in excess of the federally insured limit of $ 250,000

The Company minimizes this risk by

placing its cash deposits with major financial institutions.

At December 31, 2021 and 2020, the uninsured balance amounted to $ 29,836,142

and $-0-, respectively.

The Company uses primarily a network

of unaffiliated distributors for international sales and employee-based direct sales force for domestic sales.

No international

distributor individually exceeded 10% of total revenues and no customer receivable balance exceeded 10% of total accounts receivable

for the years ended December 31, 2020 and 2019.

Company purchases finished circuit boards and other proprietary component parts from suppliers located in the United States and on a

limited basis from Asia.

Although the Company obtains certain of these components from single source suppliers, it generally owns all

tooling and management has located alternative suppliers to reduce the risk in most cases to supplier problems that could result in significant

production delays.

The Company has not historically experienced significant supply disruptions from any of its principal vendors and

does not anticipate future supply disruptions.

The Company acquires most of its components on a purchase order basis and does not have

long-term contracts with its suppliers.

ACCOUNTS RECEIVABLE –

ALLOWANCE FOR DOUBTFUL ACCOUNTS

and $ 3,653,192 ,

respectively.

The Company uses primarily a network of unaffiliated distributors for international sales and employee-based direct sales

force for domestic sales.

No international distributor individually exceeded 10 %

of total revenues.

One individual customer receivable balance exceeded 10 %

of total accounts receivable as of December 31, 2021 and 2020, which totaled $ 352,603

and $ 319,000

of total accounts receivable, respectively.

Company’s video solutions segment purchases finished circuit boards and other proprietary component parts from suppliers

located in the United States and on a limited basis from Asia.

Although the Company obtains certain of these components from single source

suppliers, it generally owns all tooling and management has located alternative suppliers to reduce the risk in most cases to supplier

problems that could result in significant production delays.

The Company has not historically experienced significant supply disruptions

from any of its principal vendors and does not anticipate future supply disruptions.

The Company acquires most of its components on a

purchase order basis and does not have long-term contracts with its suppliers.

ACCOUNTS RECEIVABLE – ALLOWANCE FOR DOUBTFUL ACCOUNTS

allowance for doubtful accounts receivable was comprised of the following for the years ended December 31, 2021 and 2020:

OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

Beginning balance

Provision for bad debts

Charge-offs to allowance,

net of recoveries

Charge-offs to allowance, net of recoveries

Ending balance

consisted of the following at December 31, 2021 and 2020:

Raw material and component parts

Work-in-process

Finished goods

Reserve for excess and

obsolete inventory

OF INVENTORIES

Raw material and component parts– video solutions segment

Work-in-process– video solutions segment

Finished goods – video solutions segment

Finished goods – ticketing segment

Reserve for excess and obsolete inventory– video solutions segment

( 3,353,458 )

( 1,960,351 )

Reserve for excess and obsolete inventory – ticketing segment

Total inventories

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The cost of such units

totaled $138,263 and $80,711 as of December 31, 2020 and 2019, respectively.

FURNITURE, FIXTURES AND EQUIPMENT

fixtures and equipment consisted of the following at December 31, 2020 and 2019:

totaled $ 153,976

and $ 138,263

as of December 31, 2021 and 2020, respectively.

PREPAID EXPENSES

expenses were the following at December 31, 2021 and 2020:

OF PREPAID EXPENSE

Prepaid inventory

Prepaid advertising

Total prepaid expenses

expenses increased by nearly $ 7.7 million primarily due to a prepaid inventory purchases and additional prepaid expenses related to completed

acquisitions in 2021.

PROPERTY, PLANT AND EQUIPMENT

plant and equipment consisted of the following at

December 31, 2021 and 2020:

OF PROPERTY, PLANT AND EQUIPMENT

Office furniture, fixtures and equipment

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Demonstration and tradeshow equipment

Leasehold improvements

Building improvements

Rental equipment

accumulated depreciation

and amortization

Net furniture, fixtures

and equipment

and amortization of furniture, fixtures and equipment aggregated $62,048 and $254,491 for the years ended December 31,

2020 and 2019, respectively.

The cost and accumulated depreciation related to assets sold or retired are removed from the accounts

and any gain or loss is credited or charged to income.

The Company retired fixed assets during 2020 totaling $519,468, all of

which were fully depreciated resulting in no gain or loss for the year ended December 31, 2020.

INTANGIBLE ASSETS

accumulated depreciation and amortization

Net property, plant and equipment

and amortization of property, plant and equipment aggregated $ 258,999

for the years ended December 31, 2021 and 2020,

respectively.

The cost and accumulated depreciation related to assets sold or retired are removed from the accounts and any gain or loss

is credited or charged to income.

The Company retired fixed assets during 2021 totaling $ 391,535

all of which were fully depreciated resulting

in no gain or loss for the year ended December 31, 2021.

GOODWILL AND OTHER INTANGIBLE ASSETS

assets consisted of the following at December 31, 2021 and 2020:

carrying value

OF INTANGIBLE ASSETS

December 31, 2021

December 31, 2020

Amortized intangible assets:

Patents and Trademarks

Unamortized intangible assets:

Patents and trademarks

Licenses (video solutions segment)

Patents and trademarks (video solutions segment)

Sponsorship agreement network (ticketing segment)

SEO content (ticketing segment)

Personal seat licenses (ticketing

Indefinite life intangible assets:

Goodwill (ticketing and revenue cycle management segments)

Trade name (ticketing segment)

Patents and trademarks pending

(video solutions

and trademarks pending will be amortized beginning at the time they are issued by the appropriate authorities.

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patent or trademark is denied, then the amount deferred will be immediately charged to expense.

expense for the years ended December 31, 2020 and 2019 was $188,108 and $135,660, respectively.

expense for the years ended December 31, 2021 and 2020 was $ 563,490

and $ 188,108 ,

respectively.

Estimated amortization for intangible

assets with definite lives for the next five years ending December 31 and thereafter is as follows:

OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS

Year ending December 31:

2026 and thereafter

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obligations is comprised of the following:

OF SECURED CONVERTIBLE DEBENTURES AND PROCEEDS INVESTMENT AGREEMENT

Economic injury disaster loan (EIDL)

Payroll protection program loan (PPP)

2019 Secured convertible notes, at fair value

2018 Proceeds investment agreement, at fair

Unsecured promissory

note payable, less unamortized discount of $-0- and $66,061 at December 31, 2020 and 2019, respectively

Contingent consideration promissory note – Nobility Healthcare Division Acquisition

Debt obligations

current maturities

of debt obligations

current maturities of debt obligations

Debt obligations, long-term

obligations mature as follows as of December 31, 2021:

OF MATURITY OF DEBT OBLIGATIONS

2026 and thereafter

Small Business Administration Notes .

May 4, 2020, the Company issued a promissory note in connection with the receipt of the PPP Loan of $1,418,900 under the SBA’s

PPP Program under the CARES Act.

The PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum.

Monthly principal and

interest payments are deferred for nine months after the date of disbursement and total $79,850.57 per month thereafter.

may be prepaid at any time prior to maturity with no prepayment penalties.

The promissory note contains events of default and other provisions

customary for a loan of this type.

The PPP provides that the PPP Loan may be partially or wholly forgiven if the funds are used for certain

qualifying expenses as described in the CARES Act.

The Company intends to use the majority of the PPP Loan amount for qualifying expenses

May 4, 2020, the Company issued a promissory note in connection with the receipt of the PPP Loan of $ 1,417,413

under the SBA’s PPP Program under the

The PPP Loan has a two-year term and bears interest at a rate of 1.0 %

Monthly principal and interest payments are deferred for nine months after the date of disbursement and total $ 79,850.57

per month thereafter.

The PPP Loan may be prepaid

at any time prior to maturity with no prepayment penalties.

The promissory note contains events of default and other provisions customary

for a loan of this type.

The PPP provides that the PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying

expenses as described in the CARES Act.

The Company intended to use the majority of the PPP Loan amount for qualifying expenses

and to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act.

The Company is in process of applying for

forgiveness of the PPP Loan.

On December 10, 2020, the Company was fully forgiven of its $1,418,900 PPP Loan, thus we recorded a gain

on the extinguishment of debt in the amount of $1.4 million in the line item “Gain on Extinguishment of Debt”

in our Consolidated

Statements of Operations.

The Company applied for forgiveness of the

PPP Loan and on December 10, 2020 the Company was fully forgiven of its $ 1,417,413

Additionally, during the year

ended December 31, 2021, the Company was fully forgiven of its $ 10,000

EIDL advance received in association with

the PPP Loan.

Therefore, we recorded a gain on the extinguishment of debt totaling $ 10,000 and $ 1,417,413 in our Consolidated

Statements of Operations for the years ended December 31, 2021 and 2020, respectively.

May 12, 2020, the Company received $ 150,000 in loan funding from the SBA under the EIDL program administered by the SBA, which program

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the terms of the note issued under the EIDL program, interest accrues on the outstanding principal at the rate of 3.75 % per annum.

The term of such note is thirty years, though it may be payable sooner upon an event of default under such note.

Monthly principal

and interest payments are deferred for twelve months after the date of disbursement and total $731.00 per month thereafter.

note may be prepaid in part or in full, at any time, without penalty.

The Company granted the secured party a continuing interest

in and to any and all collateral, including but not limited to tangible and intangible personal property.

term of such note is thirty years, though it may be payable sooner upon an event of default under such note.

Monthly principal and interest

payments are deferred for twelve months after the date of disbursement and total $ 731.00 per month thereafter.

Such note may be prepaid

in part or in full, at any time, without penalty.

The Company granted the secured party a continuing interest in and to any and all collateral,

including but not limited to tangible and intangible personal property.

Secured Convertible Notes .

April 17, 2020, the Company entered into a securities purchase agreement with several accredited investors providing for the issuance

of (i) the Company’s 8% secured convertible notes due April 16, 2021 with a principal face amount of $1,666,666, which convertible

notes are, subject to certain conditions, convertible into 1,650,164 shares of the Company’s common stock, at a price per share

of $1.01 (the “2020 Convertible Notes”), and (ii) five-year warrants to purchase an aggregate of 1,237,624 shares of Common

of (i) the Company’s 8 % secured convertible notes due April 16, 2021 with a principal face amount of $ 1,666,666 , which convertible

notes are, subject to certain conditions, convertible into 1,650,164 shares of the Company’s common stock, at a price per share

of $ 1.01 (the “2020 Convertible Notes”), and (ii) five-year warrants to purchase an aggregate of 1,237,624 shares of Common

Stock at an exercise price of $ 1.31 , which warrants are immediately exercisable upon issuance and on a cashless basis if the Warrants

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their rights to convert the notes or exercise the warrants if, as a result of such conversion or exercise, such holder, together with

its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock outstanding immediately after

giving effect to such exercise.

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fair value as determined on April 17, 2020, the date of origination:

OF FAIR VALUE OF EMBEDDED DERIVATIVES AND WARRANTS

Secured convertible notes

Common stock purchase

Common stock purchase warrants

Gross cash proceeds

the year ended December 31, 2020, the holders of the 2020 Convertible Notes exercised their right to convert principal balances aggregating

$1,665,666 into equity.

In addition, on June 12, 2020, the Company exercised its right to prepay in cash the remaining outstanding principal

balance aggregating $1,000.

There remains no outstanding 2020 Convertible notes as of December 31, 2020 as a result of these conversions

and prepayments.

In addition, on June 12, 2020, the

Company exercised its right to prepay in cash the remaining outstanding principal balance aggregating $ 1,000 .

There remains no outstanding 2020 Convertible notes as of December 31, 2021 or 2020 as a result of these conversions and prepayments.

the fair value basis, the Company determines the fair value of the secured convertible notes and adjusts the carrying value of the secured

convertible notes at each reporting date with the resulting charge or credit being reflected in the consolidated statement of operations.

Following is an analysis of the activity in the secured convertible notes during the year ended December 31, 2020:

Following is an analysis of the activity in the secured convertible notes during the years ended December 31, 2021 and

OF FAIR VALUE AND ADJUSTED CARRYING VALUE OF SECURED CONVERTIBLE NOTES

Balance at December 31, 2019

2020 convertible notes at fair value

Principal repaid during

the period by issuance of common stock

Principal repaid during

the period by payment of cash

in fair value of secured convertible note during the period

Issuance of 2020 convertible notes at fair value

Principal repaid during the period by issuance of common stock

( 1,665,666 )

Principal repaid during the period by payment of cash

Change in fair value of secured convertible note during the period

Balance at December 31, 2020

Issuance of 2020 convertible notes at fair value

Principal repaid during the period by issuance of common stock

Principal repaid during the period by payment of cash

Change in fair value of secured convertible note during

Balance at December 31, 2021

is a range of certain estimates and assumptions utilized as of the April 17, 2020 issuance date to determine the fair value of secured

convertible notes:

Volatility –

OF CERTAIN ESTIMATES AND ASSUMPTIONS OF FAIR VALUE OF SECURED CONVERTIBLE NOTES

Volatility – range

Risk-free rate

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charged to expense as incurred.

A total of $34,906 and $-0- of such issuance costs were charged to operations during the years ended

December 31, 2020 and 2019, respectively.

A total of $ - 0 - and $ 34,906

of such issuance costs were charged to operations

during the years ended December 31, 2021 and 2020, respectively.

Secured Convertible Notes .

August 5, 2019, the Company, entered into a securities purchase agreement with several accredited investors providing for the issuance

of (i) the Company’s 8% secured convertible notes due August 4, 2020 with a principal face amount of $2,777,777.78, which convertible

notes are, subject to certain conditions, convertible into 1,984,126 shares of the Company’s common stock, at a price per share

of (i) the Company’s 8% secured convertible notes due August 4, 2020 with a principal face amount of $ 2,777,777 .78, which convertible

notes are, subject to certain conditions, convertible into 1,984,126 shares of the Company’s common stock, at a price per share

(ii) five -year warrants to purchase an aggregate of 571,428 shares of Common Stock at an exercise price of $ 1.8125 , which warrants

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and (iii) the issuance of shares of common stock equal to 5 % of the aggregate purchase price of the convertible notes, with

an aggregate value of $125,000 (the “Commitment Shares”).

an aggregate value of $ 125,000 (the “Commitment Shares”).

The accredited investors purchased the foregoing securities for

an aggregate cash purchase price of $ 2,500,000 .

to the purchase agreement, an aggregate of $1,153,320 in principal amount of convertible notes (the “Registered Notes”),

to the purchase agreement, an aggregate of $ 1,153,320 in principal amount of convertible notes (the “Registered Notes”),

the conversion shares underlying the Registered Notes and all of the Commitment Shares were issued to the accredited investors in a registered

direct offering pursuant to a prospectus supplement to the Company’s currently effective shelf registration statement on Form S-3.

Accordingly, $ 1,153,320 in original principal amount of our convertible notes were issued as Registered Notes pursuant to the shelf registration

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with the investors, pursuant to which the Company and its subsidiary granted a security interest in, among other items, the Company and

its subsidiary’s accounts, chattel paper, documents, equipment, general intangibles, instruments and inventory, and all proceeds,

as set forth in the security agreement.

In addition, pursuant to an intellectual property security agreement, dated as of August 5, 2019,

the Company granted a continuing security interest in all of the Company’s right, title and interest in, to and under certain of

the Company’s trademarks, copyrights and patents.

In addition, the Company’s subsidiary jointly and severally agreed to guarantee

and act as surety for the Company’s obligation to repay the convertible notes pursuant to a subsidiary guarantee.

the Company granted a continuing security interest in all of the Company’s right, title and interest in, to and under certain of

the Company’s trademarks, copyrights and patents.

In addition, the Company’s subsidiary jointly and severally agreed to guarantee

and act as surety for the Company’s obligation to repay the convertible notes pursuant to a subsidiary guarantee.

the purchase agreement, the convertible notes and warrants contain provisions whereby the accredited investors are prohibited from exercising

their rights to convert the notes or exercise the warrants if, as a result of such conversion or exercise, such holder, together with

its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock outstanding immediately after

giving effect to such exercise.

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The following represents the resulting fair value as determined on August 5, 2019, the date of origination:

Secured convertible notes

Common stock issued as Commitment Shares

Common stock purchase

Gross cash proceeds

SCHEDULE OF FAIR VALUE OF EMBEDDED DERIVATIVES AND WARRANTS

convertible notes

stock issued as Commitment Shares

stock purchase warrants

cash proceeds

the fair value basis, the Company determines the fair value of the secured convertible notes and adjusts the carrying value of the secured

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Following is an analysis of the activity in the secured convertible notes during the years ended December 31, 2021 and 2020:

Balance at December 31, 2018

convertible notes on August 5, 2019, at fair value

Principal repaid during

the period by issuance of common stock

Principal repaid during

the period by payment of cash

SUMMARY OF FAIR VALUE AND ADJUSTED CARRYING VALUE OF SECURED CONVERTIBLE NOTES

at December 31, 2019

repaid during the period by issuance of common stock

repaid during the period by payment of cash

in fair value of secured convertible note during the period

Balance at December 31, 2019

Principal repaid during

the period by issuance of common stock

Principal repaid during

the period by payment of cash

at December 31, 2020

repaid during the period by issuance of common stock

repaid during the period by payment of cash

in fair value of secured convertible note during the period

Balance at December 31, 2020

is a range of certain estimates and assumptions utilized as of December 31, 2020 to determine the fair value of secured convertible notes:

Volatility –

Risk-free rate

Contractual term

Calibrated stock price

the fair value basis, legal, accounting, and miscellaneous costs directly related to the issuance of the secured convertible notes are

charged to expense as incurred.

A total of $-0- and $89,148 of such issuance costs were charged to operations during the years ended

December 31, 2020 and 2019, respectively.

at December 31, 2021

Proceeds Investment Agreement .

July 31, 2018, the Company entered into a Proceeds Investment Agreement (the “PIA Agreement”) with Brickell Key Investments

LP (“BKI”), pursuant to which BKI funded an aggregate of $500,000 (the “First Tranche”) to be used (i) to fund

the Company’s litigation proceedings relating to the infringement of certain patent assets listed in the PIA Agreement and (ii)

to repay the Company’s existing debt obligations and for certain working capital purposes set forth in the PIA Agreement.

to the PIA Agreement, BKI was granted an option to provide the Company with an additional $9.5 million, at BKI’s sole discretion

(the “Second Tranche”).

July 31, 2018, the Company entered into a Proceeds Investment Agreement (the “PIA Agreement”) with Brickell Key Investments

LP (“BKI”), pursuant to which BKI funded an aggregate of $ 500,000 (the “First Tranche”) to be used (i) to fund

the Company’s litigation proceedings relating to the infringement of certain patent assets listed in the PIA Agreement and (ii)

to repay the Company’s existing debt obligations and for certain working capital purposes set forth in the PIA Agreement.

to the PIA Agreement, BKI was granted an option to provide the Company with an additional $ 9.5 million, at BKI’s sole discretion

(the “Second Tranche”).

On August 21, 2018, BKI exercised its option on the Second Tranche for $ 9.5 million which completed

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pre-tax monetary recoveries paid by any defendant(s) to the Company or its affiliates agreed to in a settlement or awarded in judgment

in connection with the patent assets, plus any interest paid in connection therewith by such defendant(s) (the “Patent Assets Proceeds”),

up to the minimum return (as defined in the Agreement) and (ii) if BKI has not received its minimum return by the earlier of a liquidity

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security interest is enforceable by BKI if the Company is in default under the PIA Agreement which would occur if (i) the Company fails,

after five (5) days’

written notice, to pay any due amount payable to BKI under the PIA Agreement, (ii) the Company fails to comply

after five (5) days’ written notice, to pay any due amount payable to BKI under the PIA Agreement, (ii) the Company fails to comply

with any provision of the PIA Agreement or any other agreement or document contemplated under the PIA Agreement, (iii) the Company becomes

insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to the Company, (iv) the Company’s

creditors commence actions against the Company (which are not subsequently discharged) that affect material assets of the Company, (v)

the Company, without BKI’s consent, incurs indebtedness other than immaterial ordinary course indebtedness up to $500,000, (vi)

the Company fails, within five (5) business days following the closing of the second tranche, to fully satisfy its obligations to certain

holders of the Company’s senior secured convertible promissory notes listed in the PIA Agreement and fails to obtain unconditional

releases from such holders as to the Company’s obligations to such holders and the security interests in the Company held by such

holders or (vii) there is an uncured non-compliance of the Company’s obligations or misrepresentations by the Company under the

holders of the Company’s senior secured convertible promissory notes listed in the PIA Agreement and fails to obtain unconditional

releases from such holders as to the Company’s obligations to such holders and the security interests in the Company held by such

holders or (vii) there is an uncured non-compliance of the Company’s obligations or misrepresentations by the Company under the

PIA Agreement.

the PIA Agreement, the Company issued BKI a warrant to purchase up to 465,712 shares of the Company’s common stock, par value $0.001

per share (the “PIA Warrant”), at an exercise price of $2.60 per share provided that the holder of the PIA Warrant will be

the PIA Agreement, the Company issued BKI a warrant to purchase up to 465,712 shares of the Company’s common stock, par value $ 0.001

per share (the “PIA Warrant”), at an exercise price of $ 2.60 per share provided that the holder of the PIA Warrant will be

prohibited from exercising the PIA Warrant if, as a result of such exercise, such holder, together with its affiliates, would own more

than 4.99% of the total number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise.

than 4.99 % of the total number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise.

However, such holder may increase or decrease such percentage to any other percentage not in excess of 9.99 % , provided that any increase

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Company elected to account for the PIA on the fair value basis.

Therefore, the Company determined the fair value of the PIA and PIA Warrants

which yielded estimated fair values of the PIA including their embedded derivatives and the detachable PIA Warrants as follows:

Therefore, the Company determined

the fair value of the PIA and PIA Warrants which yielded estimated fair values of the PIA

including their embedded derivatives and the detachable PIA Warrants as follows:

SCHEDULE OF FAIR VALUE OF EMBEDDED DERIVATIVES AND WARRANTS

Proceeds investment agreement

Common stock purchase

Common stock purchase warrants

Gross cash proceeds

Company utilized a probability weighted present value of expected patent asset proceeds for the litigation involving both Axon and WatchGuard

(see Note 12 –

Commitments and Contingencies) which involved estimates of the amount and timing of the expected patent asset proceeds

(see Note 12 – Commitments and Contingencies) which involved estimates of the amount and timing of the expected patent asset proceeds

from the alleged patent infringement.

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asset proceeds for the litigation involving both Axon and WatchGuard:

Discount rate

Expected term to patent asset proceeds payment

OF CERTAIN ESTIMATES AND ASSUMPTIONS OF FAIR VALUE OF SECURED CONVERTIBLE NOTES

term to patent asset proceeds payment

years - 4 years

Probability of success

Estimated minimum return payable to BKI

Negotiation discount

minimum return payable to BKI

2019, the Company settled its patent infringement litigation with WatchGuard whereby it received a lump-sum payment of $ 6.0 million as

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settlement income in the accompanying consolidated statement of operations.

July 20, 2020, the Company and BKI executed a Termination Agreement and Mutual Release (the “Termination Agreement”).

the terms of the Termination Agreement the parties agreed to terminate the PIA and to release each other from any further liability under

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(a) a contingent payment in the amount of $ 2,750,000 following the closing

of an asset purchase, membership interest purchase, or similar transaction between the Company and a specified third-party (the “Purchase

Transaction”) and (b) any and all future proceeds received from Watchguard and its successors and assigns by the Company for WatchGuard’s

of an asset purchase, membership interest purchase, or similar transaction between the Company and a specified third-party (the “Purchase

Transaction”) and (b) any and all future proceeds received from Watchguard and its successors and assigns by the Company for WatchGuard’s

8,781,292 and 9,253,452.

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Furthermore, the Company does not anticipate any

future recoveries from Watchguard and its successors and assigns relative to WatchGuard’s use of U.S.

8,781,292 and

1 unchanged sentence

following represents activity in the PIA during the years ended December 31, 2021 and 2020:

SUMMARY OF FAIR VALUE AND ADJUSTED CARRYING VALUE OF SECURED CONVERTIBLE NOTES

Beginning balance as of January 1, 2020

Repayment of obligation

Change in the fair value

during the period

( 1,250,000 )

Change in the fair value during the period

( 5,250,000 )

Ending balance as of December 31, 2020

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Repayment of obligation

Change in fair value

during the period

Change in fair value during the period

Ending balance as of December 31, 2021

1 unchanged sentence

December 23, 2019, the Company, borrowed $ 300,000 under an unsecured note payable to a private, third-party lender.

The promissory

note bears interest at the rate of 8% per annum with principal and accrued interest payable on or before its maturity date of

March 31, 2020.

The Company granted the lender warrants exercisable to purchase a total of 107,000 shares of its common stock

at an exercise price of $1.40 per share until December 23, 2024.

When determining the fair value of these warrants, the assumptions

utilized in the Black-Scholes model include the expected volatility of stock price of 86%, discount rate of 1.75%, and expected

dividends of 0%.

The Company allocated $71,869 of the proceeds of the promissory note to additional paid-in-capital, which

represented the grant date relative fair value of the warrants issued to the lender.

The discount will be amortized to interest

expense ratably over the term of the promissory note which approximates the effective interest method.

The amortization of discount

resulted in $66,061 and $5,808 of the discount amortized to interest expense during the years ended December 31, 2020 and 2019,

respectively.

The promissory note

bears interest at the rate of 8 % per annum with principal and accrued interest payable on or before its maturity date of March 31, 2020 .

The Company granted the lender warrants exercisable to purchase a total of 107,000 shares of its common stock at an exercise price of

$ 1.40 per share until December 23, 2024.

When determining the fair value of these warrants, the assumptions utilized in the Black-Scholes

model include the expected volatility of stock price of 86% , discount rate of 1.75 % , and expected dividends of 0% .

The Company allocated

$ 71,869 of the proceeds of the promissory note to additional paid-in-capital, which represented the grant date relative fair value of

the warrants issued to the lender.

The discount will be amortized to interest expense ratably over the term of the promissory note which

approximates the effective interest method.

The amortization of discount resulted in $- 0 - and $ 66,061 of the discount amortized to interest

expense during the years ended December 31, 2021 and 2020, respectively.

January 17, 2020, the Company borrowed $ 100,000 under an unsecured note payable to a private, third-party lender.

promissory note bore interest at the rate of 8% per annum with principal and accrued interest payable on or before its

maturity date of April 17, 2020.

The Company granted the lender warrants exercisable to purchase a total of 35,750 shares of

its common stock at an exercise price of $1.40 per share until January 17, 2025.

When determining the fair value of these

warrants, the assumptions utilized in the Black-Scholes model include the expected volatility of stock price of 86%, discount

rate of 2%, and expected dividends of 0%.

The Company allocated $20,806 of the proceeds of the promissory note to additional

paid-in-capital, which represented the grant date relative fair value of the warrants issued to the lender.

repaid in full on March 12, 2020 and the discount was amortized to interest expense through the date of payment.

amortization of discount resulted in $20,806 of the discount amortized to interest expense during the year ended December 31,

Promissory Notes Payable –

Related party

February and April 2020, the Company borrowed a total of $319,000 from the Company’s Chairman, CEO & President under an unsecured

The promissory note

bore interest at the rate of 8 % per annum with principal and accrued interest payable on or before its maturity date of April 17, 2020 .

The Company granted the lender warrants exercisable to purchase a total of 35,750 shares of its common stock at an exercise price of

$ 1.40 per share until January 17, 2025.

When determining the fair value of these warrants, the assumptions utilized in the Black-Scholes

model include the expected volatility of stock price of 86% , discount rate of 2% , and expected dividends of 0% .

The Company allocated

$ 20,806 of the proceeds of the promissory note to additional paid-in-capital, which represented the grant date relative fair value of

the warrants issued to the lender.

The note was repaid in full on March 12, 2020 and the discount was amortized to interest expense through

the date of payment.

The amortization of discount resulted in $ 20,806 of the discount amortized to interest expense during the year ended

December 31, 2020.

Promissory Notes Payable – Related party

February and April 2020, the Company borrowed a total of $ 319,000 from the Company’s Chairman, CEO & President under an unsecured

promissory note bearing interest at 6 % through its May 28, 2020 maturity date.

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Total interest

accrued and paid on this note was $5,236.

accrued and paid on this note was $ 5,236 in 2020.

Consideration Promissory Notes

June 30, 2021, Nobility Healthcare, a subsidiary of the Company, issued a contingent consideration promissory note (the “June

Contingent Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company

(the “June Seller”) of $ 350,000 .

The Contingent Note has a three -year

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for six months and is due in equal quarterly installments on the seventh

business day of each quarter.

The principal amount of the June Contingent Note is subject to an earn-out adjustment, being the

difference between the $ 975,000

(the “June Projected Revenue”)

and the cash basis revenue (the “June Measurement Period Revenue”) collected by the June Seller in its normal

course of business from the clients existing on June 30, 2021, during the period from October 1, 2021 through September 30, 2022 (the

“June Measurement Period”) measured on a quarterly basis and annualized as of the relevant period.

Measurement Period Revenue is less than the June Projected Revenue, such amount will be subtracted from the principal balance

of this June Contingent Note on a dollar-for-dollar basis.

If the June Measurement Period Revenue is more than the June

Projected Revenue, such amount will be added to the principal balance of this June Contingent Note on a dollar-for-dollar

In no event will the principal balance of this June Contingent Note become a negative number.

The maximum downward earn-out

adjustment to the principal balance will be to zero.

There are no limits to the increases to the principal balance of the June

Contingent Note as a result of the earn-out adjustments.

June Contingent Note is considered to be additional purchase price;

therefore, the estimated fair value of the contingent liability

is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition

with subsequent changes in fair value recorded as a gain or loss in the Consolidated Statements of Operations.

Management has

recorded the contingent consideration promissory note at its estimated fair value of $ 350,000

at the acquisition date.

Management’s estimate

of the fair value of this June Contingent Note at December 31, 2021 to be $ 317,212

representing a reduction in its estimated

fair value of $ 32,788 .

The Company recorded a gain of $ 32,788

in the Consolidated Statements of

Operations for the year ended December 31, 2021.

August 31, 2021, Nobility Healthcare, issued another contingent consideration promissory note (the “August Contingent

Payment Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company

(the “August Sellers”) of $ 650,000 .

The August Contingent Payment Note has a three -year

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for six months and is due in equal quarterly installments on the seventh

business day of each quarter.

The principal amount of the August Contingent Payment Note is subject to an earn-out adjustment,

being the difference between the $ 3,000,000

(the “August Projected Revenue”)

and the cash basis revenue (the “August Measurement Period Revenue”) collected by the August Sellers in its

normal course of business from the clients existing on September 1, 2021, during the period from December 1, 2021 through November 30,

2022 (the “August Measurement Period”) measured on a quarterly basis and annualized as of the relevant period.

the August Measurement Period Revenue is less than the August Projected Revenue, such amount will be subtracted from the

principal balance of this August Contingent Payment Note on a dollar-for-dollar basis.

If the August Measurement Period

Revenue is more than the August Projected Revenue, such amount will be added to the principal balance of this August Contingent

Payment Note on a dollar-for-dollar basis.

In no event will the principal balance of this August Contingent Payment Note become

a negative number.

The maximum downward earn-out adjustment to the principal balance will be to zero.

There are no limits to the increases

to the principal balance of the August Contingent Payment Note as a result of the earn-out adjustments.

August Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent

liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the

Management has recorded the contingent consideration promissory note at its estimated fair value of $ 650,000

at the acquisition date.

Management will continue

to estimate the fair value of this August Contingent Payment Note at each reporting date with the change, if any recorded as a

gain or loss in the statement of operations during the relevant period.

Management determined that there was no change in estimated

fair value relative to this contingent consideration promissory note for the year ended December 31, 2021.

consideration earn-out Agreement – TicketSmarter Acquisition

September 1, 2021, TicketSmarter, Inc., a subsidiary of the Company, issued a contingent consideration earn-out agreement (the “TicketSmarter

Earn-Out”) in connection with the Stock Purchase Agreement between TicketSmarter, Inc., Goody Tickets, LLC and TicketSmarter, LLC

(“TicketSmarter”) of up to $ 4,244,400

with a fair value at acquisition of $ 3,700,000 .

The TicketSmarter Earn-Out shall be payable with

ninety percent ( 90 %)

readily available funds and ten percent ( 10 %)

in stock consideration.

The principal amount of the TicketSmarter Earn-Out is subject to an earn-out adjustment, being the difference

between the $ 2,896,829

(the “Projected EBITDA”) and the

actual EBITDA (the “Measurement Period EBITDA”) generated by TicketSmarter in its normal course of business, during

the period from September 1, 2021 through December 31, 2021 (the “Measurement Period”).

If the Measurement Period EBITDA

is less than seventy percent ( 70 %)

of the Projected EBITDA, there will be zero contingent payment.

If the Measurement Period EBITDA is between seventy percent ( 70 %)

and one hundred percent ( 100 %)

of the Projected EBITDA, then a fractional amount of the contingent payment will be paid out.

If the Measurement Period EBITDA is more

than the Projected EBITDA, the full principal balance of this TicketSmarter Earn-Out will be paid out.

In no event will the principal

balance of this TicketSmarter Earn-Out become a negative number.

The maximum downward earn-out adjustment to the earn-out balance will

be to reduce the balance to zero.

contingent consideration earn-out is considered to be additional purchase price, therefore the estimated fair value of the contingent

liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the

Management has recorded the contingent consideration earn-out at its estimated fair value of $ 3,700,000

at the acquisition date.

determined that the actual Measurement Period EBITDA generated by TicketSmarter was less than 70% of the Projected EBITDA

Therefore, no TicketSmarter Earn-Out payments amounts were due under the agreement.

Therefore, the fair value of the

contingent consideration earn-out agreement was reduced to zero, and the resulting gain of $ 3,700,000

was reported in

our Consolidated Statements of Operations for the year ended December 31, 2021.

FAIR VALUE MEASUREMENT

accordance with ASC Topic 820 —

Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the

accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the

market approach to measure fair value for its financial assets and liabilities.

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2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities)

Significant unobservable inputs (including the Company’s own assumptions in determining the fair value)

following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring

3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value)

following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring

basis as of December 31, 2021 and 2020.

Secured convertible

investment agreement

Secured convertible

investment agreement

OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS

December 31, 2021

Warrant derivative liabilities

Contingent consideration promissory notes and contingent

consideration earn-out agreement

December 31, 2020

Warrant derivative liabilities

Contingent consideration promissory notes and contingent

consideration earn-out agreement

following table represents the change in Level 3 tier value measurements:

SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS

Consideration

Promissory Notes

and Earn-Out Agreement

Warrant Derivative

Balance, December 31, 2020

Principal payments made on debentures

New secured convertible debentures

Conversion of secured convertible debentures

Repayment of 2019 secured convertible notes

Change in fair value of secured convertible debentures and proceeds

investment agreement

Issuance of detachable warrants in the January 14, 2021 Offering

Issuance of detachable warrants in the February 1, 2021 Offering

Issuance of detachable pre-funded warrants in the January 14, 2021 Offering

Issuance of detachable pre-funded warrants in the February 1, 2021 Offering

Transition of derivative warrant liability to equity on pre-funded warrants

Issuance of contingent consideration promissory note - Revenue Cycle Management Segment Acquisition

Issuance of contingent consideration earn-out agreement – Ticketing Segment Acquisition

Change in fair value of contingent consideration promissory note - Revenue Cycle Management Acquisition

Change in fair value of contingent consideration earn-out agreement –Ticketing Segment

( 3,700,000 )

Change in fair value of warrant derivative liabilities due to modification

Change in fair value of warrant derivative liabilities

( 36,664,908 )

Balance, December 31, 2021

following table represents the change in other Level 3 tier value measurements:

Balance, December 31, 2019

Issuance of secured convertible debt

Conversion of secured convertible debentures

( 1,259,074 )

( 1,665,666 )

( 2,924,740 )

Repayment of proceeds investment agreement

( 1,250,000 )

Repayment of secured convertible notes

Change in fair value of secured convertible debentures and proceeds investment agreement

Change in fair value of secured convertible debentures and proceeds investment

( 5,250,000 )

( 3,949,748 )

Balance, December 31, 2020

Balance, December 31, 2021

ACCRUED EXPENSES

expenses consisted of the following at December 31, 2021 and 2020:

SCHEDULE OF ACCRUED EXPENSES

Accrued warranty expense

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Accrued payroll and related fringes

Accrued insurance

Accrued sales returns and allowances

Accrued sales taxes

Accrued taxes

Total accrued expenses

warranty expense was comprised of the following for the years ended December 31, 2021 and 2020:

SCHEDULE OF ACCRUED WARRANTY EXPENSE

Beginning balance

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components of income tax provision (benefit) for the years ended December 31, 2021, and 2020 are as follows:

OF COMPONENTS OF INCOME TAX PROVISION (BENEFIT)

Current taxes:

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reconciliation of the income tax (provision) benefit at the statutory rate of 21% for the years ended December 31, 2021, and 2020 to the

Company’s effective tax rate is as follows:

OF RECONCILIATION OF INCOME TAX (PROVISION) BENEFIT

Statutory tax rate

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Stock based compensation

Change in valuation reserve on deferred tax

Change in valuation reserve on deferred tax assets

Forgiveness of Payroll Protection Plan loan

Income tax (provision) benefit

components of the Company’s deferred tax assets (liabilities) as of December 31, 2020 and 2019 are as follows:

components of the Company’s deferred tax assets (liabilities) as of December 31, 2021 and 2020 are as follows:

OF SIGNIFICANT COMPONENTS OF COMPANY'S DEFERRED TAX ASSETS (LIABILITIES)

Deferred tax assets:

Stock-based compensation

Start-up costs

Inventory reserves

Uniform capitalization

of inventory costs

Allowance for doubtful

accounts receivable

Equipment depreciation

Uniform capitalization of inventory costs

Allowance for doubtful accounts receivable

Property, plant and equipment depreciation

Deferred revenue

Debt and PIA obligations

carried at fair value

Accrued litigation reserve

Accrued expenses

Net operating loss carryforward

Research and development

tax credit carryforward

Research and development tax credit carryforward

State jobs credit carryforward

contributions carryforward

Charitable contributions carryforward

Total deferred tax assets

Valuation reserve

( 16,980,000 )

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Total deferred tax assets

international sales company

Deferred tax liabilities:

Warrant derivative liabilities

Intangible assets

Domestic international sales company

Total deferred tax liabilities

Net deferred tax assets

valuation allowance on deferred tax assets totaled $24,595,000 and $23,740,000 as of December 31, 2020 and 2019, respectively.

records the benefit it will derive in future accounting periods from tax losses and credits and deductible temporary differences as “deferred

tax assets.”

In accordance with ASC 740, “Income Taxes,”

the Company records a valuation allowance to reduce the carrying

value of our deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the deferred tax

assets will not be realized.

Company has incurred operating losses in 2020 and 2019 and it continues to be in a three-year cumulative loss position at December 31,

( 9,715,000 )

Net deferred tax assets (liability)

valuation allowance on deferred tax assets totaled $ 16,980,000

and $ 24,595,000

Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits

to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740.

Therefore, it determined

to increase our valuation allowance by $855,000 to continue to fully reserve its deferred tax assets at December 31, 2020.

expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates

its ability to realize these assets.

To the extent the Company determines that the realization of some or all of these benefits is more

likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed.

Such a reversal

would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’

December 31, 2020, the Company had available approximately $76,070,000 of Federal net operating loss carryforwards available to offset

future taxable income generated.

Such tax net operating loss carryforwards expire between 2026 and 2040.

In addition, the Company had

research and development tax credit carryforwards totaling $1,795,000 available as of December 31, 2020, which expire between 2023 and

Internal Revenue Code contains provisions under Section 382 which limit a company’s ability to utilize net operating loss carry-forwards

as of December 31, 2021, and 2020, respectively.

The Company records the benefit it will derive in future accounting periods from tax losses and credits and deductible temporary differences

as “deferred tax assets.” In accordance with ASC 740, “Income Taxes,” the Company records a valuation allowance

to reduce the carrying value of our deferred tax assets if, based on all available evidence, it is more likely than not that some or

all of the deferred tax assets will not be realized.

Company generated income in 2021 but incurred operating losses 2021 and it continues to be in a three-year cumulative loss position at

December 31, 2021 and 2020.

Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for

future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740.

it determined to decrease our valuation allowance by $ 7,615,000

but continue to fully reserve its deferred

tax assets at December 31, 2021.

The Company expects to continue to maintain a full valuation allowance until it determines that it can

sustain a level of profitability that demonstrates its ability to realize these assets.

To the extent the Company determines that the

realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the

valuation allowance will be reversed.

Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions

for stock option exercises, an increase in shareholders’ equity.

December 31, 2021, the Company had available approximately $ 81,385,000

of Federal net operating loss carry-forwards

available to offset future taxable income generated.

Such tax net operating loss carry-forwards expire between 2026 and 2042, with $31,956,673 of the tax net operating loss carry-forwards have an indefinite life since the enactment of the Tax Cuts and Jobs Act

the Company had research and development tax credit carry-forwards totaling $ 1,795,000

available as of December 31, 2021, which

expire between 2023 and 2038 .

Internal Revenue Code contains provisions under Section 382 which limit a company’s ability to utilize net operating loss carry-forwards

in the event that it has experienced a more than 50% change in ownership over a three-year period.

Current estimates prepared by the

Company indicate that due to ownership changes which have occurred, approximately $765,000 of its net operating loss and $175,000 of

its research and development tax credit carryforwards are currently subject to an annual limitation of approximately $1,151,000, and

may be further limited by additional ownership changes which may occur in the future.

As stated above, the net operating loss and research

and development credit carryforwards expire between 2023 and 2037, allowing the Company to potentially utilize all of the limited net

operating loss carry-forwards during the carryforward period.

discussed in Note 1, “Summary of Significant Accounting Policies,”

tax positions are evaluated in a two-step process.

Company indicate that due to ownership changes which have occurred, approximately $ 765,000

of its net operating loss and $ 175,000

of its research and development tax credit

carry-forwards are currently subject to an annual limitation of approximately $ 1,151,000

and may be further limited by additional

ownership changes which may occur in the future.

As stated above, the net operating loss and research and development credit carry-forwards

expire between 2023 and 2038 ,

allowing the Company to potentially utilize all of the limited net operating loss carry-forwards during the carry-forward period.

discussed in Note 1, “Summary of Significant Accounting Policies,” tax positions are evaluated in a two-step process.

Company first determines whether it is more likely than not that a tax position will be sustained upon examination.

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meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial

The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate

Management has identified no tax positions taken that would meet or exceed these thresholds and therefore there are no gross

interest, penalties and unrecognized tax expense/benefits that are not expected to ultimately result in payment or receipt of cash in

the consolidated financial statements.

The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon

ultimate settlement.

Management has identified no tax positions taken that would meet or exceed these thresholds and therefore there

are no gross interest, penalties and unrecognized tax expense/benefits that are not expected to ultimately result in payment or receipt

of cash in the consolidated financial statements.

effective tax rate for the years ended December 31, 2021, and 2020 varied from the expected statutory rate due to the Company continuing

to provide a 100% valuation allowance on net deferred tax assets.

The Company determined that it was appropriate to continue the full

valuation allowance on net deferred tax assets as of December 31, 2020 primarily because of the current year operating losses.

Company’s federal and state income tax returns are closed for examination purposes by relevant statute and by examination for 2016

to provide a 100 %

valuation allowance on net deferred tax assets.

The Company determined that it was appropriate to continue the full valuation allowance

on net deferred tax assets as of December 31, 2021, primarily because of the current year operating losses.

Company’s federal and state income tax returns are closed for examination purposes by relevant statute and by examination for 2017

and all prior tax years.

OPERATING LEASE

May 13, 2020, the Company entered into an operating lease for new warehouse and office space which will serve as its new principal executive

office and primary business location.

The original lease agreement was amended on August 28, 2020 to correct the footage under lease

and monthly payment amounts resulting from such correction.

The lease terms, as amended include no base rent for the first nine months

and monthly payments ranging from $12,398 to $14,741 thereafter, with a termination date of December 2026.

The Company is responsible

for property taxes, utilities, insurance and its proportionate share of common area costs related to its new location.

The Company took

possession of the leased facilities on June 15, 2020.

The remaining lease term for the Company’s office and warehouse operating

lease as of December 31, 2020 was seventy-one months.

The Company’s previous office and warehouse space lease expired in April

2020 and the Company paid holdover rent for the time period until it moved to and commenced occupying the new space on June 15, 2020.

May 13, 2020, the Company entered into an operating lease for new warehouse and office space which will served as its office,

assembly and warehouse location.

The original lease agreement was amended on August 28, 2020 to correct the footage under

lease and monthly payment amounts resulting from such correction.

The lease terms, as amended include no base rent for the first

nine months and monthly payments ranging from $ 12,398 to

$ 14,741 thereafter,

with a termination

date of December 2026 .

The Company is

responsible for property taxes, utilities, insurance and its proportionate share of common area costs related to its new location.

The Company took possession of the leased facilities on June 15, 2020.

The remaining lease term for the Company’s office and

warehouse operating lease as of December 31, 2021 was sixty

The Company’s previous

office and warehouse space lease expired in April 2020 and the Company paid holdover rent for the time period until it moved to and

commenced occupying the new space on June 15, 2020.

Company entered into an operating lease with a third party in October 2019 for copiers used for office and warehouse purposes.

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at maturity for its estimated fair market value at that point in time.

The remaining lease term for the Company’s copier operating

lease as of December 31, 2021 was 22 months.

June 30, 2021, the Company completed the acquisition of a private medical billing company, through its revenue cycle management segment.

Upon completion of this acquisition, the Company became responsible for the operating lease for the Seller’s office space.

The lease terms include monthly payments ranging from $ 2,648

thereafter, with a termination

date of July 2024 .

The Company is responsible

for property taxes, utilities, insurance and its proportionate share of common area costs related to this location.

The Company took

possession of the leased facilities on June 30, 2021.

The remaining lease term for the Company’s office and warehouse operating

lease as of December 31, 2021 was 31

August 31, 2021, the Company completed the acquisition of a private medical billing company, through its revenue cycle management

Upon completion of this acquisition, the Company became responsible for the operating lease for the Seller’s office

The lease terms include monthly payments ranging from $ 11,579

thereafter, with a termination

date of March 2023 .

The Company is responsible

for property taxes, utilities, insurance and its proportionate share of common area costs related to this location.

The Company took

possession of the leased facilities on September 1, 2021.

The remaining lease term for the Company’s office and warehouse operating

lease as of December 31, 2021 was 15

September 1, 2021, the Company completed the acquisition of Goody Tickets, LLC and TicketSmarter, LLC (“TicketSmarter Acquisition”),

through its ticketing segment.

Upon completion of this acquisition, the Company became responsible for the operating lease for

TicketSmarter Inc.’s office space.

The lease terms include monthly payments ranging from $ 7,211

thereafter, with a termination

date of December 2022 .

The Company is responsible

for property taxes, utilities, insurance and its proportionate share of common area costs related to this location.

The Company took

possession of the leased facilities on September 1, 2021.

The remaining lease term for the Company’s office and warehouse operating

lease as of December 31, 2021 was 12

expense related to the office space and copier operating leases were recorded on a straight-line basis over their respective lease terms.

Total lease expense under the two operating leases was approximately $349,079 for the year ended December 31, 2020.

discount rate implicit within the Company’s operating leases was not generally determinable and therefore the Company determined

Total lease expense under the five operating leases was approximately $ 266,294

and $ 349,079 , for

the years ended December 31, 2021 and 2020, respectively.

weighted-average remaining lease term related to the Company’s lease liabilities as of December 31, 2021 and 2020

was 3.8 years and 5.8 years, respectively.

discount rate implicit within the Company’s operating leases was not generally determinable and therefore the Company determined

the discount rate based on its incremental borrowing rate on the information available at commencement date.

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following sets forth the operating lease right of use assets and liabilities as of December 31, 2021:

OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

Operating lease right of use assets

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components of lease expense were as follows for the year ended December 31, 2021:

Selling, general and administrative

OF COMPONENTS OF LEASE EXPENSES

Selling, general and administrative expenses

are the minimum lease payments for each year and in total.

OF FUTURE MINIMUM LEASE PAYMENTS

Year ending December 31:

Total undiscounted minimum future lease payments

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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 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.

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.

We do not expect there to be material

changes to our assets on our balance sheet or our ability to timely account for those assets.

Further, in connection with the preparation

of this annual report on Form 10-K and the financial statements contained herein, 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 all 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 possible.

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

In April 2020,

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

Actions 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

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.

We will continue to actively monitor this situation and

will implement actions necessary to maintain business continuity.

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.

The 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

time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us.

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Company owns U.S.

9,253,452 (the “

‘452 Patent’

”), which generally covers the automatic activation

9,253,452 (the “ ‘452 Patent’ “), which generally covers the automatic activation

and coordination of multiple recording devices in response to a triggering event, such as a law enforcement officer activating the light

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2:16-cv-02032) against Axon, alleging

willful patent infringement against Axon’s body camera product line and Signal auto-activation product.

The Company is seeking

both monetary damages and a permanent injunction against Axon for infringement of the ‘452 Patent.

December 2016 and January 2017, Axon filed two petitions for Inter Partes Review (“IPR”) against the ‘452 Patent.

The United States Patent and Trademark Office (“USPTO”) rejected both of Axon’s petitions.

both monetary damages and a permanent injunction against Axon for infringement of the ‘452 Patent.

December 2016 and January 2017, Axon filed two petitions for Inter Partes Review (“IPR”) against the ‘452 Patent.

The United States Patent and Trademark Office (“USPTO”) rejected both of Axon’s petitions.

Axon is now statutorily

precluded from filing any more IPR petitions against the ‘452 Patent.

District Court litigation in Kansas was temporarily stayed following the filing of the petitions for IPR.

However, on November 17, 2017,

the Federal District Court of Kansas rejected Axon’s request to maintain the stay.

With this significant ruling, the parties will

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Since litigation has resumed, the Court has issued a claim construction order (also called a Markman Order)

where it sided with the Company on all disputes and denied Axon’s attempts to limit the scope of the claims.

Following the Markman

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The parties filed motions for summary judgment on January 31, 2019.

June 17, 2019, the Court granted Axon’s motion for summary judgment that Axon did not infringe on the Company’s patent and

dismissed the case.

Importantly, the Court’s ruling did not find that Digital’s ‘452 Patent was invalid.

not address any other issue, such as whether Digital’s requested damages were appropriate, and it did not impact the Company’s

Importantly, the Court’s ruling did not find that Digital’s ‘452 Patent was invalid.

not address any other issue, such as whether Digital’s requested damages were appropriate, and it did not impact the Company’s

ability to file additional lawsuits to hold other competitors accountable for patent infringement.

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WatchGuard settlement.

Those issues are separate and the judge’s ruling on summary judgment had nothing to do with Digital’s

damages request.

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Company filed an opening appeal brief on August 26, 2019 with the U.S.

Court of Appeals for the Tenth Circuit (the “Court of Appeals”),

appealing the U.S.

District Court’s granting of Axon’s motion for summary judgment.

Axon responded by filing a responsive

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arguments on our appeal of the U.S.

District Court’s summary judgment ruling on April 6, 2020.

This appeal was intended to address

the Company’s position that the U.S.

District Court incorrectly dismissed our claims against Axon.

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panel of judges for the Court of Appeals issued an order cancelling the oral arguments previously set for April 6, 2020, having determined

that the appeal will be decided solely based on the parties’

that the appeal will be decided solely based on the parties’ briefs.

On April 22, 2020, a three-judge panel of the United States

Court of Appeals denied our appeal and affirmed the District Court’s previous decision to grant Axon summary judgment.

2020, we filed a petition for panel rehearing requesting that we be granted a rehearing of our appeal of the U.S.

District Court’s

summary judgment ruling.

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The Company has abandoned its right to any further appeals.

May 27, 2016, the Company filed suit against WatchGuard, (Case No.

2:16-cv-02349-JTM-JPO) alleging patent infringement based on WatchGuard’s

VISTA Wi-Fi and 4RE In-Car product lines.

May 13, 2019, the parties resolved the dispute and executed a settlement agreement in the form of a Release and License Agreement.

litigation has been dismissed as a result of this settlement.

Release and License Agreement encompasses the following key terms:

paid Digital Ally a one-time, lump settlement payment of $6,000,000.

Ally granted WatchGuard a perpetual covenant not to sue if WatchGuard’s products incorporate agreed-upon modified recording

functionality.

Digital Ally also granted WatchGuard a license to the ‘292 Patent and the ‘452 Patent (and related patents,

now existing and yet-to-issue) through December 31, 2023.

The parties agreed to negotiate in good faith to attempt to resolve any

alleged infringement that occurs after the license period expires.

parties further agreed to release each other from all claims or liabilities pre-existing the settlement.

part of the settlement, the parties agreed that WatchGuard made no admission that it infringed any of Digital Ally’s patents.

receipt of the $6,000,000 the parties filed a joint motion to dismiss the lawsuit with the court, which was granted.

The Company sponsors a 401(k) retirement savings plan for the benefit of its employees.

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it to provide 100 % matching contributions for employees, who elect to contribute up to 3% of their compensation to the plan and 50 % matching

contributions for employee’s elective deferrals on the next 2% of their contributions.

contributions for employee’s elective deferrals on the next 2% of their contributions .

The Company made matching contributions

totaling $ 127,293 and $ 110,491 for the years ended December 31, 2021 and 2020, respectively.

Each participant is 100% vested at all times

in employee and employer matching contributions.

Each participant is 100 % vested at all

times in employee and employer matching contributions.

and Distributor Agreements.

1 unchanged sentence

to future commissions and/or consulting fees to be earned by the provider.

The agreement is with a limited liability company (“LLC”)

that is minority owned by a relative of the Company’s chief financial officer.

The agreement is with a limited liability company (“LLC”)

that is minority owned by a relative of the Company’s chief financial officer.

Under the agreement, dated January 15, 2016, and

19 unchanged sentences

which was extended to December 31, 2018, by mutual agreement of the parties at $ 6,000 per month.

The parties have mutually agreed to further

extend the arrangement on a monthly basis at $5,000 per month.

The parties have mutually agreed to

further extend the arrangement on a monthly basis at $5,000 per month .

The Company had advanced a total of $ 53,332 pursuant to this agreement,

until September of 2020 when the agreement was mutually terminated, thus as of December 31, 2020 the Company had advanced $-0- pursuant

until September 2020 when the agreement was mutually terminated, thus as of December 31, 2021, the Company had advanced $- 0 - pursuant

to this agreement.

STOCK-BASED COMPENSATION

Company recorded pretax compensation expense related to the grant of stock options and restricted stock issued of $1,462,270 and $2,112,090

for the years ended December 31, 2020 and 2019, respectively.

Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $ 1,605,949

and $ 1,462,270

for the years ended December 31, 2021 and 2020,

respectively.

of December 31, 2021, the Company had adopted nine separate stock option and restricted stock plans:

(i) the 2005 Stock Option and Restricted

Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the

2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the

“2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option

and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”),

(viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”) and (ix) the 2020 Stock Option and Restricted Stock

Plan (the “2020 Plan”)..

Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the

2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the

“2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option

and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”),

(viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”) and (ix) the 2020 Stock Option and Restricted Stock

Plan (the “2020 Plan”).

The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan and 2020

Plan are referred to as the “Plans.”

Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others for up to a total of

shares of common stock.

The 2005 Plan terminated during 2015 with 19,678 shares not awarded or underlying options, which shares

are now unavailable for issuance.

Stock options granted under the 2005 Plan that remain unexercised and outstanding as of December 31,

2020 total 7,563.

The 2006 Plan terminated during 2016 with 25,849 shares not awarded or underlying options, which shares are now unavailable

for issuance.

Stock options granted under the 2006 Plan that remain unexercised and outstanding as of December 31, 2020 total 39,750.

The 2007 Plan terminated during 2017 with 89,651 shares not awarded or underlying options, which shares are now unavailable for issuance.

Stock options granted under the 2007 Plan that remain unexercised and outstanding as of December 31, 2020 total 5,000.

The 2008 Plan

terminated during 2018 with 9,249 shares not awarded or underlying options, which shares are now unavailable for issuance.

Stock options

granted under the 2008 Plan that remain unexercised and outstanding as of December 31, 2020 total 31,250.

Board of Directors adopted the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”) on September 30, 2020 and the

Company’s stockholders approved the 2020 Plan at the Annual Meeting held on September 9, 2020.

The 2020 Plan authorizes us to issue

1,500,000 shares of Common Stock upon exercise of options and grant of restricted stock awards.

A total of 438,341 options and restricted

stock have been granted under the 2020 Plan to date.

The 2020 Plan also authorizes us to grant (i) to the key employees’

stock options to purchase shares of Common Stock and non-qualified stock options to purchase shares of Common Stock and restricted stock

awards and (ii) to non-employee directors and consultants non-qualified stock options and restricted stock.

The 2005 Plan terminated

during 2015 with 22,053

shares not awarded or underlying options,

which shares are now unavailable for issuance.

Stock options granted under the 2005 Plan that remain unexercised and outstanding as of

December 31, 2021 total 5,689 .

The 2006 Plan terminated during 2016 with 39,974

shares not awarded or underlying options,

which shares are now unavailable for issuance.

Stock options granted under the 2006 Plan that remain unexercised and outstanding as of

December 31, 2021 total 25,625 .

The 2007 Plan terminated during 2017 with 94,651

shares not awarded or underlying options,

which shares are now unavailable for issuance.

stock options granted under the 2007 Plan that

remain unexercised and outstanding as of December 31, 2021.

The 2008 Plan terminated during 2018 with 40,499

shares not awarded or underlying options,

which shares are now unavailable for issuance.

stock options granted under the 2008 Plan that

remain unexercised and outstanding as of December 31, 2021.

Board of Directors adopted the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”) on June 30, 2020 and

the Company’s stockholders approved the 2020 Plan at the Annual Meeting held on September 9, 2020.

The Company’s stockholders

approved an amendment to the 2020 Plan at the Annual Meeting held on June 22, 2021 which increased the number of shares of

Common Stock authorized and reserved for issuance under the 2020 Plan to a total of 2,500,000 .

A total of 1,584,155

options and restricted stock have been granted

under the 2020 Plan to date.

The 2020 Plan also authorizes us to grant (i) to the key employees’ incentive stock options to purchase

shares of Common Stock and non-qualified stock options to purchase shares of Common Stock and restricted stock awards and (ii) to non-employee

directors and consultants non-qualified stock options and restricted stock.

Company believes that such awards better align the interests of our employees with those of its stockholders.

9 unchanged sentences

in the various Plans during the years ended December 31, 2021 and 2020 is reflected in the following table:

OF STOCK OPTIONS OUTSTANDING

Exercise Price

8 unchanged sentences

The total estimated grant

date fair value stock options issued during the year ended December 31, 2020 and 2019 was $415,742 and $436,217, respectively.

date fair value stock options issued during the year ended December 31, 2021 and 2020 was $ 466,831

and $ 415,742 ,

respectively.

Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated grant date fair

value of the options during the years ended December 31, 2021 and 2020:

Volatility –

OF FAIR VALUE OF STOCK OPTIONS ASSUMPTION

Volatility – range

Risk-free rate

Contractual term

Expected term

Exercise price

6 unchanged sentences

the aggregate intrinsic value of options exercisable was approximately $- 0 - and $ 58,025 , respectively.

of December 31, 2020, the unrecognized portion of stock compensation expense on all existing stock options was $183,415 and will be recognized

over the next five months.

of December 31, 2021, the unrecognized portion of stock compensation expense on all existing stock options was $ 233,415

and will be recognized over the next six

following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable

options under the Company’s option plans as of December 31, 2020:

options under the Company’s option plans as of December 31, 2021:

OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE

contractual life

9 unchanged sentences

Except for restrictions placed on the

transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights

and the right to receive cash dividends.

summary of all restricted stock activity under the equity compensation plans for the years ended December 31, 2021 and 2020 is as follows:

OF RESTRICTED STOCK ACTIVITY

Nonvested balance, January 1, 2020

3 unchanged sentences

Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant.

December 31, 2020, there were $130,072 of total unrecognized compensation costs related to all remaining non-vested restricted stock

grants, which will be amortized over the next 12 months in accordance with their respective vesting scale.

December 31, 2021, there were $ 1,013,415

of total unrecognized compensation costs

related to all remaining non-vested restricted stock grants, which will be amortized over the next fifty-seven months in accordance

with their respective vesting scale.

nonvested balance of restricted stock vests as follows:

OF NON-VESTED BALANCE OF RESTRICTED STOCK

COMMON STOCK PURCHASE WARRANTS

2 unchanged sentences

exercisable, or have a delayed initial exercise date, no more than six months from their respective issue date and allow the holders

to purchase up to 3,388,364 shares of common stock at $2.60 to $13.43 per share as of December 31, 2020.

The warrants expire from January

22, 2021 through July 31, 2023 and allow for cashless exercise.

to purchase up to 26,008,598

shares of common stock at $ 2.60

per share as of December 31, 2021.

warrants expire from February 23, 2022 through September 18, 2026 and

certain of the outstanding warrants allow for cashless exercise.

January 14, 2021 and February 1, 2021, the Company issued warrants to purchase a total of 42,550,000 shares of Common Stock.

terms provide for net cash settlement outside the control of the Company under certain circumstances in the event of tender offers.

such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their

issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change

in fair value of warrant derivative liabilities.

Furthermore, the Company re-values the fair value of warrant derivative liability as

of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated

statement of operations.

August 19, 2021, the Company entered into a Warrant Exchange Agreement (the “Exchange Agreement”) with the Investors cancelling

February Warrants exercisable for an aggregate of 7,681,540 shares of Common Stock in consideration for its issuance of (i) new warrants

(the “Exchange Warrants”) to the Investors exercisable for an aggregate of up to 7,681,540

shares of Common Stock.

The Company also

issued warrants (the “Replacement Original Warrants”) replacing the February Warrants for the remaining shares of Common

Stock exercisable thereunder, representing an aggregate of 6,618,460 shares of Common Stock, and extended the expiration date of the

February Warrants to September 18, 2026.

The Exchange Warrants provide for an initial exercise price of $ 3.25

per share, subject to customary adjustments

thereunder, and are immediately exercisable upon issuance for cash and on a cashless basis.

On the date of the exchange, the Company

calculated the fair value, using the Black-Scholes method, of the cancelled February Warrants and the newly issued Exchange Warrants,

the difference in fair value measurement of the respective warrants was attributed to warrant modification expense in the consolidated

statement of operations.

the date of the exchange, the February Warrants and Exchange Warrants were valued at $ 11,818,644

and $ 12,114,424

using the original and modified expiry date of the warrants, respectively, using the Black-Scholes method.

The difference of $ 295,780

was accordingly recorded as a warrant modification expense in the consolidated statement of operations.

SCHEDULE OF WARRANT

Original terms at August 19, 2021

Modified terms at August 19, 2021

Volatility - range

Risk-free rate

Remaining contractual term

Exercise price

Common stock issuable under the warrants

in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period.

the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases,

therefore increasing the liability on the Company’s balance sheet.

Additionally, stock price volatility is one of the significant

unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

The simulated fair value

of these liabilities is sensitive to changes in the Company’s expected volatility.

Increases in expected volatility would generally

result in higher fair value measurement.

A 10 % change in pricing inputs and changes in volatilities and correlation factors would not

result in a material change in our Level 3 fair value.

Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the

warrant derivative liabilities as of their date of issuance and as of December 31, 2021:

SCHEDULE OF FAIR VALUE OF THE WARRANT DERIVATIVE LIABILITIES

Issuance date assumptions

December 31, 2021 assumptions

Volatility - range

Risk-free rate

Remaining contractual term

Exercise price

Common stock issuable under the warrants

the year ended December 31, 2021, holders of pre-funded warrants exercised a total of 18,250,000 warrants which were fair valued at $ 1,817,549

at their date of issuance and recorded as a derivative warrant liability.

On the date of exercise such pre-funded warrants were fair

valued at zero, which was transitioned to permanent equity during the year ended December 31, 2021.

The Company reported the $ 1,817,549

change in fair value from their issuance date to their exercise date in the statements of operations as the change in fair

value of warrant derivative liabilities.

following table summarizes information about shares issuable under warrants outstanding during the years ended December 31, 2021 and

OF WARRANT ACTIVITY

exercise price

Vested Balance, January 1, 2020

( 2,704,583 )

Vested Balance, December 31, 2020

1 unchanged sentence

Vested Balance, January 1, 2021

( 18,250,000 )

( 1,679,766 )

Vested Balance, December 31, 2021

total intrinsic value of all outstanding warrants aggregated $-0- as of December 31, 2020 and the weighted average remaining term is

total intrinsic value of all outstanding warrants aggregated $- 0 -

as of December 31, 2021 and 2020, and the weighted average remaining term was 50.7 and 15.8 months as of December 31, 2021

and 2020, respectively.

following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable

warrants to purchase common shares as of December 31, 2021:

and exercisable warrants

OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS

Outstanding and exercisable warrants

Weighted average

contractual life

15 - STOCKHOLDERS’

to Articles of Incorporation

Company held its annual meeting of the shareholders on September 9, 2020.

At such meeting a proposed amendment to the Company’s

Articles of Incorporation to increase the number of authorized shares of capital stock that the Company may issue from 50,000,000 to

100,000,000, of which all 100,000,000 shares shall be classified as Common Stock, was approved.

Public Offering

March 3, 2020, the Company entered into an underwriting agreement with Aegis Capital Corp., as the representative of the underwriters

and sole book-running manager, pursuant to which the Company agreed to sell to the underwriters in a firm commitment underwritten public

offering (the “Offering”) an aggregate of 2,521,740 shares of the Company’s common stock at a public price of $1.15

The Company also granted the underwriters a forty-five (45)-day option to purchase up to an additional 378,261 shares of common

stock to cover over-allotments, if any.

The Offering was registered and the common stock was issued pursuant to the Company’s effective

shelf registration statement on Form S-3 (File No.

333-225227), which was initially filed with the SEC on May 25, 2018 and was declared

effective on June 6, 2018.

underwriting agreement contained customary representations, warranties and agreements by the Company, customary conditions to closing,

indemnification obligations of the Company and the Underwriters.

The Underwriters received discounts and commissions of seven percent

(7%) of the gross cash proceeds received by the Company from the sale of the common stock in the Offering.

In addition, the Company agreed

to pay the Underwriters (a) a non-accountable expense reimbursement of 1% of the gross proceeds received and (b) “road show”

expenses, diligence fees and the fees and expenses of the Underwriters’

legal counsel not to exceed $50,000.

The net proceeds to

the Company from the Offering totaled $2,502,136, after deducting underwriting discounts and commissions and estimated expenses payable

by the Company.

June 2, 2020, the Company entered into an underwriting agreement with Aegis Capital Corp., as the representative of the underwriters

and sole book-running manager, pursuant to which the Company agreed to sell to the underwriters in a firm commitment underwritten public

offering an aggregate of 3,090,909 shares of the Company’s common stock, at a public price of $1.65 per share (the “June

2 nd Offering”).

The Company also granted the underwriters a forty-five (45)-day option to purchase up to an additional

463,636 shares of common stock to cover over-allotments, if any (the “June 2 nd Option Shares”).

The June 2 nd

Offering was registered and the common stock was issued pursuant to the Company’s shelf registration statement on Form S-3

333-225227), which was initially filed with the SEC on May 25, 2018 and was declared effective on June 6, 2018.

June 8, 2020, the Underwriters fully exercised their over-allotment option to acquire the June 2 nd Option Shares at $1.65

per share, and the offering of the June 2 nd Option Shares closed on June 10, 2020.

The exercise of such over-allotment option

resulted in additional gross proceeds, before deducting underwriting discounts and commissions and other estimated offering expenses,

of $765,000, which t he Company intends to use for general corporate purposes, including

for compliance with certain Nasdaq continued listing requirements and continued investments in the Company’s commercialization

underwriting agreement contained customary representations, warranties and agreements by the Company, customary conditions to closing,

indemnification obligations of the Company and the Underwriters.

The Underwriters received discounts and commissions of seven percent

(7%) of the gross cash proceeds received by the Company from the sale of the common shares in the June 2 nd Offering.

the Company agreed to pay the Underwriters “road show”

expenses, diligence fees and the fees and expenses of the Underwriters’

legal counsel not to exceed $30,000.

The net proceeds to the Company from the June 2 nd Offering totaled $5,350,413, including

the exercise of the underwriter’s overallotment option and after deducting underwriting discounts and commissions and estimated

expenses payable by the Company.

June 8, 2020, the Company entered into an underwriting agreement with Aegis Capital Corp., as the representative of the underwriters

and sole book-running manager, pursuant to which the Company agreed to sell to the underwriters in a firm commitment underwritten public

offering an aggregate of 2,325,581 shares of common stock at a public price of $2.15 per share (the “June 8 th Offering”).

The Company also granted the underwriters a forty-five (45)-day option to purchase up to an additional 213,953 shares of common stock

to cover over-allotments, if any (the “June 8 th Option Shares”).The June 8 th Offering was registered

and the common stock was issued pursuant to the Company’s shelf registration statement on Form S-3 (File No.

333-225227), which

was initially filed with the SEC on May 25, 2018 and was declared effective on June 6, 2018.

June 10, 2020, the Underwriters fully exercised their over-allotment option to acquire the June 8 th Option Shares at $2.15

per share, and the offering of the June 8 th Option Shares closed on June 10, 2020.

The exercise of such over-allotment option

resulted in additional gross proceeds, before deducting underwriting discounts and commissions and other estimated Offering expenses,

of $460,000, which t he Company intends to use for general corporate purposes, including

for compliance with certain Nasdaq continued listing requirements and continued investments in the Company’s commercialization

underwriting agreement contained customary representations, warranties and agreements by the Company, customary conditions to closing,

indemnification obligations of the Company and the Underwriters.

The Underwriters received discounts and commissions of seven percent

(7%) of the gross cash proceeds received by the Company from the sale of the common shares in the June 8 th Offering.

the Company agreed to pay the Underwriters “road show”

expenses, diligence fees and the fees and expenses of the Underwriters’

legal counsel not to exceed $30,000.

The net proceeds to the Company from the June 8 th Offering totaled $4,976,692, including

the exercise of the underwriter’s overallotment option and after deducting underwriting discounts and commissions and estimated

expenses payable by the Company.

Issuances of Restricted Common Stock .

January 3, 2020, the board of directors approved the grant of 530,050 shares of restricted common stock to officers and employees of

Such shares will generally vest one-half on January 2, 2021 and one half on January 2, 2022, provided that each grantee

remains an officer or employee on such dates.

April 17, 2020 the Compensation Committee of the Board of Directors of the Company determined that the cash portion of the annual base

salaries of the Company’s President and Chief Executive Officer, and the Company’s Chief Financial Officer, Treasurer and

Secretary, would be reduced to annual rates of $150,000 each for the balance of 2020 commencing May 1, 2020.

Committee also decided that the reduction of the base annual salaries of Company’s President and Chief Executive Officer, and the

Company’s Chief Financial Officer, Treasurer and Secretary, for 2020, which totaled $69,231 and $55,384, respectively, as of May

1, 2020 was paid through the issuance of shares of restricted stock under the 2018 Stock Option and Restricted Stock Plan with the Company

paying the applicable federal and state taxes on such amounts.

Accordingly, the Company issued the Company’s President and Chief

Executive Officer, and the Company’s Chief Financial Officer, Treasurer and Secretary 75,250 shares and 60,200 shares, respectively,

effective April 17, 2020 based on a closing price of $0.92 per share on such date.

In addition, on September 9, 2020 a total of 178,091

shares of restricted stock were issued to five employees in consideration for their agreement to voluntary reduce their cash compensation

by a total of $165,625 with the Company paying the applicable federal and state taxes on such amounts.

July 1, 2020, the Company entered into a commission agreement with an individual who provides services for our Shield and ThermoVU product

Pursuant to such agreement, we issued a total of 10,000 shares of common stock valued at $30,700 based on the closing market price

which has been expensed during the year ended December 31, 2020.

Registration Statement on Form S-3

July 2, 2020, the SEC declared the Company’s shelf registration statement on Form S-3 (the “Shelf Registration Statement”)

The Shelf Registration Statement allows the Company to offer and sell, from time to time in one or more offerings, any combination

of our common stock, debt securities, debt securities convertible into common stock or other securities in any combination thereof, rights

to purchase shares of common stock or other securities in any combination thereof, warrants to purchase shares of common stock or other

securities in any combination thereof or units consisting of common stock or other securities in any combination thereof having an aggregate

initial offering price not exceeding $125,000,000.

The Company has utilized the shelf for its two recent offerings as described in “

SUBSEQUENT EVENTS”.

RELATED PARTY TRANSACTIONS

Rebel Holding, Inc.

Secured Promissory Notes

October 1, 2020, the Company advanced $250,000 to American Rebel Holdings, Inc.

(AREB) under a secured promissory note.

The CEO, President

and Chairman of AREB is the brother of the Company’s CEO, President and Chairman.

Such note bears interest at 8% and is secured

by all the tangible and intangible assets of the Company that are not currently secured by other indebtedness.

The Company also received

warrants to purchase 1,250,000 shares of AREB common stock at an exercise price of $0.10 per share with a five-year term .

note had an original maturity date of January 2, 2021;

however, additional provisions within the note provided for an extension of the

maturity date for fourteen months due to AREB’s failure to raise $300,000 in new debt or equity financing prior to the original

maturity date.

Upon this extension, the AREB was obligated to make equal monthly payments of principal and interest over the extended

period of the note.

The required monthly payments have not been made by AREB, therefore this note is currently in default status.

October 21, 2020, the Company advanced $250,000 to American Rebel Holdings, Inc.

(AREB) under a second secured promissory note.

Such note bears interest at 8% and is secured by inventory manufactured and revenue/accounts receivable derived from a specific

purchase order.

The Company also received warrants to purchase 1,250,000 shares of AREB common stock at an exercise price of $0.10

per share with a five-year term .

This note has a maturity date of April 21, 2021, subject to full repayment upon AREB closing

on debt or equity financings of at least $600,000, and the receipt of revenue from the sale of inventory sold under the specific

purchase order serving as collateral.

The required monthly payments have not been made by AREB, therefore

this note is currently in default status.

On March 1, 2021, the Company advanced an additional $117,600 to AREB on terms

similar to the previously issued notes.

The parties have been

negotiating the terms of a Forbearance Agreement regarding the following:

(a) the secured promissory note dated October 1, 2020;

(b) the secured promissory note dated October 21, 2020;

and (c) an advance made by the Company on March 1, 2021.

The parties are

attempting to arrange for a series of payments that will liquidate the outstanding balances of the two delinquent notes and the

advance by no later than June 30, 2021.

Based on the terms being negotiated, if AREB timely and fully complies with all of its

obligations under the Forbearance Agreement, the Company would agree that AREB’s obligations to the Company in connection

with the defaults would be satisfied.

However, there is no assurance that the parties will agree to the terms contained in the

Forbearance Agreement, and whether AREB will be able to comply with such terms.

Promissory Notes Payable –

Related party

February and April 2020, the Company borrowed a total of $319,000 from the Company’s Chairman, CEO & President under an unsecured

promissory note bearing interest at 6% through its May 28, 2020 maturity date.

The proceeds from the note were used for general corporate

The principal balance and related accrued interest were paid in full in cash during the year ended December 31, 2020.

interest accrued and paid on this note was $5,236.

NET LOSS PER SHARE

calculation of the weighted average number of shares outstanding and loss per share outstanding for the years ended December 31, 2020

and 2019 are as follows:

ended December 31,

for basic and diluted income per share –

$ (2,625,881 )

$ (10,005,713 )

Denominator for basic loss per share –

weighted average shares

Dilutive effect of shares

issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding

Denominator for diluted loss per share

adjusted weighted average shares outstanding

Net loss per share:

loss per share is based upon the weighted average number of common shares outstanding during the period.

For the years ended December

31, 2020 and 2019, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options and warrants

were antidilutive, and, therefore, not included in the computation of diluted income (loss) per share.

SUBSEQUENT EVENTS

public offering - On January 14, 2021, the Company consummated an underwritten public offering (the “Offering”)

of (i) 2,800,000 shares of common stock (”Shares”), (ii) pre-funded warrants to purchase up to 7,200,000 of Common

Stock (the “Pre-Funded Warrants”), issuable to investors whose purchase of shares

of Common Stock would otherwise result in such investor, together with its affiliates and certain related parties, beneficially

owning more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding Common Stock immediately

following the consummation of the Registered Offering (“Pre-Funded Warrants”);

and (iii) common stock purchase warrants

(“Warrants”) to purchase up to an aggregate of 10,000,000 shares of Common Stock (the “Warrant Shares”),

which are exercisable for a period of five years after issuance at an initial exercise price $3.25 per share, subject to certain

adjustments, as provided in the Warrants.

The Offering was conducted pursuant to an underwriting agreement, dated January

12, between the Company and Kingswood Capital Markets, division of Benchmark Investments, Inc.

(the “Underwriters”),

acted as the exclusive placement agent in connection with the Offering pursuant to a placement

agency agreement .

The common stock in the Offering was sold at a public offering price of $3.095 per share.

common stock in the Offering was issued pursuant to the Company’s effective shelf registration statement on Form S-3 (File No.

The underwriting agreement contained customary representations, warranties and agreements by the Company, customary conditions

to closing, indemnification obligations of the Company and the Underwriters.

The Underwriters received

discounts and commissions of six percent (6%) of the gross cash proceeds received by the Company from the sale of the common shares in

the Offering and certain expenses.

the underwriting agreement, the Company and its officers and directors executed lock-up agreements whereby, (a) the Company has agreed

not to engage in the following for a period of 90 days from the date of the pricing of the Offering, (i)

offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option,

right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company

16 - STOCKHOLDERS’ EQUITY

Direct Offerings

January 14, 2021, the Company consummated a registered direct offering (the “Offering”) of (i) 2,800,000 shares of common

stock (“Shares”), (ii) pre-funded warrants to purchase up to 7,200,000 shares of Common Stock (the “Pre-Funded Warrants”),

issuable to investors whose purchase of shares of Common Stock would otherwise result in such investor, together with its affiliates

and certain related parties, beneficially owning more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding

Common Stock immediately following the consummation of the Registered Offering (“Pre-Funded Warrants”);

and (iii) common

stock purchase warrants (“Warrants”) to purchase up to an aggregate of 10,000,000 shares of Common Stock (the “Warrant

Shares”), which are exercisable for a period of five years after issuance at an initial exercise price $ 3.25 per share, subject

to certain adjustments, as provided in the Warrants .

The Offering was conducted pursuant to a placement agency agreement, dated January

12, 2021, between the Company and Kingswood Capital Markets, division of Benchmark Investments, Inc., who acted as the exclusive placement

agent in connection with the Offering pursuant to a placement agency agreement.

The Shares and accompanying Warrants in the Offering

were sold at a combined offering price of $ 3.095 per Share and accompanying Warrant and the Pre-Funded Warrants and accompanying Warrants

in the Offering were sold at a combined offering price of $ 3.085 per Pre-Funded Warrant and accompanying Warrant.

securities in the Offering were issued pursuant to a prospectus supplement to the Company’s effective shelf registration statement

on Form S-3 (File No.

The placement agency agreement contained customary representations, warranties and agreements by the

Company, customary conditions to closing, indemnification obligations of the Company and the placement agent.

The placement agent received

discounts and commissions of six percent ( 6 %) of the gross cash proceeds received by the Company from the sale of the securities sold

in the Offering and certain expenses.

the placement agency agreement, the Company and its officers and directors executed lock-up agreements whereby, subject to certain expectations,

(a) the Company has agreed not to engage in the following for a period of 90 days from the date of the pricing of the Offering, (i) offer,

pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right

or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company

or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company;

5 unchanged sentences

consequences of ownership of capital stock of the Company.

pursuant to the terms of the Purchase Agreement the Company has granted to the Investors, for a period of 12 months after the closing

of the Offering, the right to participate in subsequent offerings by the Company of Common Stock and Common Stock equivalents in an amount

up to 50% of the amount of each such subsequent offering, on the same terms, conditions and price provided for in such subsequent offering.

Company received approximately $29,013,000 in net proceeds from the Offering after deducting the discounts, commissions,

and other estimated offering expenses payable by the Company.

As of March 31, 2021, all pre-funded warrants have been fully

The Company plans to use the net proceeds from the Offering for working capital, product development, order fulfillment

and for general corporate purposes.

public offering - On February 1, 2021, the Company consummated an underwritten public offering (the “Offering”) of

(i) 3,250,000 shares of common stock (”Shares”), (ii) pre-funded warrants to purchase up to 11,050,000 of Common Stock (the

“Pre-Funded Warrants”), issuable to investors whose purchase of shares of Common Stock

would otherwise result in such investor, together with its affiliates and certain related parties, beneficially owning more than 4.99%

(or, at the election of the holder, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of

the Registered Offering (“Pre-Funded Warrants”);

and (iii) common stock purchase warrants (“Warrants”) to purchase

up to an aggregate of 14,300,000 shares of Common Stock (the “Warrant Shares”), which are exercisable for a period of five

years after issuance at an initial exercise price $3.25 per share, subject to certain adjustments, as provided in the Warrants.

The Offering was conducted pursuant to an underwriting agreement, dated January 28, between the Company and Kingswood Capital Markets,

division of Benchmark Investments, Inc.

(the “Underwriters”), acted as the exclusive

placement agent in connection with the Offering pursuant to a placement agency agreement .

The common stock in the Offering was

sold at a public offering price of $2.799 per share.

common stock in the Offering was issued pursuant to the Company’s effective shelf registration statement on Form S-3 (File No.

The underwriting agreement contained customary representations, warranties and agreements by the Company, customary conditions

to closing, indemnification obligations of the Company and the Underwriters.

The Underwriters received

discounts and commissions of six percent (6%) of the gross cash proceeds received by the Company from the sale of the common shares in

the Offering and certain expenses.

the underwriting agreement, the Company and its officers and directors executed lock-up agreements whereby, (a) the Company has agreed

not to engage in the following for a period of 90 days from the date of the pricing of the Offering, (i)

offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option,

right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company

pursuant to the terms of the Securities Purchase Agreement the Company has granted to the Investors, for a period of 12 months after

the closing of the Offering, the right to participate in subsequent offerings by the Company of Common Stock and Common Stock equivalents

in an amount up to 50 % of the amount of each such subsequent offering, on the same terms, conditions and price provided for in such subsequent

Company received approximately $ 28,941,000 ($ 29,013,000 upon full exercise of the prefunded warrants) in net proceeds from the Offering

after deducting the discounts, commissions, and other estimated offering expenses payable by the Company.

As of December 31, 2021, all

pre-funded warrants have been fully exercised.

The Company plans to use the net proceeds from the Offering for working capital, product

development, order fulfilment and for general corporate purposes.

Company received net proceeds from this offering as follows:

SCHEDULE OF NET PROCEEDS FROM OFFERING

Net proceeds received:

Proceeds from the sale of 2,800,000 shares of Common Stock at $ 3.095 per share

Proceeds from the sale of pre-funded warrants to purchase 7,200,000 shares of Common Stock at $ 3.085 per share

Placement agent fees and other expenses of the offering

( 1,937,000 )

Net proceeds of the offering

conjunction with this Offering, the Company issued prefunded Common Stock purchase warrants to purchase up to 7,200,000 shares Common

Stock at $ 3.095 per share ($ 3.085 prefunded at closing) and Common Stock purchase warrants to purchase up to 10,000,000 shares of Common

Stock at $ 3.25 per share.

The underlying warrant terms provide for net cash settlement outside the control of the Company under certain

circumstances in the event of tender offers.

As such, the Company is required to treat these warrants as derivative liabilities which

are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the

consolidated statements of operations as the change in fair value of warrant derivative liabilities.

Accordingly, the Company allocated

a portion of the net proceeds of this offering to warrant derivative liabilities based on their estimated fair value as follows (See

Notes 4 and 11):

SCHEDULE OF NET PROCEEDS FROM OFFERING

Warrant derivative liabilities

Pre-funded warrant derivative liabilities

Total allocation of the net proceeds of the offering to warrant derivative liabilities

Direct Offerings

February 1, 2021, the Company consummated an registered direct offering (the “Second Offering”) of (i) 3,250,000 shares of

common stock (“Shares”), (ii) pre-funded warrants to purchase up to 11,050,000 shares of Common Stock (the “Pre-Funded

Warrants”), issuable to investors whose purchase of shares of Common Stock would otherwise result in such investor, together with

its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s

outstanding Common Stock immediately following the consummation of the Registered Offering (“Pre-Funded Warrants”);

common stock purchase warrants (“Warrants”) to purchase up to an aggregate of 14,300,000 shares of Common Stock (the “Warrant

Shares”), which are exercisable for a period of five years after issuance at an initial exercise price $ 3.25 per share, subject

to certain adjustments, as provided in the Warrants .

The Second Offering was conducted pursuant to a placement agency agreement, dated

January 28, 2021, between the Company and Kingswood Capital Markets, division of Benchmark Investments, Inc., who acted as the exclusive

placement agent in connection with the Second Offering pursuant to a placement agency agreement.

The Shares and accompanying Warrants

in the Second Offering were sold at a combined offering price of $ 2.80 per Share and accompanying Warrant and the Pre-Funded Warrants

and accompanying Warrants in the Offering were sold at a combined offering price of $ 2.79 per Pre-Funded Warrant and accompanying Warrant.

securities in the Second Offering were issued pursuant to a prospectus supplement to the Company’s effective shelf registration

statement on Form S-3 (File No.

The placement agency agreement contained customary representations, warranties and agreements

by the Company, customary conditions to closing, indemnification obligations of the Company and the placement agent.

The placement agent

received discounts and commissions of six percent ( 6 %) of the gross cash proceeds received by the Company from the sale of the securities

sold in the Second Offering and certain expenses.

the placement agency agreement, the Company and its officers and directors executed lock-up agreements whereby, subject to certain exceptions,

(a) the Company has agreed not to engage in the following for a period of 90 days from the date of the pricing of the Offering, (i) offer,

pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right

or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company

or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company;

5 unchanged sentences

consequences of ownership of capital stock of the Company.

pursuant to the terms of the Purchase Agreement the Company has granted to the Investors, for a period of 12 months after the closing

of the Offering, the right to participate in subsequent offerings by the Company of Common Stock and Common Stock equivalents in an amount

up to 50% of the amount of each such subsequent offering, on the same terms, conditions and price provided for in such subsequent offering.

Company received approximately $37,587,600 in net proceeds from the Offering after deducting the discounts, commissions,

and other estimated offering expenses payable by the Company.

As of March 31, 2021, all pre-funded warrants have been fully

The Company plans to use the net proceeds from the Offering for working capital, product development, order fulfillment

and for general corporate purposes.

pursuant to the terms of the Securities Purchase Agreement the Company has granted to the Investors, for a period of 12 months after

the closing of the Second Offering, the right to participate in subsequent offerings by the Company of Common Stock and Common Stock

equivalents in an amount up to 50 % of the amount of each such subsequent offering, on the same terms, conditions and price provided for

in such subsequent offering.

Company received approximately $ 37,447,100 ($ 37,557,600 upon full exercise of the prefunded warrants) in net proceeds from the Second

Offering after deducting the discounts, commissions, and other estimated offering expenses payable by the Company.

As of December 31,

2021, all pre-funded warrants have been fully exercised.

The Company plans to use the net proceeds from the Second Offering for working

capital, product development, order fulfilment and for general corporate purposes.

Company received net proceeds from this offering as follows:

SCHEDULE OF NET PROCEEDS FROM OFFERING

Net proceeds received:

Proceeds from the sale of 3,250,000 shares of Common Stock at $ 2.80 per share

Proceeds from the sale of pre-funded warrants to purchase 11,050,000 shares of Common Stock at $ 2.79 per share

Placement agent fees and other expenses of the offering

( 2,482,400 )

Net proceeds of the offering

conjunction with this Offering, the Company issued prefunded Common Stock purchase warrants to purchase up to 11,050,000 Shares Common

Stock at $ 2.80 per share ($ 2.79 prefunded at closing) and Common Stock purchase warrants to purchase up to 14,300,000 shares of Common

Stock at $ 3.25 per share.

The underlying warrant terms provide for net cash settlement outside the control of the Company under certain

circumstances in the event of tender offers.

As such, the Company is required to treat these warrants as derivative liabilities which

are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the

consolidated statements of operations as the change in fair value of warrant derivative liabilities.

Accordingly, the Company allocated

a portion of the net proceeds of this offering to warrant derivative liabilities based on their estimated fair value as follows (See

Notes 4 and 11):

SCHEDULE OF NET PROCEEDS FROM OFFERING

Warrant derivative liabilities

Pre-funded warrant derivative liabilities

Total allocation of the net proceeds of the offering to warrant derivative liabilities

Issuance of Restricted Common Stock.

January 7, 2021, the board of directors approved the grant of 450,000 shares of common stock to officers of the Company.

will generally vest one-half on January 7, 2022, and one half on January 7, 2023, provided that each grantee remains an officer or employee

on such dates .

September 20, 2021, the board of directors approved the grant of 406,000 shares of common stock to employees of the Company.

of 26,000 shares vested immediately upon grant and the remaining 380,000 shares will generally vest in varying amounts over the next

5 years, provided that each grantee remains an employee on such vesting dates.

Cancellation of Restricted Stock

the year ended December 31, 2021, the Company cancelled 7,700

shares for various reasons.

of Common Stock as Consideration for the TicketSmarter Acquisition.

September 2, 2021, the Company issued a total of 719,738

shares of common stock as a portion of the consideration

paid for the acquisition of Goody Tickets, LLC and TicketSmarter, LLC.

See full description of this acquisition in “ Note 20.

TICKETSMARTER ACQUISITION ”.

Repurchase Program

December 6, 2021, the board of directors of the Company authorized the repurchase of up to $ 10.0

million of the Company’s outstanding common stock under the specified terms of a share repurchase program (the

During 2021, the Company repurchased 1,734,838

shares of its common stock for $ 1,975,079,

in accordance with the Program.

The Program does not obligate the Company to acquire any specific number of shares and shares may be

repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the

Securities Exchange Act of 1934, as amended.

OF STOCK HOLDERS EQUITY

Purchased (1)

Shares Purchased as

Part of Publicly

Approximate Dollar Value of

Shares that May Yet Be

Purchased Under the

December 2021

Total all plans

of Treasury Stock

December 31, 2021, the Company cancelled its 63,518 shares held in treasury, in addition to the repurchased shares through the Program.

Noncontrolling Interests

The Company owns a 51 % equity

interest in its consolidated subsidiary, Nobility Healthcare.

As a result, the noncontrolling shareholders or minority interest is allocated

49 % of the income/loss of Nobility Healthcare which is reflected in the statement of income (loss) as “net income (loss) attributable

to noncontrolling interests of consolidated subsidiary”.

We reported net income (loss) attributable to noncontrolling interests

of consolidated subsidiary of $ 56,453 and $- 0 - for the years ended December 31, 2021 and 2020, respectively.

RELATED PARTY TRANSACTIONS

Rebel Holding, Inc.

Secured Promissory Notes - On October 1, 2020, the Company advanced $250,000 to American Rebel

Holdings, Inc.

(AREB) under a secured promissory note and on October 21, 2020, the Company advanced an additional $250,000 to

American Rebel Holdings, Inc.

(AREB) under a second secured promissory note.

Both notes are currently in default.

1, 2021, the Company advanced an additional $117,600 to AREB on terms similar to the previously issued notes.

RELATED PARTY TRANSACTIONS”

for further information.

The parties have been

negotiating the terms of a Forbearance Agreement regarding the following:

(a) the secured promissory note dated October 1,

Secured Promissory Notes

October 1, 2020, the Company advanced $ 250,000 to American Rebel Holdings, Inc.

(AREB) under a secured promissory note.

The CEO, President

and Chairman of AREB is the brother of the Company’s CEO, President and Chairman.

Such note bears interest at 8 % and is secured

by all the tangible and intangible assets of the Company that are not currently secured by other indebtedness.

The Company also received

warrants to purchase 1,250,000 shares of AREB common stock at an exercise price of $ 0.10 per share with a five-year term.

This note had

an original maturity date of January 2, 2021 ;

however, additional provisions within the note provided for an extension of the maturity

date for fourteen months due to AREB’s failure to raise $300,000 in new debt or equity financing prior to the original maturity

Upon this extension, the AREB was obligated to make equal monthly payments of principal and interest over the extended period of

October 21, 2020, the Company advanced $ 250,000 to AREB under a second secured promissory note.

Such note bears interest at 8 % and is

secured by inventory manufactured and revenue/accounts receivable derived from a specific purchase order.

The Company also received warrants

to purchase 1,250,000 shares of AREB common stock at an exercise price of $ 0.10 per share with a five-year term.

This note has a maturity

date of April 21, 2021 , subject to full repayment upon AREB closing on debt or equity financings of at least $600,000, and the receipt

of revenue from the sale of inventory sold under the specific purchase order serving as collateral .

On March 1, 2021, the Company advanced

an additional $ 117,600 to AREB on terms similar to the previously issued notes.

April 21, 2021, the parties agreed to the terms of a Debt Settlement Agreement and Mutual Release regarding the following:

(a) the secured

promissory note dated October 1, 2020;

(b) the secured promissory note dated October 21, 2020;

and (c) an advance made by the Company on March 1, 2021.

are attempting to arrange for a series of payments that will liquidate the outstanding balances of the two delinquent notes

and the advance by no later than June 30, 2021.

Based on the terms being negotiated, if AREB timely and fully complies

with all of its obligations under the Forbearance Agreement, the Company would agree that AREB’s obligations

to the Company in connection with the defaults would be satisfied.

However, there is no assurance that the parties will

agree to the terms contained in the Forbearance Agreement, and whether AREB will be able to comply with such terms.

of Building - On February 24, 2021 the Company entered into a contract to purchase a 71,361 square foot building located in Lenexa

Kansas which is intended to serve as the Company’s office and warehouse needs.

The building contains approximately 30,000 square

foot of office space and the remainder warehouse space.

The total purchase price is approximately $5.3 million and is expected to close

on or around May 1, 2021.

and (c) an advance made by the Company

on March 1, 2021.

The parties arranged for a lump sum payment aggregating $ 639,956

to liquidate all outstanding debt including accrued

interest for the two delinquent notes and the advance which lump-sum payment was made on April 21, 2021.

No gain or loss was determined

on this transaction.

Transactions with Affiliate and Member of

Board of Director

III is currently the Chief Financial Officer and General Counsel for Nobility, LLC, which is the managing member of the

Company’s majority owned subsidiary, Nobility Healthcare, LLC.

The Company has made payments to Mr.

Hoffmann and his

affiliates for legal and other services rendered totaling $ 105,926

during the year ended December 31, 2021.

Furthermore, on January 27, 2022, the Company’s Board of Directors appointed Mr.

Hoffmann to become a member of the Board until the next annual meeting of shareholders of the Company at which directors are being

with Managing Member of Nobility Healthcare

LLC, is currently the managing member of Nobility Healthcare, LLC.

The Company has advanced a total of $ 158,384

in the form of working capital loan to Nobility, LLC in order to fund capital expenditures necessary for the initial growth of the

joint venture during the year ended December 31, 2021.

The outstanding balance of working capital loan was $ 158,384 as of December

31, 2021 and the Company anticipates full repayment of this advance during the year ended

December 31, 2022.

NET INCOME (LOSS) PER SHARE

calculation of the weighted average number of shares outstanding and loss per share outstanding for the years ended December 31, 2021

and 2020 are as follows:

SCHEDULE OF WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING AND LOSS PER SHARE OUTSTANDING

Year ended December 31,

Numerator for basic and diluted income (loss) per share –

Net income (loss)

$ ( 2,625,881 )

Denominator for basic loss per share – weighted average shares outstanding

Dilutive effect of shares issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding

Denominator for diluted loss per share – adjusted weighted average shares outstanding

Net income (loss) per share:

income (loss) per share is based upon the weighted average number of common shares outstanding during the period.

For the years ended

December 31, 2021 and 2020, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options and

warrants were antidilutive, and, therefore, not included in the computation of diluted income (loss) per share.

DIGITAL ALLY HEALTHCARE VENTURE

June 4, 2021, Digital Ally Healthcare, a wholly-owned subsidiary of the Company, entered into a venture with Nobility LLC (“Nobility”),

an eight-year old revenue cycle management (“RCM”) company servicing the medical industry, to form Nobility Healthcare, LLC

(“Nobility Healthcare”).

Digital Ally Healthcare is capitalizing the venture with $ 13.5

million to support the venture’s business

strategy to make acquisitions of RCM companies.

Ally Healthcare owns 51% of the venture that entitles it to 51% of the distributable cash as defined in the venture’s operating

agreement plus a cumulative preferred return of 10% per annum on its invested capital.

Nobility will receive a management fee and 49%

of the distributable cash, subordinated to Digital Ally Healthcare’s preferred return .

The venture comprises the Company’s revenue cycle management segment.

June 30, 2021, the Company’s revenue cycle management segment completed the acquisition of a private medical billing company

(the “Healthcare Acquisition”).

In accordance with the stock purchase agreement, the Company’s revenue cycle management

segment agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $ 850,000 .

In addition to the Initial Payment Amount, the Company’s revenue cycle management segment agreed to issue a promissory note

to the stockholders of the Healthcare Acquisition in the principal amount of $ 350,000

that is subject to an earn-out adjustment.

estimate of the fair value of this Contingent Note at December 31, 2021 is $ 317,212 .

The gain associated with the adjustment in

the estimated fair value of this contingent promissory note is recorded as a gain in the Consolidated Statements

of Operations for the year ended December 31, 2021.

Lastly, the Company’s revenue cycle management segment agreed to pay

$ 162,552 representing the principal and accrued interest balance due under a promissory note issued to the selling

shareholders prior to the acquisition closing date.

The Company’s revenue cycle management segment anticipates the

estimated fair value of the contingent promissory note to be paid in full, therefore, the total aggregate purchase price was determined

to be approximately $ 1,376,509 .

Total acquisition related costs aggregated $ 164,630 ,

which was expensed as incurred.

Subsequent to the acquisition date, the Company received further information regarding the purchased

assets and assumed liabilities.

As a result, the initial allocation of the purchase price was adjusted by increasing accounts receivable

by $ 75,000 with a corresponding reduction of goodwill during the year ended December 31, 2021.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

S-X dated May 21, 2020 and has concluded that this acquisition was not significant.

Accordingly, the presentation of the assets acquired,

historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are

not required to be presented.

Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to

the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of

the Healthcare Acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially affect the

timing or amounts recognized in our financial statements.

Our assumptions and estimates are based upon information

obtained from the management of the Company’s revenue cycle management segment.

The acquisition was structured as stock

purchase, therefore the excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will

not be amortized for income tax filing purposes.

The results of operations of acquired businesses are included in the consolidated

financial statements from the acquisition date.

purchase price of the Healthcare Acquisition was allocated to the tangible assets, and assumed liabilities

based on their preliminary estimated fair values at the time of the Healthcare Acquisition.

The Company expects to retain the

services of independent valuation firm to determine the fair value of these identifiable intangible assets.

Once determined, the Company

will reallocate the purchase price of the acquisition based on the results of the independent evaluation if they are materially different

from the allocations as recorded on June 30, 2021.

The preliminary estimated fair value of assets acquired and liabilities

assumed in the Healthcare Acquisition were as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Assets acquired:

Tangible assets acquired, consisting of acquired cash, accounts receivable

and right of use asset

Liabilities assumed consisting of a promissory note issued

by the selling shareholders which was paid off at closing, net of lease liability assumed

Total assets acquired and liabilities assumed

Consideration:

Cash paid at Healthcare Acquisition date

Contingent consideration

Total Healthcare Acquisition purchase price

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there

could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained

about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these

assets or liabilities as of that date.

The change in fair value of the contingent consideration is more fully described in Note 8, “Debt

Obligations”.

August 31, 2021, the Company’s revenue cycle management segment completed the acquisition of another private medical

billing company (the “Medical Billing Acquisition”).

In accordance with the stock purchase agreement, Nobility Healthcare

agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $ 2,270,000 .

In addition to the Initial Payment Amount, the Company’s revenue cycle management segment agreed to issue a contingent

promissory note to the stockholders of the Medical Billing Acquisition in the principal amount of $ 650,000

that is subject to an earn-out adjustment.

Company’s revenue cycle management segment anticipates the estimated fair value of the contingent promissory note to be paid in

full, therefore, the total aggregate purchase price was determined to be approximately $ 2,920,000 .

Total acquisition related costs aggregated $ 5,602 ,

which was expensed as incurred.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

S-X dated May 21, 2020 and has concluded that this acquisition was not significant.

Accordingly, the presentation of the assets acquired,

historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are

not required to be presented.

Under the acquisition method, the purchase price of the Medical Billing Acquisition has been allocated

to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time

of the Medical Billing Acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially

affect the timing or amounts recognized in our financial statements.

The acquisition was structured as stock purchase, therefore the

excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income

tax filing purposes.

The results of operations of acquired businesses are included in the consolidated financial statements from

the acquisition date.

purchase price of the Medical Billing Acquisition was allocated to the tangible assets, and assumed liabilities

based on their preliminary estimated fair values at the time of the Medical Billing Acquisition.

The Company expects to retain

the services of independent valuation firm to determine the fair value of these identifiable intangible assets.

Once determined, the

Company will reallocate the purchase price of the acquisition based on the results of the independent evaluation if they are materially

different from the allocations as recorded on August 31, 2021.

The preliminary estimated fair value of assets acquired, and

liabilities assumed in the Medical Billing Acquisition were as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Assets acquired:

Tangible assets acquired

assumed pursuant to stock purchase agreement

Total assets acquired and liabilities assumed

Consideration:

Cash paid at acquisition date

Contingent consideration

Total acquisition purchase price

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there

could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained

about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these

assets or liabilities as of that date.

The change in fair value of the contingent consideration is more fully described in Note 8, “Debt

Obligations”.

TICKETSMARTER ACQUISITION

September 1, 2021, Digital Ally, Inc.

formed TicketSmarter, Inc.

(“TicketSmarter”), through which the Company completed the

acquisition of Goody Tickets, LLC, a Kansas limited liability company (“Goody Tickets”) and TicketSmarter, LLC, a Kansas

limited liability company (“TicketSmarter LLC”), collectively the “TicketSmarter Acquisition”.

TicketSmarter,

comprises the Company’s ticketing business segment.

In accordance with the stock purchase agreement, the Company agreed

to an initial payment (the “Initial Payment Amount”) of $ 9,403,600

through a combination of cash and common stock.

In addition to the Initial Payment Amount, the Company agreed to issue an earn-out agreement to the stockholders of Goody Tickets and

TicketSmarter LLC in the contingent amount of $ 4,244,400

that is subject to an earn-out adjustment based

on actual EBITDA achieved in 2021, of which the Company gave a fair value of $ 3,700,000 on the date of acquisition.

However, following

the completion of 2021, it was determined that the actual EBITDA threshold for any earn-out adjustment to be paid was not met.

in accordance with U.S.

GAAP, the fair value of the contingent earn-out is reduced to zero, and the associated gain related to this revaluation

is recorded in our Consolidated Statements of Operations for the year ended December 31, 2021.

Lastly, included in the agreement, the

Company agreed to place $ 500,000

in escrow, subject to a working capital adjustment

based on actual working capital amounts on the acquisition date as defined in the agreement, this amount was subject to disbursement

45 days following the close of the acquisition.

The parties completed the working capital adjustment resulting in the Company retaining

of the escrow amount with the $ 202,274

released to the Sellers.

The total acquisition

related costs aggregated $ 40,625 ,

which was expensed as incurred.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

S-X dated May 21, 2020 and has concluded that this acquisition was not significant.

Accordingly, the presentation of the assets acquired,

historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are

not required to be presented.

Under the acquisition method, the purchase price of the TicketSmarter Acquisition has been allocated

to Goody Tickets’ and TicketSmarter LLC’s acquired tangible and identifiable intangible assets and assumed liabilities based

on their estimated fair values at the time of the TicketSmarter Acquisition.

This allocation involves a number of assumptions, estimates,

and judgments that could materially affect the timing or amounts recognized in our financial statements.

The TicketSmarter Acquisition

was structured as a stock purchase, however the parties agreed to coordinate the election to invoke IRS Section 338(h)(10) relative to

this transaction for tax purposes.

Therefore, the excess purchase price over the fair value of net tangible assets acquired was recorded

as goodwill, which will be amortized over 15

years for income tax filing purposes.

Likewise, the other acquired assets were stepped up to fair value and is deductible for income tax purposes.

The results of operations

of acquired businesses are included in the consolidated financial statements from the acquisition date.

purchase price of the TicketSmarter Acquisition was allocated to Goody Tickets’ and TicketSmarter LLC’s tangible assets,

goodwill, identifiable intangible assets, and assumed liabilities based on their preliminary estimated fair values at the time

of the TicketSmarter Acquisition.

The Company retained the services of an independent valuation firm to determine the fair value

of these identifiable intangible assets.

The Company will continue to evaluate the fair value of the identified intangible assets.

The preliminary estimated fair value of assets acquired, and liabilities assumed in the TicketSmarter Acquisition were as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN THE TICKET SMARTER ACQUISITION

Assets acquired:

Preliminary purchase price

September 30,

Assets acquired:

Tangible assets acquired, including $ 51,432 of cash acquired

Identifiable intangible assets acquired

Liabilities assumed

( 5,128,964 )

Net assets acquired and liabilities assumed

Consideration:

Cash paid at TicketSmarter Acquisition date

Common stock issued as consideration for TicketSmarter Acquisition at date of acquisition

Contingent consideration earn-out agreement

Cash paid at closing to escrow amount

Cash retained from escrow amount pursuant to settlement of working capital target

Total TicketSmarter Acquisition purchase price

following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of

the date of acquisition:

SCHEDULE OF COMPONENTS OF

IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND ESTIMATED USEFUL LIVES

Amortization through December

Estimated useful life

Identifiable intangible assets:

Sponsorship agreement network

Search engine optimization/content

the period from the date of the TicketSmarter Acquisition to December 31, 2021, the Company adjusted its preliminary fair value estimates

and estimated useful lives based upon information obtained through December 31, 2021, which resulted in adjustments to the preliminary

allocation of the purchase price.

These adjustments primarily related to estimated identifiable intangible asset fair values (primarily

related to the sponsorship agreement network), the estimated fair value of the contingent earn-out agreement liability and goodwill.

The primary area of the acquisition accounting that had not yet been finalized as of December 31, 2021 related to identifiable intangible

assets, which could result in a change to goodwill.

During the measurement

period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such

information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to

the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances

that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that

The change in fair value of the contingent consideration is more fully described in Note 8, “Debt Obligations”.

21 - SEGMENT DATA

accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual

financial statements and requires selected information of those segments to be presented in financial statements.

Operating segments

are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the

chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to

allocate resources and assess performance.

The Company’s three operating segments are Video Solutions, Revenue Cycle

Management, and Ticketing, each of which has specific personnel responsible for that business and reports to the CODM.

expenses capture the Company’s corporate administrative activities, is also to be reported in the segment information.

Company’s captive insurance subsidiary provides services to the Company’s other business segments and not to outside

Therefore, its operations are eliminated in consolidation and is not considered a separate business segment for financial

reporting purposes.

Video Solutions Segment encompasses our law, commercial, and shield divisions.

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.

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 we act 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.

Company’s corporate administration activities are reported in the corporate line item.

These activities primarily include expense

related to certain corporate officers and support staff, certain accounting staff, expense related to the Company’s Board of Directors,

stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities,

and a portion of the Company’s legal, auditing and professional fee expenses.

Corporate identifiable assets primarily consist of

cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

financial information for the Company’s reportable business segments is provided for the indicated periods and as of December 31,

2021, and December 31, 2020:

OF SEGMENT REPORTING

Years Ended December 31,

Net Revenues:

Video Solutions

Revenue Cycle Management

Total Net Revenues

Gross Profit:

Video Solutions

Revenue Cycle Management

Total Gross Profit

Operating Income (loss):

Video Solutions

$ ( 4,497,196 )

$ ( 578,417 )

Revenue Cycle Management

( 10,592,909 )

( 7,085,234 )

Total Operating Income (Loss)

$ ( 14,760,910 )

$ ( 7,663,651 )

Depreciation and Amortization:

Video Solutions

Revenue Cycle Management

Total Depreciation and Amortization

Assets (net of eliminations):

Video Solutions

Revenue Cycle Management

Total Identifiable Assets

segments recorded noncash items effecting the gross profit and operating income (loss) through the established inventory reserves based

on estimates of excess and/or obsolete current and non-current inventory.

The Company recorded a reserve for excess and obsolete inventory

in the video solutions segment of $ 3,353,458 and a reserve for the ticketing segment of $ 561,631 .

The segment net revenues reported

above represent sales to external customers.

Segment gross profit represents net revenues less cost of revenues.

Segment operating income,

which is used in management’s evaluation of segment performance, represents net revenues, less cost of revenues, less all operating

Identifiable assets are those assets used by each segment in its operations.

Corporate assets primarily consist of cash, property,

plant and equipment, accounts receivable, inventories, and other assets.

SUBSEQUENT EVENTS

of Third Medical Billing Company

January 1, 2022, the Company’s revenue cycle management segment completed the acquisition of 100 %

of the capital stock of a third medical billing company for a total purchase price of approximately $ 1.90

The purchase price includes approximately $ 1.15 million

in cash at closing and a $ 750,000 contingent

consideration promissory note bearing interest at 3 %

per annum subject to adjustment based on revenues achieved over an approximate 18-month period after closing, maturing

in July of 2024 .

This closely-held company provides revenue cycle management (RCM) and other services for over 180 dental

practices located throughout the United States with an annual revenue run rate of approximately $ 3.5 million.

Meeting of Shareholders

January 11, 2022, the Company held a special meeting of its stockholders (the “Special

Set forth below are the two proposals that were voted on at the Special Meeting and the results of the voting for each:

1 – To approve an amendment to the Company’s Articles of Incorporation, as amended, to increase the number of authorized

shares of the Company’s capital stock that the Company may issue from 100,000,000 shares to 300,000,000 shares, of which all 300,000,000

shares shall be classified as Common Stock (“Proposal No.

The Company’s stockholders did not approve Proposal

2 – To approve an adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies (“Proposal

The Company’s stockholders did not approve Proposal No.

of Christian J.

Hoffmann III to Board of Directors

January 27, 2022, the Board of Directors appointed Christian J.

Hoffmann, III as a member of the Board, effective immediately, to hold

office until the next meeting of shareholders of the Company at which directors are being elected or as set forth in the Company’s

Hoffmann, co-founded Nobility, LLC (“Nobility”), a medical billing and revenue cycle management company, in 2014

where he has served as the Chief Financial Officer and General Counsel.

On June 4, 2021, the Company and Nobility launched Nobility Healthcare,

LLC, a subsidiary of the Company, to provide revenue cycle management services for the healthcare industry.

During 2020 and 2021,

Hoffmann also served as an outside counsel to the Board on specific matters as requested.

as disclosed herein, there are no other arrangements

or understandings between Mr.

Hoffmann and any other persons pursuant to which he was appointed as a member of the Board.

There are also

no family relationships between any of the Company’s directors or officers and Mr.

All related party transactions

involving Mr.

Hoffmann that are reportable under Item 404(a) of Regulation S-K are disclosed in Part III, Item 13 of this Annual Report

on Form 10-K.

Hoffmann will receive standard board compensation for his service as a director.

of Fourth Medical Billing Company

February 1, 2022, the Company’s revenue cycle management segment completed the acquisition of 100 %

of the assets of a fourth medical billing company for a total purchase price of $ 335,000 .

The purchase price includes $ 230,000

in cash at closing and a $ 105,000

contingent consideration promissory note bearing

interest at 3 %

per annum subject to adjustment based on revenues achieved over an approximate 18-month period after closing, maturing in August

The acquisition provides revenue cycle management (RCM) and other services throughout the southwestern portion of

United States with an annual revenue run rate of approximately $ 440,000 .

of Intent to Acquire Medical Billing Company

March 16, 2022, the Company’s revenue cycle management segment entered a letter of intent to acquire 100 %

of the capital stock of a medical billing company located in the Southern portion of the United States for a total purchase price of

(the “Target”).

price includes $ 3.25

million in cash at closing and a $ 1,750,000

contingent consideration promissory note

bearing interest at 4 %

per annum subject to adjustment based on revenues

achieved over an approximate 24-month period after closing.

The letter of intent is subject to satisfactory completion of due

diligence procedures, review of legal, financial, tax and other matters concerning the Target’s business.

The letter of intent

is also not binding until the parties mutually agree to the terms of the underlying definitive agreements including the receipt of all

approvals and consents considered necessary by both parties.

The parties are currently negotiating the final definitive agreements and

anticipate a closing date on or around May 31, 2022.

However, there can be no assurances that the parties will complete

the acquisition of the Target and on what terms will be included in the final definitive agreements.

Issuance of Restricted Common Stock

March 23, 2022, the board of directors approved the grant of 190,000 restricted common shares to

certain new employees of the Company.

A total of 5,000 shares vested immediately upon issuance and the remainder vest over a period of

one to five years.

Such shares will generally vest over a period of one to five years on their respective anniversary dates in January

through January 2027, provided that each grantee remains an employee on such dates.

Repurchase Program

December 6, 2021, the Board of Directors of the Company authorized the repurchase of up to $ 10.0 million of the Company’s outstanding

common stock under the specified terms of a share repurchase program (the “Program”).

Subsequent to December 31, 2021, the

Company repurchased 2,163,341 shares of its common stock for $ 2,312,054 , in accordance with the Program.

The Program does not obligate

the Company to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions,

including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

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 9A. Controls and Procedures