What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 635 added, 567 removed, 1273 unchanged (49% of the section changed)

2 unchanged sentences

30, 2023 AND DECEMBER 31, 2022

June 30, 2023 (Unaudited)

September 30, 2023

December 31, 2022

1 unchanged sentence

Cash and cash equivalents

Accounts receivable – trade, net of $ 176,876 allowance – June 30, 2023 and $ 152,736 – December 31, 2022

Other receivables, net of $ 5,000 allowance – June 30, 2023 and $ 0 – December 31, 2022 (including $ 138,384 due from related parties – June 30, 2023 and $ 138,384 – December 31, 2022, refer to Note 20)

Accounts receivable – trade, net of $ 200,667 allowance – September 30, 2023 and $ 152,736

– December 31, 2022

Other receivables, net of $ 5,000 allowance – September 30, 2023 and $ 0 –

December 31, 2022 (including $ 0 due from related parties – September 30, 2023 and $ 138,384 – December 31, 2022, refer

Inventories, net

11 unchanged sentences

Contract liabilities – current portion

Notes payable – related party – current portion

Debt obligations, net – current portion

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Contract liabilities – long term

Notes payable – related party – long term

Lease Deposit

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shares issued:

2,800,752 shares issued – June 30, 2023 and 2,720,170 shares issued – December 31, 2022

shares issued – September 30, 2023 and 2,720,170 shares issued – December 31, 2022

Additional paid in capital

7 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

THE THREE AND SIX MONTHS ENDED

THE THREE AND NINE MONTHS ENDED

30, 2023 AND 2022

three months ended June 30,

six months ended June 30,

the three months ended

September 30,

the nine months ended

September 30,

Service and other

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( 2,480,947 )

( 1,521,049 )

Other income (loss)

1 unchanged sentence

( 1,792,308 )

Loss on conversion of convertible note

2 unchanged sentences

Change in fair value of warrant derivative liabilities

Gain on extinguishment of liabilities

Gain on extinguishment of warrant derivative liabilities

Total other income (expense)

( 1,717,617 )

Loss before income tax benefit

( 3,679,043 )

Income (loss) before income tax benefit

( 1,919,071 )

5 unchanged sentences

( 17,979,171 )

( 9,299,498 )

Net (income) attributable to noncontrolling interests of consolidated subsidiary

8 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

Noncontrolling

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$ ( 68,672,206 )

$ 124,476,447

$ ( 68,672,206 )

Stock-based compensation

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$ ( 77,336,028 )

$ 124,871,161

$ ( 77,336,028 )

Stock-based compensation

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$ ( 80,364,204 )

Issuance of common stock through warrant exchange agreement

Stock-based compensation

( 1,902,475 )

( 1,919,071 )

Balance, December 31, 2022

Balance, September 30, 2022

$ 129,999,695

$ ( 82,266,679 )

Balance, December 31, 2022

$ 127,869,342

21 unchanged sentences

$ ( 106,479,356 )

Stock-based compensation

Net Income (loss)

( 3,708,673 )

( 3,679,043 )

Balance, September 30, 2023

$ 128,367,929

$ ( 110,188,029 )

$ 128,367,929

$ ( 110,188,029 )

Notes to the Unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

the six months ended June 30,

THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

For the nine months ended September

Cash Flows From Operating Activities:

7 unchanged sentences

( 1,803,560 )

( 6,726,638 )

Gain on extinguishment of liabilities

Gain on extinguishment of warrant derivative liabilities

( 3,624,794 )

Convertible debt discount amortization

8 unchanged sentences

Accounts receivable – other

( 3,426,732 )

( 1,448,044 )

Prepaid expenses

11 unchanged sentences

( 17,797,992 )

( 10,932,515 )

Cash Flows from Investing Activities:

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Net proceeds of convertible debt with detachable warrants

Net proceeds of related party note payable

Proceeds – Commercial Extension of Credit – Entertainment Segment

Payments on Commercial Extension of Credit – Entertainment Segment

Principal payment on contingent consideration promissory notes

( 1,156,441 )

Principal payment on contingent consideration promissory

Net cash (used in) provided by financing activities

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Supplemental disclosures of non-cash investing and financing activities:

Commercial extension of credit repaid through accrued revenue – Entertainment segment

ROU and lease liability recorded on extension of lease

Conversion of convertible notes payable into common stock

Issuance of contingent consideration promissory note for business acquired

Issuance of common stock through warrant exchange agreement

Issuance of contingent consideration promissory note for

business acquired

Assets acquired in business acquisitions

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(such merged entity, the “Predecessor Registrant”).

August 23, 2022 (the “ Effective Time ”), the Predecessor Registrant merged with and into its wholly owned subsidiary,

DGLY Subsidiary Inc., a Nevada corporation (the “ Registrant ”), pursuant to an agreement and plan of merger, dated

as of August 23, 2022 (the “ Merger Agreement ”), between the Predecessor Registrant and the Registrant, with the Registrant

as the surviving corporation in the merger (such transaction, the “ Merger ”).

At the Effective Time, Articles of Merger

were filed with the Secretary of State of the State of Nevada, pursuant to which the Registrant was renamed “Digital Ally, Inc.”

and, by operation of law, succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor Registrant

immediately prior to the Merger.

Under the Nevada Revised Statutes, shareholder approval was not required in connection with the Merger

Agreement or the transactions contemplated thereby.

August 23, 2022 (the “Effective Time”), the Predecessor Registrant merged with and into its wholly owned subsidiary, DGLY

Subsidiary Inc., a Nevada corporation (the “Registrant”), pursuant to an agreement and plan of merger, dated as of August

23, 2022 (the “Merger Agreement”), between the Predecessor Registrant and the Registrant, with the Registrant as the surviving

corporation in the merger (such transaction, the “Merger”).

At the Effective Time, Articles of Merger were filed with the

Secretary of State of the State of Nevada, pursuant to which the Registrant was renamed “Digital Ally, Inc.” and, by operation

of law, succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor Registrant immediately

prior to the Merger.

Under the Nevada Revised Statutes, shareholder approval was not required in connection with the Merger Agreement

or the transactions contemplated thereby.

the Effective Time, pursuant to the Merger Agreement, (i) each outstanding share of Predecessor Registrant’s common stock, par

value $ 0.001 per share (the “ Predecessor Common Stock ”) automatically converted into one share of common stock, par

value $ 0.001 per share, of the Registrant (“ Registrant Common Stock ”), (ii) each outstanding option, right or warrant

to acquire shares of Predecessor Common Stock converted into an option, right or warrant, as applicable, to acquire an equal number of

shares of Registrant Common Stock under the same terms and conditions as the original options, rights or warrants, and (iii) the directors

and executive officers of the Predecessor Registrant were appointed as directors and executive officers, as applicable, of the Registrant,

each to serve in the same capacity and for the same term as such person served with the Predecessor Registrant immediately before the

value $ 0.001

per share (the “Predecessor Common Stock”)

automatically converted into one share of common stock, par value $ 0.001

per share, of the Registrant (“Registrant

Common Stock”), (ii) each outstanding option, right or warrant to acquire shares of Predecessor Common Stock converted into an

option, right or warrant, as applicable, to acquire an equal number of shares of Registrant Common Stock under the same terms and conditions

as the original options, rights or warrants, and (iii) the directors and executive officers of the Predecessor Registrant were appointed

as directors and executive officers, as applicable, of the Registrant, each to serve in the same capacity and for the same term as such

person served with the Predecessor Registrant immediately before the Merger.

business of the Registrant, Digital Ally, Inc.

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

Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets,

Inc., Kustom 440, Inc., Kustom Entertainment, Inc., and its majority-owned subsidiary Nobility Healthcare, LLC, collectively,

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

1) the Video Solutions Segment, 2) the Revenue Cycle Management Segment and 3) the Entertainment Segment.

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.

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 Entertainment Segment acts as an intermediary between ticket buyers and

sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell

through various platforms.

The 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

Products, LLC, Digital Ally Healthcare, LLC (“Digital Ally Healthcare”), TicketSmarter, Inc.

(“TicketSmarter”), Worldwide Reinsurance,

Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc.

(“Kustom 440”), Kustom Entertainment, Inc., 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

Entertainment Segment.

The Video Solutions Segment is our legacy business that produces digital video imaging, storage products,

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

This segment includes

both service and product revenues through our subscription models offering cloud and warranty solutions, and hardware sales for

video and health safety solutions.

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

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

The Entertainment Segment acts as an

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

tickets from primary sellers to then sell through various platforms.

The 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 19.

June 1, 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital

Corp., a Delaware corporation (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of

Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as the

representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Clover Leaf in accordance

with the terms and conditions of the Merger Agreement (the “Sponsor” or the “Purchaser Representative”), and

Kustom Entertainment, Inc., a Nevada corporation, a wholly owned subsidiary of the Company, with a focus and mission to own and produce

events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies (“Kustom”).

to the Merger Agreement, subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated

by the Merger Agreement (the “Closing”), Merger Sub will merge with and into Kustom (the “Merger” and, together

with the other transactions contemplated by the Merger Agreement, the “Business Combination”), with Kustom continuing as

the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf.

In the Merger, all of the issued and outstanding

capital stock of Kustom immediately prior to the Effective Time shall no longer be outstanding and shall automatically be cancelled and

shall cease to exist in exchange for the right for the Company to receive the Merger Consideration (as defined below).

Upon consummation

of the Business Combination, Clover Leaf will change its name to “Kustom Entertainment, Inc.”

aggregate merger consideration to be paid pursuant to the Merger Agreement to the Company as of immediately prior to the Effective Time

will be an amount equal to (the “Merger Consideration”) (i) $ 125 million, minus (ii) the estimated consolidated indebtedness

of Kustom as of the Closing (“Closing Indebtedness”).

The Merger Consideration to be paid to the Company will be paid solely

by the delivery of new shares of Clover Leaf Class A Common Stock, each valued at $ 11.14 per share (the “Merger Consideration Shares”).

The Closing Indebtedness (and the resulting Merger Consideration) is based solely on estimates determined shortly prior to the Closing

and is not subject to any post-Closing true-up or adjustment.

is comprised of TicketSmarter, Inc.

(“TicketSmarter”) and Kustom 440, Inc.

(“Kustom 440”), both currently wholly

owned subsidiaries.

Both TicketSmarter and Kustom 440 will combine their management teams and focus on concerts, entertainment and garnering

additional ticketing partnerships in 2023 and beyond.

Kustom 440 and TicketSmarter will use their existing sponsorships and sports property

partnerships to develop alternative entertainment options for consumers.

combined company will be known as Kustom Entertainment and will operate under the same management team as Kustom.

which is currently

led by Stanton E.

Ross, the current CEO of the Company.

The transaction contemplates an equity value of $ 125 million for Kustom.

combined company is expected to have an implied initial pro forma equity value of approximately $222.2 million, with the proposed Business

Combination expected to provide approximately $18.1 million in gross proceeds from the cash held in trust by Clover Leaf, assuming no

Additionally, the Company will distribute to its shareholders 15% of the Merger Consideration Shares obtained in Kustom

immediately following the closing of the Merger and intends to distribute the balance of such Merger Consideration Shares following a

six-month lock-up period.

transaction has been approved by the board of directors of the Company (the “Board”) and the board of directors of Clover

Leaf and is subject to approval by the stockholders of Clover Leaf and other customary closing conditions.

The Company, as the sole holder

of Kustom common stock, has approved the transaction.

to the plan to consummate the Business Combination, the Company no longer expects to pursue a separation of Kustom into its own independent

publicly traded company via spin-off, as announced on December 8, 2022.

June 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp.,

a Delaware corporation (Nasdaq:

CLOE) (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary

of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as

the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Clover Leaf in accordance

with the terms and conditions of the Merger Agreement, and Kustom Entertainment, Inc., a Nevada corporation, a wholly owned subsidiary

of the Company, with a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary

ticketing technologies (“Kustom”).

Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein

upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with

and into Kustom, with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf.

the Closing which is subject to the approval of Clover Leaf’s shareholders and the satisfaction or waiver of certain other customary

closing conditions, the common stock of the combined company is expected to be listed on the Nasdaq under a mutually agreed new ticker

symbol that reflects the name “Kustom Entertainment”.

of Presentation:

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a fair presentation have been included.

Operating results for the three- and six-month period ended June 30, 2023 are not necessarily

Operating results for the three- and nine-month period ended September 30, 2023 are not necessarily

indicative of the results that may be expected for the year ending December 31, 2023.

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for the year ended December 31, 2022.

Uncertainty Due to Geopolitical Events

Due to the Hamas-Israel and Russia-Ukraine

conflicts, there has been uncertainty and disruption in the global economy.

Although these events did not have a direct material adverse

impact on the Company’s financial results for the three and nine months ended September 30, 2023, at this time the Company

is unable to fully assess the aggregate impact the Hamas-Israel and Russia-Ukraine conflicts will have on its business due to various

uncertainties, which include, but are not limited to, the duration of the conflicts, the conflicts’ effect on the economy, the impact

on the Company’s businesses and actions that may be taken by governmental authorities related to the conflicts.

and Going Concern

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ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about the

Company’s ability to continue as a going concern within 12 months after the Company’s financial statements were issued (August

Company’s ability to continue as a going concern within 12 months after the Company’s financial statements were issued (November

Management considered the Company’s current financial condition and liquidity sources, including current funds available,

forecasted future cash flows and the Company’s obligations due before August 14, 2024.

forecasted future cash flows and the Company’s obligations due before November 14, 2024.

Company has experienced net losses and cash outflows from operating activities since inception.

For the six months ended June 30, 2023,

For the nine months ended September 30,

2023, the Company had a net loss attributable to common stockholders of $ 18,207,795 net cash used in operating activities of $ 5,842,158 ,

$ 197,241 used in investing activities and $ 4,715,031 provided by financing activities.

The Company will have to restore positive operating cash

flows and profitability over the next year and/or raise additional capital to fund its operational plans, meet its customary payment

The Company will have to restore positive operating

cash flows and profitability over the next year and/or raise additional capital to fund its operational plans, meet its customary payment

obligations and otherwise execute its business plan.

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date the unaudited condensed consolidated financial statements were issued.

Such factors raise substantial doubt about the Company’s ability to sustain operations for at least one year

from the issuance of these unaudited condensed financial statements.

The accompanying unaudited condensed financial statements do not

include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might

be necessary should the Company be unable to continue as a going concern.

of Consolidation :

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during August 2009 to facilitate the export sales of its products.

formed 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.

The Company formed

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.

The Company formed TicketSmarter, Inc.

1, 2021, upon its acquisition of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate its global entertainment operations.

formed Worldwide Reinsurance Ltd.

in December 2021, which is a captive insurance company 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.

TicketSmarter, Inc.

on September 1, 2021, upon its acquisition of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate its

global entertainment operations.

The Company formed Worldwide Reinsurance Ltd.

in December 2021, which is a captive insurance

company domiciled in Bermuda, the Company is in the process of unwinding these operations.

The Company formed Digital Connect, Inc.

and BirdVu Jets, Inc.

BirdVu Jets, Inc.

for travel and transportation purposes in 2022.

The company formed Kustom 440, Inc.

in 2022 to create unique entertainment experiences directly for consumers.

in 2022 to create unique

entertainment experiences directly for consumers.

Value of Financial Instruments :

1 unchanged sentence

notes payable approximate fair value because of the short-term nature of these items.

Recognition :

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

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

During the six months ended June 30, 2023, the Company recognized revenue of $ 1.0 million related to its contract liabilities.

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

as current liabilities and non-current liabilities in the Consolidated Balance Sheets.

Such amounts consist of extended warranty contracts,

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

During the nine months ended September 30, 2023, the Company recognized revenue of $ 2.2 million related to its contract liabilities.

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

separately as current liabilities and non-current liabilities in the Consolidated Balance Sheets.

Such amounts consist of extended warranty

contracts, prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations

are satisfied.

Total contract liabilities consist of the following:

SCHEDULE OF CONTRACT LIABILITIES

June 30, 2023

OF CONTRACT LIABILITIES

September 30, 2023

Contract liabilities, current

Contract liabilities, non-current

June 30, 2022

September 30, 2022

Contract liabilities, current

Contract liabilities, non-current

returns and allowances aggregated $ 116,629 and $ 118,027 for the six months ended June 30, 2023 and December 31, 2022, respectively.

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.

returns and allowances aggregated $ 116,543 and $ 118,029 for the nine months ended September 30, 2023 and December 31, 2022, 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.

of Estimates :

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OF SHORT TERM INVESTMENTS

June 30, 2023

September 30, 2023

Demand deposits

1 unchanged sentence

Money market funds

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

December 31, 2022

Demand deposits

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

Money market funds

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

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with major financial institutions.

At June 30, 2023 and December 31, 2022, the uninsured balance amounted to $ 2,232,909 and $ 2,495,189 ,

At September 30, 2023 and December 31, 2022, the uninsured balance amounted to $ 1,652,978 and $ 2,495,189 ,

respectively.

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if fair value is not available.

The Company last assessed potential impairments of its long-lived assets as of June 30, 2023 and concluded

that there was no impairment.

The Company last assessed potential impairments of its long-lived assets as of September 30, 2023 and

concluded that there was no impairment.

assets include deferred patent costs, license agreements, and intangibles related to acquisitions.

Legal expenses incurred in preparation of patent application have been

deferred and will be amortized over the useful life of granted patents.

Costs incurred in preparation of applications that are not

granted will be charged to expense at that time.

The Company has entered into several sublicense agreements under which it has been

assigned the exclusive rights to certain licensed materials used in its products.

These sublicense agreements generally require

upfront payments to obtain the exclusive rights to such material.

The Company capitalizes the upfront payments as intangible assets

and amortizes such costs over their estimated useful life on a straight-line method.

Legal expenses incurred in preparation

of patent application have been deferred and will be amortized over the useful life of granted patents.

Costs incurred in preparation

of applications that are not granted will be charged to expense at that time.

The Company has entered into several sublicense agreements

under which it has been assigned the exclusive rights to certain licensed materials used in its products.

These sublicense agreements

generally require upfront payments to obtain the exclusive rights to such material.

The Company capitalizes the upfront payments as intangible

assets and amortizes such costs over their estimated useful life on a straight-line method.

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

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time to time, 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.

Shares 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 represent the interest in subsidiaries held by our venture

The venture partner holds a noncontrolling interest in the Company’s consolidated subsidiary Nobility Healthcare,

Since the 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 or loss

attributable to noncontrolling interest in the Consolidated Statements of Operations.

interests in the Company’s Consolidated Financial Statements represent the interest in subsidiaries held by our venture partner.

The venture partner holds a noncontrolling interest 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 or loss attributable to noncontrolling interest

in the Consolidated Statements of Operations.

Accounting Standards

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Company’s financial position and results of operations.

consisted of the following at June 30, 2023 and December 31, 2022:

consisted of the following at September 30, 2023 and December 31, 2022:

SCHEDULE OF INVENTORIES

6 unchanged sentences

( 5,230,261 )

Reserve for excess and obsolete inventory – entertainment segment

Reserve for excess and obsolete inventory – entertainment

Total inventories

1 unchanged sentence

The cost of such units

totaled $ 217,441 and $ 171,071 as of June 30, 2023 and December 31, 2022, respectively.

totaled $ 164,029 and $ 171,071 as of September 30, 2023 and December 31, 2022, respectively.

DEBT OBLIGATIONS

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Debt obligations, long-term

obligations mature as follows as of June 30, 2023:

obligations mature as follows as of September 30, 2023:

OF MATURITY OF DEBT OBLIGATIONS

2023 (July 1, 2023 to December 31, 2023)

September 30, 2023

2023 (October 1, 2023 to December 31, 2023)

2027 and thereafter

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Monthly principal and interest

payments began in November 2022, after being deferred for thirty 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.

payments began in November 2022, after being deferred for thirty 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.

Consideration Promissory Notes

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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.

interest payments are deferred for nine 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 $ 975,000 (the “June

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on this contingent consideration promissory note totaled $ 202,725 .

The estimated fair value of the June Contingent Note at June 30, 2023

is $ 117,637 , representing a reduction in its estimated fair value of $ 58,919 as compared to its estimated fair value as of March 31,

This reduction only relates to the principal payments made for the three and six months ended June 30, 2023.

Therefore, the Company

recorded no gain or loss in the Consolidated Statements of Operations for the three and six months ended June 30, 2023.

The estimated fair value of the June Contingent Note at September 30, 2023

is $ 87,348 , representing a reduction in its estimated fair value of $ 89,109 as compared to its estimated fair value as of December 31,

This reduction only relates to the principal payments made for the three and nine months ended September 30, 2023.

Therefore, the

Company recorded no gain or loss in the Consolidated Statements of Operations for the three and nine months ended September 30, 2023.

August 31, 2021, Nobility Healthcare issued another contingent consideration promissory note (the “August Contingent Payment Note”)

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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.

and interest payments are deferred for nine 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 $ 3,000,000

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The estimated fair value of the August Contingent Note

at June 30, 2023 is $ 259,303 , representing a reduction in its estimated fair value of $ 64,826 as compared to its estimated fair value

as of March 31, 2023.

This reduction only relates to the principal payments made for the three and six months ended June 30, 2023.

Therefore, the Company recorded no gain or loss in the Consolidated Statements of Operations for the three and six months ended June

at September 30, 2023 is $ 194,477 , representing a reduction in its estimated fair value of $ 194,477 as compared to its estimated fair

value as of December 31, 2022.

This reduction only relates to the principal payments made for the three and nine months ended September

Therefore, the Company recorded no gain or loss in the Consolidated Statements of Operations for the three and nine months

ended September 30, 2023.

January 1, 2022, Nobility Healthcare issued another contingent consideration promissory note (the “January Contingent Payment Note”)

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The estimated fair value

of the January Contingent Note at June 30, 2023 is $ 5,936 , representing a reduction in its estimated fair value of $ 175,146 as compared

to its estimated fair value as of December 31, 2022.

of the January Contingent Note at September 30, 2023 is $- 0 -, representing a reduction in its estimated fair value of $ 208,083 as compared

to its estimated fair value as of December 31, 2022, of which $ 32,936 represents payments made during the nine months ended September 30, 2023.

Therefore, the Company recorded a gain of $ 175,146 in the Consolidated Statements

of Operations for the six months ended June 30, 2023.

of Operations for the nine months ended September 30, 2023.

February 1, 2022, Nobility Healthcare issued another contingent consideration promissory note (the “February Contingent Payment

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The estimated fair value

of the February Contingent Note at June 30, 2023 is $ 19,888 , representing an increase in its estimated fair value of $ 17,125 as compared

to its estimated fair value as of December 31, 2022.

Therefore, the Company recorded a loss of $ 17,125 in the Consolidated Statements

of Operations for the six months ended June 30, 2023.

of the February Contingent Note at September 30, 2023 is $- 0 -, representing a decrease in its estimated fair value of $ 4,347 as

compared to its estimated fair value as of December 31, 2022, of which $ 1,584 represents payments made during the nine months ended September 30, 2023.

Therefore, the Company recorded a gain of $ 2,763 in the Consolidated Statements

of Operations for the nine months ended September 30, 2023.

Commercial Extension of Credit

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December 31, 2023 .

of the six months ended June 30, 2023, the Company’s Entertainment segment had repaid $ 824,383 towards the principal on the loan

through remittances and had an outstanding balance of $ 175,617 .

April 5, 2023, the Company entered into and consummated the initial closing (the “First Closing”)

of the transactions contemplated by a Securities Purchase Agreement, dated as of April 5, 2023 (the “Purchase Agreement”),

between the Company and certain investors (the “Purchasers”).

During the nine months

ended September 30, 2023, the Entertainment segment drew an additional $ 224,577 on this agreement, with the principal balance never

exceeding $ 1,000,000 .

During the nine months ended

September 30, 2023, the Company’s Entertainment segment had repaid $ 1,156,441

towards the principal on the loan through remittances and had an outstanding balance of $ 68,135 .

April 5, 2023, the Company entered into and consummated the initial closing (the “First Closing”) of the transactions contemplated

by a Securities Purchase Agreement, dated as of April 5, 2023 (the “Purchase Agreement”), between the Company and certain

investors (the “Purchasers”).

the First Closing, the Company issued and sold to the Purchasers Senior Secured Convertible Notes in the aggregate original principal

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are exercisable for an aggregate 1,125,000 shares comprised of 375,000 warrants at an exercise price of $ 5.50 per share of the Company’s

common stock, par value $ 0.001 (the “Common Stock”), 375,000 warrants at an exercise price of $ 6.50 per share of Common Stock, and 375,000

warrants at an exercise price of $ 7.50 per share of Common Stock.

to certain conditions, within 18 months from the effectiveness date and while the Notes remain outstanding, the Purchasers have the

right to require the Company to consummate a second closing of up to an additional $ 3,000,000

of Notes (the “Second Notes”) and Warrants on the same terms and conditions as the First Closing, except that the Second

Notes may be subordinate to a mortgage on the Company’s headquarters building (the “Bank Mortgage”).

common stock, par value $ 0.001 (the “Common Stock”), 375,000 warrants at an exercise price of $ 6.50 per share of Common Stock,

and 375,000 warrants at an exercise price of $ 7.50 per share of Common Stock.

to certain conditions, within 18 months from the effectiveness date and while the Notes remain outstanding, the Purchasers have the right

to require the Company to consummate a second closing of up to an additional $ 3,000,000 of Notes (the “Second Notes”) and

Warrants on the same terms and conditions as the First Closing, except that the Second Notes may be subordinate to a mortgage on the

Company’s headquarters building (the “Bank Mortgage”).

Notes are convertible into shares of Common Stock at the election of the Purchasers at any time at a fixed conversion price of $ 5.00

(the “Conversion Price”) per share

of Common Stock.

The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the

like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or

exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject to certain exceptions).

Subject to certain

conditions, including certain equity conditions, the Company may redeem some or all of the then outstanding principal amount of the Note

for cash in an amount equal to 110 %

of the outstanding principal amount of the Notes (the “Optional Redemption Amount”).

In addition, the Purchasers may, at

their option, demand repayment at the Optional Redemption Amount upon five (5) business days’ written notice following (i) the

closing by the Company of the Bank Mortgage, or (ii) a sale by the Company of Common Stock or Common Stock equivalents.

(the “Conversion Price”) per share of Common Stock.

The Conversion Price is subject to customary adjustments for stock dividends,

stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or

securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject

to certain exceptions).

Subject to certain conditions, including certain equity conditions, the Company may redeem some or all of the

then outstanding principal amount of the Note for cash in an amount equal to 110 % of the outstanding principal amount of the Notes (the

“Optional Redemption Amount”).

In addition, the Purchasers may, at their option, demand repayment at the Optional Redemption

Amount upon five (5) business days’ written notice following (i) the closing by the Company of the Bank Mortgage, or (ii) a sale

by the Company of Common Stock or Common Stock equivalents.

Notes rank senior to all outstanding and future indebtedness of the Company and its subsidiaries, and are secured by substantially all

of the Company’s assets, as evidenced by (i) a security agreement entered into at the Closing,

(ii) a trademark security agreement entered into at the Closing, (iii) a patent security

agreement entered into at the Closing, (iv) a guaranty executed by all direct and indirect

subsidiaries of the Company pursuant to which each of them has agreed to guaranty the obligations of the

Company under the Notes, and (v) a mortgage on the Company’s headquarters building in favor of the Purchasers.

of the Company’s assets, as evidenced by (i) a security agreement entered into at the Closing, (ii) a trademark security agreement

entered into at the Closing, (iii) a patent security agreement entered into at the Closing, (iv) a guaranty executed by all direct and

indirect subsidiaries of the Company pursuant to which each of them has agreed to guaranty the obligations of the Company under the Notes,

and (v) a mortgage on the Company’s headquarters building in favor of the Purchasers.

at the Closing, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers.

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Company recognized the full warrant derivative value, with the remaining amount being allocated to the debt obligation.

the warrant derivative value exceeded the net proceeds from the issuance, the excess amount is recognized as a loss on the date of the

As the warrant

derivative value exceeded the net proceeds from the issuance, the excess amount is recognized as a loss on the date of the issue date.

Thus, the Company recorded a loss of $ 576,380 as an interest expense on the date of issuance relating to the Convertible note.

The following is the assumptions used

in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted in connection with the

Convertible Note:

The following

is the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted

in connection with the Convertible Note:

OF WARRANT TO PURCHASE COMMON STOCK GRANTED

April 5, 2023

(issuance date)

Volatility - range

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Exercise price

$ 5.50 – 7.50

Common stock issuable under the warrants

is a summary of activity relative to the Convertible Note for the six months ended June 30, 2023:

SUMMARY OF CONVERTIBLE NOTE ACTIVITY

is a summary of activity relative to the Convertible Note for the nine months ended September 30, 2023:

OF CONVERTIBLE NOTE ACTIVITY

Balance, December 31, 2022

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( 1,014,091 )

Balance, June 30, 2023

During the three and six months

ended June 30, 2023 the Company amortized $ 925,455 of debt discount under interest expense, compared to $- 0 - for the three and six months

ended June 30, 2022.

On June 2, 2023, the Purchasers elected to convert $ 125,000 principal, at the fixed price of $ 5.00 per share of

common stock, 25,000 shares valued at $ 119,750 .

The loss on conversion of convertible note into common shares, of $ 93,386 , was recorded

during the period.

Balance, September 30, 2023

the three and nine months ended September 30, 2023 the Company amortized $ 1,887,273 of debt discount under interest expense, compared

to $- 0 - for the three and nine months ended September 30, 2022.

June 2, 2023, the Purchasers elected to convert $ 125,000 principal, at the fixed price of $ 5.00 per share of common stock, 25,000 shares

valued at $ 119,750 .

The loss on conversion of convertible note into common shares, of $ 93,386 , was recorded during the period.

FAIR VALUE MEASUREMENT

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following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring

basis as of June 30, 2023 and December 31, 2022:

SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS

June 30, 2023

Contingent consideration promissory notes and contingent consideration earn-out agreement

basis as of September 30, 2023 and December 31, 2022:

OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS

September 30, 2023

Contingent consideration promissory notes and contingent consideration

earn-out agreement

Warrant derivative liabilities

Liabilities, fair value

December 31, 2022

Contingent consideration promissory notes and contingent consideration earn-out agreement

Contingent consideration promissory notes and contingent consideration

earn-out agreement

Warrant derivative liabilities

following table represents the change in Level 3 tier value measurements for the periods ended June 30, 2023:

SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS

Liabilities, fair value

following table represents the change in Level 3 tier value measurements for the periods ended September 30, 2023:

OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS

Contingent Consideration Promissory Notes

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Principal payments on contingent consideration promissory notes – Revenue Cycle Management Acquisitions

Change in fair value of contingent consideration promissory notes – Revenue Cycle Management Acquisitions

Change in fair value of contingent consideration promissory notes – Revenue

Cycle Management Acquisitions

Balance, March 31, 2023

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Balance, June 30, 2023

Principal payments on contingent consideration promissory notes – Revenue Cycle Management Acquisitions

Change in fair value of contingent consideration promissory notes –

Revenue Cycle Management Acquisitions

Change in fair value of warrant derivative liabilities

( 1,863,326 )

Balance, September 30, 2023

ACCRUED EXPENSES

expenses consisted of the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF ACCRUED EXPENSES

expenses consisted of the following at September 30, 2023 and December 31, 2022:

OF ACCRUED EXPENSES

Accrued warranty expense

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Accrued taxes

accrued expenses

warranty expense was comprised of the following for the six months ended June 30, 2023:

SCHEDULE OF ACCRUED WARRANTY EXPENSE

for warranty expense

applied to warranty reserve

effective tax rate for the three months ended June 30, 2023 and 2022 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 June 30, 2023, primarily because of the Company’s history of operating losses.

Company has incurred operating losses in recent years, and it continues to be in a three-year cumulative loss position at June 30, 2023.

Total accrued expenses

warranty expense was comprised of the following for the nine months ended September 30, 2023:

OF ACCRUED WARRANTY EXPENSE

Beginning balance

Provision for warranty expense

Charges applied to warranty reserve

Ending balance

effective tax rate for the three months ended September 30, 2023 and 2022 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 September 30, 2023, primarily because of the Company’s history of

operating losses.

Company has incurred operating losses in recent years, and it continues to be in a three-year cumulative loss position at September 30,

Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh

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The Company has available to it approximately $ 113.3

million (based on its December 31, 2022 tax return) in net operating loss carryforwards to offset future taxable income as of June 30,

million (based on its December 31, 2022 tax return) in net operating loss carryforwards to offset future taxable income as of September

PREPAID EXPENSES

expenses were the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF PREPAID EXPENSE

expenses were the following at September 30, 2023 and December 31, 2022:

OF PREPAID EXPENSE

Prepaid inventory

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PROPERTY, PLANT AND EQUIPMENT

plant and equipment consisted of the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

plant and equipment consisted of the following at September 30, 2023 and December 31, 2022:

OF PROPERTY, PLANT AND EQUIPMENT

Office furniture, fixtures, equipment, and aircraft

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accumulated depreciation and amortization

( 1,141,539 )

Net property, plant and equipment

Depreciation expense for the three months ended June 30, 2023 and June 30, 2022 was $ 174,261 and $ 171,890 , respectively,

and is included in general and administrative expenses.

expense for the six months ended June 30, 2023 and June 30, 2022 was $ 345,892 and $ 307,328 , respectively, and is included in general

and administrative expenses.

expense for the three months ended September 30, 2023 and September 30, 2022 was $ 188,100 and $ 73,686 , respectively, and is included

in general and administrative expenses.

Depreciation expense for the nine months ended September 30, 2023 and September 30, 2022 was

$ 533,992 and $ 381,014 , respectively, and is included in general and administrative expenses.

OPERATING LEASE

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The remaining lease term for the Company’s office and warehouse operating

lease as of June 30, 2023, was forty-two months .

lease as of September 30, 2023, was thirty-nine months .

The Company’s previous office and warehouse space lease expired in April

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The remaining lease term for the Company’s copier operating

lease as of June 30, 2023, was four months .

lease as of September 30, 2023, was one month .

June 30, 2021, the Company completed the acquisition of a private medical billing company, through its revenue cycle management segment.

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possession of the leased facilities on June 30, 2021.

The remaining lease term for the Company’s office operating lease as of June

30, 2023, was thirteen months .

The remaining lease term for the Company’s office operating lease as of September

30, 2023, was ten months .

August 31, 2021, the Company completed the acquisition of a private medical billing company, through its revenue cycle management segment.

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The remaining lease term for the

Company’s operating lease as of June 30, 2023 was eighty-one months .

Company’s operating lease as of September 30, 2023 was seventy-eight months .

September 1, 2021, the Company completed the acquisition of Goody Tickets, LLC and TicketSmarter, LLC through TicketSmarter.

completion of this acquisition, the Company became responsible for the operating lease for TicketSmarter’s office space.

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.

signed a six-month extension for the lease, extending the remaining lease term for the Company’s office with an expiry date of

June 30, 2023.

The Company signed a three-month

extension for the lease, extending the remaining lease term for the Company’s office and the remaining lease term for the

Company’s operating lease as of June 30, 2023 was three months.

The Company plans to relocate the entertainment operating

segment acquired operations to existing owned or leased facilities upon termination of this operating lease.

Upon completion

of this acquisition, the Company became responsible for the operating lease for TicketSmarter’s office space.

The lease terms include

monthly payments ranging from $ 7,211 to $ 7,364 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 Company signed a month-to-month extension for the lease, extending the remaining lease

term for the Company’s office until a new space is located.

The Company plans to relocate the entertainment operating segment acquired

operations to existing owned or leased facilities upon termination of this operating lease.

January 1, 2022, the Company completed the acquisition of a private medical billing company, through its revenue cycle management segment.

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The remaining lease term for the Company’s office operating lease as of

June 30, 2023, was twenty-four months .

September 30, 2023, was twenty-one months .

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 six operating leases was approximately $ 156,856 and $ 297,117 , during the three and six months ended June

Total lease expense under the six operating leases was approximately $ 105,439 and $ 402,556 , during the three and nine months ended September

30, 2023, respectively.

weighted-average remaining lease term related to the Company’s lease liabilities as of June 30, 2023 was 4.6 years.

weighted-average remaining lease term related to the Company’s lease liabilities as of September 30, 2023 was 4.5 years.

discount rate implicit within the Company’s operating leases was not generally determinable and therefore the Company determined

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the operating lease liabilities reflect a weighted average discount rate of 8 %.

following sets forth the operating lease right of use assets and liabilities as of June 30, 2023:

SCHEDULE OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

following sets forth the operating lease right of use assets and liabilities as of September 30, 2023:

OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

Operating lease right of use assets, net

2 unchanged sentences

Total operating lease obligations

components of lease expense were as follows for the six months ended June 30, 2023:

components of lease expense were as follows for the nine months ended September 30, 2023:

SCHEDULE OF LEASE EXPENSE

1 unchanged sentence

are the minimum lease payments for each year and in total:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

OF FUTURE MINIMUM LEASE PAYMENTS

Year ending December 31:

2023 (July 1, to December 31, 2023)

2023 (October 1, to December 31, 2023)

Total undiscounted minimum future lease payments

2 unchanged sentences

GOODWILL AND OTHER INTANGIBLE ASSETS

assets consisted of the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF INTANGIBLE ASSETS

June 30, 2023

assets consisted of the following at September 30, 2023 and December 31, 2022:

OF INTANGIBLE ASSETS

September 30, 2023

December 31, 2022

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

expense for the three months ended June 30, 2023 and 2022 was $ 374,714 and $ 358,944 , respectively, and $ 745,150 and $ 716,910 , for the

six months ended June 30, 2023 and 2022, respectively.

Estimated amortization for intangible assets with definite lives for the next

five years ending December 31 and thereafter is as follows:

SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS

expense for the three months ended September 30, 2023 and 2022 was $ 377,485 and $ 460,489 , respectively, and $ 1,122,635 and $ 1,177,759 ,

for the nine months ended September 30, 2023 and 2022, 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:

2023 (July 1, to December 31, 2023)

2023 (October 1, to December 31, 2023)

2027 and thereafter

assets were the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF OTHER ASSETS

assets were the following at September 30, 2023 and December 31, 2022:

OF OTHER ASSETS

Lease receivable

26 unchanged sentences

any and all liability.

of June 30, 2023, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case, our estimate of the aggregate reasonably possible

loss (in excess of any accrued amounts) was approximately $ 1.8

Our estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is

subject to significant judgment and a variety of assumptions and known and unknown uncertainties, which may change quickly and

significantly from time to time, particularly if and as we engage with applicable governmental agencies or plaintiffs in connection

with a proceeding.

Also, the matters underlying the reasonably possible loss will change from time to time.

As a result, actual

results may vary significantly from the current estimate.

of September 30, 2023, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case, our estimate of

the aggregate reasonably possible loss (in excess of any accrued amounts) was approximately $ 1.8 million.

Our estimate with respect to

the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety

of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time, particularly if and

as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding.

Also, the matters underlying the reasonably

possible loss will change from time to time.

As a result, actual results may vary significantly from the current estimate.

the ultimate resolution is unknown, based on the information currently available, we do not expect that these lawsuits will individually,

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Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $ 84,586 and

for the three months ended June 30, 2023 and 2022, and $ 321,779 and $ 776,350 for the six months ended June 30, 2023 and 2022, respectively.

of June 30, 2023, the Company had adopted ten separate stock option and restricted stock plans:

$ 251,733 for

the three months ended September 30, 2023 and 2022, and $ 378,917 and

$ 1,028,084 for

the nine months ended September 30, 2023 and 2022, respectively.

of September 30, 2023, the Company had adopted ten separate stock option and restricted stock plans:

(i) the 2005 Stock Option and Restricted

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are now unavailable for issuance.

Stock options granted under the 2005 Plan that remain unexercised and outstanding as of June 30, 2023

Stock options granted under the 2005 Plan that remain unexercised and outstanding as of September 30,

2023 total 284 .

The 2006 Plan terminated during 2016 with 2,739 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 June 30, 2023 total 531 .

Stock options granted under the 2006 Plan that remain unexercised and outstanding as of September 30, 2023 total 531 .

2007 Plan terminated during 2017 with 4,733 shares not awarded or underlying options, which shares are now unavailable for issuance.

are no stock options granted under the 2007 Plan that remain unexercised and outstanding as of June 30, 2023.

The 2008 Plan terminated

during 2018 with 2,025 shares not awarded or underlying options, which shares are now unavailable for issuance.

There are no stock options

granted under the 2008 Plan that remain unexercised and outstanding as of June 30, 2023.

There are no stock options granted under the 2007 Plan that remain unexercised and outstanding as of September 30, 2023.

The 2008 Plan

terminated during 2018 with 2,025 shares not awarded or underlying options, which shares are now unavailable for issuance.

no stock options granted under the 2008 Plan that remain unexercised and outstanding as of September 30, 2023.

option grants.

7 unchanged sentences

A total of 137,042 shares remained available for awards under the various Plans

as of June 30, 2023.

as of September 30, 2023.

fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model.

summary of all stock option activity under the Plans for the six months ended June 30, 2023 is as follows:

SUMMARY OF STOCK OPTIONS OUTSTANDING

Exercise Price

summary of all stock option activity under the Plans for the nine months ended September 30, 2023 is as follows:

OF STOCK OPTIONS OUTSTANDING

Outstanding at December 31, 2022

Outstanding at June 30, 2023

Exercisable at June 30, 2023

Outstanding at September 30, 2023

Exercisable at September 30, 2023

Plans allow for the cashless exercise of stock options.

2 unchanged sentences

There were no shares surrendered pursuant to cashless exercises

during the six months ended June 30, 2023 and 2022.

aggregate intrinsic value of options outstanding was $- 0 - and $- 0 -, at June 30, 2023 and December 31, 2022, respectively.

during the nine months ended September 30, 2023 and 2022.

aggregate intrinsic value of options outstanding was $- 0 - and $- 0 -, at September 30, 2023 and December 31, 2022, respectively.

The aggregate

intrinsic value of options exercisable was $- 0 - and $- 0 -, at June 30, 2023 and December 31, 2022, respectively.

of June 30, 2023, the unrecognized portion of stock compensation expense on all existing stock options was $- 0 -.

intrinsic value of options exercisable was $- 0 - and $- 0 -, at September 30, 2023 and December 31, 2022, respectively.

of September 30, 2023, the unrecognized portion of stock compensation expense on all existing stock options was $- 0 -.

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 June 30, 2023:

options under the Company’s option plans as of September 30, 2023:

SCHEDULE OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE

Outstanding options

Exercisable options

Exercise price

Weighted average

contractual life

Weighted average

contractual life

$ 0.01 to $ 49.99

$ 50.00 to $ 69.99

$ 70.00 to $ 89.99

stock grants.

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and the right to receive cash dividends.

summary of all restricted stock activity under the Plans for the six months ended June 30, 2023 is as follows:

SUMMARY OF RESTRICTED STOCK ACTIVITY

Number of Restricted

summary of all restricted stock activity under the Plans for the nine months ended September 30, 2023 is as follows:

OF RESTRICTED STOCK ACTIVITY

of Restricted

Nonvested balance, December 31, 2022

Nonvested balance, June 30, 2023

Nonvested balance, September 30, 2023

Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant.

June 30, 2023, there were $ 298,313 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants,

which will be amortized over the next fifty-two months in accordance with their respective vesting scale.

September 30, 2023, there were $ 213,727 of total unrecognized compensation costs related to all remaining non-vested restricted stock

grants, which will be amortized over the next forty-nine months in accordance with their respective vesting scale.

nonvested balance of restricted stock vests as follows:

SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK

2023 (July 1, 2023 through December 31, 2023)

OF NON-VESTED BALANCE OF RESTRICTED STOCK

Number of shares

2023 (October 1, 2023 through December 31, 2023)

COMMON STOCK PURCHASE WARRANTS

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The warrants are either immediately

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 1,148,286 shares of common stock at $ 5.50 to $ 52.00 per share as of June 30, 2023.

exercisable or have a delayed initial exercise date, no more than nine months from their respective issue date and allow the holders

to purchase up to 1,148,286 shares of common stock at $ 5.50 to $ 52.00 per share as of September 30, 2023.

The warrants expire from July

8 unchanged sentences

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 384,077

shares of Common Stock (the “February Warrants”) in consideration for its issuance of (i) new warrants (the

“Exchange Warrants”) to the Investors exercisable for an aggregate of up to 384,077

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 384,077 shares of Common Stock (the “February Warrants”) in consideration

for its issuance of (i) new warrants (the “Exchange Warrants”) to the Investors exercisable for an aggregate of up to 384,077

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 330,923

shares of Common Stock, and extended the expiration date of the February Warrants to September

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 330,923 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 $ 65.00

per share, subject to customary adjustments thereunder, and are immediately exercisable upon issuance for cash and on a cashless

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 MODIFICATION

terms at August 19, 2021

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.

OF WARRANT MODIFICATION

Original terms

at August 19,

Modified terms

at August 19,

Volatility - range

2 unchanged sentences

Exercise price

Common stock issuable under

Common stock issuable under the warrants

August 23, 2022, the Company entered into Warrant Exchange Agreements (the “Warrant Exchange Agreements”) with certain investors

7 unchanged sentences

On the date of the Warrant Exchange Agreement, using the

Black-Scholes method, the fair value of the warrant derivative liability was $ 8.1 million, compared to $ 9.3 million at June 30, 2022,

Black-Scholes method, the fair value of the warrant derivative liability was $ 8.1 million, compared to $ 9.3 million at September 30,

2022, resulting in income from change in fair market value of warrant derivative liabilities of $ 1.2 million during the year ended December

2 unchanged sentences

August 23, 2022

contractual term

stock issuable under the warrants

Volatility - range

Risk-free rate

Remaining contractual term

Exercise price

Common stock issuable under the warrants

in the Company’s stock price is a primary driver for the changes in the derivative valuations during each reporting period.

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cash settlement outside the control of the Company under certain circumstances.

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.

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.

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.

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.

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 June 30, 2023:

date assumptions

30, 2023 assumptions

contractual term

stock issuable under the warrants

following table summarizes information about shares issuable under warrants outstanding during the six months ended June 30, 2023:

SUMMARY OF WARRANT ACTIVITY

warrant derivative liabilities as of their date of issuance and as of September 30, 2023:

Issuance date assumptions

September 30, 2023

Volatility - range

Risk-free rate

Remaining contractual term

Exercise price

$ 5.50 - 7.50

Common stock issuable under the warrants

following table summarizes information about shares issuable under warrants outstanding during the nine months ended September 30, 2023:

OF WARRANT ACTIVITY

Vested Balance, January 1, 2023

Forfeited/cancelled

Vested Balance, June 30, 2023

total intrinsic value of all outstanding warrants aggregated $- 0 - as of June 30, 2023, and the weighted average remaining term is fifty-six

Vested Balance, September 30, 2023

total intrinsic value of all outstanding warrants aggregated $- 0 - as of September 30, 2023, and the weighted average remaining term is

fifty-four months.

following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable

warrants to purchase shares of Common Stock as of June 30, 2023:

warrants to purchase shares of Common Stock as of September 30, 2023:

SUMMARY OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS

Outstanding and exercisable warrants

Exercise price

Weighted average

remaining contractual life

and exercisable warrants

contractual life

STOCKHOLDERS’ EQUITY

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February 6, 2023, we filed a Certificate of Amendment to the Articles of Incorporation, as amended, with the Secretary of State of the

State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of our Common

The Reverse Stock Split was effective as of time of filing.

No fractional shares were issued in connection with the Reverse Stock

Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the

nearest whole number.

In connection with the Reverse Stock Split, our board approved appropriate and proportional adjustments to all

outstanding securities or other rights convertible or exercisable into shares of our Common Stock, including, without limitation, all

preferred stock, warrants, options, and other equity compensation rights.

All historical share and per-share amounts reflected throughout

our consolidated financial statements and other financial information in this Report have been adjusted to reflect the Reverse Stock

Split as if the split occurred as of the earliest period presented.

The par value per share of our Common Stock was not affected by the

Reverse Stock Split.

As a result of the Reverse Stock Split, no fractional shares of new common stock will be issued in connection with

the Reverse Stock Split, all of which shares of new common stock shall be rounded up to the nearest whole number of such shares.

the Company issued 24,206 shares pursuant to Reverse Stock Split related to rounding up to the nearest whole number of shares.

State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of our Common Stock.

Reverse Stock Split was effective as of time of filing.

No fractional shares were issued in connection with the Reverse Stock Split.

Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest

whole number.

In connection with the Reverse Stock Split, our board approved appropriate and proportional adjustments to all outstanding

securities or other rights convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock,

warrants, options, and other equity compensation rights.

All historical share and per-share amounts reflected throughout our consolidated

financial statements and other financial information in this Report have been adjusted to reflect the Reverse Stock Split as if the split

occurred as of the earliest period presented.

The par value per share of our Common Stock was not affected by the Reverse Stock Split.

a result of the Reverse Stock Split, no fractional shares of new common stock will be issued in connection with the Reverse Stock Split,

all of which shares of new common stock shall be rounded up to the nearest whole number of such shares.

Therefore, the Company issued

24,206 shares pursuant to Reverse Stock Split related to rounding up to the nearest whole number of shares.

Noncontrolling

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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 attributable to noncontrolling interests of consolidated

subsidiary of $ 72,754

and $ 383,326

for the three months ended June 30, 2023 and

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 $ 29,630

and $ ( 16,596 )

for the three months ended September 30, 2023 and 2022, and $ 228,624

and $ 268,636

for the six months ended June 30, 2023 and 2022,

respectively.

Noncontrolling

the six months ended June 30, 2023, the Company cancelled 3,625 shares for various reasons.

for the nine months ended September 30, 2023 and 2022, respectively.

Cancellation of Common Stock

the nine months ended September 30, 2023, the Company cancelled 3,625 shares for various reasons.

of Convertible Note

the six months ended June 30, 2023, pursuant to the Convertible Note, the Purchasers elected to convert $ 125,000 principal, at the fixed price of

per share of common stock, 25,000

shares valued at $ 119,750 .

the nine months ended September 30, 2023, pursuant to the Convertible Note, the Purchasers elected to convert $ 125,000 principal, at

the fixed price of $ 5.00 per share of common stock, 25,000 shares valued at $ 119,750 .

NET EARNINGS (LOSS) PER SHARE

calculation of the weighted average number of shares outstanding and loss per share outstanding for the three and six months ended June

calculation of the weighted average number of shares outstanding and loss per share outstanding for the three and nine months ended September

30, 2023 and 2022 are as follows:

OF WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING AND LOSS PER SHARE OUTSTANDING

the three months ended

the six months ended

Numerator for basic and diluted

income per share – Net loss attributable to common stockholders

For the three months ended

For the nine months ended

Numerator for basic and diluted income per share – Net loss

attributable to common stockholders

$ ( 3,708,673 )

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income (loss) per share is based upon the weighted average number of common shares outstanding during the period.

For the three and six

months ended June 30, 2023 and 2022, 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.

For the three and nine

months ended September 30, 2023 and 2022, 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.

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 “June Initial Payment Amount”) of $ 850,000 .

In addition to the June 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.

Management’s estimate of the fair value of this contingent promissory 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 and, 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.

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.

Digital 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

Nobility will receive a management fee and 49% of the distributable cash, subordinated to Digital Ally Healthcare’s preferred

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 “June Initial Payment Amount”) of $ 850,000 .

In addition to the June

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.

Management’s estimate

of the fair value of this contingent promissory 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.

Company’s revenue cycle management segment anticipates the estimated fair value of the contingent promissory note to be paid in

full and, 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.

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 the Company has early adopted the amendments of Regulation

17 unchanged sentences

liabilities assumed in the Healthcare Acquisition were as follows:

SCHEDULE OF PRELIMINARY

FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

June 30, 2021

June 30, 2022

OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Purchase price allocation

June 30, 2021

June 30, 2022

Assets acquired:

Tangible assets acquired, consisting of acquired cash, accounts receivable and right of use asset

Tangible assets acquired, consisting of acquired cash, accounts receivable

and right of use asset

assets acquired – Client Agreements

Intangible assets acquired – client agreements

Liabilities assumed consisting of a promissory note issued by the selling shareholders which was paid off at closing, net of lease liability assumed

Liabilities assumed pursuant to stock purchase agreement

Liabilities assumed consisting of a promissory note issued

by the selling shareholders which was paid off at closing, net of lease liability assumed

Liabilities assumed pursuant

to stock purchase agreement

Net assets acquired and liabilities assumed

6 unchanged sentences

OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

Amortization through

June 30, 2023

September 30,

Identifiable intangible assets:

Client agreements

the period from the date of the Healthcare Acquisition to June 30, 2022, the Company adjusted its preliminary fair value estimates and

estimated useful lives based upon information obtained through June 30, 2022, which resulted in adjustments to the preliminary allocation

of the purchase price.

These adjustments primarily related to estimated identifiable intangible asset fair values of client agreements

and goodwill.

the period from the date of the Healthcare Acquisition to June 30, 2022, the Company adjusted its preliminary fair value estimates

and estimated useful lives based upon information obtained through June 30, 2022, which resulted in adjustments to the preliminary

allocation of the purchase price.

These adjustments primarily related to estimated identifiable intangible asset fair values of client

agreements and goodwill.

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

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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 “August Initial Payment Amount”) of $ 2,270,000 .

In addition to the August 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.

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 $ 2,920,000 .

Total acquisition related costs aggregated $ 5,602 ,

which was expensed as incurred.

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 “August Initial Payment Amount”) of $ 2,270,000 .

In addition to the August 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.

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 $ 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

34 unchanged sentences

the date of acquisition:

OF IDENTIFIABLE INTANGIBLE ASSET ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

Amortization through

June 30, 2023

OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

September 30,

Identifiable intangible assets:

12 unchanged sentences

Obligations”.

January 1, 2022, 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 “January Initial Payment Amount”) of $ 1,153,626 .

In addition to the January 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 $ 750,000

that is subject to an earn-out adjustment.

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 $ 1,903,626 .

Total acquisition related costs aggregated $ 7,996 ,

which was expensed as incurred.

January 1, 2022, 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 “January Initial Payment Amount”) of $ 1,153,626 .

In addition to the January 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 $ 750,000 that is subject to an earn-out adjustment.

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 $ 1,903,626 .

Total acquisition related costs aggregated $ 7,996 , which was expensed as

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

18 unchanged sentences

OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Final purchase

price allocation

Assets acquired:

13 unchanged sentences

Obligations”.

February 1, 2022, the Company’s revenue cycle management segment completed an asset acquisition from another private medical

billing company (the “Medical Billing Asset Acquisition”).

In accordance with the asset purchase agreement, Nobility

Healthcare agreed to a non-refundable initial payment (the “February Initial Payment Amount”) of $ 230,000 .

In addition to the February Initial Payment Amount, the Company’s revenue cycle management segment agreed to issue a

contingent promissory note to the stockholders of the Medical Billing Asset Acquisition in the principal amount of $ 105,000

that is subject to an earn-out adjustment.

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 $ 335,000 .

Total acquisition related costs aggregated $ 10,322 ,

which was expensed as incurred.

February 1, 2022, the Company’s revenue cycle management segment completed an asset acquisition from another private medical billing

company (the “Medical Billing Asset Acquisition”).

In accordance with the asset purchase agreement, Nobility Healthcare agreed

to a non-refundable initial payment (the “February Initial Payment Amount”) of $ 230,000 .

In addition to the February Initial

Payment Amount, the Company’s revenue cycle management segment agreed to issue a contingent promissory note to the stockholders

of the Medical Billing Asset Acquisition in the principal amount of $ 105,000 that is subject to an earn-out adjustment.

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 $ 335,000 .

Total acquisition related costs aggregated $ 10,322 , which

was expensed as incurred.

accordance ASC 805, “Business Combinations”, the acquisition method of accounting is used, and recognition of the assets

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the date of acquisition:

SCHEDULE OF IDENTIFIABLE

INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

Amortization through

OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

September 30,

Identifiable intangible assets:

3 unchanged sentences

TICKETSMARTER ACQUISITION

September 1, 2021, the Company formed 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”) (such acquisitions, collectively, the “TicketSmarter Acquisition”).

TicketSmarter,

comprises the Company’s entertainment business segment.

In accordance with the stock purchase agreement, the Company

agreed to an initial payment (the “TicketSmarter Initial Payment Amount”) of $ 9,403,600

through a combination of cash and Common Stock.

In addition to the TicketSmarter 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.

September 1, 2021, the Company formed 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”) (such acquisitions, collectively, the “TicketSmarter Acquisition”).

TicketSmarter, Inc.

comprises the Company’s

entertainment business segment.

In accordance with the stock purchase agreement, the Company agreed to an initial payment (the “TicketSmarter

Initial Payment Amount”) of $ 9,403,600 through a combination of cash and Common Stock.

In addition to the TicketSmarter 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.

Thus, 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

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 $ 297,726

of the escrow amount with the $ 202,274

released to the sellers.

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 $ 297,726 of the escrow amount with the $ 202,274 released to the sellers.

The total acquisition related costs aggregated

28 unchanged sentences

fair value of assets acquired, and liabilities assumed in the TicketSmarter Acquisition were as follows:

SCHEDULE OF PARLIAMENT AND FINAL ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION

SCHEDULE OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION

Preliminary purchase price allocation

September 30,

Assets acquired:

13 unchanged sentences

Cash paid at closing to escrow amount

Cash retained from escrow amount pursuant to settlement of working capital target

Cash retained from escrow amount pursuant to settlement of

working capital target

Total TicketSmarter Acquisition purchase price

1 unchanged sentence

the date of acquisition:

SCHEDULE OF COMPONENTS OF IDENTIFIABLE INTANGIBLE ASSETS ACCRUED AND ESTIMATED USEFUL LIVES

Amortization through

June 30, 2023

OF COMPONENTS OF IDENTIFIABLE INTANGIBLE ASSETS ACCRUED ACQUIRED

September 30,

Identifiable intangible assets:

6 unchanged sentences

related to the sponsorship agreement network), the estimated fair value of the contingent earn-out agreement liability and goodwill.

There were no adjustments to the allocation of the purchase price during the six months ended June 30, 2023.

There were no adjustments to the allocation of the purchase price during the nine months ended September 30, 2022.

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

32 unchanged sentences

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 June 30, 2023,

and June 30, 2022:

SCHEDULE OF SEGMENT REPORTING

the three months ended June 30,

the six months ended June 30,

financial information for the Company’s reportable business segments is provided for the indicated periods and as of September

30, 2023, and September 30, 2022:

OF SEGMENT REPORTING

For the three months ended

September 30,

For the nine months ended

September 30,

Net Revenues:

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( 9,102,631 )

Total Operating Loss

( 10,025,236 )

Total Operating Income (Loss)

$ ( 5,148,043

1 unchanged sentence

$ ( 16,261,554 )

$ ( 20,031,610 )

Depreciation and Amortization:

3 unchanged sentences

Total Depreciation and Amortization

September 30,

Assets (net of eliminations):

16 unchanged sentences

LLC is currently the managing member of Nobility Healthcare, LLC.

The Company has advanced a total of $ 158,384

in the form of a working capital loan to Nobility,

LLC in order to fund capital expenditures necessary for the initial growth of the joint venture during 2021.

The outstanding balance

of the working capital loan was $ 138,384

as of June 30, 2023 and the Company anticipates

full repayment of this advance during the year ended December 31, 2023.

The Company has advanced a total of $ 158,384 in the form of a working

capital loan to Nobility, LLC in order to fund capital expenditures necessary for the initial growth of the joint venture during 2021.

The outstanding balance of the working capital loan was $- 0 - as of September 30, 2023 as the Company received full repayment of this

with Related Party of TicketSmarter

September 22, 2023, a trust, the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse,

contributed cash in the amount of $ 2,325,000

to TicketSmarter to support the TicketSmarter’s operations.

The transaction was recorded as a related party note payable (the

“TicketSmarter Related Party Note”).

The TicketSmarter Related Party Note bears interest of 13.25 %

per annum with repayment beginning January 2, 2024.

As of September 30, 2023 the current portion of the TicketSmarter Related Party

note is $ 2,106,000 , and the long-term portion is $ 219,000 , with an accrued interest balance of $ 3,478 .

The use of proceeds of the

TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted rate, the discount received is

recognized as a gain on extinguishment of liabilities on the statement of operations.

Additionally, these negotiations relieved

TicketSmarter of numerous future obligations following fiscal year 2023.

SUBSEQUENT EVENTS

*************************************

Business Combination

In October 2023, Kustom Entertainment and Clover Leaf announced the

filing of a Registration Statement on Form S-4 by Clover Leaf with the SEC on October 4, 2023, relating to the previously announced proposed

business combination between Kustom Entertainment and Clover Leaf .

October 17, 2023, the Board of Directors appointed D.

Duke Daughtery 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 bylaws.

Agreement and Mortgage

October 26, 2023, the Company entered into a Loan and Security Agreement (the “ Loan Agreement ”) by and between the

Company, Digital Ally Healthcare (together with the Company, the “ Borrower ”), and Kompass Kapital Funding, LLC, a

Kansas limited liability company (“ Kompass ”).

In connection with the Loan Agreement, on October 26, 2023, the Company

entered into a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “ Mortgage ”) by

and between the Company, as grantor, and Kompass, as grantee, and issued a Revolving Note (the “ Revolving Note ”) to

The gross proceeds to the Company are $ 4,880,000 before repaying those certain Senior Secured Convertible Notes issued on April

5, 2023 in the aggregate amount of $ 3,162,500 and paying customary fees and expenses.

to the Loan Agreement, Kompass agreed to make revolving loans (the “ Revolving Loans ”) available to the Borrower as

the Borrower may from time to time request until, but not including, October 26, 2025, and in such amounts as the Borrower may from time

to time request, provided, however, that the aggregate principal balance of the Revolving Loans outstanding at any time shall not exceed

the lesser of $ 4,880,000.00 or an amount equal to eighty percent of the value of the mortgaged property, which consists of the real property

owned by the Company having an address of 14001 Marshall Drive, Lenexa, KS 66215 (the “ Mortgaged Property ”).

the Loan Agreement, the Revolving Loans made by Kompass may be repaid and, subject to customary terms and conditions, borrowed again

up to, but not including October 26, 2025, unless the Revolving Loans are otherwise accelerated, terminated or extended as provided in

the Loan Agreement.

The Revolving Loans shall be used by the Borrower for the purpose of working capital and to retire existing debt.

Under the Loan Agreement, the Borrower is required to provide written notice to Kompass prior to creating, assuming or incurring any debt or becoming liable, whether as endorser, guarantor, surety or otherwise, for any debt

or obligation of any other party.

While obligations remain outstanding under the Loan Agreement, the Borrower is required to maintain

a minimum balance of $ 97,600 in a reserve account (the “ Capital Reserve Account ”).

Under the Loan Agreement, the Borrower

is prohibited from creating, assuming, incurring or suffering or permitting to exist any lien of any kind or character upon the collateral,

which consists of the Mortgaged Property and the Company’s interest in the Capital Reserve Account.

The Loan Agreement

contains customary covenants, representations and warranties by the Borrower.

to the Loan Agreement, the Company issued the Revolving Note to Kompass whereby the Company and Digital Ally Healthcare jointly and severally

promise to pay to the order of Kompass the lesser of (i) $4,880,000.00, or (ii) the aggregate principal amount of all Revolving Loans

outstanding under and pursuant to the Loan Agreement at the maturity or maturities and in the amount or amounts stated on the records

of Kompass, together with interest (computed on the actual number of days elapsed on the basis of a 360 day year) at a floating per annum

rate equal to the greater of (i) the Prime Rate plus four percent or (ii) eight percent, on the aggregate principal amount of all Revolving

Loans outstanding from time to time as provided in the Loan Agreement .

Company entered into the Mortgage to secure its obligations under the Loan Agreement.

The property mortgaged under the Mortgage consists

of the Mortgaged Property.

The Mortgage contains customary covenants, representations and warranties by the Company.

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-Q

Item 1. Financial Statements