What changed in this filing

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Item 1. Financial Statements

2024-08-16 compared with 2024-05-17 · 521 added, 400 removed, 1118 unchanged (45% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

31, 2024 AND DECEMBER 31, 2023

March 31, 2024

June 30, 2024

December 31, 2023

1 unchanged sentence

Cash and cash equivalents

Accounts receivable – trade, net of $ 234,727 allowance – March 31, 2024 and $ 200,668 – December 31, 2023

Other receivables, net of $ 25,000 allowance – March 31, 2024 and $ 5,000 – December 31, 2023

Accounts receivable – trade, net of $ 239,391 allowance – June 30, 2024 and $ 200,668 – December 31, 2023

Other receivables, net of $ 25,000 allowance – June 30, 2024 and $ 5,000 – December 31, 2023

Inventories, net

26 unchanged sentences

shares issued:

2,879,826 shares issued – March 31, 2024 and 2,800,754 shares issued – December 31, 2023

3,502,037 shares issued – June 30, 2024 and 2,800,754 shares issued – December 31, 2023

Additional paid in capital

7 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

THE THREE MONTHS ENDED

31, 2024 AND 2023

Three months ended

March 31, 2024

Three months ended

March 31, 2023

three months ended June 30,

six months ended June 30,

Service and other

11 unchanged sentences

( 4,940,704 )

( 7,553,193 )

( 11,113,511 )

Other income (expense):

1 unchanged sentence

Interest expense

( 1,085,063 )

( 1,515,509 )

( 1,733,690 )

( 1,521,049 )

Loss on accrual for legal settlement

( 1,792,308 )

Loss on conversion of convertible note

Change in fair value of warrant derivative liabilities

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

Change in fair value of contingent consideration promissory notes

Gain on extinguishment of liabilities

Loss on extinguishment of debt

Gain on sale of intangibles

Loss on sale of property, plant and equipment

Total other income

Income (loss) before income tax benefit

Total other income (expense)

( 1,096,330 )

( 3,379,845 )

( 1,400,626 )

( 3,186,617 )

Loss before income tax benefit

( 5,010,551 )

( 8,320,549 )

( 8,953,819 )

( 14,300,128 )

Income tax benefit

1 unchanged sentence

( 8,320,549 )

Net (income) loss attributable to noncontrolling interests of consolidated subsidiary

( 8,953,819 )

( 14,300,128 )

Net (income) attributable to noncontrolling interests of consolidated subsidiary

Net loss attributable to common stockholders

1 unchanged sentence

$ ( 8,393,304 )

$ ( 9,014,882 )

$ ( 14,499,122 )

Net loss per share information:

2 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Noncontrolling

3 unchanged sentences

Stock-based compensation

Restricted common stock grant

Restricted common stock forfeitures

Issuance due to rounding from reverse stock split

4 unchanged sentences

$ 127,984,155

Balance, December 31, 2023

$ ( 98,086,052 )

Stock-based compensation

Restricted common stock forfeitures

Issuance due to rounding from reverse stock split

Conversion of convertible note into common stock

Net income (loss)

( 8,393,304 )

( 8,320,549 )

Balance, June 30, 2023

$ 128,283,343

$ ( 106,479,356 )

Balance, December 31, 2023

$ 128,441,083

$ ( 117,668,781 )

Stock-based compensation

1 unchanged sentence

Restricted common stock forfeitures

Net Income (loss)

( 3,931,020 )

5 unchanged sentences

$ ( 121,599,801 )

Stock-based compensation

Sale of common stock and pre-funded warrants, net of offering costs

Fair value of warrants issued along with sale of common stock

( 2,075,300 )

Net Income (loss)

( 5,083,861 )

( 5,010,551 )

Balance, June 30, 2024

$ 128,995,997

$ ( 126,683,662 )

$ 128,995,997

$ ( 126,683,662 )

Notes to the Unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

MONTHS ENDED MARCH 31, 2024 AND 2023

Three months ended

March 31, 2024

Three months ended

March 31, 2023

THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

For the six months ended June 30,

Cash Flows From Operating Activities:

3 unchanged sentences

Depreciation and amortization

Loss on accrual for legal settlement

Loss on sale of property, plant and equipment

Gain on sale of intangible

Gain on sale on intangible

Stock-based compensation

Non-cash interest expense

Amortization of debt issuance costs

Gain on extinguishment of liabilities

Loss on extinguishment of debt

Change in fair value of warrant derivative liabilities

Convertible debt discount amortization

Loss on conversion of debt

Provision for inventory obsolescence

Provision for doubtful accounts receivable

Provision for doubtful lease receivable

Allowance for doubtful lease reserve

Change in fair value of contingent consideration promissory note

Change in operating assets and liabilities (net of assets and liabilities acquired):

Change in operating assets and liabilities:

(Increase) decrease in:

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Accrued expenses

Operating lease obligations

Accrued Expenses – related party

Income taxes payable

Lease deposit

Operating lease obligations

Contract liabilities

1 unchanged sentence

( 3,408,757 )

( 3,109,986 )

Cash Flows from Investing Activities:

Purchases of furniture, fixtures and equipment

Purchases of property, plant and equipment

Additions to intangible assets

Cash paid for acquisition of Country Stampede

Proceeds from sale of intangible assets

Proceeds from sale of intangible asset

Proceeds from sale of property, plant and equipment

3 unchanged sentences

Proceeds – Merchant Advances – Entertainment Segment

Net proceeds of equity offering with detachable warrants

Net proceeds of convertible debt with detachable warrants

Proceeds – Commercial Extension of Credit – Entertainment Segment

1 unchanged sentence

Payments on Merchant Advances – Video Solutions Segment

( 1,215,000 )

Payments on Merchant Advances – Entertainment Segment

Principal payment on EIDL loan

1 unchanged sentence

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net decrease in cash, cash equivalents, and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

2 unchanged sentences

Cash payments for interest

Cash payments for income taxes

Supplemental disclosures of non-cash investing and financing activities:

Restricted common stock grant

Restricted common stock forfeitures

Adjustments of accounts payable

with the sale proceeds of property, plant and equipment

Assets acquired in business acquisitions

Goodwill acquired in business acquisitions

Liabilities assumed in business acquisitions

payable for Country Stampede acquisition

Commercial extension of credit repaid through accrued revenue – Entertainment segment

ROU and lease liability recorded on extension (termination) of lease

Conversion of convertible notes payable into common stock

Fair value of warrants issued with sale of shares

Assets acquired in business acquisitions

Liabilities assumed in the business acquisition

Goodwill acquired in business acquisitions

Adjustments of accounts payable with the sale proceeds of property, plant and equipment

Restricted common stock grant

Reverse stock split rounding issuances

Restricted common stock forfeitures

Debt discount on convertible note

Notes to the Unaudited Condensed Consolidated Financial Statements.

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organizations throughout the country, as a monthly service fee.

The Entertainment Segment acts as an intermediary between ticket buyers and

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

various platforms.

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments

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

Such required

segment information is included in Note 18.

The Entertainment Segment acts as an intermediary between ticket buyers

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

through various platforms.

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating

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

Such required segment information is included in Note 18.

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

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

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

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

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

symbol that reflects the name “Kustom Entertainment”.

and into Kustom (the “Merger”), with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary

of Clover Leaf.

In the Merger, all of the issued and outstanding capital stock of Kustom immediately prior to the Closing shall no longer

be outstanding and shall automatically be cancelled and shall cease to exist, in exchange for the right for the Company to receive the

Merger Consideration (as defined below).

total consideration to be received by Company and its financial advisor at the Closing in connection with the Merger (the “Merger

Consideration”) will be a number of newly issued shares of Class A Common Stock, par value $ 0.0001 per share, of Clover Leaf (the

“Combined Company Common Stock”) with an aggregate value equal to $ 125,000,000 , subject to adjustments for Kustom’s

closing debt (net of cash) and based on a deemed value of $ 11.14 per share of Combined Company Common Stock.

Company will also distribute to its stockholders and certain of its warrant holders 30 % of the Combined Company Common Stock received

as Merger Consideration immediately following the Closing, and will distribute the balance of such shares immediately following the lock-up period,

which will expire six months after the Closing.

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

of Presentation :

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a fair presentation have been included.

Operating results for the three month period ended March 31, 2024 are not necessarily indicative

of the results that may be expected for the year ending December 31, 2024.

Operating results for the three- and six-month period ended June 30, 2024 are not necessarily

indicative of the results that may be expected for the year ending December 31, 2024.

balance sheet at December 31, 2023 has been derived from the audited financial statements at that date, but does not include all the

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

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

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

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

forecasted future cash flows and the Company’s obligations due before May 15, 2024.

forecasted future cash flows and the Company’s obligations due before August 15, 2024.

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

For the three months ended March 31,

2024, the Company had a net loss attributable to common stockholders of $ 3,931,020 ,

net cash used in operating activities of $ 918,545 ,

$ 160,830 provided

by investing activities and $ 1,005,027 provided by financing

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.

For the six months ended June 30, 2024,

the Company had a net loss attributable to common stockholders of $ 8,953,819 , net cash used in operating activities of $ 3,408,757 , $ 36,504

provided by investing activities and $ 3,208,817 provided by financing activities.

The Company will have to restore positive operating

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

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 has implemented an enhanced quality control program to detect and correct product issues before they result in significant rework

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Value of Financial Instruments :

carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated

carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and

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

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

During the three months ended March 31, 2024, the Company recognized revenue of $ 241,371 related to its contract liabilities.

During the six months ended June 30, 2024, the Company recognized revenue of $ 1.4 million related to its contract liabilities.

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

3 unchanged sentences

Total contract liabilities consist of the following:

OF CONTRACT LIABILITIES

March 31, 2024

December 31, 2023

Additions/Reclass

Recognized Revenue

March 31, 2024

SCHEDULE OF CONTRACT LIABILITIES

June 30, 2024

Contract liabilities, current

$ ( 610,807 )

Contract liabilities, non-current

March 31, 2023

December 31, 2022

Additions/Reclass

Recognized Revenue

March 31, 2023

$ ( 1,364,757 )

June 30, 2023

Contract liabilities, current

$ ( 496,034 )

Contract liabilities, non-current

returns and allowances aggregated $ 93,170 and $ 117,713 as of March 31, 2024 and December 31, 2023, 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.

$ ( 983,140 )

returns and allowances aggregated $ 93,170 and $ 117,713 for the six months ended June 30, 2024 and December 31, 2023, respectively.

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

The accrual is determined based upon

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

of Estimates :

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.

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, allowance for doubtful accounts, the estimate of

fair value of the lease liabilities and related right of use asset, inventory valuation reserve, fair value of assets and

liabilities acquired in a business combination, incremental borrowing rate on leases, the valuation allowance for deferred tax

assets and other legal claims and contingencies.

The results of any changes in accounting estimates are reflected in the financial

statements in the period in which the changes become evident.

Estimates and assumptions are reviewed periodically, and the effects

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

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, fair value of assets and liabilities acquired in

a business combination, incremental borrowing rate on leases, the valuation allowance for deferred tax assets and other legal claims

and contingencies.

The results of any changes in accounting estimates are reflected in the financial statements in the period in which

the changes become evident.

Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period

that they are determined to be necessary.

and cash equivalents :

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

The following table shows the Company’s cash and cash equivalents by significant investment category as of March 31, 2024 and December

OF SHORT TERM INVESTMENTS

March 31, 2024

Demand deposits

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

Money market funds

December 31, 2023

Demand deposits

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

Money market funds

SCHEDULE OF SHORT TERM INVESTMENTS

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

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

2 unchanged sentences

with major financial institutions.

At March 31, 2024 and December 31, 2023, the uninsured balance amounted to $ 296,799 and $ 29,700 , respectively.

cash of $ 97,600 and $ 97,600 was included in other assets as of March 31, 2024 and December 31, 2023, respectively.

At June 30, 2024 and December 31, 2023, the uninsured balance amounted to $ 136,717 and $ 29,700 , respectively.

cash of $ 97,600 and $ 97,600 was included in other assets as of June 30, 2024 and December 31, 2023, respectively.

Restricted cash consists

2 unchanged sentences

restricted cash in the consolidated statements of cash flows:

OF RECONCILIATION OF CASH AND CASH EQUIVALENTS

March 31, 2024

SCHEDULE OF RECONCILIATION OF CASH AND CASH EQUIVALENTS

June 30, 2024

December 31, 2023

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if fair value is not available.

The Company last assessed potential impairments of its long-lived assets as of December 31, 2023 and concluded

that there was no impairment.

Subsequent to completing our 2023 annual impairment test, no events or

changes in circumstances were noted that required an interim goodwill impairment test.

The Company last assessed potential impairments of its long-lived assets as of December 31, 2023 and

concluded that there was no impairment.

Subsequent to completing our 2023 annual impairment test, no events or changes in circumstances

were noted that required an interim goodwill impairment test.

assets include deferred patent costs, license agreements, trademarks and trade names.

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.

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

Legal expenses incurred in preparation of patent

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

Costs incurred in preparation of applications

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

The Company has entered into several sublicense agreements under which

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

These sublicense agreements generally require

upfront payments to obtain the exclusive rights to such material.

The Company capitalizes the upfront payments as intangible assets and

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

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

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financial statements and related disclosures.

consisted of the following at March 31, 2024 and December 31, 2023:

OF INVENTORIES

March 31, 2024

December 31, 2023

consisted of the following at June 30, 2024 and December 31, 2023:

SCHEDULE OF INVENTORIES

Raw material and component parts– video solutions segment

9 unchanged sentences

The cost of such units

totaled $ 51,099 and $ 42,797 as of March 31, 2024 and December 31, 2023, respectively.

totaled $ 43,274 and $ 42,797 as of June 30, 2024 and December 31, 2023, respectively.

DEBT OBLIGATIONS

obligations is comprised of the following:

OF DEBT OBLIGATIONS

March 31, 2024

SCHEDULE OF DEBT OBLIGATIONS

June 30, 2024

December 31, 2023

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Debt obligations, long-term

obligations mature as follows as of March 31, 2024:

obligations mature as follows as of June 30, 2024:

SCHEDULE OF MATURITY OF DEBT OBLIGATIONS

March 31, 2024

June 30, 2024

2024 (July 1, 2024 to December 31, 2024)

2028 and thereafter

Small Business Administration Notes .

May 12, 2020, the Company received $ 150,000 in loan funding from the SBA under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program

was expanded pursuant to the recently enacted CARES Act.

The EIDL is evidenced by a secured promissory note, dated May 8, 2020, in

the original principal amount of $ 150,000 with the SBA, the lender.

May 12, 2020, the Company received $ 150,000 in loan funding from the SBA under the Economic Injury Disaster Loan (“EIDL”)

program administered by the SBA, which program was expanded pursuant to the recently enacted CARES Act.

The EIDL is evidenced by a secured

promissory note, dated May 8, 2020, in the original principal amount of $ 150,000 with the SBA, the lender.

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

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

The Company granted the SBA a continuing interest

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

Company made principal payments of $ 810 during the three months ended March 31, 2024 and recorded interest expense of $ 1,383 .

The Company granted the SBA a continuing interest in and to

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

Company made principal payments of $ 1,628 during the six months ended June 30, 2024 and recorded interest expense of $ 1,383 and $ 2,758

for the three and six months ended June 30, 2024.

Consideration Promissory Notes

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Management recorded the contingent

consideration promissory note at its estimated fair value of $ 350,000 at the acquisition date.

Total principal payments, since inception,

on this contingent consideration promissory note totaled $ 261,543 .

The estimated fair value of the June Contingent Note at March 31,

2024 is $ 29,409 , representing a reduction in its estimated fair value of $ 29,409 as compared to its estimated fair value as of December

This reduction only relates to the principal payments made for the three months ended March 31, 2024.

Therefore, the Company

recorded no gain or loss in the Consolidated Statements of Operations for the three months ended March 31, 2024.

consideration promissory note at its estimated fair value of $ 350,000

at the acquisition date.

Total principal payments,

since inception, on this contingent consideration promissory note totaled $ 290,952 .

The estimated fair value of the June Contingent

Note at June 30, 2024 is $- 0 -,

representing a reduction in its estimated fair value of $ 58,819

as compared to its estimated fair value as of

December 31, 2023.

This reduction only relates to the principal payments made for the six months ended June 30, 2024.

Therefore, the

Company recorded no gain or loss in the Consolidated Statements of Operations for the six months ended June 30, 2024.

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

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The estimated fair value

of the August Contingent Note at March 31, 2024 is $ 64,826 , representing a decrease in its estimated fair value of $ 64,826 as compared

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

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

March 31, 2024.

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

March 31, 2024.

of the August Contingent Note at June 30, 2024 is $- 0 -, representing a decrease in its estimated fair value of $ 129,651 as compared to

is estimated fair value as of December 31, 2023.

This reduction only relates to the principal payments made for the six months ended

June 30, 2024.

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

June 30, 2024.

Commercial Extension of Credit

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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 or (ii) expiration of the Private Label Agreement on

December 31, 2023.

the three months ended March 31, 2024, the Entertainment segment Company’s Entertainment segment repaid the outstanding principal

of (i) repayment of the Principal Sum, accrued Interest, and a fee of $35,000 or (ii) expiration of the Private Label Agreement on December

the six months ended June 30, 2024, the Entertainment segment Company’s Entertainment segment repaid the outstanding principal

of $ 87,928 and did not renew this agreement.

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and operating its business in accordance with the Ticket Solution Agreement.

The Lender, Ticket Evolution, Inc., agreed

to extend, subject to the conditions hereof, and Borrower agreed to take, a Loan for Principal Sum of $ 75,000 with monthly advances of $ 100,000 .

The Lender, Ticket Evolution, Inc., agreed to extend, subject

to the conditions hereof, and Borrower agreed to take, a Loan for Principal Sum of $ 75,000 with monthly advances of $ 100,000 .

advances made are recoupable from client service fees with no more than $ 25,000 being recouped in any one week.

The total advances received

for the three months ended March 31, 2024 were $ 275,000 and payments made totaled $ 205,357 .

The outstanding balance as of March 31, 2024

was $ 69,643 .

for the six months ended June 30, 2024 were $ 575,000 and payments made totaled $ 562,500 .

The outstanding balance as of June 30, 2024 was

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

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

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 Notes:

OF WARRANT TO PURCHASE COMMON STOCK GRANTED

April 5, 2023

(issuance date)

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 Notes:

SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED

Terms at April 5, 2023 (issuance date)

Volatility - range

2 unchanged sentences

Exercise price

$ 5.50 – 7.50

Common stock issuable under the warrants

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

$ 4,880,000 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”).

$ 4,880,000 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,

23 unchanged sentences

Company recorded debt issuance costs of $ 188,255 .

During the three months ended March 31, 2024, the Company amortized $ 23,435 of debt

discount under interest expense.

During the three and six months ended June 30, 2024, the Company amortized $ 23,435

and $ 46,871 of debt discount under interest expense.

Cash Advances – Video Solutions Segment

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, secured by expected future sales transactions of the Company with expected payments on a weekly

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, 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.

The loan bears interest at 2.9 %

During the three months ended March 31, 2024, the Company made repayments totaling $ 702,000

and received additional proceeds of $ 700,000 .

As of March 31, 2024 the outstanding balance was $ 1,348,000

which is expected to be repaid in 2024.

the three months ended March 31, 2024 the Company amortized $ 278,256 of debt discount under interest expense.

The loan bears interest at 2.9 % per week.

During the six months ended June 30, 2024, the Company made repayments

totaling $ 1,215,000 and received additional proceeds of $ 1,144,000 .

The Company refinanced this loan in April 2024 resulting in the additional

The refinancing was deemed to be an extinguishment of debt and a loss on extinguishment of debt was recorded during the three

months ended June 30, 2024 of $ 68,827 .

of June 30, 2024 the outstanding balance was $ 2,259,000 which is expected to be repaid in 2024.

the six months ended June 30, 2024 the Company amortized $ 820,429 of debt discount under interest expense.

Cash Advances – Entertainment Segment

March 2024, the Company obtained a short-term merchant advance, which totaled $ 1,000,000 ,

from a single lender to fund operations.

These advances included origination and issuance fees totaling $ 85,000

for net proceeds of $ 915,000 .

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 $ 1,425,000

to the lender.

The loan bears interest at 5.05 % per annum.

During the three months ended March 31, 2024, the Company made no

As of March 31, 2024 the outstanding balance was $ 1,425,000

which is expected to be repaid in 2024.

the three months ended March 31, 2024 the Company amortized $ 63,750 of debt discount and issuance costs under interest expense.

March 2024, the Company obtained a short-term merchant advance, which totaled $ 1,000,000 , from a single lender to fund operations.

advances included origination and issuance fees totaling $ 85,000 for net proceeds of $ 915,000 .

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 $ 1,425,000 to the lender.

The loan bears interest at 5.19 % per month.

During the six months ended June 30, 2024, the Company made

repayments totaling $ 51,899 .

As of June 30, 2024 the outstanding balance was $ 1,373,101 which is expected to be repaid in 2024.

the three and six months ended June 30, 2024 the Company amortized $ 139,118 and $ 202,868 of debt discount and issuance costs under interest

FAIR VALUE MEASUREMENT

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

basis as of March 31, 2024 and December 31, 2023:

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

March 31, 2024

basis as of June 30, 2024 and December 31, 2023:

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

June 30, 2024

Warrant derivative liabilities

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Contingent consideration promissory notes and contingent consideration earn-out agreement

following table represents the change in Level 3 tier value measurements for the three months ended March 31, 2024:

following table represents the change in Level 3 tier value measurements for the three months ended June 30, 2024:

SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS

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

Balance, March 31, 2024

Balance, June 30, 2024

ACCRUED EXPENSES

expenses consisted of the following at March 31, 2024 and December 31, 2023:

expenses consisted of the following at June 30, 2024 and December 31, 2023:

SCHEDULE OF ACCRUED EXPENSES

March 31, 2024

June 30, 2024

December 31, 2023

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Total accrued

warranty expense was comprised of the following for the three months ended March 31, 2024:

warranty expense was comprised of the following for the six months ended June 30, 2024:

SCHEDULE OF ACCRUED WARRANTY EXPENSE

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Ending balance

effective tax rate for the three months ended March 31, 2024 and 2023 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 March 31, 2024, primarily because of the Company’s history of operating losses.

Company has incurred operating losses in recent years, and it continues to be in a three-year cumulative loss position at March 31, 2024.

effective tax rate for the three and six months ended June 30, 2024 and 2023 varied from the expected statutory rate due to the Company

continuing to provide a 100 % valuation allowance on net deferred tax assets.

The Company determined that it was appropriate to continue

the full valuation allowance on net deferred tax assets as of June 30, 2024, primarily because of the Company’s history of operating

Company has incurred operating losses in recent years, and it continues to be in a three-year cumulative loss position at June 30, 2024.

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

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The Company has available to it approximately $ 140.9

million (based on its December 31, 2023 tax return) in net operating loss carryforwards to offset future taxable income as of March 31,

million (based on its December 31, 2023 tax return) in net operating loss carryforwards to offset future taxable income as of June 30,

PREPAID EXPENSES

expenses were the following at March 31, 2024 and December 31, 2023:

OF PREPAID EXPENSE

March 31, 2024

expenses were the following at June 30, 2024 and December 31, 2023:

SCHEDULE OF PREPAID EXPENSE

June 30, 2024

December 31, 2023

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PROPERTY, PLANT AND EQUIPMENT

plant and equipment consisted of the following at March 31, 2024 and December 31, 2023:

OF PROPERTY, PLANT AND EQUIPMENT

March 31, 2024

plant and equipment consisted of the following at June 30, 2024 and December 31, 2023:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

June 30, 2024

December 31, 2023

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Net property, plant and equipment

expense for the three months ended March 31, 2024 and 2023 was $ 162,712 and $ 171,631 , respectively, and is included in general and administrative

During the three

months ended March 31, 2024 the Company engaged a broker and sold its aircraft for $ 1,100,000 less closing costs of $ 1,500 .

The carrying amount of the

aircraft on the date of sale was $ 1,141,661 .

As a result of the sale the Company recorded a loss

in the Consolidated Statement of Operations.

expense for the three months ended June 30, 2024 and June 30, 2023 was $ 181,121 and $ 174,261 , respectively, and is included in general

and administrative expenses.

Depreciation expense for the six months ended June 30, 2024 and June 30, 2023 was $ 343,833 and $ 345,892 ,

respectively, and is included in general and administrative expenses.

the six months ended June 30, 2024 the Company engaged a broker and sold its aircraft for $ 1,100,000 less closing costs of $ 1,500 .

carrying amount of the aircraft on the date of sale was $ 1,141,661 .

As a result of the sale the Company recorded a loss of $ 41,661 in

the Consolidated Statement of Operations.

OPERATING LEASE

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The remaining lease term for the Company’s copier

operating lease as of March 31, 2024 was forty-three months.

operating lease as of June 30, 2024 was forty months .

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.

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

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 March 31, 2024 was thirty-three months .

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 June 30, 2024 was thirty months .

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 March 31, 2024 was four months.

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

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 June 30, 2024 was one

The lease was not renewed by the Company.

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

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to this location.

The remaining term for the Company’s office operating lease was seventy-two months as of March 31, 2024.

The remaining term for the Company’s office operating lease was sixty-nine months as of June 30, 2024.

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

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

lease terms include monthly payments ranging from $ 4,233

with a termination

date of June 2025 .

lease terms include monthly payments ranging from $ 4,233 to $ 4,626 , with a termination date of June 2025 .

The Company is responsible

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possession of the leased facilities on January 1, 2022.

The Company terminated this lease in January 2024 and reversed the right of use asset and lease liability by $ 73,894 .

The Company terminated this lease in January 2024 and reversed the right of use

asset and lease liability by $ 73,894 .

expense related to the office space and copier operating leases were recorded on a straight-line basis over their respective lease terms.

Total lease expense under the operating leases was approximately $ 108,879 during the three months ended March 31, 2023.

weighted-average remaining lease term related to the Company’s lease liabilities as of March 31, 2023 was 4.5 years.

Total lease expense under the operating leases was approximately $ 117,810 and $ 226,695 during the three and six months ended June 30,

weighted-average remaining lease term related to the Company’s lease liabilities as of June 30, 2023 was 4.3 years.

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

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

following sets forth the operating lease right of use assets and liabilities as of March 31, 2024:

OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

following sets forth the operating lease right of use assets and liabilities as of June 30, 2024:

SCHEDULE OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

Operating lease right of use assets

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Total operating lease obligations

components of lease expense were as follows for the three months ended March 31, 2024:

components of lease expense were as follows for the six months ended June 30, 2024:

SCHEDULE OF LEASE EXPENSE

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

OF FUTURE MINIMUM LEASE PAYMENTS

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Year ending December 31:

2023 (April 1, to December 31, 2024)

2024 (July 1, to December 31, 2024)

Total undiscounted minimum future lease payments

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GOODWILL AND OTHER INTANGIBLE ASSETS

assets consisted of the following at March 31, 2024 and December 31, 2023:

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.

expense for the three months ended March 31, 2024 and 2023 was $ 388,278 and $ 371,478 , respectively.

Estimated amortization for intangible

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

OF INTANGIBLE ASSETS

March 31, 2024

assets consisted of the following at June 30, 2024 and December 31, 2023:

SCHEDULE OF INTANGIBLE ASSETS

June 30, 2024

December 31, 2023

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(video solutions segment)

OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS

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.

expense for the three months ended June 30, 2024 and 2023 was $ 346,889 and $ 374,714 , respectively and $ 735,167 and $ 745,150 for the six

months ended June 30, 2024 and 2023, respectively.

Estimated amortization for intangible assets with definite lives for the next five

years ending December 31 and thereafter is as follows:

SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS

Year ending December 31:

2024 (April 1, to December 31, 2024)

2024 (July 1, to December 31, 2024)

2028 and thereafter

assets were the following at March 31, 2024 and December 31, 2023:

OF OTHER ASSETS

March 31, 2024

assets were the following at June 30, 2024 and December 31, 2023:

SCHEDULE OF OTHER ASSETS

June 30, 2024

December 31, 2023

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any and all liability.

of March 31, 2024, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case, our estimate of the

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

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

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Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $ 60,772 and $ 179,482

for the three months ended March 31, 2024 and 2023, respectively.

of March 31, 2024, the Company had adopted ten separate stock option and restricted stock plans:

for the three months ended June 30, 2024 and 2023, and $ 101,467 and $ 321,779 for the six months ended June 30, 2024 and 2023, respectively.

of June 30, 2024, the Company had adopted ten separate stock option and restricted stock plans:

(i) the 2005 Stock Option and Restricted

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are now unavailable for issuance.

Stock options granted under the 2005 Plan that remain unexercised and outstanding as of March 31, 2024

Stock options granted under the 2005 Plan that remain unexercised and outstanding as of June 30, 2024

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 March 31, 2024 total 531 .

Stock options granted under the 2006 Plan that remain unexercised and outstanding as of June 30, 2024 total 531 .

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

are no stock options granted under the 2007 Plan that remain unexercised and outstanding as of March 31, 2024.

are no stock options granted under the 2007 Plan that remain unexercised and outstanding as of June 30, 2024.

The 2008 Plan terminated

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There are no stock options

granted under the 2008 Plan that remain unexercised and outstanding as of March 31, 2024.

granted under the 2008 Plan that remain unexercised and outstanding as of June 30, 2024.

option grants.

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

as of March 31, 2024.

as of June 30, 2024.

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

summary of all stock option activity under the Plans for the three months ended March 31, 2024 is as follows:

summary of all stock option activity under the Plans for the three months ended June 30, 2024 is as follows:

OF STOCK OPTIONS OUTSTANDING

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Outstanding at December 31, 2023

Outstanding at March 31, 2024

Exercisable at March 31, 2024

Outstanding at June 30, 2024

Exercisable at June 30, 2024

Plans allow for the cashless exercise of stock options.

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There were no shares surrendered pursuant to cashless exercises

during the three months ended March 31, 2024 and 2023.

aggregate intrinsic value of options outstanding was $- 0 - and $- 0 -, at March 31, 2024 and December 31, 2023, respectively.

during the six months ended June 30, 2024 and 2023.

aggregate intrinsic value of options outstanding was $- 0 - and $- 0 -, at June 30, 2024 and December 31, 2023, respectively.

The aggregate

intrinsic value of options exercisable was $- 0 - and $- 0 -, at March 31, 2024 and December 31, 2023, respectively.

of March 31, 2024, the unrecognized portion of stock compensation expense on all existing stock options was $- 0 -.

intrinsic value of options exercisable was $- 0 - and $- 0 -, at June 30, 2024 and December 31, 2023, respectively.

of June 30, 2024, the unrecognized portion of stock compensation expense on all existing stock options was $- 0 -.

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

options under the Company’s option plans as of March 31, 2024:

options under the Company’s option plans as of June 30, 2024:

OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE

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and the right to receive cash dividends.

summary of all restricted stock activity under the Plans for the three months ended March 31, 2024 is as follows:

summary of all restricted stock activity under the Plans for the three months ended June 30, 2024 is as follows:

OF RESTRICTED STOCK ACTIVITY

Nonvested balance, December 31, 2023

Nonvested balance, March 31, 2024

Nonvested balance, June 30, 2024

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

March 31, 2024, there were $ 245,233 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.

June 30, 2024, there were $ 184,461 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants,

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

nonvested balance of restricted stock vests as follows:

OF NON-VESTED BALANCE OF RESTRICTED STOCK

2024 (April 1, 2024 through December 31, 2024)

2024 (July 1, 2024 through December 31, 2024)

COMMON STOCK PURCHASE WARRANTS

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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 March 31, 2024:

warrant derivative liabilities as of their date of issuance and as of June 30, 2024:

OF WARRANT MODIFICATION

date assumptions

March 31, 2024

June 30, 2024

Volatility - range

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Common stock issuable under the warrants

following table summarizes information about shares issuable under warrants outstanding during the three months ended March 31, 2024

OF WARRANT ACTIVITY

Purchase Warrants

June 25, 2024, the Company issued Series A and pre-funded warrants to purchase a total of 1,768,227

shares of Common Stock along with the sale of common stock.

The Company also issued Series B Warrants that will be exercisable at any time or times on or after the date Stockholder

Approval is obtained.

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.

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

warrant derivative liabilities as of their date of issuance and as of June 30, 2024:

date assumptions

June 30, 2024

Volatility - range

Risk-free rate

4.25 - 5.46 %

Remaining contractual term

Exercise price

Common stock issuable under the warrants

following table summarizes information about shares issuable under warrants outstanding during the six months ended June 30, 2024:

OF WARRANT ACTIVITY

Weighted average

Vested Balance, December 31, 2023

Forfeited/cancelled

Vested Balance, March 31, 2024

total intrinsic value of all outstanding warrants aggregated $- 0 - as of March 31, 2024 and 2023, and the weighted average remaining term

was 48.2 months as of March 31, 2024, respectively.

Vested Balance, June 30, 2024

total intrinsic value of all outstanding warrants aggregated $- 0 - as of June 30, 2024 and 2023, and the weighted average remaining term

was 42.6 months as of June 30, 2024, respectively.

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 March 31, 2024:

warrants to purchase shares of common stock as of June 30, 2024:

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

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Weighted average

remaining contractual

remaining contractual life

STOCKHOLDERS’ EQUITY

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anniversary dates in January through January 2026, provided that each grantee remains an employee of the company on such dates.

Cancellation of Restricted

During the three months ended March 31, 2024, the Company cancelled 1,125

shares due to termination of employee.

Private Placement Transaction

June 24, 2024, the Company entered into a private placement transaction (the “Private Placement”), pursuant to a

Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional investors (the

“Purchasers”) for aggregate gross proceeds of approximately $ 2.9

million, before deducting fees of $ 0.8 million to the placement agent and other expenses payable by the Company in connection with

the Private Placement.

part of the Private Placement, the Company issued an aggregate of 1,768,227 units and pre-funded units (collectively, the “Units”)

at a purchase price of $ 2.51 per unit (less $ 0.0001 per pre-funded unit).

Each Unit consists of (i) one share of common stock, par value

$ 0.001 per share, of the Company (the “Common Stock”) (or one pre-funded warrant to purchase one share of Common Stock (the

“Pre-Funded Warrants”)), (ii) one Series A warrant to purchase one share of Common Stock (the “Series A Warrant”)

and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset Date and in accordance with the terms therein (the “Series B Warrant”, and together with the Series A Warrant, the “Warrants”).

of Restricted Stock

the six months ended June 30, 2024, the Company cancelled 1,125 shares due to termination of employees.

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

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as “net (income) loss attributable to noncontrolling interests of consolidated subsidiary”.

We reported net (income) loss

attributable to noncontrolling interests of consolidated subsidiary of $ 12,248 and ($ 126,239 ) for the three months ended March 31, 2024

and 2023, respectively.

NET LOSS PER SHARE

calculation of the weighted average number of shares outstanding and loss per share outstanding for the three months ended March 31,

reported net income attributable to noncontrolling interests of consolidated subsidiary of $ 73,310 and $ 72,754 for the three months ended

June 30, 2024 and 2023, and $ 61,062 and $ 198,993 for the six months ended June 30, 2024 and 2023, respectively.

NET EARNINGS (LOSS) PER SHARE

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

30, 2024 and 2023 are as follows:

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

Three months ended March 31,

Numerator for basic and diluted loss per share – Net loss

attributable to common stockholders

For the three months ended

For the six months ended

Numerator for basic and diluted income per share – Net loss attributable to common stockholders

$ ( 5,083,861 )

$ ( 8,393,304 )

$ ( 9,014,882 )

$ ( 14,499,122 )

Denominator for basic loss per share – weighted average shares outstanding

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

Dilutive effect of shares issuable under stock options and warrants outstanding

Denominator for diluted loss per share – adjusted weighted average shares outstanding

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

For the three months

ended March 31, 2024 and 2023, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options

For the three and six

months ended June 30, 2024 and 2023, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options

and warrants were antidilutive, and, therefore, not included in the computation of diluted income (loss) per share.

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Intellectual Property, the “Purchased Assets”).

As consideration for acquiring the Purchased Assets, Kustom 440 paid JC

Entertainment the aggregate purchase price amount $ 542,959 ,

with the sum of $ 400,000 paid at the time of closing (“Closing”), and the remainder

to be paid on or before thirty days from the time of Closing.

Kustom 440 shall receive a credit for all non-refunded festival ticket sales

for the 2024 Country Stampede to be calculated immediately prior to Closing, and JC Entertainment shall be entitled to keep all ticket

sale proceeds made and/or received prior to Closing.

Kustom 440 shall be obligated, to the extent a refund is sought after Closing, to

provide such refund, if appropriate, to the customer requesting a refund, and shall indemnify and hold harmless JC Entertainment from

any and all claims, liabilities, costs, suits, or the like relating to such refund request.

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 Country Stampede

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 Country Stampede 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 Country Stampede

Acquisition was structured as an asset purchase;

however the parties agreed to coordinate the election to invoke IRS Section

338(h)(10) relative to this transaction for tax purposes.

Therefore, the excess purchase price over the fair value of net tangible

assets acquired was recorded as goodwill, which will be amortized over 15 years for income tax filing purposes.

Likewise, the other

acquired assets were stepped up to fair value and is deductible for income tax purposes.

The results of operations of acquired

businesses are included in the consolidated financial statements from the acquisition date.

purchase price of the Country Stampede Acquisition was allocated to tangible

assets, goodwill, identifiable intangible assets, and assumed liabilities based on their preliminary estimated fair values at the

time of the acquisition.

The Company retained the services of an independent valuation firm to determine the fair

value of these identifiable intangible assets.

The Company will continue to evaluate the fair value of the identified intangible

The preliminary estimated fair value of assets acquired, and liabilities assumed in the Country Stampede Acquisition were as

consideration for acquiring the Purchased Assets, Kustom 440 paid JC Entertainment the aggregate purchase price amount $ 542,959 .

Kustom 440 shall receive a credit for all non-refunded festival ticket sales for the 2024 Country Stampede to be calculated immediately

prior to Closing, and JC Entertainment shall be entitled to keep all ticket sale proceeds made and/or received prior to Closing.

440 shall be obligated, to the extent a refund is sought after Closing, to provide such refund, if appropriate, to the customer requesting

a refund, and shall indemnify and hold harmless JC Entertainment from any and all claims, liabilities, costs, suits, or the like relating

to such refund request.

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 Country Stampede 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 Country Stampede 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 Country Stampede Acquisition was structured as an asset purchase;

however the parties agreed to coordinate the election to invoke IRS Section 338(h)(10) relative to this transaction for tax purposes.

Therefore, the excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will be amortized

over 15 years for income tax filing purposes.

Likewise, the other acquired assets were stepped up to fair value and is deductible for

income tax purposes.

The results of operations of acquired businesses are included in the consolidated financial statements from the

acquisition date.

purchase price of the Country Stampede Acquisition was allocated to tangible assets, goodwill, identifiable intangible assets, and assumed

liabilities based on their preliminary estimated fair values at the time of the acquisition.

The Company retained the services of an

independent valuation firm to determine the fair value of these identifiable intangible assets.

The Company will continue to evaluate

the fair value of the identified intangible assets.

The preliminary estimated fair value of assets acquired, and liabilities assumed

in the Country Stampede Acquisition were as follows:

OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION

As allocated (Preliminary)

(Preliminary)

March 1, 2024

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Video Solutions Segment encompasses our law, commercial, and Shield™ divisions.

This segment includes both service and product revenues

through our subscription models offering cloud and warranty solutions, and hardware sales for video and health safety solutions.

Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout

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.

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cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

financial information for the Company’s reportable business segments is provided for the indicated periods and as of March 31,

2024, and March 31, 2023:

financial information for the Company’s reportable business segments is provided for the indicated periods and as of June 30, 2024,

and June 30, 2023:

SCHEDULE OF SEGMENT REPORTING

Three Months Ended March 31,

For the three months ended

For the six months ended

Net Revenues:

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$ ( 1,364,987 )

$ ( 2,533,242 )

$ ( 3,328,173 )

Revenue Cycle Management

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( 1,561,936 )

Total Operating Loss

( 3,398,832 )

( 2,675,571 )

( 6,479,211 )

Total Operating Income (Loss)

$ ( 3,914,221 )

$ ( 4,940,704 )

$ ( 7,553,193 )

$ ( 11,113,511 )

Depreciation and Amortization:

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Total Identifiable Assets

segments recorded noncash items effecting the gross profit and operating income (loss) through the established inventory reserves

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

The Company recorded a reserve for excess and

obsolete inventory in the video solutions segment of $ 4,315,132

and a reserve for the entertainment segment of $ 171,257 as of March 31, 2024.

segments recorded noncash items effecting the gross profit and operating income (loss) through the established inventory reserves based

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

The Company recorded a reserve for excess and obsolete inventory

in the video solutions segment of $ 4,008,278 and a reserve for the entertainment segment of $ 126,723 as of June 30, 2024.

segment net revenues reported above represent sales to external customers.

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with Managing Member of Nobility Healthcare

Company accrued reimbursable expenses payable to Nobility, LLC totaling $ 576,690 and $ 265,241 for the three months ended March 31, 2024

and 2023 and management fees in accordance with the operating agreement of $ 12,379 and $ 32,181 for the three months ended March 31, 2024

Company accrued reimbursable expenses payable to Nobility, LLC totaling $ 398,379 and $ 265,241 for the six months ended June 30, 2024

and 2023 and management fees in accordance with the operating agreement of $ 10,024 and $ 32,181 for the three months ended June 30, 2024

The company recorded management fees of $ 22,403 and $ 67,106 for the six months ended June 30, 2024 and 2023.

with Related Party of TicketSmarter

September 22, 2023, a trust, the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse, made a loan in the amount of $ 2,325,000 to TicketSmarter to support TicketSmarter’s operations.

On October 2, 2023 an additional $ 375,000

was advanced to Ticketsmarter.

The transaction was recorded as a related party note payable (the “TicketSmarter Related Party

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

in the amount of $ 2,325,000 to TicketSmarter to support TicketSmarter’s operations.

On October 2, 2023 an additional $ 375,000 was

advanced 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.

March 31 2024, the entire TicketSmarter Related Party note is $ 2,700,000 , is classified as current, with an accrued interest balance

of $ 187,346 .

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.

As of June 30, 2024,

the entire TicketSmarter Related Party note is $ 2,700,000 , is classified as current, with an accrued interest balance of $ 283,782 .

use of proceeds of the TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted rate, the discount

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

Additionally, these negotiations relieved

TicketSmarter of numerous future obligations following fiscal year 2023.

SUBSEQUENT EVENTS

A Preferred Stock and Series B Preferred Stock Elimination

April 5, 2024, Digital Ally, Inc., a Nevada corporation (the “Company”), filed with the Secretary of State of the State of

Nevada an Elimination of Certificate of Designations of the Preferences, Rights and Limitations of the Series A Convertible Redeemable

Preferred Stock (the “Series A Elimination Certificate”) and Elimination of Certificate of Designations of the Preferences,

Rights and Limitations of the Series B Convertible Redeemable Preferred Stock (the “Series B Elimination Certificate”) in

order to eliminate and cancel all designations, rights, preferences and limitations of the shares of the Company’s Series A Convertible

Redeemable Preferred Stock, par value $ 0.001 per share (the “Series A Preferred Stock”) and Series B Convertible Redeemable

Preferred Stock, par value $ 0.001 per share (the “Series B Preferred Stock”).

In December 2022, all 1,400,000 shares of Series

A Preferred Stock that had originally been issued pursuant to the Certificate of Designations of the Preferences, Rights and Limitations

of the Series A Preferred Stock of the Company (the “Series A Certificate of Designations”) and all 100,000 shares of Series

B Preferred Stock that had originally been issued pursuant to the Certificate of Designations of the Preferences, Rights and Limitations

of the Series B Preferred Stock of the Company (the “Series B Certificate of Designations”) were exchanged for shares of

the Company’s common stock and warrants to purchase shares of the Company’s common stock.

Such shares of Series A Preferred

Stock and Series B Preferred Stock have resumed the status of authorized but unissued shares of preferred stock of the Company.

to the filing of the Series A Elimination Certificate, none of the 1,400,000 authorized shares of Series A Preferred Stock or 100,000

authorized shares of Series B Preferred Stock were issued and outstanding, and no shares of Series A Preferred Stock or Series B Preferred

Stock were to be issued subject to the Series A Certificate of Designations or Series B Certificate of Designations.

The Series A Elimination

Certificate and Series B Elimination Certificate became effective upon their filing with the Secretary of State of the State of Nevada.

Merchant Cash

Advances – Video Solutions Segment

In April 2024, the Company received

additional advances of $ 444,000 from the lender and agreed to new terms where total proceeds received since inception totaled $ 2,144,000 .

The Company will repay an aggregate of $ 2,880,000 to the lender.

The advances remain secured by expected future sales of the Company with

payments on a weekly basis and the full amount is expected to be repaid in 2024.

previously disclosed, on March 1, 2024, the Company entered into a Note Purchase Agreement (the “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 .

July 13, 2024, the Company entered into a Letter Agreement (the “ Letter Agreement ”), by and between the Company, Kustom

Entertainment and the Purchaser, increasing automatically the principal amount of the Note from $ 1,425,000

to $ 1,725,000 ;

provided, however, that if the Borrowers repay the Note in full on or before August 15, 2024, then the principal amount of the Note shall

be reduced automatically by $ 100,000 .

Pursuant to the Letter Agreement, the Borrowers’ failure to adhere to Sections 3.2(d)(iii) (the “Section 3.2(d)(iii) Failure”)

and Section 3.3(a) (the “Section 3.3(a) Failure”) of the Purchase Agreement shall not constitute Events of Default, as defined

in the Purchase Agreement;

provided, however, that if the Borrowers shall be in breach or default under the Letter Agreement or otherwise

fail to satisfy their obligations thereunder, the Section 3.2(d)(iii) Failure and Section 3.3(a) Failure shall each automatically constitute

an Event of Default under the Purchase Agreement.

Pursuant to the Letter Agreement, the Company agreed to make a cash payment to the

Purchaser in the amount of $ 150,000 on or before July 26, 2024.

The Company also agreed to sell or enter into a firm commitment to sell

the office building owned by the Company and located at 14001 Marshall Drive, Lenexa, Kansas 66215 (the “Company Office Building”)

and pay to the Purchaser:

(i) $325,000, if the Company sells or enters into a firm commitment to sell the Company Office Building on

or before August 7, 2024;

or (ii) $400,000, if the Company sells or enters into a firm commitment to sell the Company Office Building

after August 7, 2024.

Pursuant to the Letter Agreement, the Company’s failure to sell or enter into a firm commitment to sell the

Company Office Building prior to September 1, 2024 shall constitute an Event of Default, as defined in the Purchase Agreement, under

the Purchase Agreement.

The Company shall pay to the Purchaser $ 100,000 per month until the Note is repaid in full, with the first such

payment occurring on August 12, 2024, and each subsequent payment occurring on the 12th calendar day of each month thereafter.

to the Letter Agreement, the Purchaser shall be a party to any and every flow of funds when there is an extraordinary receipt of capital

by the Company.

The Company shall pay to the Purchaser a penalty payment of $ 200,000 within five Business Days, as defined in the Purchase

Agreement, if the Company fails to make the Purchaser a party to any flow of funds in respect of an extraordinary receipt of capital

by the Company.

as stated above, the Letter Agreement does not result in any other substantive changes to the Agreement.

and Sale Agreement

August 2, 2024, the Company entered into a purchase and sale agreement (the “Purchase Agreement”) with Serenity Now, LLC,

a Kansas limited liability company (the “Buyer”) to sell a commercial office building and associated property located at

14001 Marshall Drive, Lenexa, KS (the “Office Building”).

The Buyer has no prior material relationship with the Company beyond

the Agreement.

to the Agreement, the Buyer has agreed to acquire the Property (as defined in the Agreement) for five million nine hundred thousand and

00/100 dollars ($ 5,900,000 ), exclusive of closing costs.

Purchase Agreement includes customary representations and warranties, covenants and closing conditions, including, without

limitation, assignment and assumption of existing leases and performance of all the covenants.

Pursuant to the terms of the

Agreement, during the Inspection Period (as defined in the Purchase Agreement), the Buyer is entitled to conduct inspections and

review title and survey matters.

The Company will lease its premises in the Office Building from the Buyer for six months after the

closing of the Agreement for $ 240,000 .

On August 12, 2024, pursuant

to the Agreement, the Company and the Buyer completed the sale of the Property.

The Buyer has no prior material relationship with the

Company beyond the Agreement.

Common Stock Issuance

The Company issued 353,123 shares of

common stock subsequent to June 30, 2024.

Effectiveness of Registration Statement

Clover Leaf Capital Corp.’s (“Clover Leaf”)

registration statement on Form S-4 was declared effective by the U.S.

Securities and Exchange Commission (the “SEC”) as of Tuesday,

July 30, 2024, relating to the previously announced proposed business combination by and among Clover Leaf, Kustom Entertainment, Inc.

and CL Merger Sub, Inc.

On August 1, the board of directors of the Company (the “Board”)

set the record date for the dividend distribution to August 12, 2024 for determining stockholders entitled to receive the dividend distribution

(the “Record Date”).

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

What changed 10-Q

Item 1. Financial Statements