What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-31 · 540 added, 531 removed, 640 unchanged (63% of the section changed)

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transpire or prove to be accurate.

that could cause or contribute to our actual results differing materially from those discussed herein or for our stock price to be

adversely affected include, but are not limited to:

that could cause or contribute to our actual results differing materially from those discussed herein or for our stock price to be adversely

affected include, but are not limited to:

(1) our losses in recent years, including fiscal years 2023 and 2022;

economic and other risks for our business from the effects of the COVID-19 pandemic, including the impacts on our law-enforcement

and commercial customers, suppliers and employees and on our ability to raise capital as required;

(3) our ability to increase

revenues, increase our margins and return to consistent profitability in the current economic and competitive environment;

operation in developing markets and uncertainty as to market acceptance of our technology and new products;

(5) the availability of

funding from federal, state and local governments to facilitate the budgets of law enforcement agencies, including the timing,

amount and restrictions on such funding;

(6) our ability to deliver our new product offerings as scheduled in 2023, and whether new

products perform as planned or advertised and whether they will help increase our revenues;

(7) whether we will be able to increase

the sales, domestically and internationally, for our products in the future;

(8) our ability to maintain or expand our share of the

market for our products in the domestic and international markets in which we compete, including increasing our international

(2) economic and other

risks for our business from the effects of the COVID-19 pandemic, including the impacts on our law-enforcement and commercial customers,

suppliers and employees and on our ability to raise capital as required;

(3) our ability to increase revenues, increase our margins and

return to consistent profitability in the current economic and competitive environment;

(4) our operation in developing markets and uncertainty

as to market acceptance of our technology and new products;

(5) the availability of funding from federal, state and local governments

to facilitate the budgets of law enforcement agencies, including the timing, amount and restrictions on such funding;

(6) our ability

to maintain or expand our share of the market for our products in the domestic and international markets in which we compete, including

increasing our international revenues;

(7) our ability to produce our products in a cost-effective manner;

(10) competition from larger, more established

companies with far greater economic and human resources;

(8) competition from larger,

more established companies with far greater economic and human resources;

(9) our ability to attract and retain quality employees;

related to dealing with governmental entities as customers;

risks related to dealing with governmental entities as customers;

(11) our expenditure of significant resources in anticipation of sales

due to our lengthy sales cycle and the potential to receive no revenue in return;

(14) characterization of our market by new

products and rapid technological change;

(15) that stockholders may lose all or part of their investment if we are unable to compete

in our markets and return to profitability;

(16) defects in our products that could impair our ability to sell our products or could

result in litigation and other significant costs;

(17) our dependence on key personnel;

(18) our reliance on third-party

distributors and sales representatives for part of our marketing capability;

(19) our dependence on a few manufacturers and

suppliers for components of our products and our dependence on domestic and foreign manufacturers for certain of our products;

our ability to protect technology through patents and to protect our proprietary technology and information, such as trade secrets,

through other similar means;

(12) characterization of our market by new products

and rapid technological change;

(13) our dependence on sales of our EVO-HD, DVM-800, DVM-250 and FirstVU products;

(14) that stockholders

may lose all or part of their investment if we are unable to compete in our markets and return to profitability;

(15) defects in our

products that could impair our ability to sell our products or could result in litigation and other significant costs;

(16) our dependence

on a few manufacturers and suppliers for components of our products and our dependence on domestic and foreign manufacturers for certain

of our products;

(17) our ability to protect technology through patents and to protect our proprietary technology and information, such

as trade secrets, through other similar means;

(18) our ability to generate more recurring cloud and service revenues;

(22) risks related to our

license arrangements;

(23) our revenues and operating results may fluctuate unexpectedly from quarter to quarter;

(24) sufficient

voting power by coalitions of a few of our larger stockholders, including directors and officers, to make corporate governance

decisions that could have a significant effect on us and the other stockholders;

(25) the sale of substantial amounts of our Common

Stock that may have a depressive effect on the market price of the outstanding shares of our Common Stock;

(26) the possible

issuance of Common Stock subject to options and warrants that may dilute the interest of stockholders;

(27) our nonpayment of

dividends and lack of plans to pay dividends in the future;

(28) future sale of a substantial number of shares of our Common Stock

that could depress the trading price of our common stock, lower our value and make it more difficult for us to raise capital;

our additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our Common

(30) our stock price is likely to be highly volatile due to a number of factors, including a relatively limited public float;

(31) whether such technology will have a significant impact on our revenues in the long-term;

(32) whether we will be able to meet

the standards for continued listing on the Nasdaq Capital Market;

and (33) indemnification of our officers and directors.

(19) risks related

to our license arrangements;

(20) the fluctuation of our operation results from quarter to quarter;

(21) sufficient voting power by coalitions

of a few of our larger stockholders, including directors and officers, to make corporate governance decisions that could have a significant

effect on us and the other stockholders;

(22) the issuance or sale of substantial amounts of our Common Stock, or the perception that

such sales may occur in the future, which may have a depressive effect on the market price of our securities;

(23) potential dilution

from the issuance of Common Stock underlying outstanding options and warrants;

(24) our additional securities available for issuance,

which, if issued, could adversely affect the rights of the holders of our Common Stock;

(25) the volatility of our stock price due to

a number of factors, including, but not limited to, a relatively limited public float;

(26) our ability to integrate and realize the

anticipated benefits from acquisitions;

(27) our ability to maintain the listing of our Common Stock on the Nasdaq Capital Market.

Trends and Recent Developments for the Company

Solutions Operating Segment – Within our video solutions operating segment we supply technology-based products utilizing our portable

digital video and audio recording capabilities for the law enforcement and security industries and for the commercial fleet and mass

transit markets.

We have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create positive

solutions to our customers’ requests.

Solutions Operating Segment – Within our video solutions operating segment we supply technology-based products utilizing our

portable digital video and audio recording capabilities for the law enforcement and security industries and for the commercial fleet

and mass transit markets.

We have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create

positive solutions to our customers’ requests.

Our products include:

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

systems for law enforcement and commercial markets;

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

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

automatic activation for both law enforcement and commercial markets;

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

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

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

We further diversified and broadened our product offerings in 2020,

by introducing two new lines of branded products:

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

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

disinfectants and cleansers which are for use against viruses and bacteria.

Cycle Management Operating Segment - We entered the revenue cycle management business late in the second quarter of 2021 with

the formation of our wholly owned subsidiary, Digital Ally Healthcare, Inc.

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

video systems for law enforcement and commercial markets;

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

and the FirstVU HD;

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

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

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

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

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

We further diversified and broadened our product offerings

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

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

stations that provides alerts and controls facility access when an individual’s temperature exceeds a pre-set threshold and (2)

our Shield™ disinfectants and cleansers which are for use against viruses and bacteria.

Cycle Management Operating Segment - We entered the revenue cycle management business late in the second quarter of 2021 with the

formation of our wholly owned subsidiary, Digital Ally Healthcare, Inc.

and its majority-owned subsidiary Nobility Healthcare.

Nobility Healthcare completed its first acquisition in June 2021, when it acquired a private medical billing company, and have since

completed three additional acquisitions of private medical billing companies, in which we will assist in providing working capital and back-office services to

healthcare organizations throughout the country.

Healthcare completed its first acquisition in June 2021, when it acquired a private medical billing company, and have since completed

three additional acquisitions of private medical billing companies, in which we will assist in providing working capital and back-office

services to healthcare organizations throughout the country.

Our assistance consists of insurance and benefit verification, medical treatment

documentation and coding, and collections.

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

service revenues collected, leading to substantial improvements in their operating margins and cash flows.

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

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

Entertainment

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

We also offer production and promotion of live music events in third-party

venues throughout the country.

These services begin with the logistical matters of an event, including artist booking and research, ticketing,

staging, on-site operations, vendor sourcing, and day of production.

June 2023, the Company, entered into the Merger Agreement with 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.

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

the Merger Agreement, 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.

Upon 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”.

reportable segments are:

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revenue cycle management segment consists of our medical billing subsidiaries.

Revenues of this segment are recognized after we

perform our obligations of our revenue cycle management services.

Our revenue cycle management segment is services performed and

such services are charged monthly, generally based on a contractual percentage of total customer collections, for which we recognize

our net service fees.

Revenues of this segment are recognized after we perform

our obligations of our revenue cycle management services.

Our revenue cycle management segment is services performed and such services

are charged monthly, generally based on a contractual percentage of total customer collections, for which we recognize our net service

judge the health of our revenue cycle management segment, we review the collection success rate and collection timing.

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Revenues of this segment include ticketing service charges generally determined as a percentage of the face value of the underlying ticket

and ticket sales from our ticket inventory which are recognized when the underlying tickets are sold.

Ticketing direct expenses include

the cost of tickets purchased for resale by the Company and holds as inventory, credit card fees, ticketing platform expenses, website

maintenance fees, along with other administrative costs.

and ticket sales from our ticket inventory which are recognized when the underlying tickets are sold along with tickets, concession,

merchandise, and other sales from the live events produced by this segment.

Direct expenses include the cost of tickets purchased for

resale by the Company and holds as inventory, artist costs, staging costs, credit card fees, ticketing platform expenses, website maintenance

fees, along with other administrative costs.

judge the health of our entertainment operating segment, we review the gross transaction value, which represents the total value related

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number and percentage of tickets sold via the website and mobile app.

Summary Financial Data

Financial Data

financial information for the Company’s reportable business segments is provided for the years ended December 31, 2023, and 2022:

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the Three Months Ended:

Total revenue

Gross profit margin percentage

Total selling, general and

administrative expenses

Operating loss

Operating loss percentage

Net income/(loss)

profit margin percentage

selling, general and administrative expenses

loss percentage

income/(loss)

$ (7,484,778 )

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$ (5,979,579 )

Our business is subject to substantial

fluctuations on a quarterly basis as reflected in the significant variations in revenues and operating results in the above table.

variations result from various factors, including but not limited to:

(1) the timing of large individual orders;

(2) the traction gained

by products, such as the recently released FirstVu Pro, FirstVu II, FLT-250, EVO HD, the ThermoVu™ and the Shield™ lines;

$ (9,574,258 )

$ (1,919,071 )

$ (6,698,242 )

business is subject to substantial fluctuations on a quarterly basis as reflected in the significant variations in revenues and operating

results in the above table.

These variations result from various factors, including but not limited to:

(1) the timing of large individual

(2) the traction gained by products, such as the recently released FirstVu Pro, FirstVu II, FLT-250, EVO HD, the ThermoVu™

and the Shield™ lines;

(3) production, quality and other supply chain issues affecting our cost of goods sold;

(4) unusual increases in operating expenses, such

as the timing of trade shows and stock-based and bonus compensation;

(5) the timing of patent infringement litigation settlements (6)

ongoing patent and other litigation and related expenses respecting outstanding lawsuits;

and (7) the completion of corporate acquisitions

including the recent purchases in the revenue cycle management and entertainment operating segments.

We reported net loss of $9,574,258

on revenues of $8,879,504 for the fourth quarter of 2022.

(4) unusual increases

in operating expenses, such as the timing of trade shows and stock-based and bonus compensation;

(5) the timing of patent infringement

litigation settlements (6) ongoing patent and other litigation and related expenses respecting outstanding lawsuits;

and (7) the completion

of corporate acquisitions including the recent purchases in the revenue cycle management and entertainment operating segments.

net loss of $7,484,778 on revenues of $6,228,351 for the fourth quarter of 2023.

factors and trends affecting our recent performance include:

The Company formed two new operating segments in 2021 and revenues increased

in the first through third quarters of 2022 compared to the same quarters in 2021.

The primary reason for the revenue increase in 2022

is the completion of three acquisitions in 2021, being TicketSmarter which is included in our entertainment operating segment and two

acquisitions of medical billing companies through our revenue cycle management operating segment, paired with two further acquisitions

within the revenue cycle management operating segment in the first quarter of 2022.

The new entertainment operating segment generated

$20,871,500 in revenue in 2022, and our revenue cycle management operating segment generated $7,886,107 in revenues for 2022.

to continue to experience improved results from our two new operating segments and their recent acquisitions, along with improved results

from the video solutions segment as the recurring revenue model expands.

objective is to expand our video solutions segment’s recurring service revenue to help stabilize our revenues on a quarterly

Revenues from cloud storages have been increasing in recent quarters and reached approximately $431,167 in the fourth quarter

of 2022, an increase of $128,533 (42%) over the fourth quarter of 2021.

Overall, cloud revenues increased to approximately $1,471,860

for the year ended December 31, 2022 compared to approximately $1,055,965 for the year ended December 31, 2021, an increase of $415,895,

We are pursuing several new market channels outside of our traditional law enforcement and private security customers, similar

to our NASCAR and event security customers, which we believe will help expand the appeal of our products and service capabilities

to new commercial markets.

If successful, we believe that these new market channels could yield recurring service revenues for us

in the future.

have a multi-year official partnership with NASCAR, naming us “A Preferred Technology Provider of NASCAR.” As part of

the relationship, we provide cameras that are mounted in the Monster Energy NASCAR Cup Series garage throughout the season, bolstering

both NASCAR’s commitment to safety at every racetrack, as well as enhancing its officiating process through technology.

relationship with NASCAR has yielded many new opportunities with NASCAR related sponsors.

We believe this partnership with NASCAR

demonstrates the flexibility of our product offerings and will help expand the appeal of our products and service capabilities to

new commercial markets.

We also have an affiliation with the Indy series races and, in particular, the Rahal Letterman Lanigan Racing

team which has several cars in most Indy style races.

These relationships provide us with access to many potential customers through

the various programs supported by both the NASCAR and Indy-Style car race series.

Company formed two new operating segments in 2021 and continued to make acquisitions within these segments in 2021 and 2022 resulting

in increased revenues and costs.

The Company has since focused on the profitability of these segments and resulting in fluctuating

revenues and costs on a quarterly basis.

The entertainment operating segment generated $14,063,381 and $20,871,500

in revenue during the years ended December 31, 2023 and 2022, respectively, a decrease of $6,808,119 (33%).

The revenue cycle management

operating segment generated $6,713,678 and $7,886,107 in revenue for the years ended December 31, 2023 and 2022, respectively, a decrease

of $1,172,429 (15%).

We expect to continue to experience improved results from our two new operating segments and their recent acquisitions,

along with improved results from the video solutions segment as the recurring revenue model expands.

objective is to expand our video solutions segment’s recurring service revenue to help stabilize our revenues on a quarterly basis.

Revenues from cloud storages have been increasing in recent quarters and reached approximately $572,892 in the fourth quarter of 2023,

an increase of $141,725 (33%) over the fourth quarter of 2022.

Overall, cloud revenues increased to approximately $1,994,066 for the

year ended December 31, 2023 compared to approximately $1,471,860 for the year ended December 31, 2022, an increase of $522,206, or 35%.

We are pursuing several new market channels outside of our traditional law enforcement and private security customers, similar to our

NASCAR and event security customers, which we believe will help expand the appeal of our products and service capabilities to new commercial

If successful, we believe that these new market channels could yield recurring service revenues for us in the future.

Sheet Arrangements

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

Warrant modification expense

Change in fair value of short-term investments

Gain on extinguishment of warrant derivative liability

Loss on accrual for legal settlement

Loss on extinguishment of convertible debt

Gain on extinguishment of debt

Gain on sale of property, plant and equipment

Interest income (expense) and other income, net

Income (loss) before income tax benefit

Interest expense

Interest income and other income, net

Loss before income tax benefit

Income tax expense (benefit)

Net income (loss)

Net loss attributable to noncontrolling interests of consolidated subsidiary

Loss on redemption – Series A & B convertible redeemable preferred stock

Net income (loss) attributable to common stockholders

Net income (loss) per share information:

Net loss attributable to common stockholders

Net loss per share information:

by Type and by Operating Segment

operating segments generate two types of revenues:

revenues primarily includes video operating segment hardware sales of in-car and body-worn cameras, along with sales of our ThermoVu TM

units, disinfectants, and personal protective equipment.

Additionally, product revenues also include the sale of tickets by our

entertainment operating segment that have been purchased or received through our sponsorships and partnerships and held in inventory

by our entertainment segment until their sale.

revenues primarily includes video solutions operating segment hardware sales of in-car and body-worn cameras, along with sales

of our ThermoVu TM units, disinfectants, and personal protective equipment.

Additionally, product revenues also include

the sale of tickets by our entertainment operating segment that have been purchased or received through our sponsorships and

partnerships and held in inventory by our entertainment segment until their sale.

and other revenues consist of cloud and warranty services revenues from our subscription plan and storage offerings of our video

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Total revenues

video operating segment sells our products and services to customers in the following manner:

video solutions operating segment sells our products and services to customers in the following manner:

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

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may discount our prices on specific orders based upon the size of the order, the specific customer and the competitive landscape.

revenues for the years ended December 31, 2022 and 2021 were $10,999,892 and $9,180,287, respectively, an increase of $1,819,605 (20%),

revenues by operating segment is as follows:

Years ended December 31,

Product Revenues:

Video Solutions

Revenue Cycle Management

Entertainment

Total Product Revenues

revenues for the years ended December 31, 2023 and 2022 were $9,347,495 and $10,999,892, respectively, a decrease of $1,651,947 (15%),

due to the following factors:

generated by the new entertainment operating segment began with the Company’s acquisition of TicketSmarter on September 1,

The new entertainment operating segment generated $5,598,803 in product revenues for the year ended December 31, 2022,

compared to $2,787,237 for the fiscal year ended December 31, 2021.

This largely relates to the Company having a full year of

activity in 2022, in comparison to just four months of activity post-acquisition in 2021.

generated by the entertainment operating segment began with the Company’s acquisition of TicketSmarter on September 1, 2021.

The entertainment operating segment generated $5,044,576 in product revenues for the year ended December 31, 2023, compared to $5,598,803

for the fiscal year ended December 31, 2022.

This largely relates to the Company focusing on right sizing and reducing costs and

working towards profitability.

Company’s video solutions operating segment generated product revenues totaling $4,303,369 during the year ended December 31,

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Additionally, our law enforcement revenues declined over the year ended December 31,

2022 due to price-cutting and competitive actions by our competitors, adverse marketplace effects related to our patent litigation

proceedings and our recent financial condition.

2023 and 2022 due to price-cutting and competitive actions by our competitors, adverse marketplace effects related to our patent

litigation proceedings and our recent financial condition.

video solutions operating segment management has continued to focus on migrating commercial customers, from a hardware sale to a

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revenues over a span of three to five years.

and other revenues for the years ended December 31, 2022 and 2021 were $26,010,003 and $12,233,147, respectively, an increase of $13,776,856

and other revenues by operating segment is as follows:

Years ended December 31,

Service and Other Revenues:

Video Solutions

Revenue Cycle Management

Entertainment

Total Service and Other Revenues

and other revenues for the years ended December 31, 2023 and 2022 were $18,900,399 and $26,010,003, respectively, a decrease of $7,109,604

(27%), due to the following factors:

revenues generated by the video solutions operating segment were $1,471,860 and $1,055,965 for the years ended December 31, 2022

and 2021, respectively, an increase of $415,895 (39%).

We continue to experience increased interest in our cloud solutions for law

enforcement primarily due to the deployment of our cloud-based EVO-HD in-car system and our next generation body-worn camera products,

which contributed to our increased cloud revenues in the year ended December 31, 2022.

We expect this trend to continue for 2023

as the migration from local storage to cloud storage continues in our customer base.

Video solutions operating segment revenues from extended warranty services

were $692,017 and $978,018 for the years ended December 31, 2022 and 2021, respectively, an decrease of $286,001 (29%).

This correlates

with the decrease in sales of DVM-800 hardware systems resulting in a decrease in their associated extended warranty.

new entertainment operating segment generated service revenues totaling $15,272,697 and $7,922,523 for the years ended December 31,

revenues generated by the video solutions operating segment were $1,994,066 and $1,471,860 for the years ended December 31, 2023 and

2022, respectively, an increase of $522,206 (35%).

We continue to experience increased interest in our cloud solutions for law enforcement

primarily due to the deployment of our cloud-based EVO-HD in-car system and our next generation body-worn camera products, which contributed

to our increased cloud revenues in the year ended December 31, 2023.

We expect this trend to continue for 2024 as the migration from

local storage to cloud storage continues in our customer base.

solutions operating segment revenues from extended warranty services were $860,337 and $692,017 for the years ended December 31, 2023

and 2022, respectively, an increase of $168,320 (24%).

T his correlates with consistent sales of

hardware and additional extended warranties sold during the year .

entertainment operating segment generated service revenues totaling $9,018,805 and $15,272,697 for the years ended December 31, 2023

and 2022, respectively, a decrease of $6,253,892 (41%).

The Company completed the acquisitions of Goody Tickets, LLC and TicketSmarter,

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platform for the buying and selling of tickets for live events throughout the country.

This increase reflects a full twelve months

of service revenues by our entertainment operating segment, which we hope will continue to present a strong revenue outlook moving

new revenue cycle management operating segment generated service revenues totaling $7,886,107 and $1,630,048 for the years ended

December 31, 2022 and 2021, respectively, an increase of $6,256,059 (384%).

Our revenue cycle management operating segment has completed

four acquisitions since formation in June 2021, thus resulting in the new service revenue stream added in the twelve months ended

December 31, 2022.

Our revenue cycle management operating segment provides revenue cycle management solutions and back-office services

to healthcare organizations throughout the country.

We expect our revenue cycle management segment to continue to present a strong

revenue outlook moving forward.

revenues for the years ended December 31, 2022, and 2021 were $37,009,895 and $21,413,434, respectively, an increase of $15,596,461 (73%),

our entertainment operating segment to continue to fluctuate as we look right-size this segment and work towards profitability .

revenue cycle management operating segment generated service revenues totaling $6,713,678 and $7,886,107 for the years ended December

31, 2023 and 2022, respectively, a decrease of $1,172,429 (15%).

Our revenue cycle management operating segment has completed four

acquisitions since formation in June 2021, thus resulting in the new service revenue stream added in the twelve months ended December

Our revenue cycle management operating segment provides revenue cycle management solutions and back-office services to

healthcare organizations throughout the country.

The decrease in revenue is due to refinement

within one of the recent acquisitions, as they strive to maximize profitability rather than focus on top line revenue.

revenues for the years ended December 31, 2023, and 2022 were $28,248,344 and $37,009,895, respectively, a decrease of $8,761,551 (24%),

due to the reasons noted above.

of Product Revenue

cost of product revenue sold for the years ended December 31, 2022, and 2021 was $14,372,115 and $8,635,047, respectively, an increase

cost of product revenue sold for the years ended December 31, 2023, and 2022 was $9,974,890 and $14,372,115, respectively, a decrease

of $4,397,225 (31%).

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Total Cost of Product Revenues

increase in cost of goods sold for our video solutions segment products is due to numerous factors including a sizeable increase in the

allowance for excess and obsolete inventory, mostly surrounding the personal protective equipment product line.

Cost of product sold

as a percentage of product revenues for the video solutions segment increased to 154% for the year ended December 31, 2022 as compared

decrease in cost of goods sold for our video solutions segment products is due to numerous factors including a sizeable increase in the

allowance for excess and obsolete inventory in 2022, mostly surrounding the personal protective equipment product line.

Cost of product

sold as a percentage of product revenues for the video solutions segment decreased to 112% for the year ended December 31, 2023 as compared

to 154% for the year ended December 31, 2022.

The increase in

entertainment operating segment cost of product sold is due to the September 1, 2021 acquisition of TicketSmarter, resulting in a

full twelve months of cost of product revenues for the year ended December 31, 2022, and an increase to cost of product revenue of

$3,601,645 for the year ended December 31, 2022 compared to $2,437,986 for the year ended December 31, 2021.

Cost of product sold as

a percentage of product revenues for the entertainment segment increased to 108% for the year ended December 31, 2022 as compared to

87% for the year ended December 31, 2021.

decrease in entertainment operating segment cost of product sold directly correlates to the lower product revenues for the year

ended December 31, 2023.

Cost of Product Revenues were $5,149,923 and $6,039,631 for the year ended December 31, 2023 and 2022, a

decrease of $889,708 (15%).

Cost of product sold as a percentage of product revenues for the entertainment segment decreased to

102% for the year ended December 31, 2023 as compared to 108% for the year ended December 31, 2022.

recorded $4,542,461 and $5,489,541 in reserves for obsolete and excess inventories for the years ended December 31, 2023 and 2022, respectively.

Total raw materials and component parts were $3,044,653 and $4,509,165 for the years ended December 31, 2023 and 2022, respectively,

an increase of $1,447,119 (47%).

a decrease of $1,464,512 (32%).

Finished goods balances were $5,322,693 and $7,816,618 for the years ended December 31, 2023 and December

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lines and a large decrease in ticket inventory for the newly acquired entertainment segment.

The increase in the inventory reserve is

primarily due to inventory obsolescence for the level of component parts of the older versions of our printed circuit boards and the

phase out of our DVM-750, DVM-500 Plus, LaserAlly legacy products, ThermoVu products, and personal protective equipment.

Additionally,

the Company determined a reasonable reserve for inventory held at the ticket operating segment, in which some inventory items sell below

cost or go unsold, thus having to be fully written-off following the event date.

We believe the reserves are appropriate given our inventory

levels as of December 31, 2022.

The decrease in the inventory reserve is

primarily due to the disposal of obsolete inventory that was included in the reserves during 2022.

Additionally, the Company determined

a reasonable reserve for inventory held at the ticket operating segment, in which some inventory items sell below cost or go unsold,

thus having to be fully written-off following the event date.

We believe the reserves are appropriate given our inventory levels as of

December 31, 2023.

of Service Revenue

Overall cost of service revenue

sold for the years ended December 31, 2022, and 2021 was $20,315,839 and $7,114,612, respectively, an increase of $13,201,227 (186%).

Overall cost of goods sold for services as a percentage of service revenues for the years ended December 31, 2022, and 2021 were 78% and

58%, respectively.

cost of service revenue sold for the years ended December 31, 2023, and 2022 was $12,510,970 and $20,315,839, respectively, a decrease

of $7,804,869 (38%).

Overall cost of goods sold for services as a percentage of service revenues for the years ended December 31, 2023,

and 2022 were 66% and 78%, respectively.

Cost of service revenues by operating segment is as follows:

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the video solutions segment increased to 43% for the year ended December 31, 2023 as compared to 41% for the year ended December 31,

increase in revenue cycle management operating segment cost of service revenue is due to the four completed acquisitions of medical

billing companies in late 2021 and early 2022.

Cost of service revenues as a percentage of product revenues for the revenue cycle management

operating segment decreased to 58% for the year ended December 31, 2022 as compared to 68% for the year ended December 31, 2021.

The increase in entertainment

operating segment cost of service revenues is due to the September 1, 2021 acquisition of TicketSmarter, resulting in an increase to cost

of service revenue to $14,563,128 for the year ended December 31, 2022, compared to $5,131,392 for the year ended December 31, 2021.

of service revenues as a percentage of service revenues for the entertainment increased to 95% for the year ended December 31, 2022 as compared to 65% for the year ended December 31, 2021.

Overall gross profit for the years

ended December 31, 2022 and 2021 was $2,321,941 and $5,663,775, respectively, a decrease of $3,341,833 (59%).

Gross profit by operating

segment was as follows:

decrease in revenue cycle management operating segment cost of service revenue is commensurate with the decline in revenues due certain

loss generating services being eliminated during the year.

Cost of service revenues as a percentage of product revenues for the revenue

cycle management operating segment increased to 59% for the year ended December 31, 2023 as compared to 58% for the year ended December

decrease in entertainment operating segment cost of service revenues is due to management right sizing the business working towards profitability.

The Entertainment cost of service revenue was $7,213,754 for the year ended December 31, 2023, compared to $14,563,128 for the year ended

December 31, 2022.

Cost of service revenues as a percentage of service revenues for the entertainment segment decreased to 80% for the

year ended December 31, 2023 as compared to 95% for the year ended December 31, 2022.

gross profit for the years ended December 31, 2023 and 2022 was $5,762,484 and $2,321,941, respectively, an increase of $3,440,543 (148%).

Gross profit by operating segment was as follows:

Years Ended December 31,

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Total Gross Profit

overall decrease is attributable to the increase in cost of goods sold across our video and entertainment segments for the year ended

December 31, 2022, as there was an overall increase in the cost of sales as a percentage of overall revenues to 94% for the year ended

December 31, 2022 from 74% for the year ended December 31, 2021.

Our goal is to improve our margins over the longer term based on the

expected margins generated by our new recent revenue cycle management and entertainment operating segments together with our video solutions

operating segment and its expected margins from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, Shield TM disinfectants

and our cloud evidence storage and management offering, provided that they gain traction in the marketplace.

In addition, if revenues

from the video solutions segment increase, we will seek to further improve our margins from this segment through expansion and increased

efficiency utilizing fixed manufacturing overhead components.

increase is attributable to the decrease in cost of goods sold across our video and entertainment segments for the year ended December

31, 2023, as there was an overall decrease in the cost of sales as a percentage of overall revenues to 80% for the year ended December

31, 2023 from 94% for the year ended December 31, 2022.

This is primarily driven by large inventory reserve being established in 2022,

a focus on right sizing recent acquisitions to increase profitability and a transition to a service subscription-based model in our video

solutions segment.

Our goal is to improve our margins over the longer term based on the expected margins generated by our new recent

revenue cycle management and entertainment operating segments together with our video solutions operating segment and its expected margins

from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, Shield TM disinfectants and our cloud evidence storage and management

offering, provided that they gain traction in the marketplace.

We plan to continue our initiative to more efficient management of our

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General and Administrative Expenses

Overall selling, general and administrative

expenses were $32,055,199 and $20,424,685 for the years ended December 31, 2022 and 2021, respectively, an increase of $11,630,514 (57%).

The increase was primarily attributable to the recent acquisitions completed in the first quarter of 2022 and third quarter of 2021.

selling, general and administrative expenses as a percentage of sales decreased to 87% for 2022 compared to 95% in the same period in

selling, general and administrative expenses were $28,003,037 and $32,055,199 for the years ended December 31, 2023 and 2022, respectively,

a decrease of $4,052,162 (13%).

The decrease is primarily attributable to a focus on right-sizing the business with a reduction in administrative

headcount coupled with a reduction in sponsorships and advertising where costs outweighed the returns.

Our selling, general and administrative

expenses as a percentage of sales increased to 99% for 2023 compared to 87% in the same period in 2022.

significant components of selling, general and administrative expenses are as follows:

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Selling, advertising and promotional expense

Professional fees and expense

Executive, sales, and administrative staff payroll

general and administrative expenses by operating segment are as follows:

Years Ended December 31,

Selling, general and administrative expenses:

Video Solutions

Revenue Cycle Management

Entertainment

Total selling, general and administrative expenses

Research and development

Our video solutions operating segment continues to focus on bringing new products to market, including updates

and improvements to current products.

Our research and development expenses totaled $2,290,293 and $1,930,784 for the years ended December

31, 2022 and 2021, respectively, an increase of $359,509 (19%).

We employed 21 engineers at December 31, 2022 compared to 17 engineers

at December 31, 2021, most of whom are dedicated to research and development activities for new products and primarily the FirstVu Pro, FirstVu II, QuickVu docking stations, EVO-HD and non-mirror based DVM-250 that can be located in multiple places in

We expect our research and development activities will continue to trend higher in future quarters as we continue to expand

our product offerings based on our new EVO-HD product platform and we continue to outsource more development projects.

We consider our

research and development capabilities and new product focus to be a competitive advantage and will continue to invest in this area on

a prudent basis and consistent with our financial resources.

Selling, advertising and

promotional expenses.

Selling, advertising and promotional expenses totaled $9,312,204 and $5,717,824 for the years ended December

31, 2022 and 2021, respectively, an increase of $3,594,380 (63%).

Salesman salaries and commissions for our video solutions segment represent

the primary components of these costs and were $1,643,563 and $1,605,034 for the years ended December 31, 2022 and 2021, respectively,

a slight increase of $38,529 (2%).

The effective commission rate was 4% for the year ended December 31, 2022 compared to 8% for the year

ended December 31, 2021.

We increased the number of salesmen in our law enforcement and commercial channels in 2022 compared to 2021,

thus leading to an increase in sales commissions paid during the year ended December 31, 2022.

Further, our recent acquisitions require

minimal salespeople, due to their specific service offerings and platforms.

Promotional and advertising expenses

totaled $7,668,641 during the year ended December 31, 2022 compared to $4,112,790 during the year ended December 31, 2021, an increase

of $3,555,851 (86%).

The overall increase is primarily attributable to our 2022 sponsorships within NASCAR and IndyCar, along with TicketSmarter’s

very active approach to sponsorship and advertising, as they are continuing to build a brand and gaining recognition.

TicketSmarter accounted

for $4,024,748 of the total promotional and advertising expense for the year ended December 31, 2022.

Professional fees and expense .

Professional fees and expenses totaled $3,297,895 and $1,513,862 for the years ended December 31, 2022 and 2021, respectively, an increase

of $1,784,033 (118%).

The increase in professional fees is primarily attributable to increased legal and other fees in connection with

strategic transactions and acquisitions during the year ended December 31, 2022 paired with other current due diligence items and opportunities

the Company is exploring.

Additionally, board fees, audit fees, and service fees that also attribute to this increase.

Executive, sales and administrative staff payroll.

Executive, sales and administrative staff payroll expenses totaled $6,544,711 and $3,288,360 for the years ended December 31,

2022 and 2021, respectively, an increase of $3,256,351 (99%).

The primary reason for the increase in executive, sales and administrative

staff payroll was the recent formation of the revenue cycle management and entertainment operating segments and their acquisitions of

the medical billing companies and TicketSmarter which occurred in late 2021 and early 2022.

These recent acquisitions resulted in additional

payroll expenses with expanded executive positions, sales, and administrative staff numbers compared to 2021.

Other selling,

general and administrative expenses totaled $10,610,096 and $7,973,855 for the years ended December 31, 2022 and 2021, respectively, an

increase of $2,636,241 (33%).

The increase in other expenses in the year ended December 31, 2022 compared to the same period in 2021 is

primarily attributable to the increased expenses related to the two new operating segments and their acquisitions, and associated operating

expenses, completed during the year ended December 31, 2022, that were not relevant to the year ended December 31, 2021.

Additionally,

this increase is also attributable to an increase in travel costs and increased insurance costs, primarily in general liability and related

coverages which premiums have been increased throughout the marketplace.

Operating Loss

For the reasons previously stated,

our operating loss was $29,733,258 and $14,760,910 for the years ended December 31, 2022 and 2021, respectively, an increase of $14,972,348

Operating loss as a percentage of revenues worsened to 80% in 2022 from 69% in 2021.

Interest and Other Income

Interest income decreased to $131,025

for the year ended December 31, 2022, from $310,200 in 2021, which reflects our overall decline in our cash and cash equivalent levels

in 2022 compared to 2021.

The company has completed five acquisitions and numerous other capital expenditures since the beginning of 2021, leading to the decrease

in cash balances:

thus, leading to a decrease in interest income for the period.

Interest Expense

We incurred interest expenses

of $37,196 and $28,600 during the years ended December 31, 2022 and 2021, respectively.

The increase is attributable to the contingent

earn-out notes associated with the four Nobility Healthcare acquisitions, currently at a total balance of $777,840 for the four notes,

with interest rates of 3.00% per annum.

General and administrative expense

and development expense.

Our video solutions operating segment continues to focus on bringing new products to market, including

updates and improvements to current products.

Our research and development expenses totaled $2,618,746 and $2,290,293 for the years ended

December 31, 2023 and 2022, respectively, an increase of $328,453 (14%).

We employed 21 engineers at December 31, 2023 compared to 21

engineers at December 31, 2022.

Most of our engineers are dedicated to research and development

activities for new products, primarily the new generation of body-worn cameras, EVO-HD and EVO Fleet that can be located in multiple

places in a vehicle.

We expect our research and development activities will continue to trend higher in future quarters as we continue

to expand our product offerings based on our new body-worn camera and EVO-HD product platform and as we outsource more development projects .

We consider our research and development capabilities and new product focus to be a competitive advantage and will continue to invest

in this area on a prudent basis and consistent with our financial resources.

advertising and promotional expenses.

Selling, advertising and promotional expenses totaled $7,137,529 and $9,312,204 for the

years ended December 31, 2023 and 2022, respectively, a decrease of $2,174,675 (23%).

The decrease is primarily attributable to a reduction

in promotional and advertising sponsorships and expenses.

and advertising expenses totaled $5,479,437 during the year ended December 31, 2023 compared to $7,668,641 during the year ended December

31, 2022, a decrease of $2,189,204 (29%).

The overall decrease is primarily attributable to TicketSmarter’s very active approach

to sponsorship and advertising in 2022 as they were aggressively building a brand and gaining recognition.

TicketSmarter accounted for

$2,328,759 and $4,024,748 of the total promotional and advertising expense for the year ended December 31, 2023 and 2022, respectively.

and administrative expenses.

General and administrative expenses totaled $18,246,762 and

$20,452,702 for the years ended December 31, 2023 and 2022, respectively.

The decrease in general and administrative expenses for the

year ended December 31, 2023 compared to the same period in 2022 is primarily attributable to a decrease in administrative salaries,

as payroll begins to adjust from the new acquisitions completed by the Company.

General and administrative expenses also decreased due

to a decline in rent expenses, and legal and professional expenses for the years ended December 31, 2023 compared to the same

period in 2022.

the reasons previously stated, our operating loss was $22,240,553 and $29,733,258 for the years ended December 31, 2023 and 2022, respectively,

a decrease of $7,492,705 (25%).

Operating loss as a percentage of revenues improved to 78% in 2023 from 80% in 2022.

income decreased to $95,717 for the year ended December 31, 2023, from $131,025 in 2022, which reflects our overall decline in our cash

and cash equivalent levels in 2023 compared to 2022.

incurred interest expenses of $3,134,253 and $37,196 during the years ended December 31, 2023 and 2022, respectively.

The increase is

attributable the amortization of debt discounts associated with the convertible debt, revolving loan agreements and merchant advances.

on Accrual for Legal Settlement

Company recognized a loss on accrual for legal settlement of $1,792,308 and $-0- during the years ended December 31, 2023 and 2022, respectively.

This is in connection with the ongoing lawsuit with Culp McCauley, Inc.

on Conversion of Convertible Debt

Company recognized a loss on conversion of convertible debt of $1,112,705 and $-0- during the year ended December 31, 2023 and 2022,

respectively.

This is in connection with the convertible notes issued during the year ended December 31, 2023, the conversion from

debt to equity and cash settlement of debt during the period.

in Fair Value of Short-Term Investments

1 unchanged sentence

and 2022, respectively.

Such short-term investments are included in cash and cash equivalents as they contain original maturities

of ninety (90) days or less.

Such short-term investments are included in cash and cash equivalents as they contain original maturities of

ninety (90) days or less.

The decrease reflects our overall lower cash and cash equivalent levels in 2023 compared to 2022.

in Fair Value of Warrant Derivative Liabilities

2021, the Company issued detachable warrants to purchase a total of 2,127,500 shares of Common Stock in association with the two registered

direct offerings previously described.

The underlying warrant agreement terms provide for net cash settlement outside the control of

the Company in the event of tender offers 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 condensed consolidated statement of operations as the change in fair value of warrant derivative liabilities.

in fair value of the warrant derivative liabilities during year ended December 31, 2022 totaled $6,726,638, compared to $36,664,907

for the year ended December 31, 2021, which was recognized as a gain on the Consolidated Statements of Operations.

During the second quarter of

2023, the Company issued detachable warrants to purchase a total of 1,125,000 shares of Common Stock in association with the two

secured convertible notes previously described.

The underlying warrant agreement terms provide for net cash settlement outside the

control of the Company in the event of tender offers 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 statement of operations as the change in fair value of warrant

derivative liabilities.

The change in fair value of the warrant derivative liabilities during year ended December 31, 2023 totaled

$1,846,642, compared to $6,726,638 for the year ended December 31, 2022, which was recognized as a gain on the Consolidated

Statements of Operations.

in Fair Value of Contingent Consideration Promissory Notes and Earn-Out Agreements

During the year ended December

31, 2021, the Company issued a contingent consideration earn-out agreement in connection with the Stock Purchase Agreement between TicketSmarter,

Inc., Goody Tickets, LLC and TicketSmarter of $3,700,000.

Management determined that the actual Measurement Period EBITDA generated by

TicketSmarter was less than 70% of the Projected EBITDA threshold provided in such an agreement.

Therefore, no TicketSmarter earn-out

payments were due under such agreement.

Therefore, the fair value of the contingent consideration earn-out agreement was reduced to zero,

and the resulting gain of $3,700,000 was reported in our Consolidated Statements of Operations for the year ended December 31, 2021.

was no gain recorded for the year ended December 31, 2022.

On June 30, 2021, Nobility Healthcare, a subsidiary of the Company, issued a contingent consideration promissory

note (the “June Contingent Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private

company (the “June Seller”) of $350,000.

Principal payments, since its

inception, on this contingent consideration promissory note totaled $113,617.

The estimated fair value of the note at December 31,

2022 is $176,456, representing a decrease in its estimated fair value of $27,139 as compared to its estimated fair value as of

December 31, 2021.

June 30, 2021, Nobility Healthcare, a subsidiary of the Company, issued a contingent consideration promissory note (the “June Contingent

Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “June Seller”)

Principal payments, since its inception, on this contingent consideration promissory note totaled $232,134.

The estimated

fair value of the June Contingent Note at December 31, 2023 is $58,819, representing a decrease in its estimated fair value of $117,637

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

This reduction only relates to the principal payments made for the year

ended December 31, 2023.

Therefore, the Company recorded a gain of $-0- and $27,139 in the Consolidated Statements of Operations for

4 unchanged sentences

The estimated fair

value of the August Contingent Note at December 31, 2022 is $388,954, representing an increase in its estimated fair value of $31,907

value of the August Contingent Note at December 31, 2023 is $129,651, representing a decrease in its estimated fair value of $259,303

as compared to is estimated fair value as of December 31, 2023.

Therefore, the Company recorded a loss of $31,907 and $-0- in the Consolidated

Statements of Operations for the years ended December 31, 2022 and December 31, 2021, respectively.

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

in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “January Sellers”) of

Principal payments, since its inception, on this contingent consideration promissory note totaled $120,833.

The estimated fair

value of the January Contingent Note at December 31, 2022 is $208,083, representing a decrease in its estimated fair value of $421,085

as compared to its estimated fair value as of the inception date.

Therefore, the Company recorded a gain of $421,085 and $-0- in the

Consolidated Statements of Operations for the years ended December 31, 2022 and December 31, 2021, respectively.

This reduction only relates to the principal payments made for the year

ended December 31, 2023.

Therefore, the Company recorded a loss of $-0- and $31,907 in the Consolidated Statements of Operations for

the years ended December 31, 2023 and December 31, 2022, respectively.

On January 1, 2022, Nobility Healthcare

issued another contingent consideration promissory note (the “January Contingent Payment Note”) in connection with a stock

purchase agreement between Nobility Healthcare and a private company (the “January Sellers”) of $750,000.

Principal payments,

since its inception, on this contingent consideration promissory note totaled $153,769.

The estimated fair value of the January Contingent

Note at December 31, 2023 is $-0-, representing a decrease 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 year ended December 31, 2023.

Therefore, the Company recorded

a gain of $175,146 and $421,085 in the Consolidated Statements of Operations for the years ended December 31, 2023 and December 31, 2022,

respectively.

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

Note”) in connection with an asset purchase agreement between Nobility Healthcare and a private company (the “February Sellers”)

The estimated fair value of the February Contingent Note at December 31, 2022 is $4,346, representing a decrease in its

estimated fair value of $100,654 as compared to its estimated fair value as of the inception date.

Therefore, the Company recorded a

gain of $100,654 and $-0- in the Consolidated Statements of Operations for the years ended December 31, 2022 and December 31, 2021, respectively.

Gain on Extinguishment of Debt

We recognized a gain on extinguishment

of debt totaling $-0- and $10,000 during the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31,

2021 the Company was notified that its $10,000 EIDL advance received with the Payroll Protection Program (the “PPP”) Loan

was fully forgiven, thus included in “Gain on Extinguishment of Debt” in our Consolidated Statements of Operations for the

year ended December 31, 2021, and further resulting in $-0- for the year ended December 31, 2022.

Gain on Extinguishment of Warrant Derivative Liabilities

We recognized a gain on the extinguishment

of warrant derivative liabilities of $3,624,794 and $-0- during the year ended December 31, 2022 and December 31, 2021, respectively.

The estimated fair value of the February Contingent Note at December 31, 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 year ended December 31, 2023.

Therefore, the Company recorded a gain of $2,763 and

$100,654 in the Consolidated Statements of Operations for the years ended December 31, 2023 and 2022, respectively.

on Extinguishment of Warrant Derivative Liabilities

recognized a gain on the extinguishment of warrant derivative liabilities of $-0- and $3,624,794 during the year ended December 31, 2023

and December 31, 2022, respectively.

This is in connection with the Warrant Exchange Agreements executed by the Company on August 23,

Income/(Loss) before Income Tax Benefit

As a result of the above, we reported

a net income/(loss) before income tax benefit of ($18,873,758) and $25,530,961 for the years ended December 31, 2022 and 2021, respectively,

a decline of $44,404,719 (174%).

on Extinguishment of Liabilities

on extinguishment of liabilities increased to $550,867 for the year ended December 31, 2023, from $-0- during the year ended December

31, 2022, which reflects income related to the entertainment segment’s ability to negotiate down payables and contract liabilities

during the period.

This gain relates to the TicketSmarter Related Party Note payable for the entertainment segment, as a trust, the beneficiaries

of which are TicketSmarter’s Chief Executive Officer and his spouse, contributed cash in the amount of $2,700,000 to TicketSmarter.

Those funds were then utilized 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, which will result in much more significant savings over the next several years.

income increased to $144,735 for the year ended December 31, 2023, from $-0- during the year ended December 31, 2022, which largely

reflects income related to a warehouse lease within the corporate headquarters.

expense was $-0- for the year ended December 31, 2023, a decrease from $230,744 during the year ended December 31, 2022, which reflects

expense related to a note receivable adjustment.

Income/(Loss)

before Income Tax Benefit

a result of the above, we reported a net income/(loss) before income tax benefit of ($25,463,949) and ($18,873,758) for the years ended

December 31, 2023 and 2022, respectively, a decline of $6,590,191 (35%).

recorded an income tax benefit of $-0- for the years ended December 31, 2023 and 2022, respectively.

4 unchanged sentences

have further determined to continue providing a full valuation reserve on our net deferred tax assets as of December 31, 2023.

2022, we decreased our valuation reserve on deferred tax assets by $17,220,000 whereby our deferred tax assets continue to be fully reserved

due to our recent operating losses.

had approximately $113,315,000 of federal net operating loss carryforwards and $1,795,000 of research and development tax credit carryforwards

as of December 31, 2022 available to offset future net taxable income.

Income/(Loss)

As a result of the above, we reported

a net income/(loss) of ($18,873,758) and $25,530,961 for the years ended December 31, 2022 and 2021, respectively, a decline of $44,404,719

2023, we decreased our valuation reserve on deferred tax assets by $7,870,000 whereby

our deferred tax assets continue to be fully reserved due to our recent operating losses.

had approximately $145,035,000 of federal net operating loss carryforwards and $1,795,000

of research and development tax credit carryforwards as of December 31, 2023 available to offset future net taxable income.

a result of the above, we reported a net income/(loss) of ($25,463,949) and ($18,873,758) for the years ended December 31, 2023 and 2022,

respectively, a decline of $6,590,191 (35%).

Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

6 unchanged sentences

2022, respectively.

Loss on Redemption – Series A & B

Convertible Redeemable Preferred Stock

During the year ended

December 31, 2022, the Company redeemed 1,400,000 shares of Series A & 100,000 shares of Series B Preferred Stock, for

a redemption price of $15,750,000, with a $13,365,000 carrying amount, resulting in a $2,385,000 loss on redemption.

Net Income/(Loss) Attributable to Common Stockholders

As a result of the above, we reported a net income/(loss) of ($21,666,691)

and $25,474,508 for the years ended December 31, 2022 and 2021, respectively, a decline of $47,141,199 (185%).

on Redemption – Series A & B Convertible Redeemable Preferred Stock

the year ended December 31, 2022, the Company redeemed 1,400,000 shares of Series A & 100,000 shares of Series B Preferred Stock,

for a redemption price of $15,750,000, with a $13,365,000 carrying amount, resulting in a $2,385,000 loss on redemption.

Loss Attributable to Common Stockholders

a result of the above, we reported a net loss of $25,688,547 and $21,666,691 for the years ended December 31, 2023 and 2022, respectively,

a decline of $4,021,856 (19%).

and Diluted Income/(Loss) per Share

The basic and diluted income/(loss)

per share was ($8.50) and $10.14 for the years ended December 31, 2022 and 2021, respectively, for the reasons previously noted.

All outstanding

stock options and common stock purchase warrants were considered antidilutive and therefore excluded from the calculation of diluted loss

per share for the years ended December 31, 2022 and 2021 because all potentially dilutive securities during 2022 had exercise prices in

excess of the market value of the company’s common stock and because of the net loss reported for 2022.

basic and diluted income/(loss) per share was ($9.22) and ($8.50) for the years ended December 31, 2023 and 2022, respectively, for the

reasons previously noted.

All outstanding stock options and common stock purchase warrants were considered antidilutive and therefore

excluded from the calculation of diluted loss per share for the years ended December 31, 2023 and 2022 because all potentially dilutive

securities during 2023 had exercise prices in excess of the market value of the company’s common stock and because of the net loss

reported for 2023.

and Capital Resources

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See “Nasdaq Listing” below.

We had $3,532,199 of available cash and equivalents and net working capital

of $11,447,313 as of December 31, 2022.

Net working capital as of December 31, 2022, included approximately $6.1 million of accounts receivable

and other receivables and $6.8 million of current inventory.

cash equivalents:

As of December 31, 2022, we had cash and cash equivalents with an aggregate

balance of $3,532,199, a decrease from a balance of $32,007,792 for the year December 31, 2021.

Summarized immediately below and discussed

in more detail in the subsequent subsections are the main elements of the $28,475,593 net decrease in cash during the year ended December

Operating activities :

had $778,149 of available cash, equivalents and restricted cash and net negative working capital of $6,963,943 as of December 31,

Net working capital as of December 31, 2023, included approximately $4.7 million of accounts receivable and other receivables

and $3.8 million of current inventory.

cash equivalents and restricted cash:

As of December 31, 2023, we had cash, cash equivalents and restricted cash with an

aggregate balance of $778,149, a decrease from a balance of $3,532,199 for the year December 31, 2022.

Summarized immediately below

and discussed in more detail in the subsequent subsections are the main elements of the $2,754,050 net decrease in cash during the

year ended December 31, 2023:

of net cash used in operating activities.

Net cash used in operating activities was $18,580,385 and $17,825,108 for the years ended December 31, 2022 and 2021, respectively,

a deterioration of $755,277.

The deterioration is attributable to the net loss incurred for 2022, the non-cash gain attributable

to the change in value of the warrant derivative liability, increased accounts receivable and other assets during the year ended

December 31, 2022 compared to the same period in 2021.

Investing activities :

Net cash used in operating activities was $9,893,838 and $18,580,385 for the years

ended December 31, 2023 and 2022, respectively, an improvement of $8,686,547.

T he improvement

is attributable to a significant decrease in the non-cash gain attributable to the change in value of the warrant derivative liability

in 2023 compared to 2022, as well as the decline in the usage of cash to increase inventories, prepaid expenses, and other operating

assets along with the increase in operating liabilities during the year ended December 31, 2023 compared to 2022.

of net cash used in investing activities.

in investing activities was $2,940,591 and $19,124,379 for the years ended December 31, 2022 and 2021 respectively.

incurred costs for the purchase of an aircraft for our BirdVu Jets subsidiary, further building improvements, the closing of one

business acquisition and one asset acquisition.

In 2021 we incurred costs for:

(i) the purchase of an office and warehouse building;

(ii) the build out of the new leased office and warehouse space;

(iii) the tooling of new products;

(iv) patent applications on our

proprietary technology utilized in our new products and included in intangible assets;

and (v) the closing of three acquisitions

during the year ended December 31, 2021, compared to only two, smaller acquisitions during the year ended December 31,

Financing activities:

$6,954,617 of

net cash used in financing activities.

Cash used in financing activities was $6,954,617 for the year ended December 31, 2022,

compared to cash provided by financing activities of $64,595,521 for the year ended December 31, 2021.

In 2022, we utilized over

$4.0 million on the stock repurchase program, $2.4 million for completion of the preferred stock transaction, as well as over $0.5

million on payments of contingent consideration promissory notes related to the revenue cycle management segment.

In 2021, we closed

two underwritten public offerings of our Common Stock, which generated $66.6 million of cash and repurchased and cancelled shares of

common stock of approximately $1.98 million.

The net result of these activities was a decrease in cash of $28,475,593

to $3,532,199 for the year ended December 31, 2022.

We had $3,532,199 of cash and

cash equivalents and net positive working capital $11,447,313 as of December 31, 2022.

Accounts receivable and other receivable balances

represented $6,120,578 of our net working capital as of December 31, 2022.

We intend to collect our outstanding receivables on a timely

basis and reduce the overall level during 2023, which would help to provide positive cash flow to support our operations during 2023.

Inventory represented $6,839,406 of our net working capital as of December 31, 2022.

We are actively managing the level of inventory and

our goal is to reduce such level during 2023 by our sales activities, the increase of which should provide additional cash flow to help

support our operations during 2023.

Capital Expenditures .

On December 6, 2021, the Board authorized the repurchase of up to $10.0 million of the Company’s outstanding common stock under

the specified terms of a share repurchase program (the “Program”).

During the year ended December 31, 2022, the Company repurchased

186,299 shares of its common stock for $4,026,523, in accordance with the Program.

On June 30, 2022, the Board elected

to terminate the Program, effective immediately.

The Program began in December 2021, with the Company purchasing a total of 273,041

shares at a cost of $6,001,602 through its termination on June 30, 2022.

Company’s revenue cycle management segment completed its third medical billing company acquisition using approximately $1.2 in

cash for the portion of the purchase price during 2022.

The acquisition of the medical billing company included a contingent consideration

promissory note payable to the sellers of $750,000 at closing, which management estimated its fair value of $208,083 as of December 31,

Cash used in investing activities was $240,706 and $2,940,591 for the years ended December

31, 2023 and 2022 respectively.

During the year ended December 31, 2023, we made capital expenditures

(i) building improvements of the newly purchased office and warehouse building;

and (ii) patent applications on our proprietary

technology utilized in our new products and included in intangible assets.

The improvement in cash used in investing activities was

due to several large investing activities in 2022 including cost for the purchase of an aircraft for our BirdVu Jets subsidiary and

the closing of one business acquisition and one asset acquisition that did not recur in 2023.

$7,380,494 of net cash provided by financing activities.

Cash provided by financing activities was $7,380,494 for the year ended

December 31, 2023, compared to cash used in financing activities of $6,954,617 for the year ended December 31, 2022.

completed a convertible note agreement, a related party note payable, a revolving loan agreement and a merchant advance for our video

solution segment, received a Commercial Extension of Credit for our Entertainment Segment, receiving net proceeds of $12.5 million.

We also made principal payments on the extension of credit, merchant advance and contingent consideration promissory notes and paid

off the convertible loan totaling $5.2 million in principal payments.

In 2022, we utilized over $4.0 million on the stock

repurchase program, $2.4 million for completion of the preferred stock transaction, as well as over $0.5 million on payments of contingent

consideration promissory notes related to the revenue cycle management segment.

net result of these activities was a decrease in cash of $2,754,050 to $778,149 for the year ended December 31, 2023.

had $778,149 of cash, and cash equivalents, including restricted cash of $97,600 and net negative working capital $6,963,943 as of

December 31, 2023.

Accounts receivable and other receivable balances represented $4,692,296 of our net working capital as of

December 31, 2023.

We intend to collect our outstanding receivables on a timely basis and reduce the overall level during 2024,

which would help to provide positive cash flow to support our operations during 2024.

Inventory represented $3,845,281 of our net

working capital as of December 31, 2023.

We are actively managing the level of inventory and our goal is to reduce such level during

2024 by our sales activities, the increase of which should provide additional cash flow to help support our operations during

Expenditures .

On December 6, 2021, the Board authorized the repurchase of up to $10.0 million of the Company’s outstanding

common stock under the specified terms of a share repurchase program (the “Program”).

During the year ended December 31,

2022, the Company repurchased 186,299 shares of its common stock for $4,026,523, in accordance with the Program.

June 30, 2022, the Board elected to terminate the Program, effective immediately.

The Program began in December 2021, with the Company

purchasing a total of 273,041 shares at a cost of $6,001,602 through its termination on June 30, 2022.

Company’s revenue cycle management segment completed its third medical billing company acquisition using approximately $1.4 million

in cash for the portion of the purchase price during 2022.

The acquisition of

the medical billing company included a contingent consideration promissory note payable to the sellers of $750,000 at closing, which

management estimated its fair value of $-0- and $208,083 as of December 31, 2023 and 2022.

addition, the Company’s revenue cycle management segment completed its fourth medical billing asset acquisition using approximately

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a contingent consideration promissory note payable to the sellers with an estimated fair value of $105,000 at closing which management

estimated its fair value of $4,346 as of December 31, 2022.

On May 13, 2020, the Company entered into an operating lease for new warehouse and office space, which served

as its new principal executive office and primary business location prior to the April 30 purchase and sale agreement.

lease agreement was amended on August 28, 2020 to correct the footage under lease and monthly payment amounts resulting from such

The lease terms, as amended include no base rent for the first nine months and monthly payments ranging from $12,398 to

$14,741 thereafter, with a termination date of December 31, 2026.

The Company is responsible for property taxes, utilities, insurance

and its proportionate share of common area costs related to its new location.

The Company took possession of the leased facilities

on June 15, 2020.

The remaining lease term for the Company’s office and warehouse operating lease as of December 31, 2022 was

forty-eight months.

estimated its fair value of $-0- and $4,346 as of December 31, 2023 and 2022.

On May 13, 2020, the Company entered into an operating lease for new warehouse and office space, which served as

its new principal executive office and primary business location prior to the April 30 purchase and sale agreement.

The original lease

agreement was amended on August 28, 2020 to correct the footage under lease and monthly payment amounts resulting from such correction.

The lease terms, as amended include no base rent for the first nine months and monthly payments ranging from $12,398 to $14,741 thereafter,

with a termination date of December 31, 2026.

The Company is responsible for property taxes, utilities, insurance and its proportionate

share of common area costs related to its new location.

The Company took possession of the leased facilities on June 15, 2020.

The remaining

lease term for the Company’s office and warehouse operating lease as of December 31, 2023 was thirty-six months.

The Company entered into an operating

lease with a third party in October 2019 for copiers used for office and warehouse purposes.

The terms of the lease include 48 monthly

payments of $1,598 with a maturity date of October 2023.

The Company has the option to purchase such equipment at maturity for its estimated

fair market value at that point in time.

The lease for the Company’s copier operating lease expired was renewed in October 2023.

Company entered into an operating lease with a third party in October 2023 for copiers used for office and warehouse purposes.

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The remaining lease term for the Company’s copier

operating lease as of December 31, 2022 was ten months.

operating lease as of December 31, 2023 was forty-six months.

June 30, 2021, the Company completed the acquisition of its first medical billing company, through Nobility Healthcare.

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The remaining lease term

for the Company’s office and warehouse operating lease as of December 31, 2022 was nineteen months.

for the Company’s office operating lease as of December 31, 2023 was seven months.

August 31, 2021, the Company completed the acquisition of its second acquired medical billing company, through Nobility Healthcare.

completion of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space.

lease terms include monthly payments ranging from $11,579 to $11,811 thereafter, with a termination date in March 2023.

The Company is

responsible for property taxes, utilities, insurance and its proportionate share of common area costs related to this location.

took possession of the leased facilities on September 1, 2021.

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

operating lease as of December 31, 2022 was three months.

The Company plans to relocate the revenue cycle management operating segment acquired operations to existing owned

or leased facilities upon termination of this operating lease.

lease was renewed in April 2023 with favorable terms and payments ranging from $7,436 to $8,877 thereafter, with a termination date in

The Company is responsible for property taxes, utilities, insurance and its proportionate share of common area costs related

to this location.

The remaining term for the Company’s office operating lease was seventy-five months as of December 31, 2023.

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 to $7,364 thereafter, with a termination date of December 2022.

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 six month extension for the lease,

extending the remaining lease term for the Company’s office and the remaining lease term for the Company’s warehouse

operating lease as of December 31, 2022 was six months.

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 currently rents this space on a month-to-month basis with the intention to relocate

upon the identification of suitable space.

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 and warehouse operating

lease as of December 31, 2022, was thirty months.

lease as of December 31, 2023, was seventeen months.

expense related to the office spaces and copier operating leases was recorded on a straight-line basis over the lease term.

expense under the five operating leases was approximately $547,609 for the year ended December 31, 2022.

expense under the five operating leases was approximately $534,830 for the year ended December 31, 2023 and included in selling, general

and administrative expenses.

weighted-average remaining lease term related to the Company’s lease liabilities as of December 31, 2023 and December 31, 2022

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Total operating lease liability

obligations is comprised of the following:

Economic injury disaster loan (EIDL)

Contingent consideration promissory note – Nobility Healthcare Division Acquisition

Revolving Loan Agreement

Commercial Extension of Credit – Entertainment Segment

Unamortized debt issuance costs

Merchant Advances

Debt obligations

current maturities of debt obligations

Debt obligations, long-term

obligations mature as follows as of December 31, 2023:

2028 and thereafter

time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us.

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for Income Taxes;

Redeemable Preferred Stock.

Preferred Stock.

Recognition / Allowances for Doubtful Accounts.

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been low risks for uncollectible accounts.

However, we have commercial customers and international distributors that present a

greater risk for uncollectible accounts than such law enforcement customers and we consider a specific reserve for bad debts based

on their individual circumstances.

As of December 31, 2022, our historical bad debts have been negligible, with less than $286,000

charged off as uncollectible on cumulative revenues of $256.3 million since we commenced deliveries in 2006.

However, we have commercial customers and international distributors that present a greater

risk for uncollectible accounts than such law enforcement customers and we consider a specific reserve for bad debts based on their individual

circumstances.

As of December 31, 2023, our historical bad debts have been negligible, with less than $323,000 charged off as uncollectible

on cumulative revenues of $284.8 million since we commenced deliveries in 2006.

our entertainment segment, our customers are mainly online visitors that pay at the time of the transaction, and we collect the service

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to this recently added segment, we will track historical bad debts and continue to assess appropriate reserves.

As of December 31, 2022, and 2021,

we had provided a reserve for doubtful accounts of $152,736 and $113,234, respectively.

of December 31, 2023, and 2022, we had provided a reserve for doubtful accounts of $200,668 and $152,736, respectively.

periodically perform a specific review of significant individual receivables outstanding for risk of loss due to uncollectability.

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of inventory obsolescence due to changing technology and customer requirements.

As reflected above, our inventory reserves represented

44.5% of the gross inventory balance as of December 31, 2022, compared to 28.8% of the gross inventory balance as of December 31, 2021.

We had $5,489,541 and $3,915,089 in reserves for obsolete and excess inventories as of December 31, 2022 and 2021, respectively.

raw materials and component parts were $4,506,709 and $3,062,046 as of December 31, 2022 and 2021, respectively, an increase of $1,444,663

Finished goods balances were $7,816,618 and $10,512,579 as of December 31, 2022 and 2021, respectively, a decrease of $2,695,961

The decrease in finished goods was primarily attributable to declining inventory for the new Shield product line, our new body-worn

cameras and docking stations, along with a decline in inventory from our entertainment segment, acquired in September 2021.

in the inventory reserve is primarily due to inventory obsolescence for the level of component parts of the older versions of our printed

circuit boards and the phase out of our DVM-750, DVM-500 Plus, LaserAlly legacy products, ThermoVu products, and personal protective

Additionally, the Company determined a reasonable reserve for inventory held at the ticket operating segment, in which some

inventory items sell below cost or go unsold, thus having to be fully written-off following the event date.

We believe the reserves are

appropriate given our inventory levels as of December 31, 2022.

As reflected above, our inventory reserves

represented 54.2% of the gross inventory balance as of December 31, 2023, compared to 44.5% of the gross inventory balance as of

December 31, 2022.

We had $4,542,461 and $5,489,541in reserves for obsolete and excess inventories as of December 31, 2023 and 2022,

respectively.

Total raw materials and work-in-process was $3,065,049 and $4,512,329 as of December 31, 2023 and 2022, respectively,

a decrease of $1,447,280 (32%).

Finished goods balances were $5,322,693 and $7,816,618 as of December 31, 2023 and 2022,

respectively, a decrease of $2,493,925 (32%).

The decrease in finished goods was primarily attributable to declining inventory for

the new Shield product line, our new body-worn cameras and docking stations, along with a decline in inventory from our

entertainment segment, acquired in September 2021.

The decrease in the inventory reserve is primarily due to disposal of obsolete

inventory previously reserved.

actual future demand or market conditions are less favorable than those projected by management or significant engineering changes to

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most recent annual impairment test of goodwill conducted as of December 31, 2023, indicated no impairment.

Subsequent to completing our 2022 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill

impairment test.

Note 1 — Nature of Business and Summary of Significant Accounting Policies and Note 8 — Goodwill and Other

Intangible Assets in the Notes to Consolidated Financial Statements provide additional information regarding the Company’s goodwill

and other intangible assets.

Subsequent to completing our

2023 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill impairment test.

1 — Nature of Business and Summary of Significant Accounting Policies and Note 8 — Goodwill and Other Intangible Assets in

the Notes to Consolidated Financial Statements provide additional information regarding the Company’s goodwill and other intangible

We generally provide up to a two-year parts and labor standard warranty on our products to our customers.

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stock-price volatility assumption is based on historical volatilities of the underlying stock that are obtained from public data sources

and there were 1,250 stock options granted during the year ended December 31, 2022.

and there were no stock options granted during the year ended December 31, 2023.

factors change and we develop different assumptions in future periods, the compensation expense that we record in the future may differ

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In addition, we account for forfeitures as they occur.

derivative liabilities.

On April 5, 2023, the Company issued warrants to purchase a total of 1,125,000 shares of Common Stock.

The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances in the event of tender

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.

Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the

warrant derivative liabilities as of their date of issuance and as of December 31, 2023:

Issuance date assumptions

December 31, 2023 assumptions

Volatility - range

Risk-free rate

Remaining contractual term

Exercise price

$ 5.50 - 7.50

Common stock issuable under the warrants

for Income Taxes.

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of $42,070,000 were recorded in connection with the net deferred income tax assets.

Based on a review of our deferred tax assets and

recent operating performance, we determined that our valuation allowance should be increased by $17,220,000 to a balance of $34,200,000

on a review of our deferred tax assets and recent operating performance, we determined that our valuation allowance should be increased

by $ 7,870,000 to a balance of $42,070,000

to fully reserve our deferred tax assets at December 31, 2023.

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income not be realized.

Redeemable Preferred Stock.

Preferred stock may be classified as a liability, temporary

equity (i.e., mezzanine equity) or permanent equity.

In order to determine the appropriate classification, an evaluation of the cash redemption

features is required.

Where there exists an absolute right of redemption presently or in the future, the preferred stock would be

classified as a liability.

If redemption is contingently redeemable upon the occurrence of an event that is outside of the issuer’s

control, it should be classified as mezzanine equity.

Preferred Stock.

Preferred stock may be classified as a liability, temporary equity (i.e., mezzanine equity) or permanent equity.

In order to determine the appropriate classification, an evaluation of the cash redemption features is required.

Where there exists an

absolute right of redemption presently or in the future, the preferred stock would be classified as a liability.

If redemption is contingently

redeemable upon the occurrence of an event that is outside of the issuer’s control, it should be classified as mezzanine equity.

The probability that the redemption event will occur is irrelevant.

If no redemption

features exist, or if a contingent redemption feature is within the Company’s control, the preferred stock would be considered equity.

If no redemption features exist, or if a contingent redemption feature

is within the Company’s control, the preferred stock would be considered equity.

and Seasonality

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

What changed 10-K

Item 7. Management’s Discussion and Analysis