KUST filing — read by section

Item 9A. Controls and Procedures

Item
 9A. 
 Controls
 and Procedures. 

 Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures 

 Under
the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures to
provide reasonable assurance of achieving the control objectives, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
Based on their evaluation as of December 31, 2023, the end of the period covered by this Annual Report on Form 10-K, our principal
executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a
reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Exchange
Act, including this Annual Report on Form 10-K, was recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer
and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. 

 Management’s
Report on Internal Control Over Financial Reporting 

 Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies
and procedures that: 

 ● 
 Pertain
 to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
 
 38 

 ● 
 Provide
 reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance
 with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
 of our management and directors; and 

 ● 
 Provide
 reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
 could have a material effect on the financial statements. 

 All
internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate. 

 In
connection with the filing of this Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2023. In making this assessment, our management used the criteria set forth by 2013 Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment
using the framework in 2013 Internal Control – Integrated Framework, management believes that, as of December 31, 2023, our internal
control over financial reporting is not effective. 

 Material Weakness 

 In connection
with the audit of our consolidated financial statements as of December 31, 2023 and 2022, we identified a material weakness in our internal
control over financial reporting related to timely review and detection of potential accounting misstatements, which in the aggregate,
constitute a material weakness.

 Remediation Activities 

 As part
of our plan to remediate this material weakness, we are performing a full review of our internal control procedures. We have implemented,
and plan to continue to implement, new controls and new processes. We have hired and plan to continue to hire additional qualified personnel
and establish more robust processes to support our internal control over financial reporting, including clearly defined roles and responsibilities.
The Company anticipates time being required to complete the implementation and to assess and ensure the sustainability of these controls.
The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management
has concluded, through testing, that these controls are operating effectively.

 Changes
in Internal Control Over Financial Reporting 

 We
have completed the process of integrating our recent business acquisition, which was acquired at the beginning of 2022, into our overall
internal control over the financial reporting process. Other than this integration, there have been no changes in our internal control
over financial reporting during the year ended December 31, 2023, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. We are continually monitoring and assessing our internal controls to ensure the
appropriate design and operating effectiveness. 

 Item
 9B. 
 Other
 Information. 

 None
of the Company’s directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement
during the Company’s fiscal quarter ended December 31, 2023. 

 Item
 9C. 
 Disclosure
 Regarding Foreign Jurisdictions that Prevent Inspections. 

 Not
applicable. 

 39 

 PART
III 

 Item
 10. 
 Directors,
 Executive Officers and Corporate Governance. 

 Directors 

 The
names of the members of our Board of Directors and certain information about them as of the date of this Annual Report on Form 10-K are
set forth below: 

 Name
 of Board of Director Member (4) 
 
 Positions 
 
 Age 
 
 Director

 Since 

 Stanton
 E. Ross 
 
 Chairman
 and Chief Executive Officer 
 
 62 
 
 2005 

 Leroy
 C. Richie (1)(2)(3) 
 
 Lead
 Independent Director, Chairman of the Nominating Committee and Compensation Committee and attorney 
 
 82 
 
 2005 

 D.
 Duke Daughtery (1) 
 
 Independent
 Director; Chairman of Audit Committee 
 
 59 
 
 2023 

 (1) 
 Member
 of Audit Committee 

 (2) 
 Member
 of Compensation Committee 

 (3) 
 Member
 of Nominating Committee 

 (4) 
 The
 address of each executive officer and director listed is 14001 Marshall Drive, Lenexa, Kansas 66215. 

 The
Board has determined that Messrs. Richie, and Daughtery are “independent directors,” as defined by the rules and
listing standards of The Nasdaq Stock Market LLC (“Nasdaq”). In making this determination, the Board considered the transactions
and relationships disclosed under “Certain Relationships and Related Transactions” below. 

 Stanton
E. Ross has served as Chairman and Chief Executive Officer (“CEO”) since September 2005. From March 1992 to June
2005, Mr. Ross was the Chairman and President of American Noble Gas Inc. (formerly known as Infinity Energy Resources, Inc.), a publicly
held oil and gas exploration and development company (“AMGAS”) and served as an officer and director of each of AMGAS’s
subsidiaries. He resigned from all his positions with AMGAS in June 2005, except Chairman, but was reappointed President in October 2006.
From 1991 until March 1992, he founded and served as President of Midwest Financial, a financial services corporation involved in mergers,
acquisitions, and financing for corporations in the Midwest. From 1990 to 1991, Mr. Ross was employed by Duggan Securities, Inc., an
investment banking firm in Lenexa, Kansas, where he primarily worked in corporate finance. From 1989 to 1990, he was employed by Stifel,
Nicolaus & Co., a member of the New York Stock Exchange, where he was an investment executive. From 1987 to 1989, Mr. Ross was self-employed
as a business consultant. From 1985 to 1987, Mr. Ross was President and founder of Kansas Microwave, Inc., which developed a radar detector
product. From 1981 to 1985, he was employed by Birdview Satellite Communications, Inc., which manufactured and marketed home satellite
television systems, initially as a salesman and later as National Sales Manager. Mr. Ross estimates he devoted most of his time to Digital
Ally and the balance to AMGAS in 2020. In late 2007, AMGAS sold a substantial portion of its operating assets and has not required a
substantial amount of his time since such point. Mr. Ross holds no public company directorships other than with the Company and AMGAS
and has not held any others during the previous five years. The Company believes that Mr. Ross’s broad entrepreneurial, financial,
and business expertise and his experience with micro-cap public companies and his role as President and Chief Executive Officer give
him the qualifications and skills to serve as a Director. 

 Leroy
C. Richie has been the Lead Independent Director of Digital Ally since September 2005. He is also the Chairman of the
Compensation Committee and Nominating Committee and a member of the Audit Committee. Since June 1, 1999, Mr. Richie has been a
director of AMGAS. Additionally, until 2017, Mr. Richie served as a member of the board of directors of Columbia Mutual Funds, (or
mutual fund companies acquired by or merged with Columbia Mutual Funds), a family of investment companies managed by Ameriprise
Financial, Inc. From 2004 to 2015, he was of counsel to the Detroit law firm of Lewis & Munday, P.C. From 2007 to 2014, Mr.
Richie served as a member of the board of directors of OGE Energy Corp. He holds no other public directorships and has not held any
others during the previous five years. Until 2019, Mr. Richie served as the Vice-Chairman of the Board of Trustees and Chairman of
the Compensation Committee for the Henry Ford Health System, in Detroit. Mr. Richie was formerly Vice President of Chrysler
Corporation and General Counsel for automotive legal affairs, where he directed all legal affairs for its automotive operations from
1986 until his retirement in 1997. Before joining Chrysler, he was an associate with the New York law firm of White & Case
(1973-1978) and served as director of the New York office of the Federal Trade Commission (1978-1983). Mr. Richie received a B.A.
from City College of New York, where he was valedictorian, and a J.D. from the New York University School of Law, where he was
awarded an Arthur Garfield Hays Civil Liberties Fellowship. The Company believes that Mr. Richie’s extensive experience as a
lawyer and as an officer or director of public companies gives him the qualifications and skills to serve as a Director. 

 D.
Duke Daughtery joined the board of directors of Digital Ally in October 2023. He serves as Chairman of the Audit Committee
and is the Board’s financial expert. From 1987 to 2019, Mr. Daughtery was an assurance partner and audit practice leader with
Grant Thornton and Deloitte & Touche in Kansas City. Mr. Daughtery was instrumental in the significant growth of Grant
Thornton’s Kansas City audit practice. Mr. Daughtery served numerous companies ranging from high growth private equity backed
clients, to multi-billion revenue private companies to public companies ranging from smaller public companies to the Fortune 500.
Mr. Daughtery brings to the board of directors many years of leadership experience as an assurance partner at major accounting firms
and extensive experience in developing and executing growth strategies, acquisitions and capital transactions. Digital Ally
considers Mr. Daughtery to be an audit committee financial expert. Mr. Daughtery obtained his Bachelor of Arts in Accounting and in
Management and Business Administration from Saint Ambrose University. Mr. Daughtery holds no public company directorships other than
with the Company and has only held the forementioned position in Digital Ally during the previous five years. From 2019 to 2023 Mr.
Daughtery was not employed by any company. The Company believes that Mr. Daughtery’s extensive experience as an accountant of
public companies gives him the qualifications and skills to serve as a director. 

 Our
Directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are elected
and qualified. Officers are elected annually and serve at the discretion of the Board of Directors. There is no family relationship between
any of our directors, director nominees and executive officers. Board vacancies are filled by a majority vote of the Board. 

 40 

 Board
of Directors and Committee Meetings 

 Our
Board of Directors held four meetings and acted a number of times by unanimous consent resolutions during the fiscal year ended
December 31, 2023. Each of our directors attended at least 75% of the meetings of the Board of Directors and the committees on which
he was appointed and served in the fiscal year ended December 31, 2023. Our directors are expected, absent exceptional
circumstances, to attend all Board meetings and meetings of committees on which they serve and are also expected to attend our
annual meeting of stockholders. All directors then in office attended the 2023 annual meeting of stockholders. 

 Committees
of the Board of Directors 

 Our
Board of Directors currently has three committees: an Audit Committee, a Compensation Committee and a Nominating Committee. Each committee
has a written charter approved by the Board of Directors outlining the principal responsibilities of the committee. These charters are
also available on the Investor Relations page of our website. All of our directors, other than our Chairman and Chief Executive Officer,
have met in executive sessions without management present on a regular basis in 2023 and year-to-date 2024. 

 Audit
Committee 

 Our
Audit Committee appoints the Company’s independent auditors, reviews audit reports and plans, accounting policies, financial statements,
internal controls, audit fees, and certain other expenses and oversees our accounting and financial reporting process. Specific responsibilities
include selecting, hiring and terminating our independent auditors; evaluating the qualifications, independence and performance of our
independent auditors; approving the audit and non-audit services to be performed by our auditors; reviewing the design, implementation,
adequacy and effectiveness of our internal controls and critical accounting policies; overseeing and monitoring the integrity of our
financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;
reviewing any earnings announcements and other public announcements regarding our results of operations in conjunction with management
and our public auditors; conferring with management and the independent auditors regarding the effectiveness of internal controls, financial
reporting processes and disclosure controls; consulting with management and the independent auditors regarding Company policies governing
financial risk management; reviewing and discussing reports from the independent auditors on critical accounting policies used by the
Company; establishing procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees
of concerns regarding questionable accounting or auditing matters; reviewing and approving related-person transactions in accordance
with the Company’s policies and procedures with respect to related-person transactions and applicable rules; reviewing the financial
statements to be included in our Annual Report on Form 10-K; discussing with management and the independent auditors the results of the
annual audit and the results of quarterly reviews and any significant changes in our accounting principles; and preparing the report
that the SEC requires in our annual proxy statement. 

 The
Audit Committee is comprised of two Directors, each of whom is independent, as defined by the rules and regulations of the SEC and
Nasdaq Rule 5605(a)(2). The Audit Committee held four meetings during the year ended December 31, 2023. The members of our Audit Committee
are D. Duke Daughtery (Chairman), and Leroy C. Richie. The Board of Directors determined that
Mr. Daughtery qualifies as an “audit committee financial expert,” as defined under the applicable rules and listing standards
of Nasdaq and SEC rules and regulations and is independent as noted above. 

 Under
the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the Company’s independent registered public accounting
firm must be approved in advance by the Audit Committee to assure that such services do not impair the auditor’s independence from
the Company. Accordingly, the Audit Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy (the “Policy”)
that sets forth the procedures and the conditions pursuant to which services to be performed by the independent auditors are to be pre-approved.
Pursuant to the Policy, certain services described in detail in the Policy may be pre-approved on an annual basis together with pre-approved
maximum fee levels for such services. The services eligible for annual pre-approval consist of services that would be included under
the categories of Audit Fees, Audit-Related Fees and Tax Fees in the table, as well as services for limited review of actuarial reports
and calculations. If not pre-approved on an annual basis, proposed services must otherwise be separately approved prior to being performed
by the independent registered public accounting firm. In addition, any services that receive annual pre-approval but exceed the pre-approved
maximum fee level also will require separate approval by the Audit Committee prior to being performed. The Audit Committee may delegate
authority to pre-approve audit and non-audit services to any member of the Audit Committee but may not delegate such authority to management. 

 41 

 Compensation
Committee 

 Our
Compensation Committee assists our Board of Directors in determining the development plans and compensation of our officers, directors
and employees. Specific responsibilities include approving the compensation and benefits of our executive officers; reviewing the performance
objectives and actual performance of our officers; administering our stock option and other equity compensation plans; and reviewing
and discussing with management the compensation discussion and analysis that the SEC requires in our future Form 10-Ks and proxy statements. 

 Our
Compensation Committee is comprised of two Directors, whom the Board considers to be independent under the applicable rules and
listing standards of Nasdaq and SEC rules and regulations. The members of our Compensation Committee are Leroy C. Richie (Chairman)
and D. Duke Daughtery. The Compensation Committee held two meetings and acted several times by unanimous written consent resolutions
during the year ended December 31, 2023. Mr. Ross, our Chief Executive Officer, does not participate in the determination of his own
compensation or the compensation of directors. However, he makes recommendations to the Compensation Committee regarding the amount
and form of the compensation of the other executive officers and key employees, and he often participates in the Compensation
Committee’s deliberations about such persons’ compensation. Thomas J. Heckman, our Chief Financial Officer
(“CFO”), also assists the Compensation Committee in its deliberations regarding executive officer, director and employee
compensation. No other executive officers participate in the determination of the amount or the form of the compensation of
executive officers or directors. The Compensation Committee does not utilize the services of an independent compensation consultant
to assist in its oversight of executive and director compensation. 

 Nominating
Committee 

 Our
Nominating Committee assists our Board of Directors by identifying and recommending individuals qualified to become members of our Board
of Directors, reviewing correspondence from our stockholders, and establishing, evaluating, and overseeing our corporate governance guidelines.
Specific responsibilities include the following: evaluating the composition, size and governance of our Board of Directors and its committees
and making recommendations regarding future planning and appointing directors to our committees; establishing a policy for considering
stockholder nominees for election to our Board of Directors; and evaluating and recommending candidates for election to our Board of
Directors. 

 Our
Nominating Committee strives for a Board composed of individuals who bring a variety of complementary skills, expertise, or background
and who, as a group, will possess the appropriate skills and experience to oversee our business. The diversity of the members of the
Board relates to the selection of its nominees. While the Committee considers diversity and variety of experiences and viewpoints to
be important factors, it does not believe that a director nominee should be chosen or excluded solely or largely because of race, color,
gender, national origin or sexual orientation or identity. In selecting a director nominee for recommendation to our Board, our Nominating
Committee focuses on skills, expertise or background that would complement the existing members on the Board. Accordingly, although diversity
may be a consideration in the Committee’s process, the Committee and the Board of Directors do not have a formal policy regarding
the consideration of diversity in identifying director nominees. 

 When
the Nominating Committee has either identified a prospective nominee or determined that an additional or replacement director is required,
the Nominating Committee may take such measures as it considers appropriate in connection with its evaluation of a director candidate,
including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside search
firm to gather additional information, or reliance on the knowledge of the members of the Board of Directors or management. In its evaluation
of director candidates, including the members of the Board eligible for re-election, the Nominating Committee considers a number of factors,
including: the current size and composition of the Board of Directors, the needs of the Board of Directors and the respective committees
of the Board, and such factors as judgment, independence, character and integrity, age, area of expertise, diversity of experience, length
of service and potential conflicts of interest. 

 42 

 The
Nominating Committee of the Board selects director nominees and recommends them to the full Board of Directors. In relation to such nomination
process, the Nominating Committee: 

 ● 
 determines
 the criteria for the selection of prospective directors and committee members; 

 ● 
 reviews
 the composition and size of the Board and its committees to ensure proper expertise and diversity among its members; 

 ● 
 evaluates
 the performance and contributions of directors eligible for re-election; 

 ● 
 determines
 the desired qualifications for individual directors and desired skills and characteristics for the Board; 

 ● 
 identifies
 persons who can provide needed skills and characteristics; 

 ● 
 screens
 possible candidates for Board membership; 

 ● 
 reviews
 any potential conflicts of interests between such candidates and the Company’s interests; and 

 ● 
 shares
 information concerning the candidates with the Board and solicits input from other directors. 

 The
Nominating Committee has specified the following minimum qualifications that it believes must be met by a nominee for a position on the
Board: the highest personal and professional ethics and integrity; proven achievement and competence in the nominee’s field and
the ability to exercise sound business judgment; skills that are complementary to those of the existing Board; the ability to assist
and support management and make significant contributions to our success; the ability to work well with the other directors; the extent
of the person’s familiarity with the issues affecting our business; an understanding of the fiduciary responsibilities that are
required of a member of the Board of Directors; and the commitment of time and energy necessary to diligently carry out those responsibilities.
A candidate for director must agree to abide by our Code of Ethics and Conduct. 

 After
completing its evaluation, the Nominating Committee makes a recommendation to the full Board of Directors as to the persons who should
be nominated to the Board, and the Board of Directors determines the nominees after considering the recommendation and report of the
Committee. 

 Our
Nominating Committee is comprised of two Directors, whom the Board considers to be independent under the applicable rules and listing
standards of Nasdaq and SEC rules and regulations. The Nominating Committee held one meeting during the year ended December 31, 2023.
The members of our Nominating Committee are Leroy C. Richie (Chairman) and D. Duke Daughtery. 

 Board
of Directors’ Role in the Oversight of Risk Management 

 We
face a variety of risks, including credit, liquidity, and operational risks. In fulfilling its risk oversight role, our Board of
Directors focuses on the adequacy of our risk management process and overall risk management system. Our Board of Directors believes
that an effective risk management system will (i) adequately identify the material risks that we face in a timely manner; (ii)
implement appropriate risk management strategies that are responsive to our risk profile and specific material risk exposures; (iii)
integrate consideration of risk and risk management into our business decision-making; and (iv) include policies and procedures that
adequately transmit necessary information regarding material risks to senior executives and, as appropriate, to the Board or
relevant committee. 

 The
Board of Directors has designated the Audit Committee to take the lead in overseeing risk management at the Board of Directors level.
Accordingly, the Audit Committee schedules time for periodic review of risk management, in addition to its other duties. In this role,
the Audit Committee receives reports from management, independent registered public accounting firm, outside legal counsel, and other
advisors, and strives to generate serious and thoughtful attention to our risk management process and system, the nature of the material
risks we face, and the adequacy of our policies and procedures designed to respond to and mitigate these risks. 

 43 

 Although
the Board of Directors has assigned the primary risk oversight to the Audit Committee, it also periodically receives information about
our risk management system and the most significant risks that we face. This is principally accomplished through Audit Committee reports
to the Board of Directors and summary versions of the briefings provided by management and advisors to the Audit Committee. 

 In
addition to the formal compliance program, our Board of Directors and the Audit Committee encourage management to promote a corporate
culture that understands risk management and incorporates it into our overall corporate strategy and day-to-day business operations.
Our risk management structure also includes an ongoing effort to assess and analyze the most likely areas of future risk for us. As a
result, the Board of Directors and the Audit Committee periodically ask our executives to discuss the most likely sources of material
future risks and how we are addressing any significant potential vulnerability. 

 Board
Leadership Structure 

 Our
Board of Directors does not have a policy on whether the roles of Chief Executive Officer and Chairman of the Board of Directors should
be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or
be an employee. Our Board of Directors believes that it should be free to make a choice from time to time in any manner that is in the
best interest of us and our stockholders. The Board of Directors believes that Mr. Ross’s service as both Chief Executive Officer
and Chairman of the Board is in the best interest of us and our stockholders. Mr. Ross possesses detailed and in-depth knowledge of the
issues, opportunities and challenges we face and is thus best positioned to develop agendas, with the input of Mr. Richie, the lead independent
director, to ensure that the Board’s time and attention are focused on the most critical matters. His combined role enables decisive
leadership, ensures clear accountability, and enhances our ability to communicate our message and strategy clearly and consistently to
our stockholders, employees, customers, and suppliers, particularly during times of turbulent economic and industry conditions. 

 Our
Board of Directors also believes that a lead independent director is part of an effective Board leadership structure. To this end, the
Board has appointed Mr. Richie as the lead independent director. The independent directors meet regularly in executive sessions at which
only they are present, and the lead independent director chairs those sessions. As the lead independent director, Mr. Richie calls meetings
of the independent directors as needed; sets the agenda for meetings of the independent directors; presides at meetings of the independent
directors; is the principal liaison on Board issues between the independent directors and the Chairman and between the independent directors
and management; provides feedback to the Chairman and management on the quality, quantity and timeliness of information sent to the Board;
is a member of the Compensation Committee that evaluates the CEO’s performance; and oversees the directors’ evaluation of
the Board’s overall performance. The Nominating Committee and the Board believe that its leadership structure, which includes the
appointment of a lead independent director, is appropriate because it, among other things, provides for an independent director who gives
board member leadership and each of the directors, other than Mr. Ross, is independent. Our Board of Directors believes that independent
directors provide effective oversight of management. 

 Stockholder
Communications with the Board of Directors 

 Stockholders
may communicate with the Board of Directors by writing to us as follows: Digital Ally, Inc., attention: Corporate Secretary, 14001 Marshall
Drive, Lenexa, Kansas 66215. Stockholders who would like their submission directed to a member of the Board of Directors may specify
and the communication will be forwarded as appropriate. 

 Policy
for Director Recommendations and Nominations 

 Our
Nominating Committee will consider candidates for Board membership suggested by Board members, management and our stockholders. The policy
of our Nominating Committee is to consider recommendations for candidates to the Board of Directors from any stockholder of record in
accordance with our Bylaws. A director candidate recommended by our stockholders will be considered in the same manner as a nominee recommended
by a Board member, management or other sources. In addition, a stockholder may nominate a person directly for election to the Board of
Directors at an annual meeting of stockholders, provided the stockholder meets the requirements set forth in our Bylaws. We do not pay
a fee to any third party to identify or evaluate or assist in identifying or evaluating potential nominees. 

 Stockholder
Recommendations for Director Nominations . Stockholder recommendations for director nominations may be submitted to the
Company at the following address: Digital Ally, Inc., Attention: Corporate Secretary, 14001 Marshall Drive, Lenexa, Kansas 66215. Such
recommendations will be forwarded to the Nominating Committee for consideration, provided that they are accompanied by sufficient information
to permit the Board to evaluate the qualifications and experience of the nominees, and they are in time for the Nominating Committee
to do an adequate evaluation of the candidate before the Annual Meeting. The submission must be accompanied by a written consent of the
individual to stand for election if nominated by the Board of Directors and to serve if elected and to cooperate with a background check. 

 44 

 Stockholder
Nominations of Directors. Our Bylaws provide that, in order for a stockholder to nominate a director at an annual meeting of
stockholders, the stockholder must give timely written notice to our Secretary and such notice must be received at our principal executive
offices not less than one-hundred-and-twenty (120) days before the date of our release of the proxy statement to stockholders in connection
with our previous year’s annual meeting of stockholders. Such stockholder’s notice shall include, with respect to each person
whom the stockholder proposes to nominate for election as a director, all information relating to such nominee that is required under
the Exchange Act, including such person’s written consent to being named in the proxy statement as a nominee and serving as a director,
and cooperating with a background investigation. In addition, the stockholder must include in such notice the name and address, as they
appear on our records, of the stockholder proposing the nomination of such person, and the name and address of the beneficial owner,
if any, on whose behalf the nomination is made, the class and number of shares of our capital stock that are owned beneficially and of
record by such stockholder of record and by the beneficial owner, if any, on whose behalf the nomination is made, and any material interest
or relationship that such stockholder of record and/or the beneficial owner, if any, on whose behalf the nomination is made may respectively
have in such business or with such nominee. At the request of the Board of Directors, any person nominated for election as a director
shall furnish to our Secretary the information required to be set forth in a stockholder’s notice of nomination that pertains to
the nominee. 

 To
be timely in the case of a special meeting or if the date of the annual meeting is changed by more than thirty (30) days from such anniversary
date, a stockholder’s notice must be received at our principal executive offices no later than the close of business on the tenth
(10 th ) day following the earlier of the day on which notice of the meeting date was mailed or public disclosure of the meeting
date was made. 

 Compensation
Committee Interlocks and Insider Participation 

 None
of our executive officers serves, or in the past has served, as a member of the Compensation Committee. None of the members of our Compensation
Committee is, or has ever been, an officer or employee of the Company. 

 Code
of Ethics and Conduct 

 Our
Board of Directors has adopted a Code of Ethics and Conduct that is applicable to all of our employees, officers and directors.
Our Code of Ethics and Conduct is intended to ensure that our employees, officers and directors act in accordance with the highest
ethical standards. The Code of Ethics and Conduct is available on the Investor Relations page of our website at http://www.digitalally.com
 and the Code of Ethics and Conduct was filed as an exhibit to our Annual Report on Form 10-KSB filed March 4, 2008. 

 Delinquent
Section 16(a) Reports 

 Under
the securities laws of the United States, our directors, executive (and certain other) officers, and any persons holding ten percent
or more of our Common Stock must report on their ownership of the Common Stock and any changes in that ownership to the SEC. Specific
due dates for these reports have been established. During the fiscal year ended December 31, 2023, we believe the following reports listed
in the table below were required to be filed by such persons pursuant to Section 16(a) and were not filed on a timely basis for each such reporting person: 

 Name 
 
 Number
 of Late Reports 
 
 Description 

 Han
 Peng 
 
 1 
 
 Mr.
 Peng’s Form 4 was not filed on timely basis. 

 Stanton
 E. Ross 
 
 1 
 
 Mr.
 Ross’ Form 4 was not filed on timely basis. 

 Item
 11. 
 E xecutive
 Compensation. 

 The
following table presents information concerning the total compensation of the Company’s Chief Executive Officer (“CEO”),
Chief Financial Officer (“CFO”) and Chief Operating Officer (“COO”) and collectively with the CEO and the CFO,
the “Named Executive Officers”) for services rendered to the Company in all capacities for the years ended December 31, 2023
and 2022, as required by Item 402(m)(2) of Regulation S-K. 

 45 

 Summary
Compensation Table 

 Name and Principal Position 
 Year 
 Salary ($) 
 Bonus ($) 
 Stock awards ($) 
 Option awards
 ($) (1) 
 All other compensation ($) (2) 
 Total ($) 

 Stanton E. Ross 
 2022 
 $ 300,000 
 $ 100,000 
 $ 374,500 (3) 
 $ — 
 $ 32,034 
 $ 806,534 

 Chairman and CEO 
 2023 
 $ 250,000 
 $ — 
 $ 87,325 (6) 
 $ — 
 $ 11,200 
 $ 348,525 

 Thomas J. Heckman 
 2022 
 $ 120,000 
 $ — 
 $ 80,250 (4) 
 $ — 
 $ 16,292 
 $ 216,542 

 CFO, Treasurer and Secretary 
 2023 
 $ 120,000 
 $ — 
 $ 18,713 (7) 
 $ — 
 $ 6,354 
 $ 145,067 

 Peng Han 
 2022 
 $ 250,000 
 $ — 
 $ 107,000 (5) 
 $ — 
 $ 10,576 
 $ 367,576 

 COO 
 2023 
 $ 250,000 
 $ — 
 $ 24,950 (8) 
 $ — 
 $ 10,821 
 $ 285,771 

 (1)
Represents aggregate grant date fair value pursuant to ASC Topic 718 for the respective year for stock options granted. Please refer
to Note 14 to the consolidated financial statements for a further description of the awards and the underlying assumptions utilized to
determine the amount of grant date fair value related to such grants. 

 (2)
Amounts included in all other compensation include the following items: the employer contribution to the Company’s 401(k) Retirement
Savings Plan (the “401(k) Plan”) on behalf of the named executive. We are required to provide a 100% matching contribution
for all who elect to contribute up to 3% of their compensation to the plan and a 50% matching contribution for all employees’ elective
deferral between 4% and 5%. The employee (i) is 100% vested at all times in the employee contributions and employer matching contributions;
(ii) receives Company paid healthcare insurance; (iii) receives Company paid contributions to health savings accounts; and (iv) receives
Company paid life, accident and disability insurance. See “All Other Compensation Table” below. 

 (3)
Stock awards include the following restricted stock granted during 2022 to Mr. Ross: 17,500 shares at $21.40 per share that vest 50%
on January 7, 2023 and 50% on January 7, 2024, subject to Mr. Ross remaining an employee of the Company at that point in time. 

 (4)
Stock awards include the following restricted stock granted during 2022 to Mr. Heckman: 3,750 shares at $21.40 per share that on January
7, 2023, subject to Mr. Heckman remaining an employee of the Company at that point in time. 

 (5)
Stock awards include the following restricted stock granted during 2022 to Mr. Han: 5,000 shares at $21.40 per share that vest 20% annually
on the anniversary of January 7 from 2023 to 2027, subject to Mr. Han remaining an employee of the Company at that point in time. 

 (6)
Stock awards include the following restricted stock granted during 2023 to Mr. Ross: 17,500 shares at $4.99 per share that vest 50% on
January 10, 2024 and 50% on January 10, 2025, subject to Mr. Ross remaining an employee of the Company at that point in time. 

 (7)
Stock awards include the following restricted stock granted during 2023 to Mr. Heckman: 3,750 shares at $4.99 per share that vested on
April 1, 2023. 

 (8)
Stock awards include the following restricted stock granted during 2023 to Mr. Han: 5,000 shares at $4.99 per share that vest 20% annually
on the anniversary of January 10 from 2024 to 2028, subject to Mr. Han remaining an employee of the Company at that point in time. 

 46 

 All
Other Compensation Table 

 Name and Principal Position 
 Year 
 401(k) Plan contribution by Company 
 Company
paid healthcare insurance 
 Flexible & health savings account contributions by Company 
 Company
paid life, accident & disability insurance 
 Other Contractual payments 
 Total
($) 

 Stanton E. Ross 
 2022 
 $ 10,039 
 $ 20,319 
 $ 1,100 
 $ 576 
 $ — 
 $ 32,034 

 Chairman and CEO 
 2023 
 $ 11,200 
 $ — 
 $ 1,100 
 $ 821 
 $ — 
 $ 13,121 

 Thomas J. Heckman 
 2022 
 $ 4,800 
 $ 10,021 
 $ 895 
 $ 576 
 $ — 
 $ 16,292 

 CFO, Treasurer and Secretary 
 2023 
 $ 4,800 
 $ — 
 $ 895 
 $ 659 
 $ — 
 $ 6,354 

 Peng Han 
 2022 
 $ 10,000 
 $ — 
 $ — 
 $ 576 
 $ — 
 $ 10,576 

 COO 
 2023 
 $ 10,000 
 $ — 
 $ — 
 $ 821 
 $ — 
 $ 10,821 

 Compensation
Policy. Our executive compensation plan is based on attracting and retaining qualified professionals who possess the skills and
leadership necessary to enable us to achieve earnings and profitability growth to satisfy its stockholders. We must, therefore, create
incentives for these executives to achieve both our and individual performance objectives using performance-based compensation programs.
No one component is considered by itself, but all forms of the compensation package are considered in total. Wherever possible, objective
measurements will be utilized to quantify performance, but many subjective factors still come into play when determining performance. 

 Compensation
Components. The main elements of its compensation package consist of base salary, stock options or restricted stock awards and
bonus. 

 Base
Salary. The base salary for each executive officer is reviewed and compared to the prior year, with considerations given for
increase or decrease. The review is generally on an annual basis but may take place more often in the discretion of the Compensation
Committee. 

 On
January 7, 2022, the Compensation Committee restored the annual base salaries of Stanton E. Ross, Chief Executive Officer, Thomas J.
Heckman, Chief Financial Officer, Treasurer and Secretary, and Peng Han, Chief Operating Officer, at $300,000, $120,000, and $250,000,
respectively for 2022. 

 On
January 10, 2023, the Compensation Committee restored the annual base salaries of Stanton E. Ross, Chief Executive Officer, Thomas J.
Heckman, Chief Financial Officer, Treasurer and Secretary, and Peng Han, Chief Operating Officer, at $250,000, $120,000, and $250,000,
respectively for 2023. 

 The
Compensation Committee plans to review the base salaries for possible adjustments on an annual basis. Base salary adjustments will be
based on both the individual and our performances and will include both objective and subjective criteria specific to each executive’s
role and responsibility with us. 

 Stock
Options and Restricted Stock Awards. The Compensation Committee determined stock option and restricted stock awards based on
numerous factors, some of which include responsibilities incumbent with the role of each executive with us, tenure with us, as well as
our performance. The vesting period of options and restricted stock is also tied, in some instances, to our performance directly related
to certain executive’s responsibilities with us. The Compensation Committee determined that Messrs. Ross, Heckman, and Han were
eligible for awards of stock options or restricted stock in 2022 based on their performance. Refer to the “Grants of Plan-Based
Awards” table below for restricted stock awards made in 2022. The Committee also determined that Messrs. Ross, Heckman, and Han
would be eligible in 2023 for awards of restricted stock or stock options. 

 Bonuses.
 The Compensation Committee determined to award bonuses to each of the executive officers in 2023 and 2022, as set forth in the
foregoing table. Refer to the “Summary Compensation Table” above for the bonuses paid to Messrs. Ross, Heckman, and Han in
2023 and 2022. In fiscal 2023, Messrs. Ross, Heckman, and Han were eligible for bonuses of up to $250,000, $120,000, and $250,000, respectively. 

 Other.
 In July 2008, we amended and restated our 401(k) Plan. The amended 401(k) Plan requires us to provide a 100% matching contribution
for employees who elect to contribute up to 3% of their compensation to the plan and a 50% matching contribution for employees’
elective deferrals between 4% and 5%. We have made matching contributions for executives who elected to contribute to the 401(k) Plan
during 2021. Each participant is 100% vested at all times in employee and employer matching contributions. As of December 31, 2023, a
total of 66,946 shares of our Common Stock were held in the 401(k) Plan. Mr. Heckman, as trustee of the 401(k) Plan, holds the voting
power as to the shares of our Common Stock held in the 401(k) Plan. We have no profit-sharing plan in place for our employees. However,
we may consider adding such a plan to provide yet another level of compensation to our compensation plan. 

 47 

 The
following table presents information concerning the grants of plan-based awards to the Named Executive Officers during the year ended
December 31, 2023: 

 Grant
of Plan-Based Awards 

 Name 
 Grant date 
 Date 
 approved by 
 Compensation 
 Committee 
 
 All other stock 
 awards: Number 
 of shares of stock 
 or units:
 (#) (1) 
 (2) 
 
 Exercise or base 
 price of option 
 awards 
 ($/Share) 
 
 Grant date fair 
 value of stock 
 awards 

($) (3) 
 
 Stanton E. Ross

Chairman and CEO 
 January 10, 2023 
 January 10, 2023 
 17,500 (1) 
 $ 4.99 
 $ 87,325 

 Thomas J. Heckman 
 
 CFO, Treasurer and Secretary 
 — 
 — 
 — 
 $ — 
 $ — 

 Peng Han

COO 
 January 10, 2023 
 January 10, 2023 
 5,000 (2) 
 $ 4.99 
 $ 24,950 

 (1)
These restricted stock awards were made under the Digital Ally, Inc. Stock Option and Restricted Stock Plans and vest over a two-year
period (50% on January 10, 2024 and 50% on January 10, 2025) contingent upon whether the individual is still employed by us at that point. 

 (3)
These restricted stock awards were made under the Digital Ally, Inc. Stock Option and Restricted Stock Plans and vest over a five-year
period (20% on each anniversary of January 10 from 2024 to 2028) contingent upon whether the individual is still employed by us at that
point. 

 (3)
Stock awards noted represent the aggregate amount of grant date fair value as determined under ASC Topic 718. Please refer to Note 14
to the consolidated financial statements that appear in our Annual Report on Form 10-K, filed with the SEC on March 31, 2023, for a further
description of the awards and the underlying assumptions utilized to determine the amount of grant date fair value related to such grants. 

 Employment
Contracts; Termination of Employment and Change-in-Control Arrangements 

 We
do not have any employment agreements with any of our executive officers. However, on December 23, 2008, we entered into retention agreements
with the following executive officers: Stanton E. Ross and Thomas J. Heckman. In April 2018 we amended these agreements. 

 Retention
Agreements - Potential Payments upon Termination or Change of Control 

 The
following table sets forth for each named executive officer potential post-employment payments and payments on a change in control and
assumes that the triggering event took place on January 1, 2024 and that the amendments to the retention agreements of each person were
in effect. 

 48 

 Retention
Agreement Compensation 

 Name 
 Change in control 
 payment due based 
 upon successful 
 completion of 
 transaction 
 
 Severance payment 
 due based on 
 termination after 
 Change of 
 Control occurs 
 
 Total 

 Stanton E. Ross 
 $ 125,000 
 $ 500,000 
 $ 625,000 

 Thomas J. Heckman 
 $ 115,000 
 $ 460,000 
 $ 575,000 

 Total 
 $ 240,000 
 $ 960,000 
 $ 1,200,000 

 The
retention agreements guarantee the executive officers’ specific payments and benefits upon a Change in Control of the Company.
The retention agreements also provide for specified severance benefits if, after a Change in Control of the Company occurs, the executive
officer voluntarily terminates employment for “Good Reason” or is involuntarily terminated without “Cause.” 

 Under
the retention agreements, a “Change in Control” means (i) one party alone, or acting with others, has acquired or gained
control over more than 50% of the voting shares of the Company; (ii) the Company merges or consolidates with or into another entity or
completes any other corporate reorganization, if more than 50% of the combined voting power of the surviving entity’s securities
outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other reorganization; (iii) a majority of the Board of Directors is replaced
and/or dismissed by the stockholders of the Company without the recommendation of or nomination by the Company’s current Board
of Directors; (iv) the Company’s Chief Executive Officer (the “CEO”) is replaced and/or dismissed by stockholders without
the approval of the Board of Directors; or (v) the Company sells, transfers or otherwise disposes of all or substantially all of the
consolidated assets of the Company and the Company does not own stock in the purchaser or purchasers having more than 50% of the voting
power of the entity owning all or substantially all of the consolidated assets of the Company after such purchase. 

 “Good
Reason” means either (i) a material adverse change in the executive’s status as an executive or other key employee of the
Company, including without limitation, a material adverse change in the executive’s position, authority, or aggregate duties or
responsibilities; (ii) any adverse change in the executive’s base salary, target bonus or benefits; or (iii) a request by the Company
to materially change the executive’s geographic work location. 

 “Cause”
means (i) the executive has acted in bad faith and to the detriment of the Company; (ii) the executive has refused or failed to act in
accordance with any specific lawful and material direction or order of his or her supervisor; (iii) the executive has exhibited, in regard
to employment, unfitness or unavailability for service, misconduct, dishonesty, habitual neglect, incompetence, or has committed an act
of embezzlement, fraud or theft with respect to the property of the Company; (iv) the executive has abused alcohol or drugs on the job
or in a manner that affects the executive’s job performance; and/or (v) the executive has been found guilty of or has plead nolo
contendere to the commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person. Prior to
termination for Cause, the Company shall give the executive written notice of the reason for such potential termination and provide the
executive a 30-day period to cure such conduct or act or omission alleged to provide grounds for such termination. 

 If
any Change in Control occurs and the executive continues to be employed as of the completion of such Change in Control, upon completion
of such Change in Control, as payment for the executive’s additional efforts during such Change in Control, the Company shall pay
the executive a Change in Control benefit payment equal to three months of the his base salary at the rate in effect immediately prior
to the Change in Control completion date, payable in a lump sum net of required tax withholdings. If any Change in Control occurs, and
if, during the one-year period following the Change in Control, the Company terminates the executive’s employment without Cause
or the executive submits a resignation for Good Reason (the effective date of such termination or resignation, the “Termination
Date”), then: 

 a) 
 The
 Company shall pay the executive severance pay equal to 12 months of his base salary at the higher of the rate in effect immediately
 prior to the Termination Date or the rate in effect immediately prior to the occurrence of the event or events constituting Good
 Reason, payable on the Termination Date in a lump sum net of required tax withholdings, plus all other amounts then payable by the
 Company to the executive less any amounts then due and owing from the executive to the Company; 

 49 

 b) 
 The
 Company shall provide continuation of the executive’s health benefits at the Company’s expense for 18 months following
 the Termination Date; and 

 c) 
 The
 executive’s outstanding employee stock options shall fully vest and be exercisable for a 90-day period following the Termination
 Date. 

 The
executive is not entitled to the above severance benefits for a termination based on death or disability, resignation without Good Reason
or termination for Cause. Following the Termination Date, the Company shall also pay the executive all reimbursements for expenses in
accordance with the Company’ policies, within ten days of submission of appropriate evidence thereof by the executive. 

 The
following table presents information concerning the outstanding equity awards for the Named Executive Officers as of December 31, 2023: 

 Outstanding
Equity Awards at Fiscal Year-End 

 Option Awards 
 Stock Awards 

 Name 
 Number
of securities underlying unexercised options (#) exercisable (1) 
 Number
of securities underlying unexercised options (#) unexercisable 
 Equity
incentive plan awards: Number of securities underlying unexercised unearned options (#) 
 Option exercise price ($) 
 Option
expiration date 
 Number
of shares or units of stock that have not vested (1) 
 Market value of shares or units of stock that have not vested (2) 
 Equity
incentive plan awards: Number of unearned shares, units or other rights that have not vested 
 Equity
incentive plan awards: Market or Payout value of unearned shares, units or other rights that have not vested 

 Stanton E. Ross 
 
 Chairman and CEO 
 
 - 
 - 
 - 
 - 
 26,250 
 $ 55,650 
 - 
 $ - 

 Thomas J. Heckman 
 
 CFO, Treasurer and Secretary 
 - 
 - 
 - 
 - 
 - 
 - 
 $ - 
 - 
 $ - 

 Peng Han 
 
 COO 
 - 
 - 
 - 
 - 
 - 
 9,000 
 $ 19,080 
 - 
 $ - 

 50 

 (1)
These stock option and restricted stock awards were made under the Digital Ally, Inc. Stock Option and Restricted Stock Plans and vest
over the prescribed period contingent upon whether the individual is still employed by the Company at that point. 

 (2)
Market value based upon the closing market price of $2.12 on December 31, 2023. 

 The
following table presents information concerning the stock options exercised and the vesting of restricted stock awards during 2023 for
the Named Executive Officers for the year ended December 31, 2023: 

 Option Exercises and Restricted Stock Vested 

 Option Awards 
 Stock Awards 

 Number of Shares acquired realized on exercise (#) 
 Value realized 
 on exercise ($) 
 
 Number of 
 Shares 
 acquired on 
 vesting (#) 
 
 Value on 
 vesting ($) 
 
 Stanton E. Ross 
 
 Chairman and CEO 
 - 
 $ - 
 16,250 
 $ 77,675 (1) 

 Thomas J. Heckman 
 
 CFO, Treasurer and Secretary 
 - 
 $ - 
 7,500 
 $ 35,250 (2) 

 Peng Han 
 
 COO 
 - 
 $ - 
 1,000 
 $ 4,780 (3) 

 (1) 
 Based
 on the closing market price of our Common Stock of $4.78 on January 6, 2023, the date of vesting for 7,500 shares of Common Stock,
 and the closing market price of our Common Stock of $4.78 on January 7, 2023, the date of vesting for 8,750 shares of Common Stock
 for Mr. Ross. 

 (2) 
 Based
 on the closing market price of our Common Stock of $4.78 on January 6, 2023, the date of vesting for 3,750 shares of Common Stock,
 and the closing market price of our Common Stock of $4.62 on March 31, 2023, the date of vesting for 3,750 shares of Common Stock
 for Mr. Heckman. 

 (3) 
 Based
 on the closing market price of our Common Stock of $4.78 on January 7, 2023, the date of vesting for 1,000 shares of Common Stock
 for Mr. Han. 

 The
number of stock options and restricted stock awards that an employee, director, or consultant may receive under our Plans (defined below
under “Information Regarding Plans and Other Arrangements Not Subject to Security Holder Action”) is in the discretion of
the administrator and therefore cannot be determined in advance. The Board of Directors’ policy in 2023 was to grant officers an
award of 17,500 restricted shares of Common Stock to our CEO and 3,750 restricted shares of Common Stock to our CFO/Treasurer and each
non-employee director an award of options to purchase 5,000 shares of Common Stock, all subject to vesting requirements. 

 The
following table sets forth (a) the aggregate number of shares of Common Stock subject to options granted under the Plans during the year
ended December 31, 2023 and (b) the average per share exercise price of such options. 

 Stock
Options and Restricted Stock Grants 

 Name of Individual or Group 
 Number of Restricted 
 Shares of Common 
 Stock Granted 
 
 Number of 
 Options 
 Granted 
 
 Average per 
 Share Exercise 
 Price 
 
 Stanton E. Ross, Chairman of the Board of Directors & CEO 
 17,500 
 - 
 $ - 

 Leroy C. Richie, Director 
 - 
 - 
 $ - 

 Thomas J. Heckman, Vice President, CFO, Treasurer & Secretary 
 3,750 
 - 
 $ - 

 Peng Han, COO 
 5,000 
 - 
 $ - 

 All executive officers, as a group 
 26,250 
 - 
 $ - 

 All directors who are not executive officers, as a group 
 - 
 - 
 $ - 

 All employees who are not executive officers, as a group 
 12,500 
 - 
 $ - 

 Director
Compensation 

 Our
non-employee directors received the stock option grants noted in the “Director Compensation” table below for their service
on the Board of Directors in 2023, including on the Audit, Nominating and Compensation Committees. 

 Director
compensation for the year ended December 31, 2023 was as follows: 

 Director
Compensation 

 Name 
 Fees earned or paid in 
 cash ($) 
 
 Stock 
 awards
 ($) 
 
 Option 
 awards
 ($) 
 
 Total
 ($) 

 Stanton E. Ross, Chairman of the Board of Directors (1) 
 $ — 
 $ — 
 $ — 
 $ — 

 Leroy C. Richie 
 $ 60,000 
 $ — 
 $ — 
 $ 60,000 

 Daniel F. Hutchins 
 $ 55,000 
 $ — 
 $ — 
 $ 55,000 

 Michael J. Caulfield 
 $ 50,000 
 $ — 
 $ — 
 $ 50,000 

 D. Duke Daughtery 
 $ 12,500 
 $ — 
 $ — 
 $ 12,500 

 (1) 
 As
 a Named Executive Officer, Mr. Ross’s compensation and option awards are fully reflected in the “Summary Compensation”
 table, and elsewhere under “Executive Compensation.” He did not receive compensation, stock awards or options for his
 services as a director. 

 51 

 On
November 17, 2023, our board of directors adopted a clawback policy (the “Clawback Policy”) permitting the Company to
seek the recovery of incentive compensation received by any of the Company’s current and former executive officers (as
determined by the board in accordance with Section 10D of the Exchange Act) and such other senior executives/employees who may from
time to time be deemed subject to the Clawback Policy by the board (collectively, the “Covered Executives”). The amount
to be recovered will be the excess of the incentive compensation paid to the Covered Executive based on the erroneous data over the
incentive compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined
by the board. If the board cannot determine the amount of excess incentive compensation received by the Covered Executive directly
from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect
of the accounting restatement. Refer to Exhibit 97 of this Annual Report for the Company’s Clawback Policy. 

 Item
 12. 
 Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 

 The
following table sets forth, as of April 1, 2024, information regarding beneficial ownership of our Common Stock for: 

 ● 
 each
 person, or group of affiliated persons, known by us to beneficially own more than 5% of our Common Stock; 

 ● 
 each
 of our executive officers; 

 ● 
 each
 of our directors; and 

 ● 
 all
 of our current executive officers and directors as a group 

 Beneficial
ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if
he, she or it possesses sole or shared voting or investment power of that security, including securities that are currently exercisable
or exercisable within sixty (60) days of April 1, 2024. Except as indicated by the footnotes below, we believe, based on the information
furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of Common
Stock shown that they beneficially own, subject to community property laws where applicable. 

 Common
Stock subject to securities currently exercisable or exercisable within sixty (60) days of April 1, 2024 are deemed to be outstanding
for computing the percentage ownership of the person holding such securities and the percentage ownership of any group of which the holder
is a member but are not deemed outstanding for computing the percentage of any other person. 

 Unless
otherwise indicated, the address of each beneficial owner listed in the table below is c/o Digital Ally, Inc., 14001 Marshall Drive.,
Lenexa, KS 66215. 

 Number of Shares of Common
 Stock Beneficially Owned (1) 
 % of Total 

 Shares 
 % 
 Voting Power 

 5% or Greater Stockholders: 
 
 None 
 — 
 — 
 — 

 Executive Officers and Directors: 
 
 Stanton E. Ross (2) 
 116,065 
 4.1 % 
 4.1 % 

 Leroy C. Richie (3) 
 18,211 
 * 
 * 

 D. Duke Daughtery 
 1,405 
 * 
 * 

 Thomas J. Heckman (4) 
 120,513 
 4.3 % 
 4.3 % 

 Peng Han (5) 
 13,781 
 * 
 * 

 All executive officers and directors as a group (five individuals) 
 269,975 
 9.6 % 
 9.6 

 % 

 * 
 Represents
 less than 1%. 

 (1) 
 Based
 on 2,800,754 shares of Common Stock issued and outstanding as of April 1, 2024 and, with respect only to the ownership by all executive
 officers and directors as a group. 

 (2) 
 Mr.
 Ross’s total shares of Common Stock include 8,750 restricted shares that are subject to forfeiture to us. 

 (3) 
 Mr.
 Richie’s total shares of Common Stock include 16,250 shares of Common Stock to be received upon the exercise of vested options. 

 (4) 
 Mr.
 Heckman’s total shares of Common Stock include 66,946 shares of Common Stock held in the Company’s 401(k) Plan (on December
 31, 2023) as to which Mr. Heckman has voting power as trustee of the 401(k) Plan. 

 (5) 
 Mr.
 Han’s total shares of Common Stock include (i) 9,000 restricted shares that are subject to forfeiture to us and (ii) 331 shares
 of Common Stock to be received upon the exercise of vested options. 

 52 

 Securities
Authorized for Issuance Under Equity Compensation Plans 

 Our
Board of Directors adopted the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”) on September 1, 2005. The 2005
Plan authorized us to reserve 15,625 shares of our Common Stock for issuance upon exercise of options and grant of restricted stock awards.
The 2005 Plan terminated in 2015 with 1,078 shares of Common Stock reserved for awards that are now unavailable for issuance. Stock options
granted under the 2005 Plan that remain unexercised and outstanding as of December 31, 2023 total 284. 

 On
January 17, 2006, our Board adopted the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”). The 2006 Plan authorizes
us to reserve 9,375 shares of Common Stock for future grants under it. The 2006 Plan terminated in 2016 with 2,739 shares of Common Stock
reserved for awards that are now unavailable for issuance. Stock options granted under the 2006 Plan that remain unexercised and outstanding
as of December 31, 2023 total 531. 

 On
January 24, 2007, our Board adopted the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”). The 2007 Plan authorizes
us to reserve 9,375 shares of Common Stock for future grants under it. The 2007 Plan terminated in 2017 with 4,733 shares of Common Stock
reserved for awards that are now unavailable for issuance. There are no stock options granted under the 2007 Plan that remain unexercised
and outstanding as of December 31, 2023. 

 On
January 2, 2008, our Board adopted the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”). The 2008 Plan authorizes
us to reserve 6,250 shares of Common Stock for future grants under it. The 2008 Plan terminated in 2018 with 2,025 shares of Common Stock
reserved for awards that are now unavailable for issuance. There are no stock options granted under the 2008 Plan that remain unexercised
and outstanding as of December 31, 2023. 

 On
March 18, 2011, our Board adopted the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”). The 2011 Plan authorizes
us to reserve 3,125 shares of Common Stock for future grants under it. At December 31, 2023, there were 438 shares of Common Stock reserved
for awards available for issuance under the 2011 Plan. Stock options granted under the 2011 Plan that remain unexercised and outstanding
as of December 31, 2023 total 50. 

 On
March 22, 2013, our Board adopted the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”). The 2013 Plan was amended
on March 28, 2014 and November 14, 2014 to increase the number of shares of Common Stock authorized and reserved for issuance under the
2013 Plan to a total of 15,000. At December 31, 2023, there were no shares of Common Stock reserved for awards available for issuance
under the 2013 Plan. Stock options granted under the 2013 Plan that remain unexercised and outstanding as of December 31, 2023 total
1,000. 

 On
March 27, 2015, our Board of Directors adopted the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”). The 2015
Plan was amended on February 25, 2016 and May 31, 2017 to increase the number of shares of Common Stock authorized and reserved for issuance
under the 2015 Plan to a total of 62,500. At December 31, 2023, there were no shares of Common Stock reserved for awards available for
issuance under the 2015 Plan, as amended. Stock options granted under the 2015 Plan that remain unexercised and outstanding as of December
31, 2023 total 6,500. 

 On
April 12, 2018, our Board of Directors adopted the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”). The 2018
Plan was amended on May 21, 2019 to increase the number of shares of Common Stock authorized and reserved for issuance under the 2018
Plan to a total of 87,500. At December 31, 2023, there were 31,275 shares of Common Stock reserved for awards available for issuance
under the 2018 Plan. Stock options granted under the 2018 Plan that remain unexercised and outstanding as of December 31, 2023 total
17,000. 

 Our
Board of Directors adopted the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”) on June 30, 2020 and the Company’s
stockholders approved the 2020 Plan at the Annual Meeting held on September 9, 2020. The Company’s stockholders approved an amendment
to the 2020 Plan at the Annual Meeting held on June 22, 2021 which increased the number of shares of Common Stock authorized and reserved
for issuance under the 2020 Plan to a total of 125,000. At December 31, 2023, there were 12,042 shares of Common Stock reserved for awards
available for issuance under the 2020 Plan. Stock options granted under the 2020 Plan that remain unexercised and outstanding as of December
31, 2023 total 29,000. 

 Our
Board of Directors adopted the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”) on October 28, 2022 and the
Company’s stockholders approved the 2022 Plan at the Annual Meeting held on December 7, 2022. The number of shares of Common Stock
authorized and reserved for issuance under the 2022 Plan totals 125,000. At December 31, 2023, there were no shares of Common Stock reserved
for awards available for issuance under the 2022 Plan. Stock options granted under the 2022 Plan that remain unexercised and outstanding
as of December 31, 2023 total 125,000. 

 The
2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan, 2020 Plan, and 2022 Plan are collectively referred
to as the “Plans.” 

 The
Plans authorize us to grant (i) to the key employees incentive stock options (except for the 2007 Plan) to purchase shares of Common
Stock and non-qualified stock options to purchase shares of Common Stock and restricted stock awards, and (ii) to non-employee directors
and consultants’ non-qualified stock options and restricted stock. The Compensation Committee of our Board (the “Compensation
Committee”) administers the Plans by making recommendations to the Board or determinations regarding the persons to whom options
or restricted stock should be granted and the amount, terms, conditions and restrictions of the awards. 

 The
Plans allow for the grant of incentive stock options (except for the 2007 Plan), non-qualified stock options and restricted stock awards.
Incentive stock options granted under the Plans must have an exercise price at least equal to 100% of the fair market value of the Common
Stock as of the date of grant. Incentive stock options granted to any person who owns, immediately after the grant, stock possessing
more than 10% of the combined voting power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise
price at least equal to 110% of the fair market value of the Common Stock on the date of grant. Non-statutory stock options may have
exercise prices as determined by our Compensation Committee. 

 The
Compensation Committee is also authorized to grant restricted stock awards under the Plans. A restricted stock award is a grant of shares
of the Common Stock that is subject to restrictions on transferability, risk of forfeiture and other restrictions and that may be forfeited
in the event of certain terminations of employment or service prior to the end of a restricted period specified by the Compensation Committee. 

 We
have filed various registration statements on Form S-8 and amendments to previously filed Form S-8’s with SEC, which registered
a total of 408,750 shares of Common Stock issued or to be issued underlying the awards under the Plans. 

 The
following table sets forth certain information regarding the Plans as of December 31, 2023: 

 Equity
Compensation Plan Information 

 Plan category 
 Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) 
 Weighted-average exercise price of outstanding options, warrants and rights (b) 
 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) 

 Equity compensation plans approved by stockholders 
 53,600 
 $ 45.55 
 408,750 

 Equity compensation plans not approved by stockholders 
 — 
 $ — 
 — 

 Total all plans 
 53,600 
 $ 45.55 
 408,750 

 53 

 Item
 13. 
 Certain
 Relationships and Related Transactions, and Director Independence. 

 In
2023, a trust, the beneficiaries of which are the Chief Executive Officer of TicketSmarter, and his spouse, contributed cash in the
amount of $2,700,000 to support TicketSmarter’s operations and to repay approved debts and obligations of TicketSmarter in
exchange for the TicketSmarter Related Party Note (the “TickerSmarter Related Party Note”). The TicketSmarter Related Party Note
bears interest of 13.25% per annum with weekly repayments of the principal amount of $54,000.00 each, together with accrued
interest, for fifty weeks, or until the principal is paid in full, commencing on January 2, 2024. The use of proceeds of the
TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted rate, the discount received is
recognized as a gain on extinguishment of liabilities on the statement of operations. Additionally, these negotiations relieved
TicketSmarter of numerous future obligations following fiscal year 2023. 

 Item
 14. 
 Principal
 Accountant Fees and Services. 

 The
following table is a summary of the fees billed to us by RBSM LLP for the fiscal years ended December 31, 2023 and 2022: 

 Fee Category 
 Fiscal 
 2023 fees 
 
 Fiscal 
 2022 fees 
 
 Audit fees 
 $ 312,500 
 $ 327,415 

 Audit-related fees 
 145,000 
 — 

 Tax fees 
 — 
 — 

 All other fees 
 — 
 — 

 Total fees 
 $ 457,500 
 $ 327,415 

 Audit
Fees . Such amount consists of fees billed for professional services rendered in connection with the audit of our annual
financial statements and review of the interim financial statements included in our quarterly reports. It also includes services that
are normally provided by our independent registered public accounting firms in connection with statutory and regulatory filings or engagements. 

 Audit-Related
Fees . Consists of fees billed for assurance and related services that are reasonably related to the performance of the
audit or review of our financial statements and are not reported under “Audit Fees.” These services include employee benefit
plan audits, consents issued for certain filings with the SEC, accounting consultations in connection with acquisitions, attest services
that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards. 

 Tax
Fees . Tax fees consist of fees billed for professional services related to tax compliance, tax advice and tax planning.
These services include assistance regarding federal, state and international tax compliance, tax audit defense, customs and duties, mergers
and acquisitions, and international tax planning. 

 All
Other Fees . Consists of fees for products and services other than the services reported above. 

 Pre–Approval
Policy of Services Performed by Independent Registered Public Accounting Firm. The Audit Committee’s policy is to pre–approve
all audit and non–audit related services, tax services and other services. Pre–approval is generally provided for up to one
year, and any pre–approval is detailed as to the particular service or category of services and is generally subject to a specific
budget. The Audit Committee has delegated the pre–approval authority to its chairperson when expedition of services is necessary.
The independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding
the extent of services provided by the independent registered public accounting firm in accordance with this pre–approval and the
fees for the services performed to date. 

 PART
IV 

 Item
 15. 
 Exhibits
 and Financial Statement Schedules. 

 (a) 
 The
 following documents are filed as part of this Annual Report on Form 10-K: 

 1. 
 Consolidated
 Financial Statements : 

 The
 consolidated financial statements required to be included in Part II, Item 8, Financial Statements and Supplementary Data, begin
 on Page F-1 and are submitted as a separate section of this Annual Report on Form 10-K. 

 54 

 2. 
 Financial
 Statement Schedules : 

 All
 schedules are omitted because they are not applicable or are not required, or because the required information is included in the
 consolidated financial statements or notes in this Annual Report on Form 10-K. 

 3. 
 Exhibits :
 
 Exhibit 

 Number 
 
 Description
 of Exhibit 
 
 2.1 
 
 Agreement and Plan of Merger, dated August 23, 2022, between Digital Ally, Inc. and DGLY Subsidiary. 
 (19) 

 2.2 
 
 Agreement and Plan of Merger, dated June 1, 2023, by and among Clover Leaf Capital Corp., CL Merger Sub, Inc., Yntegra Capital Investments LLC, in the capacity as the Purchaser Representative, Kustom Entertainment, Inc. and Digital Ally, Inc. 
 (27) 

 3.1(i)(a) 
 
 Articles of Incorporation. 
 (19)
 
 3.1(i)(b) 
 
 Articles
 of Merger. 
 (19) 

 3.1(i)(c) 
 
 Certificate of Amendment to Digital Ally, Inc.’s Articles of Incorporation, dated December 8, 2022. 
 (22) 

 3.1(i)(d) 
 
 Certificate of Amendment to Articles of Incorporation of Digital Ally, Inc., dated February 6, 2023. 
 (23) 

 3.1(ii) 
 
 Bylaws 
 (19) 

 4.1 
 
 Form of Common Stock Certificate. 
 * 

 4.2 
 
 Form of Certificate of Designation of Series A Convertible Redeemable Preferred Stock. 
 (20) 

 4.3 
 
 Form of Certificate of Designation of Series B Convertible Redeemable Preferred Stock. 
 (20) 

 4.4 
 
 Form of Common Stock Purchase Warrant of Digital Ally, Inc., dated August 5, 2019. 
 (10) 

 4.5 
 
 Form of Pre-Funded Common Stock Purchase Warrant of Digital Ally, dated February 1, 2021. 
 (13) 

 4.6 
 
 Form of Common Stock Purchase Warrant of Digital Ally, dated February 1, 2021. 
 * 

 4.7 
 
 Form of Senior Secured Convertible Note, issued by Digital Ally, Inc., dated April 5, 2023. 
 (26) 

 4.8 
 
 Form of Warrant of Digital Ally, Inc., dated April 5, 2023. 
 (26) 

 4.9 
 
 Revolving Note, dated October 26, 2023, issued by Digital Ally, Inc.to Kompass Kapital Funding, LLC. 
 (28) 

 4.10 
 
 Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. 
 (25) 

 10.1 
 
 2005 Stock Option and Restricted Stock Plan. 
 (2) 

 10.2 
 
 2006 Stock Option and Restricted Stock Plan. 
 (2) 

 10.3 
 
 Form of Stock Option Agreement (ISO and Non-Qualified) 2005 Stock Option Plan. 
 (2) 

 10.4 
 
 Form of Stock Option Agreement (ISO and Non-Qualified) 2006 Stock Option Plan. 
 (2) 

 10.9 
 
 Forms of Restricted Stock Agreement for 2005, 2006, 2007 and 2008 Stock Option and Restricted Stock Plans. 
 (3) 

 10.11 
 
 2011 Stock Option and Restricted Stock Plan 
 (4) 

 10.12 
 
 Form of Stock Option Agreement for 2011 Stock Option and Restricted Stock Plan 
 (4) 

 10.13 
 
 Amended and Restated 2015 Stock Option and Restricted Stock Plan 
 (5) 

 10.14 
 
 Form of 2015 Stock Option and Restricted Stock Plan Restricted Stock Grant Agreement. 
 (25) 

 10.15 
 
 Digital Ally, Inc. 2018 Stock Option and Restricted Stock Plan. 
 (9) 

 10.16 
 
 Form of 2018 Stock Option and Restricted Stock Plan Restricted Stock Grant Agreement. 
 (25) 

 10.17 
 
 Digital Ally, Inc. 2020 Stock Option and Restricted Stock Plan. 
 (11) 

 10.18 
 
 Amendment to Digital Ally, Inc. 2020 Stock Option and Restricted Stock Plan. 
 (14) 

 10.19 
 
 Form of 2020 Stock Option and Restricted Stock Plan Restricted Stock Grant Agreement. 
 (25) 

 10.20 
 
 Digital Ally, Inc. 2022 Stock Option and Restricted Stock Plan. 
 (21) 

 10.21 
 
 Form of 2022 Stock Option and Restricted Stock Plan Restricted Stock Grant Agreement under the 2022 Stock Option and Restricted Stock Plan. 
 (24) 

 10.22 
 
 Proceeds Investment Agreement, dated as July 31, 2018, by and between Digital Ally, Inc. and Brickell Key Investments LP. 
 (8) 

 10.23 
 
 Letter Agreement, dated as July 31, 2018, by and between Digital Ally, Inc. and Brickell Key Investments LP. 
 (8) 

 10.24 
 
 Form of Securities Purchase Agreement, dated as of January 11, 2021, by and between Digital Ally, Inc. and the Investors. 
 (12) 

 10.25 
 
 Form of Placement Agency Agreement, dated January 27, 2021, by and between Digital Ally, Inc. and Kingswood Capital Markets, division of Benchmark Investments, Inc. 
 (13) 

 55 

 10.26 
 
 Form of Securities Purchase Agreement, dated as of January 27, 2021, by and between Digital Ally, Inc. and the Investors. 
 (13) 

 10.27 
 
 Commercial Real Estate Sales Contract, dated February 24, 2021, between Digital Ally, Inc. and DDG Holding, LLC. 
 (15) 

 10.28 
 
 Form of Operating Agreement of Nobility Healthcare, LLC, dated June 1, 2021. 
 (16) 

 10.29 
 
 Warrant Exchange Agreement, dated August 19, 2021, by and among Digital Ally, Inc. and the warrant holders who are signatories thereto. 
 (17) 

 10.30 
 
 Unit Purchase Agreement, dated September 2, 2021. 
 (18) 

 10.31 
 
 Form
 of Exchange Agreement, dated August 23, 2022. 
 (19) 

 10.32 
 
 Form of Securities Purchase Agreement, dated October 13, 2022, between Digital Ally, Inc. and the investors thereto. 
 (20) 

 10.33 
 
 Form of Registration Rights Agreement, dated October 13, 2022, by and among Digital Ally, Inc. and the investors named therein. 
 (20) 

 10.34 
 
 Form of Securities Purchase Agreement, dated April 5, 2023, between Digital Ally, Inc. and certain Purchasers who are signatories thereto. 
 (26) 

 10.35 
 
 Form of Security Agreement, dated April 5, 2023, between Digital Ally, Inc. and certain holders of Digital Ally, Inc.’s Senior Secured Convertible Notes who are signatories thereto. 
 (26) 

 10.36 
 
 Form of Trademark Security Agreement, dated April 5, 2023, between Digital Ally, Inc. and a lender. 
 (26) 

 10.37 
 
 Form of Patent Security Agreement, dated April 5, 2023, between Digital Ally, Inc. and between Digital Ally, Inc. and a lender. 
 (26) 

 10.38 
 
 Form of Subsidiary Guaranty, dated April 5, 2023, by and among Digital Ally, Inc. and its direct and indirect subsidiaries and a lender. 
 (26) 

 10.39 
 
 Form of Registration Rights Agreement, dated April 5, 2023, between Digital Ally, Inc. and certain Purchasers, who are signatories thereto. 
 (26) 

 10.40 
 
 Loan and Security Agreement, dated October 26, 2023, by and between Digital Ally, Inc., Digital Ally Healthcare, LLC, and Kompass Kapital Funding, LLC. 
 (28) 

 10.41 
 
 Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated October 26, 2023, by and between Digital Ally, Inc. and Kompass Kapital Funding, LLC. 
 (28) 

 10.42 
 
 Lock-Up Agreement, dated June 1, 2023, by and between Clover Leaf Capital Corp., Yntegra Capital Investments, LLC, and Digital Ally, Inc. 
 (27) 

 14.1 
 
 Code of Ethics and Code of Conduct. 
 (1) 

 21.1 
 
 Subsidiaries of Registrant 
 * 

 23.1 
 
 Consent of RBSM LLP 
 * 

 24.1 
 
 Power of Attorney 
 * 

 31.1 
 
 Certificate of Stanton E. Ross, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
 * 

 31.2 
 
 Certificate of Thomas J. Heckman, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
 * 

 32.1 
 
 Certificate of Stanton E. Ross, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
 * 

 32.2 
 
 Certificate of Thomas J. Heckman, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
 * 

 97 
 
 Digital Ally, Inc. Clawback Policy 
 * 

 101.INS 
 Inline
 XBRL Instance Document ** 

 101.SCH 
 Inline
 XBRL Taxonomy Schema ** 

 101.CAL 
 Inline
 XBRL Taxonomy Calculation Linkbase ** 

 101.LAB
 
 Inline
 XBRL Taxonomy Label Linkbase ** 

 101.PRE
 
 Inline
 XBRL Taxonomy Presentation Linkbase ** 

 104 
 Cover
 Page Interactive Data File (embedded within the Inline XBRL document) 

 *Filed
herewith. 

 **
The XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that Section and shall not be incorporated
by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth
by specific reference in such filing or document. 

 (1) 
 Filed
 as an exhibit to the Company’s Annual Report on Form 10KSB for the Year ended December 31, 2007. 

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

 (3) 
 Filed
 as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2009. 

 (4) 
 Filed
 as an exhibit to the Company’s Form 8-K filed June 1, 2011. 

 (5) 
 Filed
 as an exhibit to the Company’s Form S-8 filed May 23, 2016. 

 (6) 
 Filed
 as an exhibit to the Company’s Form 8-K filed August 25, 2017. 

 (7) 
 Filed
 as an exhibit to the Company’s Form 8-K filed April 4, 2018. 

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

 (9) 
 Filed
 as an exhibit to the Company’s Registration Statement on Form S-8 filed August 20, 2018. 

 (10) 
 Filed
 as an exhibit to the Company’s Form 8-K filed August 5, 2019. 

 (11) 
 Filed
 as an exhibit to the Company’s Registration Statement on Form S-8 filed November 16, 2020. 

 (12) 
 Filed
 as an exhibit to the Company’s Form 8-K filed January 12, 2021. 

 (13) 
 Filed
 as an exhibit to the Company’s Form 8-K filed January 28, 2021. 

 (14) 
 Filed
 as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed April 27, 2021. 

 (15) 
 Filed
 as an exhibit to the Company’s Form 8-K filed May 3, 2021. 

 (16) 
 Filed
 as an exhibit to the Company’s Form 8-K filed June 9, 2021. 

 (17) 
 Filed
 as an exhibit to the Company’s Form 8-K filed August 19, 2021. 

 (18) 
 Filed
 as an exhibit to the Company’s Form 8-K filed September 9, 2021. 

 (19) 
 Filed
 as an exhibit to the Company’s Form 8-K filed August 23, 2022. 

 (20) 
 Filed
 as an exhibit to the Company’s Form 8-K filed October 19, 2022. 

 (21) 
 Filed
 as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed October 28, 2022. 

 (22) 
 Filed
 as an exhibit to the Company’s Form 8-K filed December 8, 2022. 

 (23) 
 Filed
 as an exhibit to the Company’s Form 8-K filed February 7, 2023. 

 (24) 
 Filed
 as an exhibit to the Company’s Registration Statement on Form S-8 filed February 28, 2023. 

 (25) 
 Filed
 as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2022. 

 (26) 
 Filed
 as an exhibit to the Company’s Form 8-K filed April 7, 2023. 

 (27) 
 Filed
 as an exhibit to the Company’s Form 8-K filed June 6, 2023. 

 (28) 
 Filed
 as an exhibit to the Company’s Form 8-K filed October 27, 2023. 

 (b) 
 No
 financial statement schedules have been provided because the information is not required or is shown either in the financial statements
 or the notes thereto. 

 56 

 Signatures 

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. 

 DIGITAL
 ALLY, INC., 

 a
 Nevada corporation 

 By: 
 /s/
 Stanton E. Ross 

 Stanton
 E. Ross 

 Chief
 Executive Officer 

 (Principal
 Executive Officer) 
 
 Dated: 
 
 April 1, 2024 

 Each
person whose signature appears below authorizes Stanton E. Ross to execute in the name of each such person who is then an officer or
director of the registrant, and to file, any amendments to this Annual Report on Form 10-K necessary or advisable to enable the registrant
to comply with the Securities Exchange Act of 1934 and any rules, regulations and requirements of the Securities and Exchange Commission
in respect thereof, which amendments may make such changes in such Report as such attorney-in-fact may deem appropriate. 

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. 

 Signature
 and Title 
 
 Date 

 /s/
 Stanton E. Ross 
 
 April 1, 2024 

 Stanton
 E. Ross, Director and Chief Executive Officer 
 
 /s/
 Leroy C. Richie 
 
 April 1, 2024 

 Leroy
 C. Richie, Director 
 
 /s /
 D. Duke Daughtery 
 
 April 1, 2024 

 D.
 Duke Daughtery 
 
 /s/
 Thomas J. Heckman 
 
 April 1, 2024 

 Thomas J. Heckman, Chief Financial Officer, Secretary, Treasurer and

 Principal Accounting Officer

 (Principal Financial Officer and Principal Accounting Officer)
 
 57 

 DIGITAL
 ALLY, INC. AND SUBSIDIARIES 

 INDEX
 TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 Page(s) 

 Report of Independent Registered Public Accounting Firm (PCAOB ID No: 587 ) 
 
 F-2 

 Consolidated
 Financial Statements:  
 
 Consolidated Balance Sheets – December 31, 2023 and 2022 
 
 F-4 

 Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 
 
 F-5 

 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023 and 2022 
 
 F-6 

 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 
 
 F-7 

 Notes to the Consolidated Financial Statements 
 
 F-8 

 F- 1 

 New
 York Office: 

 805
 Third Avenue 

 New
 York, NY 10022 

 212.838-5100 

 www.rbsmllp.com 
 
 Report
of Independent Registered Public Accounting Firm 

 To
the Stockholders and the 

 Board
of Directors of 

 Digital
Ally, Inc. and subsidiaries 

 Lenexa,
KS 

 Opinion
on the Consolidated Financial Statements 

 We
have audited the accompanying consolidated balance sheets of Digital Ally, Inc. and its subsidiaries (the Company) as of December 31,
2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in
the two year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and
2022, and the results of its operations and its cash flow for each of the years in the two year period ended December 31, 2023, in conformity
with accounting principles generally accepted in the United States of America. 

 The
Company’s Ability to Continue as a Going Concern 

 The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has incurred substantial operating losses and will require additional capital to continue
as a going concern. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from
the outcome of this uncertainty. 

 Basis
for Opinion 

 These
financial statement are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 

 New York, NY Washington DC Mumbai & Pune, India Boca Raton, FL 

 San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece 

 Member:
ANTEA International with affiliated offices worldwide 

 F- 2 

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion. 

 Critical
Audit Matters 

 The
critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate. 

 Goodwill,
Indefinite Life Intangibles and Other Intangibles Impairment Assessments – Entertainment/Ticketing Reporting Unit – Refer
to Notes 1, 8 and 22 to the consolidated financial statements 

 Critical
Audit Matter Description 

 As
described in Note 22 to the consolidated financial statements, the Company’s goodwill and indefinite life intangible asset balance
was $5,886,547 and $600,000, respectively as of December 31, 2023. The Company also has amortizable identifiable intangible assets of
$5,600,000 and $600,000 which are being amortized over 5 years and 4 years, respectively, and are related to the Entertainment/Ticketing
reporting unit. Management tests these assets annually for impairment or more frequently when potential impairment triggering events
are present. Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying value. Management
uses a market approach to estimate the fair value of its reporting unit. The key assumptions and estimates utilized in the market approach
primarily include market multiples, peer group and comparable transaction selection and selection of relevant financial matrices for
concluding the fair value of reporting unit, and future levels of revenue growth. 

 The
principal considerations for our determination that performing procedures relating to the goodwill and intangible asset impairment assessments
of the Entertainment/Ticketing reporting unit is a critical audit matter because (i) the significant judgment used by management when
determining the fair value estimates of the reporting units; (ii) the high degree of auditor judgment, subjectivity and effort in performing
procedures and evaluating the significant assumptions used in management’s fair value estimates; and (iii) the audit effort involved
in the use of professionals with specialized skill and knowledge. 

 How
the Critical Audit Matter Was Addressed in the Audit 

 Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. 

 ● 
 These
 procedures included, among others, (i) testing management’s process for determining the fair value estimates of the entertainment/ticketing
 reporting unit; (ii) testing the completeness and accuracy of the underlying data used in the market approach; and (iii) evaluating
 the reasonableness of the significant assumptions used by management related to market multiples, peer group and comparable transaction
 selection and selection of relevant financial matrices for concluding the fair value of reporting unit and future levels of revenue
 growth. 

 ● 
 Evaluating
 management’s assumptions related to the future levels of revenue growth and involved evaluating whether the assumptions were
 reasonable considering (i) current and past performance of the reporting units; (ii) the consistency with external market and industry
 data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. 

 ● 
 Professionals
 with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the market approach and (ii) the
 reasonableness of significant assumptions related to the market multiples, peer group and comparable transaction selection and selection
 of relevant financial matrices for concluding the fair value of reporting unit and future levels of revenue growth. 

 /s/ RBSM LLP 

 We have served as the Company’s auditor since 2019. 

 New York, NY 

 April 1, 2024

 PCAOB ID Number 587

 New York, NY Washington DC Mumbai & Pune, India Boca Raton, FL 

 San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece 

 Member:
ANTEA International with affiliated offices worldwide 

 F- 3 

 DIGITAL
ALLY, INC. 

 CONSOLIDATED
BALANCE SHEETS 

 DECEMBER
31, 2023 AND 2022 

 2023 
 2022 

 Assets 
 
 Current assets: 
 
 Cash and cash equivalents 
 $ 680,549 
 $ 3,532,199 

 Accounts receivable-trade, less allowance for doubtful accounts of $ 200,668 – 2023 and $ 152,736 – 2022 
 1,584,662 
 2,044,056 

 Other receivables, net of $ 5,000 allowance – 2023 and $ 0 - 2022 (including $- 0 - due from related parties – 2023 and $ 138,384 – 2022, refer to Note 19) 
 3,107,634 
 4,076,522 

 Inventories, net 
 3,845,281 
 6,839,406 

 Prepaid expenses 
 6,366,368 
 8,466,413 

 Total current assets 
 15,584,494 
 24,958,596 

 Property, plant, and equipment, net 
 7,283,702 
 7,898,686 

 Goodwill and other intangible assets, net 
 16,510,422 
 17,872,970 

 Operating lease right of use assets, net 
 1,053,159 
 782,129 

 Other assets 
 6,597,032 
 5,155,681 

 Total assets 
 $ 47,028,809 
 $ 56,668,062 

 Liabilities and Equity 
 
 Current liabilities: 
 
 Accounts payable 
 $ 10,732,089 
 $ 9,477,355 

 Accrued expenses 
 3,269,330 
 1,090,967 

 Current portion of operating lease obligations 
 279,538 
 294,617 

 Contract liabilities – current 
 2,937,168 
 2,154,874 

 Notes payable – related party – current portion 
 2,700,000 
 — 

 Debt obligations – current 
 1,260,513 
 485,373 

 Warrant derivative liabilities 
 1,369,738 
 — 

 Income taxes payable 
 61 
 8,097 

 Total current liabilities 
 22,548,437 
 13,511,283 

 Long-term liabilities: 
 
 Debt obligations – long term 
 4,853,237 
 442,467 

 Operating lease obligation – long term 
 827,836 
 555,707 

 Contract liabilities – long term 
 7,340,459 
 5,818,082 

 Lease deposit 
 10,445 
 — 

 Total liabilities 
 35,580,414 
 20,327,539 

 Commitments and contingencies 
 - 
 - 

 Equity: 
 
 Common stock, $ 0.001 par value; 200,000,000 shares authorized; shares issued: 2,800,754 – 2023 and 2,720,170 – 2022 
 2,801 
 2,721 

 Additional paid in capital 
 128,441,083 
 127,869,342 

 Noncontrolling interest in consolidated subsidiary 
 673,292 
 448,694 

 Accumulated deficit 
 ( 117,668,781 ) 
 ( 91,980,234 ) 

 Total equity 
 11,448,395 
 36,340,523 

 Total liabilities and equity 
 $ 47,028,809 
 $ 56,668,062 

 See
Notes to Consolidated Financial Statements. 

 F- 4 

 DIGITAL
ALLY, INC. 

 CONSOLIDATED
STATEMENTS OF OPERATIONS 

 FOR
THE YEARS ENDED 

 DECEMBER
31, 2023 AND 2022 

 2023 
 2022 

 Revenue: 
 
 Product 
 $ 9,347,945 
 $ 10,999,892 

 Service and other 
 18,900,399 
 26,010,003 

 Total revenue 
 28,248,344 
 37,009,895 

 Cost of revenue: 
 
 Product 
 9,974,890 
 14,372,115 

 Service and other 
 12,510,970 
 20,315,839 

 Total cost of revenue 
 22,485,860 
 34,687,954 

 Gross profit 
 5,762,484 
 2,321,941 

 Selling, general and administrative expenses: 
 
 Research and development expense 
 2,618,746 
 2,290,293 

 Selling, advertising and promotional expense 
 7,137,529 
 9,312,204 

 General and administrative expense 
 18,246,762 
 20,452,702 

 Total selling, general and administrative expenses 
 28,003,037 
 32,055,199 

 Operating loss 
 ( 22,240,553 ) 
 ( 29,733,258 ) 

 Other income (expense): 
 
 Interest income 
 95,717 
 131,025 

 Interest expense 
 ( 3,134,253 ) 
 ( 37,196 ) 

 Other income 
 144,735 
 — 

 Other expense 
 — 
 ( 230,744 ) 

 Loss on accrual for legal settlement 
 ( 1,792,308 ) 
 — 

 Loss on conversion of convertible debt 
 ( 1,112,705 ) 
 — 

 Change in fair value of short-term investments 
 — 
 ( 84,818 ) 

 Change in fair value of warrant derivative liabilities 
 1,846,642 
 6,726,638 

 Change in fair value of contingent consideration promissory notes and earn-out agreements 
 177,909 
 516,970 

 Gain on the extinguishment of liabilities 
 550,867 
 — 

 Gain on extinguishment of warrant derivative liabilities 
 — 
 3,624,794 

 Gain on sale of property, plant and equipment 
 — 
 212,831 

 Total other income (loss) 
 ( 3,223,396 ) 
 10,859,500 

 Loss before income tax benefit (provision) 
 ( 25,463,949 ) 
 ( 18,873,758 ) 

 Income tax expense benefit (provision) 
 — 
 — 

 Net loss 
 ( 25,463,949 ) 
 ( 18,873,758 ) 

 Net income attributable to noncontrolling interests of consolidated subsidiary 
 ( 224,598 ) 
 ( 407,933 ) 

 Loss on redemption – Series A & B convertible redeemable preferred stock 
 — 
 ( 2,385,000 ) 

 Net loss attributable to common stockholders 
 $ ( 25,688,547 ) 
 $ ( 21,666,691 ) 

 Net loss per share attributable to common information: 
 
 Basic 
 $ ( 9.22 ) 
 $ ( 8.50 ) 

 Diluted 
 $ ( 9.22 ) 
 $ ( 8.50 ) 

 Weighted average shares outstanding: 
 
 Basic 
 2,784,894 
 2,548,549 

 Diluted 
 2,784,894 
 2,548,549 

 See
Notes to Consolidated Financial Statements. 

 F- 5 

 DIGITAL
ALLY, INC. 

 CONSOLIDATED STATEMENTS OF EQUITY 

 YEARS
ENDED DECEMBER 31, 2023 AND 2022 

 Noncontrolling 
 
 Additional 
 
 Interest in 
 
 Common Stock 
 Paid In 
 
 consolidated 
 Accumulated 
 
 Shares 
 Amount 
 Capital 
 
 subsidiary 
 deficit 
 Total 

 Balance, December 31, 2021 
 2,545,220 
 $ 2,545 
 $ 124,476,447 
 
 $ 56,453 
 $ ( 68,672,206 ) 
 $ 55,863,239 

 Stock-based compensation 
 — 
 — 
 1,282,757 
 
 — 
 — 
 1,282,757 

 Restricted common stock grant 
 35,750 
 36 
 ( 36 ) 
 
 — 
 — 
 — 

 Restricted common stock forfeitures 
 ( 3,250 ) 
 ( 3 ) 
 3 
 
 — 
 — 
 — 

 Distribution to noncontrolling interest in consolidated subsidiary 
 — 
 — 
 — 
 
 ( 15,692 ) 
 — 
 ( 15,692 ) 

 Issuance of common stock under rule 144 restrictions related to contemplated spin-off transaction 
 25,000 
 25 
 ( 25 ) 
 
 — 
 — 
 — 

 Repurchase and cancellation of common stock 
 ( 186,299 ) 
 ( 186 ) 
 — 
 
 — 
 ( 4,026,337 ) 
 ( 4,026,523 ) 

 Issuance of common stock through warrant exchange agreement 
 303,750 
 304 
 4,495,196 
 
 — 
 — 
 4,495,500 

 Loss on redemption of Series A and Series B Preferred Stock 
 — 
 — 
 ( 2,385,000 ) 
 
 — 
 — 
 ( 2,385,000 ) 

 Net loss 
 — 
 — 
 — 
 
 407,933 
 ( 19,281,691 ) 
 ( 18,873,758 ) 

 Balance, December 31, 2022 
 2,720,171 
 $ 2,721 
 $ 127,869,342 
 
 $ 448,694 
 $ ( 91,980,234 ) 
 $ 36,340,523 

 Balance, 
 2,720,171 
 $ 2,721 
 $ 127,869,342 
 
 $ 448,694 
 $ ( 91,980,234 ) 
 $ 36,340,523 

 Stock-based compensation 
 — 
 — 
 452,071 
 
 — 
 — 
 452,071 

 Restricted common stock grant 
 35,000 
 35 
 ( 35 ) 
 
 — 
 — 
 — 

 Restricted common stock forfeitures 
 ( 3,625 ) 
 ( 4 ) 
 4 
 
 — 
 — 
 — 

 Conversion of convertible note into common stock 
 25,000 
 25 
 119,725 
 
 — 
 — 
 119,750 

 Issuance due to rounding from reverse stock split 
 24,208 
 24 
 ( 24 ) 
 
 — 
 — 
 — 

 Net loss 
 — 
 — 
 — 
 
 224,598 
 ( 25,688,547 ) 
 ( 25,463,949 ) 

 Balance, December 31, 2023 
 2,800,754 
 $ 2,801 
 $ 128,441,083 
 
 $ 673,292 
 $ ( 117,668,781 ) 
 $ 11,448,395 

 Balance, 
 2,800,754 
 $ 2,801 
 $ 128,441,083 
 
 $ 673,292 
 $ ( 117,668,781 ) 
 $ 11,448,395 

 See
Notes to Consolidated Financial Statements. 

 F- 6 

 DIGITAL
ALLY, INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 YEARS
ENDED DECEMBER 31, 2023 AND 2022 

 2023 
 2022 

 Cash Flows from Operating Activities: 
 
 Net loss 
 $ ( 25,463,949 ) 
 $ ( 18,873,758 ) 

 Adjustments to reconcile net loss to net cash flows used in operating activities: 
 
 Depreciation and amortization 
 2,218,237 
 2,176,679 

 Gain on sale of property, plant and equipment 
 — 
 ( 212,831 ) 

 Stock based compensation 
 452,071 
 1,282,757 

 Non-cash interest expense 
 576,380 
 — 

 Amortization of debt issuance costs 
 161,893 
 — 

 Gain on extinguishment of liabilities 
 ( 550,867 ) 
 — 

 Convertible debt discount amortization 
 2,169,545 
 — 

 Loss on conversion of debt 
 93,386 
 — 

 Loss on extinguishment of convertible debt 
 1,019,319 
 — 

 Loss on accrual for legal settlement 
 1,792,308 
 
 — 

 Provision for doubtful accounts receivable 
 47,932 
 ( 39,502 ) 

 Provision for doubtful lease receivable 
 5,000 
 140,448 

 Change in fair value of contingent consideration promissory notes and earn-out agreements 
 ( 177,909 ) 
 ( 516,970 ) 

 Change in fair value of warrant derivative liability 
 ( 1,846,642 ) 
 ( 6,726,638 ) 

 Gain on extinguishment of warrant derivative liabilities 
 — 
 ( 3,624,794 ) 

 Provision for inventory obsolescence 
 ( 947,080 ) 
 1,574,453 

 Change in operating assets and liabilities: 
 
 (Increase) decrease in: 
 
 Accounts receivable – trade 
 411,462 
 722,498 

 Accounts receivable – other (including related party) 
 963,888 
 ( 2,195,157 ) 

 Inventories 
 3,941,205 
 1,245,677 

 Prepaid expenses 
 2,100,045 
 1,293,080 

 Operating lease right of use assets 
 340,672 
 328,772 

 Other assets 
 ( 1,343,751 ) 
 ( 3,048,382 ) 

 Increase (decrease) in: 
 
 Accounts payable 
 1,805,601 

 4,709,030 

 Accrued expenses 
 289,957 
 ( 112,896 ) 

 Accrued interest - related party 
 95,031 
 — 

 Income taxes payable 
 ( 8,036 ) 
 6,270 

 Lease deposit 
 10,445 
 — 

 Operating lease obligations 
 ( 354,652 ) 
 ( 328,772 ) 

 Contract liabilities 
 2,304,671 
 3,619,651 

 Net cash used in operating activities 
 ( 9,893,838 ) 
 ( 18,580,385 ) 

 Cash Flows from Investing Activities: 
 
 Purchases of property, plant and equipment 
 ( 94,165 ) 
 ( 2,068,508 ) 

 Proceeds from sale of property, plant and equipment 
 — 
 609,559 

 Purchases of intangible assets 
 ( 146,541 ) 
 ( 116,990 ) 

 Proceeds from sale of intangible assets 
 — 
 18,975 

 Cash paid for acquisition of Medical Billing Company 
 — 
 ( 1,153,627 ) 

 Cash paid for asset acquisition of Medical Billing Company 
 — 
 ( 230,000 ) 

 Net cash used in investing activities 
 ( 240,706 ) 
 ( 2,940,591 ) 

 Cash Flows from Financing Activities: 
 
 Repurchase and cancellation of common stock 
 — 
 ( 4,026,523 ) 

 Distribution to noncontrolling interest in consolidated subsidiary 
 — 
 ( 15,692 ) 

 Net proceeds of convertible debt with detachable warrants 
 2,640,000 
 — 

 Net proceeds of related party note payable 
 2,700,000 
 — 

 Net proceeds of revolving loan agreement – Video Solutions Segment 
 4,691,745 
 — 

 Proceeds – Commercial Extension of Credit – Entertainment Segment 
 1,455,643 
 — 

 Proceeds – Merchant Advances – Video Solutions Segment 
 1,000,000 
 — 

 Payments on convertible debt 
 ( 3,162,500 ) 
 — 

 Payments on Commercial Extension of Credit – Entertainment Segment 
 ( 1,367,715 ) 
 — 

 Payments on Merchant Advances – Video Solutions Segment 
 ( 162,000 ) 
 — 

 Principal payment on EIDL loan 
 ( 2,219 ) 
 — 

 Principal payment on contingent consideration promissory notes 
 ( 412,460 ) 
 ( 527,402 ) 

 Proceeds from issuance of Series A & B convertible redeemable preferred shares, net of issuance costs 
 — 
 13,365,000 

 Redemption of Series A & B convertible redeemable preferred shares 
 — 
 ( 15,750,000 ) 

 Net cash provided by (used in) financing activities 
 7,380,494 
 ( 6,954,617 ) 

 Net decrease in cash, cash equivalents and restricted cash 
 ( 2,754,050 ) 
 ( 28,475,593 ) 

 Cash, cash equivalents and restricted cash, beginning of year 
 3,532,199 
 32,007,792 

 Cash, cash equivalents, and restricted cash, end of year 
 $ 778,149 
 $ 3,532,199 

 Supplemental disclosures of cash flow information: 
 
 Cash payments for interest 
 $ 88,631 
 $ 49,070 

 Cash payments for income taxes 
 $ 1,606 
 $ 8,730 

 Supplemental disclosures of non-cash investing and financing activities: 
 
 Restricted common stock grant 
 $ 35 
 $ 61 

 Restricted common stock forfeitures 
 $ 4 
 $ 3 

 Issuance of contingent consideration earn-out agreement for business acquisitions 
 $ — 
 $ 750,000 

 Issuance of contingent consideration promissory note for asset acquisitions 
 $ — 
 $ 105,000 

 Assets acquired in business acquisitions 
 $ — 
 $ 190,631 

 Goodwill acquired in business acquisitions 
 $ — 
 $ 2,100,000 

 Liabilities assumed in business acquisitions 
 $ — 
 $ 387,005 

 ROU and lease liability recorded on extension of lease 
 $ 611,702 
 $ 42,403 

 Common stock issued due to rounding from reverse stock split 
 $ 24 
 $ — 

 Conversion of convertible notes payable into common stock 
 $ 119,750 
 $ — 

 Issuance of common stock through warrant exchange agreement 
 $ — 
 $ 4,495,500 

 Debt discount on convertible note 
 $ 3,000,000 
 $ — 

 F- 7 

 DIGITAL
ALLY, INC. 

 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS 

 NOTE
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 Nature
of Business: 

 Digital
Ally, Inc. was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November
30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital
Ally, Inc. (such merged entity, the “Predecessor Registrant”). 

 On
August 23, 2022 (the “ Effective Time ”), the Predecessor Registrant merged with and into its wholly owned subsidiary,
DGLY Subsidiary Inc., a Nevada corporation (the “ Registrant ”), pursuant to an agreement and plan of merger, dated
as of August 23, 2022 (the “ Merger Agreement ”), between the Predecessor Registrant and the Registrant, with the Registrant
as the surviving corporation in the merger (such transaction, the “ Merger ”). At the Effective Time, Articles of Merger
were filed with the Secretary of State of the State of Nevada, pursuant to which the Registrant was renamed “Digital Ally, Inc.”
and, by operation of law, succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor Registrant
immediately prior to the Merger. Under the Nevada Revised Statutes, shareholder approval was not required in connection with the Merger
Agreement or the transactions contemplated thereby. 

 At
the Effective Time, pursuant to the Merger Agreement, (i) each outstanding share of Predecessor Registrant’s common stock, par
value $ 0.001 per share (the “ Predecessor Common Stock ”) automatically converted into one share of common stock, par
value $ 0.001 per share, of the Registrant (“ Registrant Common Stock ”), (ii) each outstanding option, right or warrant
to acquire shares of Predecessor Common Stock converted into an option, right or warrant, as applicable, to acquire an equal number of
shares of Registrant Common Stock under the same terms and conditions as the original options, rights or warrants, and (iii) the directors
and executive officers of the Predecessor Registrant were appointed as directors and executive officers, as applicable, of the Registrant,
each to serve in the same capacity and for the same term as such person served with the Predecessor Registrant immediately before the
Merger. 

 The
business of the Registrant, Digital Ally, Inc. (with its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products,
LLC, Digital Ally Healthcare, LLC (“Digital Ally Healthcare”), TicketSmarter, Inc. (“TicketSmarter”), Worldwide
Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc. (“Kustom 440”), Kustom Entertainment, Inc.,
and its majority-owned subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,” and the
“Company”), is divided into three reportable operating segments: 1) the Video Solutions Segment, 2) the Revenue Cycle Management
Segment and 3) the Ticketing Segment. The Video Solutions Segment is our legacy business that produces digital video imaging, storage
products, disinfectant and related safety products for use in law enforcement, security and commercial applications. This segment includes
both service and product revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video
and health safety solutions. The Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare
organizations throughout the country, as a monthly service fee. The Ticketing Segment acts as an intermediary between ticket buyers and
sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through
various platforms. The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments
in annual financial statements and requires selected information of those segments to be presented in financial statements. Such required
segment information is included in Note 23. 

 Reverse
Stock Split 

 On
February 6, 2023, the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended, with the Secretary of State
of the State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of its common stock.
The Reverse Stock Split was effective as of time of filing. No fractional shares were issued in connection with the Reverse Stock Split.
Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest
whole number. In connection with the Reverse Stock Split, the board of directors of the Company approved appropriate and proportional
adjustments to all outstanding securities or other rights convertible or exercisable into shares of the Company’s common stock,
including, without limitation, all preferred stock, warrants, options, and other equity compensation rights. All historical share and
per-share amounts reflected throughout the Company’s consolidated financial statements and other financial information in this
Report have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented. The par value
per share of the Company’s common stock was not affected by the Reverse Stock Split. 

 F- 8 

 Business
Combination 

 In
June 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp.,
a Delaware corporation (Nasdaq: CLOE) (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary
of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as
the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Clover Leaf in accordance
with the terms and conditions of the Merger Agreement, and Kustom Entertainment, Inc., a Nevada corporation, a wholly owned subsidiary
of the Company, with a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary
ticketing technologies (“Kustom”). Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein
upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with
and into Kustom, with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf. 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”. 

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

 Basis
of Consolidation : 

 The
accompanying financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries, Digital Ally International,
Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu
Jets, Inc., Kustom 440, Inc., and its majority-owned subsidiary Nobility Healthcare, LLC. All intercompany balances and transactions
have been eliminated during consolidation. 

 The
Company formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. The Company formed
Shield Products, LLC in May 2020 to facilitate the sales of its Shield™ line of disinfectant/cleanser products and ThermoVu®
line of temperature monitoring equipment. The Company formed Nobility Healthcare, LLC (“Nobility Healthcare”) in June 2021
to facilitate the operations of its revenue cycle management solutions and back-office services for healthcare organizations. The Company
formed TicketSmarter, Inc. upon its acquisition of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate its global ticketing operations.
The Company formed Worldwide Reinsurance Ltd., which is a captive insurance company domiciled in Bermuda. It will provide primarily liability
insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s insurance
marketplace. The Company formed Digital Connect, Inc. and BirdVu Jets, Inc. for travel and transportation purposes in 2022. The Company
formed Kustom 440, Inc. in 2022 to create unique entertainment experiences directly for consumers, and Kustom Entertainment, Inc. in
2023 to serve as the participant in the Business Combination. 

 Fair
Value of Financial Instruments : 

 The
carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated
notes payable approximate fair value because of the short-term nature of these items. 

 Revenue
Recognition : 

 The
Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers , and all
related appropriate guidance. The Company recognizes revenue under the core principle to depict the transfer of control to its customers
in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company applies
the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract,
(3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize
revenue when a performance obligation is satisfied. 

 The
Company has two different revenue streams, product and service, represented through its three segments. The Company reports all revenues
on a gross basis, other than service revenues from the Company’s entertainment and revenue cycle management segments, Revenues
generated by all segments are reported net of sales taxes. 

 F- 9 

 Video
Solutions 

 The
Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the
customer. In situation where sales are to a distributor, the Company had concluded its contracts are with the distributor as the Company
holds a contract bearing enforceable rights and obligations only with the distributor. As part of part of its consideration for the contract,
the Company evaluates certain factors including the customers’ ability to pay (or credit risk). For each contract, the Company
considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In determining the
transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which
it expects to be entitled. As the Company’s standard payment terms are less than one year, it has elected the practical expedient
under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction
price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is
considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar
circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e. when the Company’s performance
obligations is satisfied), which typically occurs at shipment. Further in determining whether control has been transferred, the Company
considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the
customer. Customers do not have a right to return the product other than for warranty reasons for which they would only receive repair
services or replacement products. The Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions for
product sales when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than
one year. 

 Service
and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue. Revenue is
recognized upon shipment of the product and acceptance of the service or materials by the end customer for repair services. Revenue for
extended warranty, cloud service or other software-based products is over the term of the contract warranty or service period. A time-elapsed
method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration
related to these revenues is generally recognized on a straight-line basis over the contract term, as long as the other revenue recognition
criteria have been met. 

 The
Company’s multiple performance obligations may include future in-car or body-worn camera devices to be delivered at defined points
within a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year
contract to future deliverables using management’s best estimate of selling price. 

 Revenue
Cycle Management 

 The
Company reports revenue cycle management revenues on a net basis, as its primary source of revenue is its end-to-end service fees which
is generally determined as a percentage of the invoice amounts collected. These service fees are reported as revenue monthly upon completion
of the Company’s performance obligation to provide the agreed upon service. 

 Entertainment 

 The
Company reports ticketing revenue on a gross or net basis based on management’s assessment of whether the Company is acting as
a principal or agent in the transaction. The determination is based upon the evaluation of control over the event ticket, including the
right to sell the ticket, prior to its transfer to the ticket buyer. 

 The
Company sells tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to
the buyer upon confirmation of the order. The Company acts as the principal in these transactions as the ticket is owned by the Company
at the time of sale, therefore controlling the ticket prior to transferring to the customer. In these transactions, revenue is recorded
on a gross basis based on the value of the ticket and is recognized when an order is confirmed. Payment is typically due upon delivery
of the ticket. 

 The
Company also acts as an intermediary between buyers and sellers through online secondary marketplace. Revenues derived from this marketplace
primarily consist of service fees from ticketing operations, and consists of one primary performance obligation, which is facilitating
the transaction between the buyer and seller, being satisfied at the time the order has been confirmed. As the Company does not control
the ticket prior to the transfer, the Company acts as an agent in these transactions. Revenue is recognized on a net basis, net of the
amount due to the seller when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s
listing. Payment is due at the time of sale. 

 F- 10 

 Other 

 Contract
liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately
as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts,
prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied.
During the year ended December 31, 2023, the Company recognized revenue of $2.6 million related to its contract liabilities. Contract
liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately
as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts,
prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied.
Total contract liabilities consist of the following: 

 SCHEDULE
OF CONTRACT LIABILITIES 

 December 31, 2023 

 December 31, 2022 
 Additions/Reclass 
 Recognized Revenue 
 December 31, 2023 

 Contract liabilities, current 
 $ 2,154,874 
 $ 2,538,187 
 $ 1,755,893 
 $ 2,937,168 

 Contract liabilities, non-current 
 5,818,082 
 2,328,994 
 806,617 
 7,340,459 

 $ 7,972,956 
 $ 4,867,181 
 $ 2,562,510 
 $ 10,277,627 

 December 31, 2022 

 December 31, 2021 
 Additions/Reclass 
 Recognized Revenue 
 December 31, 2022 

 Contract liabilities, current 
 $ 1,665,519 
 $ 1,478,479 
 $ 989,124 
 $ 2,154,874 

 Contract liabilities, non-current 
 2,687,786 
 4,560,600 
 1,430,304 
 5,818,082 

 $ 4,353,305 
 $ 6,039,079 
 $ 2,419,428 
 $ 7,972,956 

 Sales
returns and allowances aggregated $ 117,713 and $ 118,026 for the years ended December 31, 2023 and 2022, respectively. Obligations for
estimated sales returns and allowances are recognized at the time of sales on an accrual basis. The accrual is determined based upon
historical return rates adjusted for known changes in key variables affecting these return rates. 

 Use
of Estimates : 

 The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Management utilizes various other estimates,
including but not limited to, determining the estimated lives of long-lived assets, determining the potential impairment of
long-lived assets, the fair value of warrants, options, the recognition of revenue, inventory valuation reserve, allowances for
doubtful accounts and other receivables, incremental borrowing rate on leases, the valuation allowance for deferred tax assets and other legal
claims and contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period
in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected
in the period that they are determined to be necessary. 

 F- 11 

 Cash
and cash equivalents : 

 Cash
and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less.
The following table shows the Company’s cash and cash equivalents by significant investment category as of December 31, 2023 and
2022: 

 SCHEDULE
OF SHORT TERM INVESTMENTS 

 December 31, 2023 

 Adjusted
 Cost 
 Realized
 Gains 
 Realized
 Losses 
 Fair Value 

 Demand deposits 
 $ 545,207 
 $ — 
 $ — 
 $ 545,207 

 Short-term investments with original maturities of 90 days or less (Level 1): 
 
 Money market funds 
 135,342 
 — 
 — 
 135,342 

 $ 680,549 
 $ — 
 $ — 
 $ 680,549 

 December 31, 2022 

 Adjusted
 Cost 
 Realized
 Gains 
 Realized
 Losses 
 Fair Value 

 Demand deposits 
 $ 897,745 
 $ — 
 $ — 
 $ 897,745 

 Short-term investments with original maturities of 90 days or less (Level 1): 
 
 Money market funds 
 2,634,454 
 — 
 — 
 2,634,454 

 $ 3,532,199 
 $ — 
 $ — 
 $ 3,532,199 

 The
Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that
at times may be in excess of the federally insured limit of $ 250,000 per bank. The Company minimizes this risk by placing its cash deposits
with numerous major financial institutions. At December 31, 2023 and 2022, the uninsured balance amounted to $ 29,700 and $ 2,495,189 ,
respectively. 

 Restricted
Cash : 

 Restricted
cash of $ 97,600 and $- 0 - was included in other assets as of December 31, 2023 and 2022, respectively. Restricted cash consists of bank
deposits that collateralize our debt obligations. 

 The
following table provides a reconciliation of cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents
and restricted cash in the consolidated statements of cash flows: 

 SCHEDULE
OF RECONCILIATION OF CASH AND CASH EQUIVALENTS 

 December 31,
 2023 
 December 31,
 2022 

 Cash and cash equivalents 
 $ 680,549 
 $ 3,532,199 

 Long-term restricted cash included in other assets 
 97,600 
 — 

 Total cash, cash equivalents and restricted cash in the statements of cash flows 
 $ 778,149 
 $ 3,532,199 

 Accounts
Receivable : 

 Accounts
receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding
amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables
and considering a customer’s financial condition, credit history, and current economic conditions. 

 Trade
receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.
A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days
beyond terms. No interest is charged on overdue trade receivables. 

 Goodwill
and Other Intangibles : 

 Goodwill
 - In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations , using the acquisition
method of accounting. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired
is recorded as goodwill. In accordance with ASC 350, Intangibles - Goodwill and Other , the Company assesses goodwill for impairment
annually as of December 31, and more frequently if events and circumstances indicate that goodwill might be impaired. 

 Goodwill
impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially
recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and
all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. 

 F- 12 

 Traditionally,
goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying
amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there
is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to
measure the amount of impairment, if any. Step two involves calculating an implied fair value of goodwill. The Company has adopted ASU
2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the
Company compares the fair value of a reporting unit with its respective carrying value and recognizes an impairment charge for the amount
by which the carrying amount exceeded the reporting unit’s fair value. 

 The
Company determines the fair value of its reporting units using the market approach. Under the market approach, we estimate the fair value
based on multiples of comparable public companies and precedent transactions. Significant estimates in the market approach include: identifying
similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing
comparable revenue and operating income multiples in estimating the fair value of the reporting unit. 

 Long-lived
and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with
the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets . An impairment review is performed whenever
events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company groups its assets
at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities.
The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level. 

 Factors
considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating
results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative
industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or
more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use
of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less
than the carrying amount of the asset, the Company recognizes an impairment loss. An impairment loss is reflected as the amount by which
the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows,
if fair value is not available. The Company assessed potential impairments of its long-lived assets as of December 31, 2023 and concluded
that there was no impairment. 

 Long-lived
assets such as property, plant and equipment and purchased intangible assets subject to amortization are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived
asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by
that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an
undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is
determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party appraisals,
as considered necessary. 

 Intangible
assets include deferred patent costs and license agreements and intangibles related to acquisitions. Legal expenses incurred in preparation of
patent application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation
of applications that are not granted will be charged to expense at that time. The Company has entered into several sublicense
agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products. These
sublicense agreements generally require upfront payments to obtain the exclusive rights to such material. The Company capitalizes
the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight-line
method. 

 Inventories : 

 Inventories
for the video solutions segment consist of electronic parts, circuitry boards, camera parts and ancillary parts (collectively, “components”),
work-in-process and finished goods. Finished goods that are manufactured and assembled by the Company are carried at the lower of cost
or net realizable value, with cost determined by standard cost methods, which approximate the first-in, first-out method. Inventory costs
include material, labor and manufacturing overhead. Inventories for the entertainment segment consists of tickets to live events purchased,
which are held at lower of cost or net realizable value, and written-off after the event has occurred. Event tickets for the entertainment
segment are carried at lower of cost or net realizable value, and fully written off at the time the event occurs if the ticket is unsold
and remaining in inventory after the completion of the event. Management has established inventory reserves based on estimates of excess
and/or obsolete current inventory. 

 F- 13 

 Manufacturing
inventory for the video solutions segment is reviewed for obsolescence and excess quantities on a quarterly basis, based on estimated
future use of quantities on hand, which is determined based on past usage, planned changes to products and known trends in markets and
technology. Changes in support plans or technology could have a significant impact on obsolescence. 

 To
support our world-wide service operations for the video solutions segment, we maintain service spare parts inventory, which consists
of both consumable and repairable spare parts. Consumable service spare parts are used within our service business to replace worn or
damaged parts in a system during a service call and are generally classified in current inventory as our stock of this inventory turns
relatively quickly. However, if there has been no recent usage for a consumable service spare part, but the part is still necessary to
support systems under service contracts, the part is considered to be non-current and included within non-current inventories within
our consolidated balance sheet. Consumables are charged to cost of goods sold when issued during the service call. 

 As
these service parts age over the related product group’s post-production service life, we reduce the net carrying value of our
repairable spare part inventory on the consolidated balance sheet to account for the excess that builds over the service life. The post-production
service life of our systems is generally seven to twelve years and, at the end of twelve years, the carrying value for these parts in
our consolidated balance sheet is reduced to zero. We also perform periodic monitoring of our installed base for premature end of service
life events and expense, through cost of sales, the remaining net carrying value of any related spare parts inventory in the period incurred. 

 Property,
plant and equipment : 

 Property,
plant and equipment is stated at cost net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance
and repair expenditures are charged to expense as incurred. Depreciation is recorded by the straight-line method over the estimated useful
life of the asset, which ranges from three to thirty years, other than the infinite useful life of land. Amortization expense on capitalized
leases is included with depreciation expense. The cost and accumulated depreciation related to assets sold or retired are removed from
the accounts and any gain or loss is credited or charged to income. 

 Leases : 

 The
Company determines if an arrangement contains a lease at inception. For arrangements where the Company is the lessee, the Company will
evaluate whether to account for the lease as an operating or finance lease. Operating leases are included in the right of use assets
(ROU) and operating lease liabilities on the consolidated balance sheet as of December 31, 2023. Finance leases would be included in
property, plant and equipment, net and long-term debt and finance lease obligations on the balance sheet. The Company had operating leases
for copiers, offices and warehouse space at December 31, 2023 but no financing leases. 

 ROU
assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement
date. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the
operating lease liabilities if the operating lease does not provide an implicit rate. Lease terms may include the option to extend when
Company is reasonably certain that the option will be exercised. Lease expense for operating leases is recognized on a straight-line
basis over the lease term. 

 The
Company elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not
recognized for short term leases. 

 Warranties : 

 The
Company’s video solutions segment products carry explicit product warranties that extend up to two years from the date of shipment.
The Company records a provision for estimated warranty costs based upon historical warranty loss experience and periodically adjusts
these provisions to reflect actual experience. Accrued warranty costs are included in accrued expenses. Extended warranties are offered
on selected products and when a customer purchases an extended warranty the associated proceeds are treated as contract liabilities and
recognized over the term of the extended warranty. 

 F- 14 

 Shipping
and Handling Costs : 

 Shipping
and handling costs video solutions segment for outbound sales orders totaled $ 51,061 and $ 70,749 for the years ended December 31, 2023
and 2022, respectively. Such costs are included in selling, general and administrative expenses in the Consolidated Statements of Operations. 

 Advertising
Costs : 

 Advertising
expense video solutions segment and entertainment segments includes costs related to trade shows and conventions, promotional material
and supplies, and media costs. Advertising costs are expensed in the period in which they are incurred. The Company incurred total advertising
expenses of approximately $ 5,773,965 and $ 7,668,641 for the years ended December 31, 2023 and 2022, respectively. Such costs are included
in selling, advertising and promotional expenses in the Consolidated Statements of Operations. 

 Income
Taxes : 

 Deferred
taxes are provided for by the liability method in which deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 

 The
Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
No. 740 - Income Taxes that provides a framework for accounting for uncertainty in income taxes and provided a comprehensive model to
recognize, measure, present, and disclose in its financial statements uncertain tax positions taken or expected to be taken on a tax
return. It initially recognizes tax positions in the financial statements when it is more likely than not the position will be sustained
upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit
that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position
and all relevant facts. Application requires numerous estimates based on available information. The Company considers many factors when
evaluating and estimating its tax positions and tax benefits, and it recognized tax positions and tax benefits may not accurately anticipate
actual outcomes. As it obtains additional information, the Company may need to periodically adjust its recognized tax positions and tax
benefits. These periodic adjustments may have a material impact on its Consolidated Statements of Operations. 

 The
Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense
in the Consolidated Statements of Operations. There was no interest expense related to the underpayment of estimated taxes during the
years ended December 31, 2023 and 2022. There were no penalties in 2023 and 2022. 

 The
Company is subject to taxation in the United States and various states. As of December 31, 2023, the Company’s tax returns filed
for 2020, 2021 and 2022 and to be filed for 2023 are subject to examination by the relevant taxing authorities. With a few exceptions,
as of December 31, 2023, the Company is no longer subject to Federal, state, or local examinations by tax authorities for taxable years
prior to 2020. 

 Research
and Development Expenses : 

 The
Company expenses all research and development costs as incurred, which is generally incurred by the video solutions segment. Development
costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological
feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s
products are released soon after technological feasibility has been established. Costs incurred subsequent to achievement of technological
feasibility were not significant, and software development costs were expensed as incurred during 2023 and 2022. 

 F- 15 

 Warrant
Derivative Liabilities : 

 In
accordance with FASB ASC 815-40, Derivatives and Hedging: Contracts in an Entities Own Equity, entities must consider whether to classify
contracts that may be settled in its own stock, such as warrants to purchase shares of Common Stock, as equity of the entity or as an
asset or liability. If an event that is not within the entity’s control could require net cash settlement, then the contract should
be classified as an asset or a liability rather than as equity. We have determined because the terms of the warrants issued during the
first quarter of 2021, and remain outstanding, include a provision that entitles all the warrant holders to receive cash for their warrants
in the event of a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled
to cash, our warrants should be classified as liability measured at fair value, with changes in fair value each period reported in earnings.
Volatility in the price of our common stock may result in significant changes in the value of the derivatives and resulting gains and
losses on our statement of operations. 

 Stock-Based
Compensation : 

 The
Company grants stock-based compensation to its employees, board of directors and certain third-party contractors. Share-based compensation
arrangements may include the issuance of options to purchase common stock in the future or the issuance of restricted stock, which generally
are subject to vesting requirements. The Company records stock-based compensation expense for all stock-based compensation granted based
on the grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period
of the award. 

 The
Company estimates the grant-date fair value of stock-based compensation using the Black-Scholes valuation model. Assumptions used to
estimate compensation expense are determined as follows: 

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

 ● 
 Expected
 volatility of award grants made in the Company’s plan is measured using the weighted average of historical daily changes in
 the market price of the Company’s common stock over the period equal to the expected term of the award; 

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

 ● 
 Risk-free
 interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a maturity equal to the expected term of
 the awards; and 

 ● 
 Forfeitures
 are accounted for as they occur. 

 Segment
Reporting 

 The
accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial
statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified
as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision
maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess
performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which
has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate
administrative activities, is also to be reported in the segment information. Therefore, its operations are eliminated in consolidation
and is not considered a separate business segment for financial reporting purposes. 

 F- 16 

 Contingent
Consideration 

 In
circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities
from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of
the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value through the consolidated
statement of operations. 

 Repurchase
and Cancellation of Shares 

 From
time to time, the Board may authorize share repurchases of common stock. Shares
repurchased under Board authorizations are held in treasury for general corporate purposes and cancelled when it is determined appropriate
by management. The Company accounts for repurchases of common stock under the cost method. Shares repurchased and cancelled during the
period were recorded as a reduction to stockholders’ equity. See further discussion of the Company’s share repurchase program
in Note 18–Stockholders’ Equity. 

 Non-Controlling
Interests 

 Non-controlling
interests in the Company’s Consolidated Financial Statements represent the interest in subsidiaries held by venture partners. The
venture partners hold noncontrolling interests in the Company’s consolidated subsidiary Nobility Healthcare, LLC. Since the Company
consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share of
each subsidiary’s results of operations are deducted and reported as net income attributable to noncontrolling interest in the
Consolidated Statements of Operations. 

 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. 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. 

 Lease
Receivable 

 Lease
receivable are carried at the original invoice amount less the total payments received pertaining to each individual customer’s
lease agreement. These agreements range from three to five years and are removed from lease receivables upon termination of the agreement.
The Company determines if an allowance for doubtful accounts by regularly evaluating individual customer lease receivables and considering
a customer’s financial condition, credit history, and current economic conditions. No allowance was deemed necessary for the year
ended December 31, 2023. 

 Notes
Receivable 

 Notes
receivable are carried at the original note amount less an estimate made for doubtful receivables based on a review of all outstanding
notes on a quarterly basis. The Company determines the allowance for doubtful accounts by regularly evaluating each note receivable and
considering the borrower’s financial condition, credit history, and current economic conditions. The Company entered into a promissory
note, through its entertainment segment, as part of a co-marketing agreement, with a principal amount of $ 3,000,000 . Principal payment,
since its inception, on this promissory note totaled $ 2,849,846 as of December 31, 2023, resulting in a remaining balance of $ 150,154 
maturing December 31, 2023 . 

 F- 17 

 New
Accounting Standards 

 In
November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December
15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to
be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories
and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in
the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial
statements and related disclosures. 

 In
December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”
(“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories
in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between
domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU
2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among
other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual
financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis,
but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated
financial statements and related disclosures. 

 Going
Concern Matters and Management’s Plans 

 The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The Company incurred substantial operating losses in
the years ended December 31, 2023 and December 31, 2022 primarily due to reduced gross margins caused by a combination of
competitors’ introduction of newer products with more advanced features together with significant price cutting of their
products and the recent acquisitions with much smaller margins than the video solutions segment, historically. The Company incurred
operating losses of approximately $ 22.2 
million for the year ended December 31, 2023 and $ 29.7 
million during the year ended December 31, 2022 and it had an accumulated deficit of $ 117.7 
million as of December 31, 2023. These matters raise substantial doubt about Company’s ability to continue as a going
concern. In recent years the Company has accessed the public and private capital markets to raise funding through the issuance of
debt and equity. In that regard, the Company raised approximately $ 66.6 million
in the year ended December 31, 2021 through two underwritten public offerings. These equity raises were utilized to fund its
operations and acquisitions. Management expects to continue this pattern until it achieves positive cash flows from operations,
although it can offer no assurance in this regard. 

 The
Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund
its operational plans, meet its customary payment obligations and otherwise execute its business plan. There can be no assurance that
it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing when needed, and
obtain it on terms acceptable or favorable to the Company. 

 The
Company has increased its contract liabilities to nearly $ 10.3 million as of December 31, 2023, which results in recurring revenue during
the period of 2023 to 2026. The Company believes that its quality control and cost cutting initiatives, expansion to non-law enforcement
sales channels and new product introduction will eventually restore positive operating cash flows and profitability, although it can
offer no assurances in this regard. 

 The
Company has significantly cut costs in its entertainment segment through the removal of several large partnerships and sponsorships.
These were not yielding the results management expected; thus, it is not expected that these costs with significantly hinder total revenues
in 2024 and beyond. 

 In
addition to the initiatives described above, the Board of Directors is conducting a review of a full range of strategic alternatives
to best position the Company for the future including, but not limited to, the sale of all or certain assets, properties or groups of
properties or individual businesses or merger or combination with another company. The result of this review may also include the continued
implementation of the Company’s business plan. There can be no assurance that any additional transactions or financings will result
from this process. 

 F- 18 

 In
that regard, the Company, entered into an Agreement and Plan of Merger with Clover Leaf Capital Corp., with a focus and mission to own
and produce events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies. Pursuant to the
Merger Agreement, the entertainment segment will become a separate publicly traded Company while the video and revenue cycle management
segments will be retained by Digital Ally, Inc. 

 Based
on the uncertainties described above, the Company believes its business plan does not alleviate the existence of substantial doubt about
its ability to continue as a going concern within one year from the date of the issuance of these consolidated financial statements.
The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of
asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

 NOTE
2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS 

 Financial
instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable. Sales to domestic customers
are typically made on credit and the Company generally does not require collateral while sales to international customers require payment
before shipment or backing by an irrevocable letter or credit. The Company performs ongoing credit evaluations of its customers’
financial condition and maintains an allowance for estimated losses. Accounts are written off when deemed uncollectible and accounts
receivable are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts totaled $ 200,668 
 as of December 31, 2023 and 
$ 152,736 as of December 31, 2022.

 The
Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that
at times may be in excess of the federally insured limit of $ 250,000 per bank. The Company minimizes this risk by placing its cash deposits
with major financial institutions. At December 31, 2023 and 2022, the uninsured balance amounted to $ 29,700 and $ 2,495,189 , respectively.
The Company uses primarily a network of unaffiliated distributors for international sales and an employee-based direct sales force for
domestic sales. No international distributor individually exceeded 10 % of total revenues. No one individual customer receivable balance
exceeded 10 % of total accounts receivable as of December 31, 2023. 

 The
Company’s video solutions segment purchases finished circuit boards and other proprietary component parts from suppliers located
in the United States and on a limited basis from Asia. Although the Company obtains certain of these components from single source suppliers,
it generally owns all tooling and management has located alternative suppliers to reduce the risk in most cases to supplier problems
that could result in significant production delays. The Company has not historically experienced significant supply disruptions from
any of its principal vendors and does not anticipate future supply disruptions. The Company acquires most of its components on a purchase
order basis and does not have long-term contracts with its suppliers. 

 NOTE
3. ACCOUNTS RECEIVABLE – ALLOWANCE FOR DOUBTFUL ACCOUNTS 

 The
allowance for doubtful accounts receivable was comprised of the following for the years ended December 31, 2023 and 2022: 

 SCHEDULE
OF ALLOWANCE FOR DOUBTFUL ACCOUNTS 

 December 31, 2023 
 December 31, 2022 

 Beginning balance 
 $ 152,736 
 $ 113,234 

 Provision for bad debts 
 84,446 
 126,018 

 Charge-offs to allowance, net of recoveries 
 ( 36,514 ) 
 ( 86,516 ) 

 Ending balance 
 $ 200,668 
 $ 152,736 

 F- 19 

 NOTE
4. OTHER RECEIVABLES 

 Other
receivables were the following at December 31, 2023 and December 31, 2022: 

 SCHEDULE OF OTHER
RECEIVABLES 

 December 31,
 2023 
 December 31,
 2022 

 Notes receivable 
 $ 150,154 
 $ 1,598,340 

 Lease receivable, net 
 2,940,261 
 2,339,799 

 Other 
 17,219 
 138,383 

 Total other receivables 
 $ 3,107,634 

 $ 4,076,522 

 Notes
receivable decreased by over $ 1.4 million at December 31, 2023 compared to December 31, 2022, primarily due to payments on a note receivable
issued by the Company during 2022. The Company entered into a promissory note, through its entertainment segment, as part of a co-marketing
agreement, with a principal amount of $ 3,000,000 . Principal payment, since its inception, on this promissory note totaled $ 2,849,846 
as of December 31, 2023, resulting in a remaining balance of $ 150,154 maturing December 31, 2023. Lease receivable increased by $ 0.6 
million primarily due to increased sales under the Company’s subscription model during 2023. The Company determines if an allowance
for doubtful accounts by regularly evaluating notes receivable and individual customer lease receivables, by considering a customer’s
financial condition, credit history, and current economic conditions. The Company recorded an allowance of $ 5,000 and $- 0 - for the years
ended December 31, 2023 and 2022. Other receivables relate to a related party receivable further described in Note 19. 

 NOTE
5. INVENTORIES 

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

 SCHEDULE
OF INVENTORIES 

 December 31,

 2023 
 December 31,

 2022 

 Raw material and component parts– video solutions segment 
 $ 3,044,653 
 $ 4,509,165 

 Work-in-process– video solutions segment 
 20,396 
 3,164 

 Finished goods – video solutions segment 
 4,623,489 
 6,846,091 

 Finished goods – entertainment segment 
 699,204 
 970,527 

 Subtotal 
 8,387,742 
 12,328,947 

 Reserve for excess and obsolete inventory– video solutions segment 
 ( 4,355,666 ) 
 ( 5,230,261 ) 

 Reserve for excess and obsolete inventory – entertainment segment 
 ( 186,795 ) 
 ( 259,280 ) 

 Total inventories 
 $ 3,845,281 
 $ 6,839,406 

 Finished
goods inventory includes units held by potential customers and sales agents for test and evaluation purposes. The cost of such units
totaled $ 42,797 and $ 171,071 as of December 31, 2023 and 2022, respectively. 

 NOTE
6. PREPAID EXPENSES 

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

 SCHEDULE
OF PREPAID EXPENSE 

 December 31,
 2023 
 December 31,
 2022 

 Prepaid inventory 
 $ 5,318,939 
 $ 6,110,321 

 Prepaid advertising 
 612,292 
 1,931,628 

 Other 
 435,137 
 424,464 

 Total prepaid expenses 
 $ 6,366,368 
 $ 8,466,413 

 Prepaid
expenses decreased by approximately $ 2.1 million primarily due to a decline in prepaid inventory purchases and advertising in 2023. 

 F- 20 

 NOTE
7. PROPERTY, PLANT AND EQUIPMENT 

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

 SCHEDULE
OF PROPERTY, PLANT AND EQUIPMENT 

 Estimated 
 Useful Life 
 December 31,
 2023 
 December 31,
 2022 

 Building 
 25 years 
 $ 4,537,037 
 $ 4,537,037 

 Land 
 Infinite 
 739,734 
 739,734 

 Office furniture, fixtures, equipment, and aircraft 
 3 - 20 years 
 2,065,092 
 2,048,169 

 Warehouse and production equipment 
 3 - 7 years 
 29,055 
 51,302 

 Demonstration and tradeshow equipment 
 3 - 7 years 
 87,987 
 72,341 

 Building improvements 
 5 - 7 years 
 1,328,654 
 1,334,374 

 Total cost 
 
 8,787,559 
 8,782,957 

 Less: accumulated depreciation and amortization 
 
 ( 1,503,857 ) 
 ( 884,271 ) 

 Net property, plant and equipment 
 
 $ 7,283,702 
 $ 7,898,686 

 Depreciation
and amortization of property, plant and equipment aggregated $ 711,103 and $ 614,121 for the years ended December 31, 2023 and 2022, respectively.
The cost and accumulated depreciation related to assets sold or retired are removed from the accounts and any gain or loss is credited
or charged to income. The Company retired fixed assets during 2023 totaling $ 89,562 resulting in no gain or loss for the year ended December
31, 2023 on the Company’s Consolidated Statement of Operations. The Company retired fixed assets during 2022 totaling $ 549,104 
resulting in a gain on sale of assets of $ 212,831 for the year ended December 31, 2022 on the Company’s Consolidated Statement
of Operations. 

 NOTE
8. GOODWILL AND OTHER INTANGIBLE ASSETS 

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

 SCHEDULE OF INTANGIBLE ASSETS 

 December 31, 2023 
 December 31, 2022 

 Gross
 value 
 Accumulated
 amortization 
 Net
 carrying
 value 
 Gross
 value 
 Accumulated
 amortization 
 Net
 carrying
 value 

 Amortized intangible assets: 
 
 Licenses (video solutions segment) 
 $ 225,545 
 $ 89,887 
 $ 135,658 
 $ 211,183 
 $ 80,378 
 $ 130,805 

 Patents and trademarks (video solutions segment) 
 483,521 
 266,403 
 217,118 
 472,077 
 305,021 
 167,056 

 Sponsorship agreement network (entertainment segment) 
 5,600,000 
 2,613,333 
 2,986,667 
 5,600,000 
 1,493,333 
 4,106,667 

 SEO content (entertainment segment) 
 600,000 
 350,000 
 250,000 
 600,000 
 200,000 
 400,000 

 Personal seat licenses (entertainment 
 segment) 
 180,081 
 14,004 
 166,077 
 180,081 
 8,001 
 172,080 

 Website enhancements (entertainment segment) 
 13,500 
 — 
 13,500 
 — 
 — 
 — 

 Client agreements (revenue cycle management segments) 
 999,034 
 226,768 
 772,266 
 999,034 
 126,864 
 872,170 

 8,101,681 
 3,560,395 
 4,541,286 
 8,062,375 
 2,213,597 
 5,848,778 

 Indefinite life intangible assets: 
 
 Goodwill (entertainment and revenue cycle management segments) 
 11,367,514 
 — 
 11,367,514 
 11,367,514 
 — 
 11,367,514 

 Trade name (entertainment segment) 
 600,000 
 — 
 600,000 
 600,000 
 — 
 600,000 

 Patents and trademarks pending 
 (video solutions segment) 
 1,622 
 — 
 1,622 
 56,678 
 — 
 56,678 

 Total 
 $ 20,070,817 
 $ 3,560,395 
 $ 16,510,422 
 $ 20,086,567 
 $ 2,213,597 
 $ 17,872,970 

 F- 21 

 Patents
and trademarks pending will be amortized beginning at the time they are issued by the appropriate authorities. If issuance of the final
patent or trademark is denied, then the amount deferred will be immediately charged to expense. 

 Amortization
expense for the years ended December 31, 2023 and 2022 was $ 1,507,134 and $ 1,562,558 , respectively. Estimated amortization for intangible
assets with definite lives for the next five years ending December 31, 2023, and thereafter is as follows: 

 SCHEDULE
OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS 

 Year ending 
December 31: 

 2024 
 $ 1,502,013 

 2025 
 1,409,517 

 2026 
 904,979 

 2027 
 112,965 

 2028 and thereafter 
 611,810 

 Total 
 $ 4,541,284 

 NOTE
9. OTHER ASSETS 

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

 SCHEDULE OF OTHER ASSETS 

 December 31,
 2023 
 December 31,
 2022 

 Lease receivable 
 $ 6,095,050 
 $ 4,700,923 

 Sponsorship network 
 — 
 116,828 

 Restricted Cash 
 97,600 
 — 

 Other 
 404,382 
 337,930 

 Total other assets 
 $ 6,597,032 
 $ 5,155,681 

 NOTE
10. DEBT OBLIGATIONS 

 Debt
obligations is comprised of the following: 

 SUMMARY
OF DEBT OBLIGATIONS 

 December 31, 
 2023 
 December 31, 
 2022 

 Economic injury disaster loan (EIDL) 
 $ 147,781 
 $ 150,000 

 Contingent consideration promissory note – Nobility Healthcare Division Acquisition 
 129,651 
 388,955 

 Contingent consideration promissory note – Nobility Healthcare Division Acquisition 
 58,819 
 176,456 

 Contingent consideration promissory note – Nobility Healthcare Division Acquisition 
 — 
 208,083 

 Contingent consideration promissory note – Nobility Healthcare Division Acquisition 
 — 
 4,346 

 Revolving Loan Agreement 
 4,880,000 
 — 

 Commercial Extension of Credit- Entertainment Segment 
 87,928 
 — 

 Merchant Advances 
 1,350,000 
 — 

 Unamortized debt issuance costs 
 ( 540,429 ) 
 — 

 Debt obligations 
 6,113,750 
 927,840 

 Less: current maturities of debt obligations 
 1,260,513 
 485,373 

 Debt obligations, long-term 
 $ 4,853,237 
 $ 442,467 

 F- 22 

 Debt
obligations mature as follows as of December 31, 2023: 

 SCHEDULE OF MATURITY OF DEBT OBLIGATIONS 

 December 31, 
 2023 

 2024 
 $ 1,260,513 

 2025 
 4,712,154 

 2026 
 3,542 

 2027 
 3,677 

 2028 and thereafter 
 133,864 

 Total 
 $ 6,113,750 

 2020
Small Business Administration Notes . 

 On
May 12, 2020, the Company received $ 150,000 in loan funding from the SBA under the EIDL program administered by the SBA, which program
was expanded pursuant to the recently enacted CARES Act. The EIDL is evidenced by an unsecured promissory note, dated May 8, 2020, in
the original principal amount of $ 150,000 with the SBA, the lender. 

 Under
the terms of the note issued under the EIDL program, interest accrues on the outstanding principal at the rate of 3.75 % per annum. The
term of such note is thirty years, though it may be payable sooner upon an event of default under such note. Monthly principal and interest
payments began in November 2022, after being deferred for thirty months after the date of disbursement and total $ 731.00 per month thereafter.
Such note may be prepaid in part or in full, at any time, without penalty. The Company granted the secured party a continuing interest
in and to any and all collateral, including but not limited to tangible and intangible personal property. 

 The
Company made principal payments of $ 2,219 and $- 0 - for the years ended December 31, 2023 and 2022 and recorded interest expense of $ 5,606 
in 2023. 

 Contingent
Consideration Promissory Notes 

 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 . The Contingent Note has a three-year term and bears interest at a rate of 3.00 % per annum. Quarterly principal and interest
payments are deferred for six months and is due in equal quarterly installments on the seventh business day of each quarter. The principal
amount of the June Contingent Note is subject to an earn-out adjustment, being the difference between the $ 975,000 (the “June Projected
Revenue”) and the cash basis revenue (the “June Measurement Period Revenue”) collected by the June Seller in its normal
course of business from the clients existing on June 30, 2021, during the period from October 1, 2021 through September 30, 2022 (the
“June Measurement Period”) measured on a quarterly basis and annualized as of the relevant period. If the June Measurement
Period Revenue is less than the June Projected Revenue, such amount will be subtracted from the principal balance of this June Contingent
Note on a dollar-for-dollar basis. If the June Measurement Period Revenue is more than the June Projected Revenue, such amount will be
added to the principal balance of this June Contingent Note on a dollar-for-dollar basis. In no event will the principal balance of this
June Contingent Note become a negative number. The maximum downward earn-out adjustment to the principal balance will be to zero. There
are no limits to the increases to the principal balance of the June Contingent Note as a result of the earn-out adjustments. 

 The
June Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability
is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition.
Management has recorded the contingent consideration promissory note at its estimated fair value of $ 350,000 at the acquisition date.
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 the years ended
December 31, 2023 and December 31, 2022, respectively. 

 F- 23 

 On
August 31, 2021, Nobility Healthcare, issued another contingent consideration promissory note (the “August Contingent Payment Note”)
in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “August Sellers”) of
$ 650,000 . The August Contingent Payment Note has a three-year term and bears interest at a rate of 3.00 % per annum. Quarterly principal
and interest payments are deferred for six months and is due in equal quarterly installments on the seventh business day of each quarter.
The principal amount of the August Contingent Payment Note is subject to an earn-out adjustment, being the difference between the $ 3,000,000 
(the “August Projected Revenue”) and the cash basis revenue (the “August Measurement Period Revenue”) collected
by the August Sellers in its normal course of business from the clients existing on September 1, 2021, during the period from December
1, 2021 through November 30, 2022 (the “August Measurement Period”) measured on a quarterly basis and annualized as of the
relevant period. If the August Measurement Period Revenue is less than the August Projected Revenue, such amount will be subtracted from
the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis. If the August Measurement Period Revenue is
more than the August Projected Revenue, such amount will be added to the principal balance of this August Contingent Payment Note on
a dollar-for-dollar basis. In no event will the principal balance of this August Contingent Payment Note become a negative number. The
maximum downward earn-out adjustment to the principal balance will be to zero. There are no limits to the increases to the principal
balance of the August Contingent Payment Note as a result of the earn-out adjustments. 

 The
August Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability
is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition.
Management has recorded the contingent consideration promissory note at its estimated fair value of $ 650,000 at the acquisition date.
Principal payments, since its inception, on this contingent consideration promissory note totaled $ 552,256 . The estimated fair 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. 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 . The January Contingent Payment Note has a two-and-a-half-year term and bears interest at a rate of 3.00 % per annum. Quarterly
principal and interest payments are deferred for seven months and is due in equal quarterly installments on the tenth business day of
each quarter. The principal amount of the January Contingent Payment Note is subject to an earn-out adjustment, being the difference
between $ 3,500,000 (the “January Projected Revenue”) and the cash basis revenue (the “January Measurement Period Revenue”)
collected by the January Sellers in its normal course of business from the clients existing on January 1, 2022, during the period from
April 1, 2022 through March 31, 2023 (the “January Measurement Period”) measured on a quarterly basis and annualized as of
the relevant period. If the January Measurement Period Revenue is less than the January Projected Revenue, such amount will be subtracted
from the principal balance of this January Contingent Payment Note on a dollar-for-dollar basis. If the January Measurement Period Revenue
is more than the January Projected Revenue, such amount will be added to the principal balance of this January Contingent Payment Note
on a dollar-for-dollar basis. In no event will the principal balance of this January Contingent Payment Note become a negative number.
The maximum downward earn-out adjustment to the principal balance will be a reduction to zero. There are no limits to the increases to
the principal balance of the January Contingent Payment Note as a result of the earn-out adjustments. 

 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.

 F- 24 

 On
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”)
of $ 105,000 . The February Contingent Payment Note has a three-year term and bears interest at a rate of 3.00 % per annum. Quarterly principal
and interest payments are deferred for seven months and are due in equal quarterly installments on the tenth business day of each quarter.
The principal amount of the February Contingent Payment Note is subject to an earn-out adjustment, being the difference between $ 440,000 
(the “February Projected Revenue”) and the cash basis revenue (the “February Measurement Period Revenue”) collected
by the February Sellers in its normal course of business from the clients existing on February 1, 2022, during the period from May 1,
2022 through April 30, 2023 (the “February Measurement Period”) measured on a quarterly basis and annualized as of the relevant
period. If the February Measurement Period Revenue is less than the February Projected Revenue, such amount will be subtracted from the
principal balance of this February Contingent Payment Note on a dollar-for-dollar basis. If the February Measurement Period Revenue is
more than the February Projected Revenue, such amount will be added to the principal balance of this February Contingent Payment Note
on a dollar-for-dollar basis. In no event will the principal balance of this February Contingent Payment Note become a negative number.
The maximum downward earn-out adjustment to the principal balance will be a reduction to zero. There are no limits to the increases to
the principal balance of the February Contingent Payment Note as a result of the earn-out adjustments. 

 The
February Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent
liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the
acquisition. Management has recorded the contingent consideration promissory note at its estimated fair value of $ 105,000 at the acquisition
date. 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. 

 Contingent
consideration earn-out Agreement – TicketSmarter Acquisition 

 On
September 1, 2021, TicketSmarter, Inc., a subsidiary of the Company, issued a contingent consideration earn-out agreement (the “TicketSmarter
Earn-Out”) in connection with the Stock Purchase Agreement between TicketSmarter, Inc., Goody Tickets, LLC and TicketSmarter, LLC
(“TicketSmarter”) of up to $ 4,244,400 with a fair value at acquisition of $ 3,700,000 . The TicketSmarter Earn-Out shall be
payable with ninety percent ( 90 %) readily available funds and ten percent ( 10 %) in stock consideration. The principal amount of the TicketSmarter
Earn-Out is subject to an earn-out adjustment, being the difference between the $ 2,896,829 (the “Projected EBITDA”) and the
actual EBITDA (the “Measurement Period EBITDA”) generated by TicketSmarter in its normal course of business, during the period
from September 1, 2021 through December 31, 2021 (the “Measurement Period”). If the Measurement Period EBITDA is less than
seventy percent ( 70 %) of the Projected EBITDA, there will be zero contingent payment. If the Measurement Period EBITDA is between seventy
percent ( 70 %) and one hundred percent ( 100 %) of the Projected EBITDA, then a fractional amount of the contingent payment will be paid
out. If the Measurement Period EBITDA is more than the Projected EBITDA, the full principal balance of this TicketSmarter Earn-Out will
be paid out. In no event will the principal balance of this TicketSmarter Earn-Out become a negative number. The maximum downward earn-out
adjustment to the earn-out balance will be to reduce the balance to zero. 

 The
contingent consideration earn-out is considered to be additional purchase price, therefore the estimated fair value of the contingent
liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the
acquisition. Management has recorded the contingent consideration earn-out at its estimated fair value of $ 3,700,000 at the acquisition
date. Management determined that the actual Measurement Period EBITDA generated by TicketSmarter was less than 70% of the Projected EBITDA
threshold. Therefore, no TicketSmarter Earn-Out payments amounts were due under the agreement. Therefore, the fair value of the contingent
consideration earn-out agreement was reduced to zero, and the resulting gain of $- 0 - and $- 0 - was reported in our Consolidated Statements
of Operations for the years ended December 31, 2023 and December 31, 2022, respectively. 

 F- 25 

 2023
Commercial Extension of Credit 

 On
February 23, 2023, the Company’s Entertainment segment entered into an extension of credit in the form of a loan to use in marketing
and operating its business in accordance with the Private Label Agreement previously entered into with the Lender. The Lender agreed
to extend, subject to the conditions hereof, and Borrower agreed to take, a Loan for Principal Sum of $ 1,000,000 . 

 Lender
shall retain 25 % of each remittance owed to Borrower under the terms of the Private Label Agreement. Such remittances shall include regular
weekly remittances and any additional incentive payments to which the Borrower may be entitled. The 25% withholding of the Borrower’s
applicable remittance shall be deemed a “Payment” under the terms of this Note, and Payments shall continue until the earlier
of (i) repayment of the Principal Sum, accrued Interest, and a fee of $35,000.00 or (ii) expiration of the Private Label Agreement on
December 31, 2023. 

 During
the year ended December 31, 2023, the Entertainment segment drew an additional $ 455,643 on this agreement, with the principal balance
never exceeding $ 1,000,000 . During the year ended December 31, 2023, the Company’s Entertainment segment had repaid $ 1,367,715 
towards the principal on the loan through remittances and had an outstanding balance of $ 87,928 . 

 Convertible
Note 

 On
April 5, 2023, the Company entered into and consummated the initial closing (the “First Closing”) of the transactions contemplated
by a Securities Purchase Agreement, dated as of April 5, 2023 (the “Purchase Agreement”), between the Company and certain
investors (the “Purchasers”). 

 At
the First Closing, the Company issued and sold to the Purchasers Senior Secured Convertible Notes in the aggregate original principal
amount of $ 3,000,000 (the “Notes”) and warrants (the “Warrants”). The Purchase Agreement provided for a ten percent
( 10 %) original interest discount resulting in gross proceeds to the Company of $ 2,700,000 . No interest accrues under the Notes. The Warrants
are exercisable for an aggregate 1,125,000 shares comprised of 375,000 warrants at an exercise price of $ 5.50 per share of the Company’s
common stock, par value $ 0.001 (the “Common Stock”), 375,000 warrants at an exercise price of $ 6.50 per share of Common Stock,
and 375,000 warrants at an exercise price of $ 7.50 per share of Common Stock. 

 Subject
to certain conditions, within 18 months from the effectiveness date and while the Notes remain outstanding, the Purchasers have the right
to require the Company to consummate a second closing of up to an additional $ 3,000,000 of Notes (the “Second Notes”) and
Warrants on the same terms and conditions as the First Closing, except that the Second Notes may be subordinate to a mortgage on the
Company’s headquarters building (the “Bank Mortgage”). 

 The
Notes are convertible into shares of Common Stock at the election of the Purchasers at any time at a fixed conversion price of $ 5.00 
(the “Conversion Price”) per share of Common Stock. The Conversion Price is subject to customary adjustments for stock dividends,
stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or
securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject
to certain exceptions). Subject to certain conditions, including certain equity conditions, the Company may redeem some or all of the
then outstanding principal amount of the Note for cash in an amount equal to 110 % of the outstanding principal amount of the Notes (the
“Optional Redemption Amount”). In addition, the Purchasers may, at their option, demand repayment at the Optional Redemption
Amount upon five (5) business days’ written notice following (i) the closing by the Company of the Bank Mortgage, or (ii) a sale
by the Company of Common Stock or Common Stock equivalents. 

 F- 26 

 The
Notes rank senior to all outstanding and future indebtedness of the Company and its subsidiaries, and are secured by substantially all
of the Company’s assets, as evidenced by (i) a security agreement entered into at the Closing, (ii) a trademark security agreement
entered into at the Closing, (iii) a patent security agreement entered into at the Closing, (iv) a guaranty executed by all direct and
indirect subsidiaries of the Company pursuant to which each of them has agreed to guaranty the obligations of the Company under the Notes,
and (v) a mortgage on the Company’s headquarters building in favor of the Purchasers. 

 Also
at the Closing, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers.
Pursuant to the terms of the Registration Rights Agreement, the Company has agreed to prepare and file with the SEC within the 10th business
day following the First Closing (the “Filing Date”) a registration statement covering the resale of the shares of Common
Stock issuable upon conversion of the Notes and exercise of the Warrants, and to use its best efforts to cause such Registration Statement
to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible, but
in any event no later than 45 days following the Filing Date (the “Effectiveness Date”). If the Registration Statement is
not filed by the Filing Date or is not declared effective by the Effectiveness Date, or under certain other circumstances described in
the Registration Rights Agreement, then the Company shall be obligated to pay, as partial liquidated damages, to each Purchaser an amount
in cash equal to 2 % of the original principal amount of the Notes each month until the applicable event giving rise to such payments
is cured. If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will
pay interest thereon at a rate of 10 % per annum. 

 The
Company recognized the full warrant derivative value, with the remaining amount being allocated to the debt obligation. As the warrant
derivative value exceeded the net proceeds from the issuance, the excess amount is recognized as a loss on the date of the issue date.
Thus, the Company recorded a loss of $ 576,380 as an interest expense on the date of issuance relating to the Convertible note. The following
is the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted
in connection with the Convertible Note: 

 SCHEDULE
OF WARRANT TO PURCHASE COMMON STOCK GRANTED 

 Terms at
 April 5, 2023
 (issuance date) 

 Volatility - range 
 106.0 % 

 Risk-free rate 
 3.36 % 

 Dividend 
 0 % 

 Remaining contractual term 
 5.0 years 

 Exercise price 
 $ 5.50 – 7.50 
 
 Common stock issuable under the warrants 
 1,125,000 

 On
June 2, 2023, the Purchasers elected to convert $ 125,000 principal, at the fixed price of $ 5.00 per share of common stock, 25,000 shares
valued at $ 119,750 . The loss on conversion of convertible note into common shares, of $ 93,386 , was recorded during the period. 

 On
October 26, 2023, the Company entered into a Revolving Loan Agreement of which a portion of the net proceeds were used to repay the principal
amount of the Convertible debt. The Company made an aggregate payment of $ 3,162,500 from the proceeds, inclusive of fees to retire the
convertible notes. In 2023, the Company amortized $ 2,169,545 in debt issuance costs associated with the convertible notes and expensed
the remaining balance of $ 731,819 upon extinguishment of the notes. As a result a loss on extinguishment of debt totaling $ 1,019,319 
was recorded in our Consolidated Statements of Operations for the year ended December 31, 2023. The warrants associated with the convertible
debt remain outstanding.

 Revolving
Loan Agreement 

 On
October 26, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”)
by and between the Company, Digital Ally Healthcare, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Digital
Ally Healthcare” and, together with the Company, the “Borrower”), and Kompass Kapital Funding, LLC, a Kansas limited
liability company (“Kompass”). In connection with the Loan Agreement, on October 26, 2023, the Company entered into a Mortgage,
Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “Mortgage”) by and between the Company, as grantor,
and Kompass, as grantee, and issued a Revolving Note (the “Revolving Note”) to Kompass. The gross proceeds to the Company
are $ 4,880,000 before repaying those certain Senior Secured Convertible Notes issued on April 5, 2023 in the aggregate amount of $ 3,162,500 
and paying customary fees and expenses. 

 F- 27 

 Pursuant
to the Loan Agreement, Kompass agreed to make revolving loans (the “Revolving Loans”) available to the Borrower as the Borrower
may from time to time request until, but not including, October 26, 2025, and in such amounts as the Borrower may from time to time request,
provided, however, that the aggregate principal balance of the Revolving Loans outstanding at any time shall not exceed the lesser of
$ 4,880,000.00 or an amount equal to eighty percent of the value of the mortgaged property, which consists of the real property owned
by the Company having an address of 14001 Marshall Drive, Lenexa, KS 66215 (the “Mortgaged Property”). Under the Loan Agreement,
the Revolving Loans made by Kompass may be repaid and, subject to customary terms and conditions, borrowed again up to, but not including
October 26, 2025, unless the Revolving Loans are otherwise accelerated, terminated or extended as provided in the Loan Agreement. The
Revolving Loans shall be used by the Borrower for the purpose of working capital and to retire existing debt. Under the Loan Agreement,
the Borrower is required to provide written notice to Kompass prior to creating, assuming or incurring any debt or becoming liable, whether
as endorser, guarantor, surety or otherwise, for any debt or obligation of any other party. While obligations remain outstanding under
the Loan Agreement, the Borrower is required to maintain a minimum balance of $ 97,600 in a reserve account (the “Capital Reserve
Account”). Under the Loan Agreement, the Borrower is prohibited from creating, assuming, incurring or suffering or permitting to
exist any lien of any kind or character upon the collateral, which consists of the Mortgaged Property and the Company’s interest
in the Capital Reserve Account. The Loan Agreement contains customary covenants, representations and warranties by the Borrower. 

 Pursuant
to the Loan Agreement, the Company issued the Revolving Note to Kompass whereby the Company and Digital Ally Healthcare jointly and severally
promise to pay to the order of Kompass the lesser of (i) $4,880,000.00, or (ii) the aggregate principal amount of all Revolving Loans
outstanding under and pursuant to the Loan Agreement at the maturity or maturities and in the amount or amounts stated on the records
of Kompass, together with interest (computed on the actual number of days elapsed on the basis of a 360 day year) at a floating per annum
rate equal to the greater of (i) the Prime Rate plus four percent or (ii) eight percent, on the aggregate principal amount of all Revolving
Loans outstanding from time to time as provided in the Loan Agreement. 

 The
Company entered into the Mortgage to secure its obligations under the Loan Agreement. The property mortgaged under the Mortgage consists
of the Mortgaged Property. The Mortgage contains customary covenants, representations and warranties by the Company. In addition, the
Company recorded debt issuance costs of $ 188,255 . During the year ended December 31, 2023, the Company amortized $ 16,997 of debt discount
under interest expense, compared to $- 0 - for the year ended December 31, 2022. 

 Merchant
Cash Advances 

 In
November 2023, the Company obtained a short-term merchant advance, which totaled $ 1,050,000 ,
from a single lender to fund operations. These advances included origination fees totaling $ 50,000 
 for net proceeds of $ 1,000,000 .
The advance is, for the most part, is secured by expected future sales transactions of the Company with expected payments on a weekly
basis. The Company will repay an aggregate of $ 1,512,000 
 to the lender. During 2023, the
Company made repayments totaling $ 162,000 
 and $ 1,350,000 
 remained outstanding, which is
expected to be repaid in 2024. 

 During
the year ended December 2023 the Company amortized $ 142,829 of debt discount under interest expense, compared to $- 0 - for year ended
December 31, 2022. 

 F- 28 

 NOTE
11. FAIR VALUE MEASUREMENT 

 In
accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the
market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information
generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a
business. 

 ASC
820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
The following is a brief description of those three levels: 

 ● 
 Level
 1 — Quoted prices in active markets for identical assets and liabilities 

 ● 
 Level
 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) 

 ● 
 Level
 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value) 

 The
following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring
basis as of December 31, 2023 and 2022. 

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

 December 31, 2023 

 Level 1 
 Level 2 
 Level 3 
 Total 

 Liabilities: 
 
 Warrant derivative liabilities 
 $ — 
 $ — 
 $ 1,369,738 
 $ 1,369,738 

 Contingent consideration promissory notes and contingent consideration earn-out agreement 
 — 
 — 
 188,470 
 188,470 

 $ — 
 $ — 
 $ 1,558,208 
 $ 1,558,208 

 December 31, 2022 

 Level 1 
 Level 2 
 Level 3 
 Total 

 Liabilities: 
 
 Warrant derivative liabilities 
 $ — 
 $ — 
 $ — 
 $ — 

 Contingent consideration promissory notes and contingent consideration earn-out agreement 
 — 
 — 
 777,840 
 777,840 

 $ — 
 $ — 
 $ 777,840 
 $ 777,840 

 The
following table represents the change in Level 3 tier value measurements: 

 SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS 

 Contingent
 Consideration
 Promissory Notes and Earn-Out Agreement 
 Warrant Derivative
 Liabilities 

 Balance, December 31, 2022 
 $ 777,840 
 $ — 

 Issuance of warrant derivative liabilities 
 — 
 3,216,380 

 Change in fair value of warrant derivative liabilities 
 — 
 ( 1,846,642 ) 

 Principal payments on contingent consideration promissory notes – Revenue Cycle Management Acquisitions 
 ( 411,460 ) 
 — 

 Change in fair value of contingent consideration promissory notes - Revenue Cycle Management Acquisitions 
 ( 177,910 ) 
 — 

 Balance, December 31, 2023 
 $ 188,470 
 $ 1,369,738 

 F- 29 

 NOTE
12. ACCRUED EXPENSES 

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

 SCHEDULE OF ACCRUED EXPENSES 

 December 31,
 2023 
 December 31,
 2022 

 Accrued warranty expense 
 $ 17,699 
 $ 15,694 

 Accrued litigation costs 
 2,040,292 
 247,984 

 Accrued sales commissions 
 87,421 
 55,000 

 Accrued payroll and related fringes 
 367,826 
 504,020 

 Accrued sales returns and allowances 
 117,713 
 118,026 

 Accrued taxes 
 150,981 
 46,408 

 Accrued interest - related party 
 95,031 
 — 

 Customer deposits 
 219,462 
 — 

 Other 
 172,905 
 103,835 

 Total accrued
 expenses 
 $ 3,269,330 
 $ 1,090,967 

 Accrued
warranty expense was comprised of the following for the years ended December 31, 2023 and 2022: 

 SCHEDULE OF ACCRUED WARRANTY EXPENSE 

 2023 
 2022 

 Beginning balance 
 $ 15,694 
 $ 13,742 

 Provision for warranty expense 
 63,980 
 71,734 

 Charges applied to warranty reserve 
 ( 61,975 ) 
 ( 69,782 ) 

 Ending balance 
 $ 17,699 
 $ 15,694 

 NOTE
13. INCOME TAXES 

 The
components of income tax provision (benefit) for the years ended December 31, 2023, and 2022 are as follows: 

 SCHEDULE
OF COMPONENTS OF INCOME TAX PROVISION (BENEFIT) 

 2023 
 2022 

 Current taxes: 
 
 Federal 
 $ — 
 $ — 

 State 
 — 
 — 

 Total current taxes 
 — 
 — 

 Deferred tax provision (benefit) 
 — 
 — 

 Income tax provision (benefit) 
 $ — 
 $ — 

 A
reconciliation of the income tax (provision) benefit at the statutory rate of 21% for the years ended December 31, 2023, and 2022 to
the Company’s effective tax rate is as follows: 

 SCHEDULE
OF RECONCILIATION OF INCOME TAX (PROVISION) BENEFIT 

 2023 
 2022 

 U.S. Statutory tax rate 
 21.0 % 
 21.0 % 

 State taxes, net of Federal benefit 
 6.0 % 
 6.0 % 

 Stock based compensation 
 4.3 % 
 ( 1.5 )% 

 Change in valuation reserve on deferred tax assets 
 ( 28.8 )% 
 ( 91.2 )% 

 Termination of warrant derivative liabilities 
 — % 
 57.0 % 

 Contingent consideration for acquisition 
 ( 3.0 )% 
 4.1 % 

 Extinguishment of convertible debt 
 3.2 % 
 — % 

 Other, net 
 ( 2.7 )% 
 4.6 % 

 Income tax (provision) benefit 
 — % 
 — % 

 The
effective tax rate for the years ended December 31, 2023, and 2022 varied from the expected statutory rate due to the Company continuing
to provide a 100 % valuation allowance on net deferred tax assets. The Company determined that it was appropriate to continue the full
valuation allowance on net deferred tax assets as of December 31, 2023, primarily because of the current year operating losses. 

 Significant
components of the Company’s deferred tax assets (liabilities) as of December 31, 2023 and 2022 are as follows: 

 SCHEDULE
OF SIGNIFICANT COMPONENTS OF DEFERRED TAX ASSETS (LIABILITIES) 

 2023 
 2022 

 Deferred tax assets: 
 
 Stock-based compensation 
 $ 305,000 
 $ 510,000 

 Start-up costs 
 110,000 
 110,000 

 Inventory reserves 
 1,120,000 
 1,355,000 

 Uniform capitalization of inventory costs 
 115,000 
 70,000 

 Allowance for doubtful accounts receivable 
 50,000 
 40,000 

 Property, plant and equipment depreciation 
 230,000 
 290,000 

 Deferred revenue 
 2,535,000 
 1,965,000 

 Accrued litigation reserve 
 500,000 
 60,000 

 Accrued expenses 
 35,000 
 50,000 

 Net operating loss carryforward 
 35,365,000 
 27,940,000 

 Research and development tax credit carryforward 
 1,795,000 
 1,795,000 

 State jobs credit carryforward 
 230,000 
 230,000 

 Charitable contributions carryforward 
 95,000 
 95,000 

 Total deferred tax assets 
 42,485,000 
 34,510,000 

 Valuation reserve 
 ( 41,610,000 ) 
 ( 34,200,000 ) 

 Total deferred tax assets 
 875,000 
 310,000 

 Deferred tax liabilities: 
 
 Warrant derivative liabilities 
 ( 455,000 ) 
 — 

 Intangible assets 
 ( 265,000 ) 
 ( 165,000 

 Domestic international sales company 
 ( 155,000 ) 
 ( 145,000 ) 

 Total deferred tax liabilities 
 ( 875,000 ) 
 ( 310,000 ) 

 Net deferred tax assets (liability) 
 $ — 
 $ — 

 The
valuation allowance on deferred tax assets totaled $ 41,610,000 and $ 34,200,000 as of December 31, 2023, and 2022, respectively. The Company
records the benefit it will derive in future accounting periods from tax losses and credits and deductible temporary differences as “deferred
tax assets.” In accordance with ASC 740, “Income Taxes,” the Company records a valuation allowance to reduce the carrying
value of our deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized. 

 The
Company incurred operating losses in 2023 and 2022 and it continues to be in a three-year cumulative loss position at December 31, 2023
and 2022. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to
outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it determined
to increase our valuation allowance by $ 7,870,000 but continue to fully reserve its deferred tax assets at December 31, 2023. The Company
expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates
its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more
likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal
would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’
equity. 

 As
of December 31, 2023, the Company had available approximately $ 140,940,000 of Federal net operating loss carry-forwards available to
offset future taxable income generated. Such tax net operating loss carry-forwards expire between 2025 and 2043, with $ 91,352,000 of
the tax net operating loss carry-forwards have an indefinite life since the enactment of the Tax Cuts and Jobs Act of 2017. In addition,
the Company had research and development tax credit carry-forwards totaling $ 1,794,000 available as of December 31, 2023, which expire
between 2024 and 2040 . 

 The
Internal Revenue Code contains provisions under Section 382 which limit a company’s ability to utilize net operating loss carry-forwards
in the event that it has experienced a more than 50% change in ownership over a three-year period. Current estimates prepared by the
Company indicate that due to ownership changes which have occurred, approximately $ 765,000 of its net operating loss and $ 175,000 of
its research and development tax credit carry-forwards are currently subject to an annual limitation of approximately $ 1,151,000 and
may be further limited by additional ownership changes which may occur in the future. As stated above, the net operating loss and research
and development credit carry-forwards expire between 2024 and 2039 , allowing the Company to potentially utilize all of the limited net
operating loss carry-forwards during the carry-forward period. 

 As
discussed in Note 1, “Summary of Significant Accounting Policies,” tax positions are evaluated in a two-step process. The
Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position
meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial
statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate
settlement. Management has identified no tax positions taken that would meet or exceed these thresholds and therefore there are no gross
interest, penalties and unrecognized tax expense/benefits that are not expected to ultimately result in payment or receipt of cash in
the consolidated financial statements. 

 The
effective tax rate for the years ended December 31, 2023, and 2022 varied from the expected statutory rate due to the Company continuing
to provide a 100 % valuation allowance on net deferred tax assets. The Company determined that it was appropriate to continue the full
valuation allowance on net deferred tax assets as of December 31, 2023, primarily because of the current year operating losses. 

 The
Company’s federal and state income tax returns are closed for examination purposes by relevant statute and by examination for 2019
and all prior tax years. 

 F- 30 

 NOTE
14. OPERATING LEASE 

 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 and was renewed in October 2023. 

 The
Company entered into an operating lease with a third party in October 2023 for copiers used for office and warehouse purposes. The terms
of the lease include 48 monthly payments of $ 1,786 with a maturity date of October 2027. The Company has the option to purchase such
equipment at maturity for its estimated fair market value at that point in time. The remaining lease term for the Company’s copier
operating lease as of December 31, 2023 was forty-six months . 

 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
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 . 

 On
June 30, 2021, the Company completed the acquisition of its first medical billing company, through Nobility Healthcare. Upon completion
of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space. The lease terms
include monthly payments ranging from $ 2,648 to $ 2,774 thereafter, with a termination date in July 2024. The Company is responsible for
property taxes, utilities, insurance and its proportionate share of common area costs related to this location. The remaining lease term
for the Company’s office operating lease as of December 31, 2023 was seven months . 

 On
August 31, 2021, the Company completed the acquisition of its second acquired medical billing company, through Nobility Healthcare. Upon
completion of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space. The
lease was renewed in April 2023 with favorable terms and payments ranging from $ 7,436 to $ 8,877 thereafter, with a termination date in
March 2030 . 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. 

 On
September 1, 2021, the Company completed the acquisition of Goody Tickets, LLC and TicketSmarter, LLC through TicketSmarter. 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 intentions to relocate
upon the identification of suitable space. 

 On
January 1, 2022, the Company completed the acquisition of a private medical billing company, through its revenue cycle management segment.
Upon completion of this acquisition, the Company became responsible for the operating lease for the seller’s office space. The
lease terms include monthly payments ranging from $ 4,233 to $ 4,626 , with a termination date of June 2025 . 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 January 1, 2022. The remaining lease term for the Company’s office and warehouse operating
lease as of December 31, 2023, was seventeen months . 

 Lease
expense related to the office spaces and copier operating leases was recorded on a straight-line basis over the lease term. Total lease
expense under the five operating leases was approximately $ 534,830 for the year ended December 31, 2023. 

 The
weighted-average remaining lease term related to the Company’s lease liabilities as of December 31, 2023 and December 31, 2022
was 4.5 years and 3.3 years, respectively. 

 The
discount rate implicit within the Company’s operating leases was not generally determinable, and therefore, the Company determined
the discount rate based on its incremental borrowing rate on the information available at commencement date. As of commencement date,
the operating lease liabilities reflect a weighted average discount rate of 8 %. 

 The
following sets forth the operating lease right of use assets and liabilities as of December 31, 2023: 

 SCHEDULE
OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES 

 Assets: 
 
 Operating lease right of use assets 
 $ 1,053,159 

 Liabilities: 
 
 Operating lease obligations-current portion 
 279,538 

 Operating lease obligations-less current portion 
 827,836 

 Total operating lease obligations 
 $ 1,107,374 

 F- 31 

 Following
are the minimum lease payments for each year and in total. 

 SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS 

 Year ending December 31: 
 
 2024 
 $ 358,424 

 2025 
 311,849 

 2026 
 293,300 

 2027 
 117,492 

 Thereafter 
 235,020 

 Total undiscounted minimum future lease payments 
 1,316,085 

 Imputed interest 
 ( 208,711 ) 

 Total operating lease liability 
 $ 1,107,374 

 NOTE
15. COMMITMENTS AND CONTINGENCIES 

 Litigation. 

 From
time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy to not disclose
the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us. After carefully assessing
the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend
any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed
reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of
possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration
factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood
of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters
progress over time. 

 On
May 31, 2022, the Company filed a lawsuit against Culp McAuley, Inc. (“defendant”) in the United States District Court for
the District of Kansas. The lawsuit arises from the defendant’s multiple breaches of its obligations to the Company. The Company
seeks monetary damages and injunctive relief based on certain conduct by the defendant. On July 18, 2022, the defendant filed its Answer
to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages. On August
8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and
any and all liability. 

 As
of December 31, 2023, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case, our estimate of
the aggregate reasonably possible loss (in excess of any accrued amounts) was approximately $ 1.8 million. Our estimate with respect to
the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety
of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time, particularly if and
as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding. Also, the matters underlying the reasonably
possible loss will change from time to time. As a result, actual results may vary significantly from the current estimate. 

 While
the ultimate resolution is unknown, based on the information currently available, we do not expect that these lawsuits will individually,
or in the aggregate, have a material adverse effect to our results of operations, financial condition or cash flows. However, the outcome
of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result
from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance
coverage and will not have a material adverse effect on our operating results, financial condition or cash flows. 

 F- 32 

 General 

 401
(k) Plan. The Company sponsors a 401(k) retirement savings plan for the benefit of its employees. The plan, as amended, requires
it to provide 100 % matching contributions for employees, who elect to contribute up to 3% of their compensation to the plan and 50 % matching
contributions for employee’s elective deferrals on the next 2% of their contributions. The Company made matching contributions
totaling $ 207,463 and $ 223,084 for the years ended December 31, 2023 and 2022, respectively. Each participant is 100 % vested at all times
in employee and employer matching contributions. 

 NOTE
16. STOCK-BASED COMPENSATION 

 The
Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $ 452,071 and $ 1,282,757 
for the years ended December 31, 2023 and 2022, respectively. 

 As
of December 31, 2023, the Company had adopted ten separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted
Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the
2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the
“2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option
and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”),
(viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock
Plan (the “2020 Plan”), and (x) the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”). The 2005 Plan,
2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan, 2020 Plan and 2022 Plan are referred to as the “Plans.” 

 These
Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others for up to a total of
 333,750 shares of common stock. The 2005 Plan terminated during 2015 with 1,078 shares not awarded or underlying options, which shares
are now unavailable for issuance. Stock options granted under the 2005 Plan that remain unexercised and outstanding as of December 31,
2023 total 284 . The 2006 Plan terminated during 2016 with 2,739 shares not awarded or underlying options, which shares are now unavailable
for issuance. Stock options granted under the 2006 Plan that remain unexercised and outstanding as of December 31, 2023 total 531 . The
2007 Plan terminated during 2017 with 4,733 shares not awarded or underlying options, which shares are now unavailable for issuance.
There are no stock options granted under the 2007 Plan that remain unexercised and outstanding as of December 31, 2023. The 2008 Plan
terminated during 2018 with 2,025 shares not awarded or underlying options, which shares are now unavailable for issuance. There are
 no stock options granted under the 2008 Plan that remain unexercised and outstanding as of December 31, 2023. 

 Our
Board of Directors adopted the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”) on June 30, 2020 and the Company’s
stockholders approved the 2020 Plan at the Annual Meeting held on September 9, 2020. The Company’s stockholders approved an amendment
to the 2020 Plan at the Annual Meeting held on June 22, 2021 which increased the number of shares of Common Stock authorized and reserved
for issuance under the 2020 Plan to a total of 125,000 . A total of 112,958 options and restricted stock have been granted under the 2020
Plan to date. The 2020 Plan also authorizes us to grant (i) to the key employees’ incentive stock options to purchase shares of
Common Stock and non-qualified stock options to purchase shares of Common Stock and restricted stock awards and (ii) to non-employee
directors and consultants non-qualified stock options and restricted stock. 

 F- 33 

 Our
Board of Directors adopted the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”) on October 28, 2022 and the
Company’s stockholders approved the 2022 Plan at the Annual Meeting held on December 7, 2022. The number of shares of Common Stock
authorized and reserved for issuance under the 2022 Plan totals 125,000 . The 2022 Plan also authorizes us to grant (i) to the key employees’
incentive stock options to purchase shares of Common Stock and non-qualified stock options to purchase shares of Common Stock and restricted
stock awards and (ii) to non-employee directors and consultants non-qualified stock options and restricted stock. 

 The
Company believes that such awards better align the interests of our employees with those of its stockholders. Option awards have been
granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting
based on the completion of continuous service and having ten-year contractual terms. These option awards typically provide for accelerated
vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable
under its Plans with the SEC. A total of 137,042 shares remained available for awards under the various Plans as of December 31, 2023. 

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

 Activity
in the various Plans during the years ended December 31, 2023 and 2022 is reflected in the following table: 

 SUMMARY OF STOCK OPTIONS OUTSTANDING 

 Options 
 Number of 
 Shares 
 Weighted
 Average
 Exercise Price 

 Outstanding at January 1, 2022 
 54,303 
 $ 47.40 

 Granted 
 1,250 
 19.60 

 Exercised 
 — 
 — 

 Forfeited 
 ( 1,603 ) 
 ( 80.80 ) 

 Outstanding at December 31, 2022 
 53,950 
 $ 45.80 

 Exercisable at December 31, 2022 
 53,950 
 $ 45.80 

 Options 
 Number of 
 Shares 
 Weighted
 Average
 Exercise Price 

 Outstanding at January 1, 2023 
 53,950 
 $ 45.80 

 Granted 
 — 
 — 

 Exercised 
 — 
 — 

 Forfeited 
 ( 350 ) 
 ( 83.20 ) 

 Outstanding at December 31, 2023 
 53,600 
 $ 45.55 

 Exercisable at December 31, 2023 
 53,600 
 $ 45.55 

 The
fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The total estimated grant
date fair value stock options issued during the year ended December 31, 2023 and 2022 was $- 0 - and $ 22,768 , respectively. 

 The
Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated grant date fair
value of the options during the years ended December 31, 2023 and 2022: 

 SCHEDULE OF FAIR VALUE OF STOCK OPTIONS ASSUMPTION 

 2023 
 2022 

 Assumptions 
 Assumptions 

 Volatility – range 
 — 
 111.67 % 

 Risk-free rate 
 — 
 1.81 % 

 Expected term 
 — 
 10.0 years 

 Exercise price 
 — 
 $ 19.60 

 F- 34 

 The
Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic
value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises
during the years ended December 31, 2023 and 2022. 

 At
December 31, 2023 and 2022, the aggregate intrinsic value of options outstanding was approximately $- 0 - and $- 0 -, respectively, and the
aggregate intrinsic value of options exercisable was approximately $- 0 - and $- 0 -, respectively. 

 The
following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable
options under the Company’s option plans as of December 31, 2023: 

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

 Outstanding options 
 Exercisable options 

 Exercise price
 range 
 Number of
 options 
 Weighted 
 average
 remaining
 contractual life 
 Number of 
 options 
 Weighted average
 remaining
 contractual life 

 $ 0.01 to $ 49.99 
 37,000 
 6.6 years 
 37,000 
 6.6 years 

 $ 50.00 to $ 69.99 
 15,100 
 4.5 years 
 15,100 
 4.5 years 

 $ 70.00 to $ 89.99 
 1,500 
 2.4 years 
 1,500 
 2.4 years 

 53,600 
 5.9 years 
 53,600 
 5.9 years 

 Restricted
stock grants. The Board of Directors has granted restricted stock awards under the Plans. Restricted stock awards are valued
on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over one to four years corresponding
to anniversaries of the grant date. Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination
of service to or employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the
transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights
and the right to receive cash dividends. 

 A
summary of all restricted stock activity under the equity compensation plans for the years ended December 31, 2023 and 2022 is as follows: 

 SUMMARY OF RESTRICTED STOCK ACTIVITY 

 Number of
 Restricted
 shares 
 Weighted
 average
 grant date
 fair value 

 Nonvested balance, January 1, 2022 
 52,869 
 $ 37.40 

 Granted 
 60,750 
 14.67 

 Vested 
 ( 31,244 ) 
 ( 34.73 ) 

 Forfeited 
 ( 3,250 ) 
 ( 21.20 ) 

 Nonvested balance, December 31, 2022 
 79,125 
 $ 21.73 

 Number of
 Restricted
 shares 
 Weighted
 average
 grant date
 fair value 

 Nonvested balance, January 1, 2023 
 79,125 
 $ 21.73 

 Granted 
 35,000 
 5.00 

 Vested 
 ( 56,625 ) 
 ( 21.29 ) 

 Forfeited 
 ( 3,625 ) 
 ( 22.41 ) 

 Nonvested balance, December 31, 2023 
 53,875 
 $ 11.27 

 F- 35 

 The
Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of the grant.
As of December 31, 2023, there was $ 140,573 of total unrecognized compensation costs related to all remaining non-vested restricted stock
grants, which will be amortized over the next forty-eight months in accordance with their respective vesting scale. 

 The
nonvested balance of restricted stock vests as follows: 

 SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK 

 Years ended 
 Number of 
 shares 

 2024 
 27,750 

 2025 
 19,000 

 2026 
 4,125 

 2027 
 2,000 

 2028 
 1,000 

 NOTE
17. COMMON STOCK PURCHASE WARRANTS 

 2021
Purchase Warrants 

 The
Company has issued Common Stock purchase warrants in conjunction with various debt and equity issuances. The warrants are either immediately
exercisable or have a delayed initial exercise date, no more than nine months from their respective issue date and allow the holders
to purchase up to 1,148,286 shares of common stock at $ 5.50 to $ 52.00 per share as of December 31, 2023. The warrants expire from July
31, 2023 through April 5, 2028 and under certain circumstances allow for cashless exercise. 

 On
January 14, 2021 and February 1, 2021, the Company issued warrants to purchase a total of 2,127,500 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 offers. As
such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their
issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change
in fair value of warrant derivative liabilities. Furthermore, the Company re-values the fair value of warrant derivative liability as
of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant
derivative liabilities through the consolidated statement of operations. 

 On
August 19, 2021, the Company entered into a Warrant Exchange Agreement (the “Exchange Agreement”) with the Investors cancelling
February Warrants exercisable for an aggregate of 384,077 shares of Common Stock in consideration for its issuance of (i) new warrants
(the “Exchange Warrants”) to the Investors exercisable for an aggregate of up to 384,077 shares of Common Stock. The Company
also issued warrants (the “Replacement Original Warrants”) replacing the February Warrants for the remaining shares of Common
Stock exercisable thereunder, representing an aggregate of 330,923 shares of Common Stock, and extended the expiration date of the February
Warrants to September 18, 2026 . The Exchange Warrants provide for an initial exercise price of $ 65.00 per share, subject to customary
adjustments thereunder, and are immediately exercisable upon issuance for cash and on a cashless basis. On the date of the exchange,
the Company calculated the fair value, using the Black-Scholes method, of the cancelled February Warrants and the newly issued Exchange
Warrants, the difference in fair value measurement of the respective warrants was attributed to warrant modification expense in the consolidated
statement of operations. 

 F- 36 

 On
August 23, 2022, the Company entered into Warrant Exchange Agreements (the “Warrant Exchange Agreements”) with certain investors
(the “Investors”), pursuant to which the Company agreed to issue to the Investors an aggregate of 303,750 shares of Common
Stock in exchange for the cancellation by the Investors of the January Warrants, the Exchange Warrants and the Replacement Originals
Warrants. On the date of the exchange, the Company calculated the fair value of the issuance of shares of common stock pursuant to the
Warrant Exchange Agreements, attributing that value to common stock and additional paid in capital. The remaining value of the warrant
derivative liability was attributed to an income from change in fair market value of warrant derivative liabilities and gain on extinguishment
of warrant derivative liabilities in the consolidated statement of operations. On the date of the Warrant Exchange Agreement, using the
Black-Scholes method, the fair value of the warrant derivative liability was $ 8.1 million, compared to $ 9.3 million at June 30, 2022,
resulting in income from change in fair market value of warrant derivative liabilities of $ 1.2 million during the year ended December
31, 2022. Further, the value of the issued shares of Common Stock was $ 4.5 million, applied to additional paid in capital, resulting
in a gain on the extinguishment of warrant derivative liabilities of $ 3.6 million during the year ended December 31, 2022. 

 SCHEDULE OF WARRANT MODIFICATION 

 Terms at 
 August 23, 2022 

 Volatility - range 
 103.7 % 

 Risk-free rate 
 3.17 - 3.36 % 

 Dividend 
 0 % 

 Remaining contractual term 
 3.4 - 4.1 years 

 Exercise price 
 $ 65.00 

 Common stock issuable under the warrants 
 1,215,000 

 Fluctuations
in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As
the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases,
therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant
unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value
of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally
result in higher fair value measurement. A 10 % change in pricing inputs and changes in volatilities and correlation factors would not
result in a material change in our Level 3 fair value. 

 2023
Purchase Warrants 

 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. As such, the Company is required to treat these warrants
as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent
changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore,
the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant
derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations. 

 The
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 
 106.0 % 
 $ 105.4 % 

 Risk-free rate 
 3.36 % 
 3.84 % 

 Dividend 
 0 % 
 0 % 

 Remaining contractual term 
 5.0 years 
 4.3 years 

 Exercise price 
 5.50 – 7.50 
 5.50 – 7.50 

 Common stock issuable under the warrants 
 1,125,000 
 1,125,000 

 F- 37 

 The
following table summarizes information about shares issuable under warrants outstanding during the years ended December 31, 2023 and
2022: 

 SUMMARY OF WARRANT ACTIVITY 

 Warrants 
 Weighted
 average
 exercise price 

 Vested Balance, January 1, 2022 
 1,300,430 
 $ 64.80 

 Granted 
 — 
 — 

 Exercised 
 — 
 — 

 Cancelled 
 ( 1,232,971 ) 
 ( 65.08 ) 

 Vested Balance, December 31, 2022 
 67,459 
 $ 60.26 

 Warrants 
 Weighted
 average
 exercise price 

 Vested Balance, January 1, 2023 
 67,459 
 $ 60.26 

 Granted 
 1,125,000 
 6.50 

 Exercised 
 — 
 — 

 Forfeited/cancelled 
 ( 67,459 ) 
 ( 60.26 ) 

 Vested Balance, December 31, 2023 
 1,125,000 
 $ 6.50 

 The
total intrinsic value of all outstanding warrants aggregated $- 0 - as of December 31, 2023 and 2022, and the weighted average remaining
term was 51.2 and 3.9 months as of December 31, 2023 and 2022, respectively. 

 The
following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable
warrants to purchase shares of common stock as of December 31, 2023: 

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

 Outstanding and exercisable warrants 

 Exercise
 price 
 Number of
 warrants 
 Weighted average
 remaining
 contractual life 

 $ 5.50 
 375,000 
 4.3 years 

 $ 6.50 
 375,000 
 4.3 years 

 $ 7.50 
 375,000 
 4.3 years 

 1,125,000 
 4.3 years 

 NOTE
18 - STOCKHOLDERS’ EQUITY 

 2022
Issuance of Restricted Common Stock. 

 On
January 7, 2022, the board of directors approved the grant of 26,250 shares of common stock to officers of the Company. Such shares will
vest over various periods ranging from one to five years on the anniversary of the grant date, provided that each grantee remains an
officer or employee on such dates. 

 On
various dates in January 2022, the board of directors approved the grant of 9,500 shares of common stock to employees of the Company.
Most shares will generally vest in varying amounts over the next two to five years , provided that each grantee remains an employee on
such vesting dates. 

 Cancellation
of Restricted Stock 

 During
the year ended December 31, 2023, the Company cancelled 3,625 shares for various reasons. 

 Preferred
Stock Transaction 

 On
October 13, 2022, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional
investors (the “Preferred Stock Investors”), pursuant to which the Company agreed to issue and sell, in a private placement
(the “2022 Offering”), 1,400,000 shares of the Company’s Series A Convertible Redeemable Preferred Stock, par value
$ 0.001 per share (the “Series A Preferred Stock”), and 100,000 shares of the Company’s Series B Convertible Redeemable
Preferred Stock, par value $ 0.001 per share (the “Series B Preferred Stock”, and together with the Series A Preferred Stock,
the “Preferred Stock”), at an offering price of $ 9.50 per share, representing a 5 % original issue discount to the stated
value of $ 10.00 per share, for gross aggregate proceeds of $ 15 million in the 2022 Offering, before the deduction of discounts, fees
and offering expenses. The shares of Preferred Stock will, under certain circumstances, be convertible into shares of the Company’s
common stock, at the option of the holders of the Preferred Stock and, in certain circumstances, by the Company. In connection with the
2022 Offering, the Company paid A.G.P./Alliance Global Partners (the “Financial Advisor”) an aggregate cash fee equal to
$ 750,000 and reimbursed the Financial Advisor for certain of its expenses in an amount not to exceed $135,000 . 

 Pursuant
to the Purchase Agreement, the Company filed on October 17, 2022 certificates of designation (the “Certificates of Designation”)
with the Secretary of the State of Nevada designating the rights, preferences and limitations of the shares of Series A Preferred Stock
and Series B Preferred Stock. The Certificate of Designation for the Series A Preferred Stock provides, in particular, that the Series
A Preferred Stock will have no voting rights other than the right to vote on the Amendments on an as-if-converted-to-Common-Stock basis.
 The Certificate of Designation for the Series B Preferred Stock provides, in particular, that the Series B Preferred Stock will have
no voting rights other than the right to vote on the Amendments and each share of Series B Preferred Stock entitles the holder thereof
the right to cast 2,500 votes on the Amendments . 

 The
holders of Preferred Stock will be entitled to dividends, on an as-if converted-to-Common-Stock basis, equal to dividends actually paid,
if any, on shares of Common Stock. The Preferred Stock is convertible, at the option of the holders and, in certain circumstances, by
the Company, into shares of Common Stock at a conversion price of $ 20.00 per share. The conversion price can be adjusted pursuant to
the Certificates of Designation for stock dividends and stock splits, subsequent rights offering, pro rata distributions of dividends
or other distribution of its assets, or the occurrence of a fundamental transaction (as defined in the applicable Certificate of Designation). 

 The
holders of the Series A Preferred Stock and Series B Preferred Stock have the right to require the Company to redeem their shares of
the relevant series at a price per share equal to 105% of the stated value of such shares commencing (i) after the earlier of (1) the
receipt of stockholder approval of the Amendments and (2) sixty (60) days after the closing of the 2022 Offering and (ii) before the
date that is ninety (90) days after such closing. The Company has the option to redeem the Series A Preferred Stock and Series B Preferred
Stock at a price per share equal to 105% of the stated value of such shares commencing after the 90th day following the closing of the
2022 Offering, subject to the holders’ rights to convert the shares prior to such redemption . 

 F- 38 

 The
proceeds of the 2022 Offering were held in an escrow account, along with the additional amount that would be necessary to fund the 105 %
redemption price until the expiration of the redemption period for the Preferred Stock, as applicable, subject to the earlier payment
to redeeming holders. Upon expiration of the redemption period, any proceeds remaining in the escrow account will be disbursed to the
Company. 

 The
2022 Offering closed on October 19, 2022. In December 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. 

 Issuance
of Common Stock as Consideration for the Potential Spin-Off Transaction. 

 On
December 28, 2022, the Company issued a total of 25,000 shares of common stock as a portion of the consideration paid for the advisory
services associated with the potential spin-off transaction. 

 Stock
Repurchase Program 

 On
December 6, 2021, the board of directors of the Company authorized the repurchase of up to $ 10.0 million of the Company’s outstanding
common stock under the specified terms of a share repurchase program (the “Program”). 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. 

 SCHEDULE OF STOCK REPURCHASE 

 Period 
 Total
 Number of
 Shares
 Purchased 
 Average
 Price 
 Paid per 
 Shares 
 Total
 Number of 
 Shares
 Purchased as
 Part of
 Publicly
 Announced
 Program 
 Maximum
 Approximate
 Dollar Value
 of
 Shares that
 May Yet Be
 Purchased
 Under the
 Program 

 December 2021 
 86,742 
 $ 22.80 
 86,742 
 — 

 January 2022 
 34,855 
 22.20 
 34,855 
 — 

 February 2022 
 34,649 
 22.40 
 34,649 
 — 

 March 2022 
 24,298 
 21.20 
 24,298 
 — 

 April 2022 
 29,774 
 22.80 
 29,774 
 — 

 May 2022 
 35,846 
 21.60 
 35,846 
 — 

 June 2022 
 26,878 
 19.20 
 26,878 
 — 

 Total all plans 
 273,042 
 $ 22.00 
 273,042 
 $ 3,998,398 

 On
June 30, 2022, the board of directors of the Company elected to terminate the Program, effective immediately. The Program began in December
2021, with the Company purchasing a total of 273,042 shares at a cost of $ 6,001,602 through June 30, 2022. 

 2023
Issuance of Restricted Common Stock 

 On
January 10, 2023, the board of directors approved the grant of 22,500 shares of Common Stock to officers of the Company. Such shares
will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided
that each grantee remains an officer or employee on such dates. Additionally, the board of directors approved the grant of 12,500 restricted
common shares to certain new employees of the Company. Such shares will generally vest over a period of one to two years on their respective
anniversary dates in January through January 2025, provided that each grantee remains an employee of the company on such dates. 

 F- 39 

 Reverse
Stock Split 

 On
February 6, 2023, we filed a Certificate of Amendment to the Articles of Incorporation, as amended, with the Secretary of State of the
State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of our Common Stock. The
Reverse Stock Split was effective as of time of filing. No fractional shares were issued in connection with the Reverse Stock Split.
Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest
whole number. In connection with the Reverse Stock Split, our board approved appropriate and proportional adjustments to all outstanding
securities or other rights convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock,
warrants, options, and other equity compensation rights. All historical share and per-share amounts reflected throughout our consolidated
financial statements and other financial information in this Report have been adjusted to reflect the Reverse Stock Split as if the split
occurred as of the earliest period presented. The par value per share of our Common Stock was not affected by the Reverse Stock Split. 

 As
a result of the Reverse Stock Split, no fractional shares of new common stock will be issued in connection with the Reverse Stock Split,
all of which shares of new common stock shall be rounded up to the nearest whole number of such shares. Therefore, the Company issued
 24,206 shares pursuant to Reverse Stock Split related to rounding up to the nearest whole number of shares. 

 Noncontrolling
Interests 

 The
Company owns a 51 % equity interest in its consolidated subsidiary, Nobility Healthcare. As a result, the noncontrolling shareholders
or minority interest is allocated 49 % of the income/loss of Nobility Healthcare which is reflected in the statement of (income) loss
as “net (income) loss attributable to noncontrolling interests of consolidated subsidiary”. We reported net income attributable
to noncontrolling interests of consolidated subsidiary of $ 224,598 and $ 407,933 for the year ended December 31, 2023 and 2022, respectively. 

 Conversion
of Convertible Note 

 During
the year ended December 31, 2023, pursuant to the Convertible Note, the Purchasers elected to convert $ 125,000 principal, at the fixed
price of $ 5.00 per share of common stock, 25,000 shares valued at $ 119,750 . 

 Cancellation
of Common Stock 

 During
the year ended December 31, 2023, the Company cancelled 3,625 shares for various reasons.

 NOTE
19. RELATED PARTY TRANSACTIONS 

 Transactions
with Managing Member of Nobility Healthcare 

 On
January 27, 2022, the board of directors appointed Christian J. Hoffmann, III as a member of the Board, effective immediately. Mr. Hoffmann
is a principal owner and manager of Nobility, LLC which is currently the managing member of our consolidated subsidiary Nobility Healthcare,
LLC. 

 The
Company has advanced a total of $ 158,384 in the form of a working capital loan to Nobility, LLC in order to fund capital expenditures
necessary for the initial growth of the joint venture during 2022. The outstanding balance of the working capital loan was $- 0 - as of
December 31, 2023. The Company paid distributions to the noncontrolling in consolidated subsidiary totaling $- 0 - and $ 15,692 , for the
years ended December 31, 2023 and 2022, respectively. 

 The Company also
accrued reimbursable expenses payable to Nobility, LLC totaling $ 619,301 and $ 265,241 for the years ended December 31, 2023 and 2022
and management fees in accordance with the operating agreement of $ 49,014 and $ 36,502 for the years ended December 31, 2023 and 2022.

 On
August 1, 2022, Mr. Hoffmann resigned as a member of the Board, effective immediately. He remains as a principal owner and manager of
Nobility, LLC. 

 F- 40 

 Transactions
with Related Party of TicketSmarter 

 On
September 22, 2023, a trust, the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse,
contributed cash in the amount of $ 2,325,000 
to TicketSmarter to support TicketSmarter’s operations. On October 2, 2023 an additional $ 375,000 was contributed to
Ticketsmarter. The transaction was recorded as a related party note payable (the “TicketSmarter Related Party Note”).
The TicketSmarter Related Party Note bears interest of 13.25 %
per annum with repayment beginning January 2, 2024. As of December 31, 2023, the entire TicketSmarter Related Party note is $ 2,700,000 ,
is classified as current, with an accrued interest balance of $ 95,031 .
The use of proceeds of the TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted rate, the
discount received is recognized as a gain on extinguishment of liabilities on the statement of operations. Additionally, these
negotiations relieved TicketSmarter of numerous future obligations following fiscal year 2023. 

 NOTE
20. NET LOSS PER SHARE 

 The
calculation of the weighted average number of shares outstanding and loss per share outstanding for the years ended December 31, 2023
and 2022 are as follows: 

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

 2023 
 2022 

 Year ended December 31, 

 2023 
 2022 

 Numerator for basic and diluted loss per share – Net loss attributable to common stockholders 
 $ ( 25,688,547 ) 
 $ ( 21,666,691 ) 

 Denominator for basic loss per share – weighted average shares outstanding 
 2,784,894 
 2,548,549 

 Dilutive effect of shares issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding 
 — 
 — 

 Denominator for diluted loss per share – adjusted weighted average shares outstanding 
 2,784,894 
 2,548,549 

 Net loss per share: 
 
 Basic 
 $ ( 9.22 ) 
 $ ( 8.50 ) 

 Diluted 
 $ ( 9.22 ) 
 $ ( 8.50 ) 

 Basic loss per share is based upon the weighted average number of shares of common stock outstanding during the period. For the years
ended December 31, 2023 and 2022, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options
and warrants were antidilutive, and, therefore, not included in the computation of diluted loss per share. 

 NOTE
21. DIGITAL ALLY HEALTHCARE VENTURE 

 On
June 4, 2021, Digital Ally Healthcare, a wholly-owned subsidiary of the Company, entered into a venture with Nobility LLC (“Nobility”),
an eight-year-old revenue cycle management (“RCM”) company servicing the medical industry, to form Nobility Healthcare, LLC
(“Nobility Healthcare”). Digital Ally Healthcare is capitalizing the venture with $ 13.5 million to support the venture’s
business strategy to make acquisitions of RCM companies. Digital Ally Healthcare owns 51% of the venture that entitles it to 51% of the
distributable cash as defined in the venture’s operating agreement plus a cumulative preferred return of 10% per annum on its invested
capital. Nobility will receive a management fee and 49% of the distributable cash, subordinated to Digital Ally Healthcare’s preferred
return. The venture comprises the Company’s revenue cycle management segment. 

 F- 41 

 On
June 30, 2021, the Company’s revenue cycle management segment completed the acquisition of a private medical billing company (the
“Healthcare Acquisition”). In accordance with the stock purchase agreement, the Company’s revenue cycle management
segment agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $ 850,000 . In addition to the Initial
Payment Amount, the Company’s revenue cycle management segment agreed to issue a promissory note to the stockholders of the Healthcare
Acquisition in the principal amount of $ 350,000 that is subject to an earn-out adjustment. Management’s estimate of the fair value
of this Contingent Note at December 31, 2021 is $ 317,212 . The gain associated with the adjustment in the estimated fair value of this
contingent promissory note is recorded as a gain in the Consolidated Statements of Operations for the year ended December 31, 2021. Lastly,
the Company’s revenue cycle management segment agreed to pay $ 162,552 representing the principal and accrued interest balance due
under a promissory note issued to the selling shareholders prior to the acquisition closing date. The Company’s revenue cycle management
segment anticipates the estimated fair value of the contingent promissory note to be paid in full, therefore, the total aggregate purchase
price was determined to be approximately $ 1,376,509 . Total acquisition related costs aggregated $ 164,630 , which was expensed as incurred.
Subsequent to the acquisition date, the Company received further information regarding the purchased assets and assumed liabilities.
As a result, the initial allocation of the purchase price was adjusted by increasing accounts receivable by $ 75,000 with a corresponding
reduction of goodwill during the year ended December 31, 2021. 

 The
Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation
S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, the presentation of the assets acquired,
historical financial statements under Rule 3-05 and related pro forma information under Article 8 of Regulation S-X, respectively, are
not required to be presented. Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to the
acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the
Healthcare Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing
or amounts recognized in our financial statements. Our assumptions and estimates are based upon information obtained from the management
of the Company’s revenue cycle management segment. The acquisition was structured as stock purchase, therefore the excess purchase
price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing
purposes. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition
date. 

 The
purchase price of the Healthcare Acquisition was allocated to the tangible assets, and assumed liabilities based on their preliminary
estimated fair values at the time of the Healthcare Acquisition. The preliminary and final estimated fair value of assets acquired and
liabilities assumed in the Healthcare Acquisition were as follows: 

 SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION 

 Description 
 Preliminary
 as allocated
 June 30, 2021 
 Final
 as allocated
 June 30, 2022 

 Purchase price allocation 

 Description 
 Preliminary
 as allocated
 June 30, 2021 
 Final
 as allocated
 June 30, 2022 

 Assets acquired: 
 
 Tangible assets acquired, consisting of acquired cash, accounts receivable and right of use asset 
 $ 174,351 
 $ 174,351 

 Tangible assets acquired 
 $ 174,351 
 $ 174,351 

 Intangible assets acquired – client agreements 
 — 
 457,079 

 Goodwill 
 1,125,000 
 667,921 

 Liabilities assumed consisting of a promissory note issued by the selling shareholders which was paid off at closing, net of lease liability assumed 
 77,158 
 77,158 

 Liabilities assumed pursuant
 to stock purchase agreement 
 77,158 
 77,158 

 Net assets acquired and liabilities assumed 
 $ 1,376,509 
 $ 1,376,509 

 Consideration: 
 
 Cash paid at Healthcare Acquisition date 
 $ 1,026,509 
 $ 1,026,509 

 Contingent consideration earn-out agreement 
 350,000 
 350,000 

 Total Healthcare Acquisition purchase price 
 $ 1,376,509 
 $ 1,376,509 

 F- 42 

 The
following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of
the date of acquisition: 

 SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES 

 Cost 
 Amortization through 
 December 31,
 2023 
 Estimated
 useful life 

 Identifiable intangible assets: 
 
 Client agreements 
 $ 457,079 
 $ 114,270 
 10 years 

 For
the period from the date of the Healthcare Acquisition to June 30, 2022, the Company adjusted its preliminary fair value estimates and
estimated useful lives based upon information obtained through June 30, 2022, which resulted in adjustments to the preliminary allocation
of the purchase price. These adjustments primarily related to estimated identifiable intangible asset fair values of client agreements
and goodwill. 

 During
the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to
conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there
could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these
assets or liabilities as of that date. The change in fair value of the contingent consideration is more fully described in Note 10, “Debt
Obligations”. 

 On
August 31, 2021, the Company’s revenue cycle management segment completed the acquisition of another private medical billing company
(the “Medical Billing Acquisition”). In accordance with the stock purchase agreement, Nobility Healthcare agreed to a non-refundable
initial payment (the “Initial Payment Amount”) of $ 2,270,000 . In addition to the Initial Payment Amount, the Company’s
revenue cycle management segment agreed to issue a contingent promissory note to the stockholders of the Medical Billing Acquisition
in the principal amount of $ 650,000 that is subject to an earn-out adjustment. The Company’s revenue cycle management segment anticipates
the estimated fair value of the contingent promissory note to be paid in full, therefore, the total aggregate purchase price was determined
to be approximately $ 2,920,000 . Total acquisition related costs aggregated $ 5,602 , which was expensed as incurred. 

 The
Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation
S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, the presentation of the assets acquired,
historical financial statements under Rule 3-05 and related pro forma information under Article 8 of Regulation S-X, respectively, are
not required to be presented. Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to the
acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the
Healthcare Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing
or amounts recognized in our financial statements. Our assumptions and estimates are based upon information obtained from the management
of the Company’s revenue cycle management segment. The acquisition was structured as stock purchase, therefore the excess purchase
price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing
purposes. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition
date. 

 F- 43 

 The
purchase price of the Medical Billing Acquisition was allocated to the tangible assets, and assumed liabilities based on their preliminary
estimated fair values at the time of the Medical Billing Acquisition. The preliminary and final estimated fair value of assets acquired,
and liabilities assumed in the Medical Billing Acquisition were as follows: 

 SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION 

 Preliminary As
 allocated 
 Final As 
 allocated 

 Purchase price
 allocation 

 Preliminary As
 allocated 
 Final As 
 allocated 

 Description 
 September 30,
 2021 
 September 30,
 2022 

 Assets acquired: 
 
 Tangible assets acquired 
 $ 401,547 
 $ 401,547 

 Identifiable intangible assets acquired – client agreements 
 — 
 206,955 

 Goodwill 
 2,920,000 
 2,713,045 

 Liabilities assumed pursuant to stock purchase agreement 
 ( 401,547 ) 
 ( 401,547 ) 

 Net assets acquired and liabilities assumed 
 $ 2,920,000 
 $ 2,920,000 

 Consideration: 
 
 Cash paid at Healthcare Acquisition date 
 $ 2,270,000 
 $ 2,270,000 

 Contingent consideration earn-out agreement 
 650,000 
 650,000 

 Total Healthcare Acquisition purchase price 
 $ 2,920,000 
 $ 2,920,000 

 The
following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of
the date of acquisition: 

 SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES 

 Cost 
 Amortization through 
 December 31, 2023 
 Estimated 
 useful life 

 Identifiable intangible assets: 
 
 Client agreements 
 $ 206,955 
 $ 48,290 
 10 years 

 For
the period from the date of the Healthcare Acquisition to August 31, 2022, the Company adjusted its preliminary fair value estimates
and estimated useful lives based upon information obtained through August 31, 2022, which resulted in adjustments to the preliminary
allocation of the purchase price. These adjustments primarily related to estimated identifiable intangible asset fair values of client
agreements and goodwill. 

 During
the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to
conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there
could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these
assets or liabilities as of that date. The change in fair value of the contingent consideration is more fully described in Note 10, “Debt
Obligations”. 

 F- 44 

 On
January 1, 2022, the Company’s revenue cycle management segment completed the acquisition of another private medical billing company
(the “Medical Billing Acquisition”). In accordance with the stock purchase agreement, Nobility Healthcare agreed to a non-refundable
initial payment (the “Initial Payment Amount”) of $ 1,153,626 . In addition to the Initial Payment Amount, the Company’s
revenue cycle management segment agreed to issue a contingent promissory note to the stockholders of the Medical Billing Acquisition
in the principal amount of $ 750,000 that is subject to an earn-out adjustment. The Company’s revenue cycle management segment anticipates
the estimated fair value of the contingent promissory note to be paid in full, therefore, the total aggregate purchase price was determined
to be approximately $ 1,903,626 . Total acquisition related costs aggregated $ 7,996 , which was expensed as incurred. 

 The
Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation
S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, the presentation of the assets acquired,
historical financial statements under Rule 3-05 and related pro forma information under Article 8 of Regulation S-X, respectively, are
not required to be presented. Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to the
acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the
Healthcare Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing
or amounts recognized in our financial statements. Our assumptions and estimates are based upon information obtained from the management
of the Company’s revenue cycle management segment. The acquisition was structured as stock purchase, therefore the excess purchase
price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing
purposes. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition
date. 

 The
purchase price of the Medical Billing Acquisition was allocated to the tangible assets, and assumed liabilities based on their preliminary
estimated fair values at the time of the Medical Billing Acquisition. There was no change from the preliminary estimated fair value to
the final estimated fair value of assets acquired, and liabilities assumed in the Healthcare Acquisition, those value were as follows: 

 SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION 

 Description 
 Amount 

 Assets acquired: 
 
 Tangible assets acquired 
 $ 190,631 

 Goodwill 
 2,100,000 

 Liabilities assumed pursuant to stock purchase agreement 
 ( 387,005 ) 

 Total assets acquired and liabilities assumed 
 $ 1,903,626 

 Consideration: 
 
 Cash paid at acquisition date 
 $ 1,153,626 

 Contingent consideration promissory note 
 750,000 

 Total acquisition purchase price 
 $ 1,903,626 

 During
the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to
conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there
could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these
assets or liabilities as of that date. The change in fair value of the contingent consideration is more fully described in Note 10, “Debt
Obligations”. 

 F- 45 

 On
February 1, 2022, the Company’s revenue cycle management segment completed an asset acquisition from another private medical billing
company (the “Medical Billing Asset Acquisition”). In accordance with the asset purchase agreement, Nobility Healthcare agreed
to a non-refundable initial payment (the “Initial Payment Amount”) of $ 230,000 . In addition to the Initial Payment Amount,
the Company’s revenue cycle management segment agreed to issue a contingent promissory note to the stockholders of the Medical
Billing Asset Acquisition in the principal amount of $ 105,000 that is subject to an earn-out adjustment. The Company’s revenue
cycle management segment anticipates the estimated fair value of the contingent promissory note to be paid in full, therefore, the total
aggregate purchase price was determined to be approximately $ 335,000 . Total acquisition related costs aggregated $ 10,322 , which was expensed
as incurred. 

 In
accordance with ASC 805, “Business Combinations”, the acquisition method of accounting is used, and recognition of the assets
acquired is at fair value as of the acquisition dates. All acquisition costs were expensed as incurred. The consideration paid has been
allocated to the assets acquired based on their estimated fair values at the acquisition date. The estimate of fair values for the intangible
assets acquired were agreed to by both buyer and seller. The estimated fair value of intangible assets acquired in the Medical Billing
Asset Acquisition were as follows: 

 SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION 

 Description 
 Amount 

 Assets acquired: 
 
 Intangible assets acquired – client agreements 
 $ 335,000 

 Total assets acquired and liabilities assumed 
 $ 335,000 

 Consideration: 
 
 Cash paid at acquisition date 
 $ 230,000 

 Contingent consideration promissory note 
 105,000 

 Total acquisition purchase price 
 $ 335,000 

 The
following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of
the date of acquisition: 

 SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES 

 Cost 
 Amortization through 
 December 31,
 2023 
 Estimated 
 useful life 

 Identifiable intangible assets: 
 
 Client agreements 
 $ 335,000 
 $ 64,208 
 10 years 

 The
change in fair value of the contingent consideration is more fully described in Note 10, “Debt Obligations” and will be estimated
on a quarterly basis. 

 F- 46 

 NOTE
22. TICKETSMARTER ACQUISITION 

 On
September 1, 2021, Digital Ally, Inc. formed TicketSmarter, Inc. (“TicketSmarter”), through which the Company completed the
acquisition of Goody Tickets, LLC, a Kansas limited liability company (“Goody Tickets”) and TicketSmarter, LLC, a Kansas
limited liability company (“TicketSmarter LLC”), collectively the “TicketSmarter Acquisition”. TicketSmarter,
Inc. comprises the Company’s entertainment business segment. In accordance with the stock purchase agreement, the Company agreed
to an initial payment (the “Initial Payment Amount”) of $ 9,403,600 through a combination of cash and common stock. In addition
to the Initial Payment Amount, the Company agreed to issue an earn-out agreement to the stockholders of Goody Tickets and TicketSmarter
LLC in the contingent amount of $ 4,244,400 that is subject to an earn-out adjustment based on actual EBITDA achieved in 2021, of which
the Company gave a fair value of $ 3,700,000 on the date of acquisition. However, following the completion of 2021, it was determined
that the actual EBITDA threshold for any earn-out adjustment to be paid was not met. Thus, in accordance with U.S. GAAP, the fair value
of the contingent earn-out is reduced to zero, and the associated gain related to this revaluation is recorded in our Consolidated Statements
of Operations for the year ended December 31, 2021. Lastly, included in the agreement, the Company agreed to place $ 500,000 in escrow,
subject to a working capital adjustment based on actual working capital amounts on the acquisition date as defined in the agreement,
this amount was subject to disbursement 45 days following the close of the acquisition. The parties completed the working capital adjustment
resulting in the Company retaining $ 297,726 of the escrow amount with the $ 202,274 released to the Sellers. The total acquisition related
costs aggregated $ 40,625 , which was expensed as incurred. 

 The
Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation
S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, the presentation of the assets acquired,
historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are
not required to be presented. Under the acquisition method, the purchase price of the TicketSmarter Acquisition has been allocated to
Goody Tickets’ and TicketSmarter LLC’s acquired tangible and identifiable intangible assets and assumed liabilities based
on their estimated fair values at the time of the TicketSmarter Acquisition. This allocation involves a number of assumptions, estimates,
and judgments that could materially affect the timing or amounts recognized in our financial statements. The TicketSmarter Acquisition
was structured as a stock purchase; however the parties agreed to coordinate the election to invoke IRS Section 338(h)(10) relative to
this transaction for tax purposes. Therefore, the excess purchase price over the fair value of net tangible assets acquired was recorded
as goodwill, which will be amortized over 15 years for income tax filing purposes. Likewise, the other acquired assets were stepped up
to fair value and is deductible for income tax purposes. The results of operations of acquired businesses are included in the consolidated
financial statements from the acquisition date. 

 The
purchase price of the TicketSmarter Acquisition was allocated to Goody Tickets’ and TicketSmarter LLC’s tangible assets,
goodwill, identifiable intangible assets, and assumed liabilities based on their preliminary estimated fair values at the time of the
TicketSmarter Acquisition. The Company retained the services of an independent valuation firm to determine the fair value of these identifiable
intangible assets. The preliminary and final estimated fair value of assets acquired, and liabilities assumed in the TicketSmarter Acquisition
were as follows: 

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

 As allocated 
 Final as allocated 

 Purchase price allocation 

 As allocated 
 Final as allocated 

 Description 
 September 30, 2021 
 December 31, 2021 

 Assets acquired: 
 
 Tangible assets acquired, including $ 51,432 of cash acquired 
 $ 7,139,930 
 $ 5,748,291 

 Identifiable intangible assets acquired 
 — 
 6,800,000 

 Goodwill 
 11,839,308 
 5,886,547 

 Liabilities assumed 
 ( 5,128,964 ) 
 ( 5,128,964 ) 

 Liabilities assumed pursuant to stock purchase agreement 
 ( 5,128,964 ) 
 ( 5,128,964 ) 

 Net assets acquired and liabilities assumed 
 $ 13,850,274 
 $ 13,305,874 

 Consideration: 
 
 Cash paid at TicketSmarter Acquisition date 
 $ 8,413,240 
 $ 8,413,240 

 Common stock issued as consideration for TicketSmarter Acquisition at date of acquisition 
 990,360 
 990,360 

 Contingent consideration earn-out agreement 
 4,244,400 
 3,700,000 

 Cash paid at closing to escrow amount 
 500,000 
 500,000 

 Cash retained from escrow amount pursuant to settlement of working capital target 
 ( 297,726 ) 
 ( 297,726 ) 

 Total TicketSmarter Acquisition purchase price 
 $ 13,850,274 
 $ 13,305,874 

 F- 47 

 The
following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of
the date of acquisition: 

 SCHEDULE OF COMPONENTS OF IDENTIFIABLE INTANGIBLE ASSETS ACCRUED ACQUIRED 

 Cost 
 Amortization through
 December 31, 2023 
 Estimated
 useful life 

 Identifiable intangible assets: 
 
 Trademarks 
 $ 600,000 
 $ — 
 indefinite 

 Sponsorship agreement network 
 5,600,000 
 2,613,333 
 5 years 

 Search engine optimization/content 
 600,000 
 350,000 
 4 years 

 $ 6,800,000 
 $ 2,963,333 
 
 For
the period from the date of the TicketSmarter Acquisition to December 31, 2021, the Company adjusted its preliminary fair value estimates
and estimated useful lives based upon information obtained through December 31, 2021, which resulted in adjustments to the preliminary
allocation of the purchase price. These adjustments primarily related to estimated identifiable intangible asset fair values (primarily
related to the sponsorship agreement network), the estimated fair value of the contingent earn-out agreement liability and goodwill.
There were no adjustments to the allocation of the purchase price during the year ended December 31, 2023. 

 During
the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to
conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there
could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these
assets or liabilities as of that date. The change in fair value of the contingent consideration is more fully described in Note 10, “Debt
Obligations”. 

 NOTE
23. SEGMENT DATA 

 The
accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial
statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified
as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision
maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess
performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which
has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate
administrative activities, is also to be reported in the segment information. The Company’s captive insurance subsidiary provides
services to the Company’s other business segments and not to outside customers. Therefore, its operations are eliminated in consolidation
and is not considered a separate business segment for financial reporting purposes. 

 The
Video Solutions Segment encompasses our law, commercial, and shield divisions. This segment includes both service and product revenues
through our subscription models offering cloud and warranty solutions, and hardware sales for video and health safety solutions. The
Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout
the country, as a monthly service fee. The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our
secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms. 

 F- 48 

 The
Company’s corporate administration activities are reported in the corporate line item. These activities primarily include expense
related to certain corporate officers and support staff, certain accounting staff, expense related to the Company’s Board of Directors,
stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities,
and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of
cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes. 

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

 SCHEDULE OF SEGMENT REPORTING 

 2023 
 2022 

 Years Ended December 31, 

 2023 
 2022 

 Net Revenues: 
 
 Video Solutions 
 $ 7,471,285 
 $ 8,252,288 

 Revenue Cycle Management 
 6,713,678 
 7,886,107 

 Entertainment 
 14,063,381 
 20,871,500 

 Total Net Revenues 
 $ 28,248,344 
 $ 37,009,895 

 Gross Profit (loss): 
 
 Video Solutions 
 $ 1,290,509 
 $ ( 1,250,277 ) 

 Revenue Cycle Management 
 2,772,271 
 3,303,477 

 Entertainment 
 1,699,704 
 268,741 

 Total Gross Profit 
 $ 5,762,484 
 $ 2,321,941 

 Operating Income (loss): 
 
 Video Solutions 
 $ ( 7,135,584 ) 
 $ ( 9,278,721 ) 

 Revenue Cycle Management 
 292,543 
 357,705 

 Entertainment 
 ( 3,646,770 ) 
 ( 7,369,241 ) 

 Corporate 
 ( 11,750,742 ) 
 ( 13,443,001 ) 

 Total Operating Income (Loss) 
 $ ( 22,240,553 ) 
 $ ( 29,733,258 ) 

 Depreciation and Amortization: 
 
 Video Solutions 
 $ 836,699 
 $ 769,228 

 Revenue Cycle Management 
 104,352 
 128,082 

 Entertainment 
 1,277,186 
 1,279,369 

 Total Depreciation and Amortization 
 $ 2,218,237 
 $ 2,176,679 

 Assets (net of eliminations): 
 
 Video Solutions 
 $ 26,396,559 
 $ 28,509,706 

 Revenue Cycle Management 
 2,260,376 
 2,201,570 

 Entertainment 
 6,324,211 
 11,190,491 

 Corporate 
 12,047,663 
 14,766,295 

 Total Identifiable Assets 
 $ 47,028,809 
 $ 56,668,062 

 The
segments recorded noncash items affecting the gross profit and operating income (loss) through the established inventory reserves based
on estimates of excess and/or obsolete current and non-current inventory. The Company recorded a reserve for excess and obsolete inventory
in the video solutions segment of $ 4,355,666 and $ 5,230,261 and a reserve for the entertainment segment of $ 186,795 and $ 259,280 as of
December 31, 2023 and 2022. 

 The
segment net revenues reported above represent sales to external customers. Segment gross profit represents net revenues less cost of
revenues. Segment operating income, which is used in management’s evaluation of segment performance, represents net revenues, less
cost of revenues, less all operating expenses. Identifiable assets are those assets used by each segment in its operations. Corporate
assets primarily consist of cash, property, plant and equipment, accounts receivable, inventories, and other assets. 

 F- 49 

 Note
24. SUBSEQUENT EVENTS 

 2023
 Issuance of Restricted Common Stock 

 On
January 31, 2024, the Compensation Committee of the Board of Directors (the “Committee”) awarded Stanton E. Ross 20,000 shares
of restricted common stock, half of these share will vest on January 31, 2025 and half on January 1, 2026, or in full at the completion
of the previously disclosed Transaction entered into by the Company’s wholly-owned subsidiary, Kustom Entertainment, pursuant to
the Merger Agreement with Clover Leaf, and the Company, whichever occurs first, provided that he remains an officer on such dates. Peng
Han was awarded 15,000 shares of restricted common stock that will vest 3,000 shares on January 31, 2024, January 31, 2025, January 31,
2026, January 31, 2027 and January 31, 2028, or in full at the completion of the Transaction, whichever occurs first, provided that he
remains an officer on such dates. 

 Resignation
of Michael J. Caulfield 

 On
January 31, 2024, Michael J. Caulfield notified the Board of Directors (the “Board”) of Digital Ally, Inc. (the “Company”)
that he resigns as a director of the Board, effective immediately. 

 Country
Stampede Acquisition 

 On
March 1, 2024, Kustom 440, entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment,
LLC, a Kansas limited liability company (“JC Entertainment”). Pursuant to the Acquisition Agreement, Kustom 440 acquired
certain assets associated with a music entertainment event (“Country Stampede”), including all intellectual property arising
out of and relating to Country Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment
is a party to host and operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede
Intellectual Property, the “Purchased Assets”). 

 Senior
Secured Promissory Note 

 On
March 1, 2024, the Company entered into a Note Purchase Agreement (the “Note Agreement”), by and between the Company, Kustom
Entertainment (together with the Company, the “Borrowers”), and Mosh Man, LLC, a New Jersey limited liability company (the
“Purchaser”), pursuant to which the Borrowers issued to the Purchaser a Senior Secured Promissory Note (the “Note”)
with a principal amount of $ 1,425,000 .
In connection with the Agreement, the Borrowers entered into a Security Agreement (the “Security Agreement”) by and between
the Borrowers, as grantor, and the Purchaser, as grantee. The gross proceeds to the Company are $ 1,000,000 ,
before paying customary fees and expenses. 

 Pursuant
to the Note, the Borrowers shall repay the Note, in full, on the earlier of (i)
November 1, 2024, and (ii) the consummation of the merger between Kustom Entertainment and Clover Leaf pursuant to the Merger Agreement
among the Company, Kustom Entertainment, Clover Leaf Capital Corp., Yntegra Capital Investments LLC and CL Merger Sub, dated as of June
1, 2023. The Borrowers shall pay in arrears in cash an amount equal to 50% of revenues from all ticket sales generated by Kustom Entertainment,
up nine thousand tickets sold, and thereafter equal to 10% of all revenues from all ticket sales until the earlier of the date on which
the Note is repaid in full or the Maturity Date. The Note bears interest at a rate of 1.58% per month. The Borrowers have the right,
but not the obligation, under the Note to prepay the Note, upon written notice to the Purchaser, by payment in full of the entire outstanding
principal balance plus interest. Upon a change of control of either Borrower or a sale or all or substantially all of either Borrower’s
assets, the Purchaser may require the Borrowers to repay the Note, upon written notice to the Borrowers, by payment in full of the entire
outstanding principal balance plus interest. In
addition, upon the receipt of proceeds from any financing or extraordinary receipts, the Borrowers are required to repay the Note as
follows: (A) if the aggregate proceeds of all such financings and extraordinary receipts are less than $ 3,000,000 ,
the Borrowers shall prepay an amount equaling to 50% of the outstanding principal of the Note, and (B) if the aggregate proceeds of all
such financings and extraordinary receipts are equal to or greater than $ 3,000,000 ,
the Borrowers shall prepay the Note in full. 

 Pursuant
to the Security Agreement, the Borrowers’ obligations under the Note and Agreement are secured by substantially all of the assets
of the Borrowers, other than any real property. 

 Notice
of Failure to Satisfy a Continued Listing Rule 

 On
March 14, 2024, the Nasdaq Listing Qualifications staff notified Digital Ally, Inc. (the “Company”), that due to resignation
of Mr. Michael J. Caulfield from the Company’s board of directors (the “Board”) effective on January 31, 2024, the
Company no longer complies with the audit committee and compensation committee requirements as set forth in Listing Rule 5605 of The
Nasdaq Stock Market LLC (“Nasdaq”), including the requirements that there are at least three independent directors on the
Company’s audit committee and at least two independent directors on the Company’s compensation committee. 

 The
notification has no immediate effect on the Company’s listing on the Nasdaq Capital Market. In accordance with Nasdaq Listing Rules,
the Company is provided a cure period until the earlier of the Company’s next annual shareholders’ meeting (or July 29, 2024
if the next shareholders’ meeting will be held before July 29, 2024) or January 31, 2025 (the “Cure Period”). If the
Company does not regain compliance by within the Cure Period, Nasdaq will provide written notice that the Company’s common stock,
par value $ 0.001 per share, will be subject to delisting from the Nasdaq Capital Market, at which time, the Company may appeal the delisting
determination to a Hearings Panel. 

 The
management of the Company has resolved to take commercially reasonable steps to fill the vacancy on the Board with a new director who
qualifies as independent under the Nasdaq Listing Rules as soon as is practical and anticipates regaining compliance during the Cure
Period. However, there can be no assurance that the Company will be able to satisfy Nasdaq Listing Rule 5605 or will otherwise be in
compliance with other Nasdaq listing criteria. 

 Business
Combination 

 In
February 2024, Kustom Entertainment and Clover Leaf announced the filing of Amendment No. 2 to a Registration Statement on Form S-4 by
Clover Leaf with the SEC on February 5, 2024, relating to the previously announced proposed Business Combination. 

 F- 50
KUSTOM ENTERTAINMENT, INC. 10-K

Item 9A. Controls and Procedures
