What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-16 compared with 2024-05-17 · 532 added, 232 removed, 656 unchanged (54% of the section changed)

132 unchanged sentences

of Operations

financial information for the Company’s reportable business segments is provided for the three months ended March 31, 2024, and

Three Months Ended March 31,

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:

For the three months ended June 30,

For the six months ended June 30,

Net Revenues:

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$ (1,400,039 )

$ (1,364,987 )

$ (2,533,242 )

$ (3,328,173 )

Revenue Cycle Management

Entertainment

Total Operating Loss

Total Operating Income (Loss)

$ (3,914,221 )

$ (4,940,704 )

$ (7,553,193 )

$ (11,113,511 )

Depreciation and Amortization:

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Results of Operations

experienced operating losses for the first quarter of 2024 and all quarters during 2023.

experienced operating losses for the first half of 2024 and all quarters during 2023.

The following is a summary of our recent operating

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

a net loss of $3,943,268 on revenues of $5,529,351 for first quarter of 2024.

a net loss of $8,953,819 on revenues of $11,145,586 for the six months ended June 30, 2024.

Sheet Arrangements

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that represent commitments to future payments for goods and services.

the Three Months Ended March 31, 2024 and 2023

the Three Months Ended June 30, 2024 and 2023

of Operations

immediately below and discussed in more detail in the subsequent subsections is an analysis of our operating results for the three months

ended March 31, 2024 and 2023, represented as a percentage of total revenues for each such quarter:

Three Months Ended March 31,

ended June 30, 2024 and 2023, represented as a percentage of total revenues for each such quarter:

For the three months ended

Cost of revenue

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Operating loss

Loss on accrual for legal settlement

Loss on conversion of convertible notes

Change in fair value of derivative liabilities

Gain on extinguishment of debt

Interest expense

Loss on extinguishment of debt

Other income and interest income (expense), net

Income (loss) before income tax benefit

Loss before income tax benefit

Income tax (provision)

Net income/(loss)

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

Net income (loss) attributable to common stockholders

Net income/(loss) per share information:

Net loss attributable to noncontrolling interests of consolidated

Net loss attributable to common stockholders

Net loss per share information:

by Type and by Operating Segment

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

revenues by operating segment are as follows:

Three Months Ended March 31,

revenues by operating segment is as follows:

For the three months ended

Product Revenues:

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Total Product Revenues

revenues for the three months ended March 31, 2024 and 2023 were $1,565,846 and $2,453,810 respectively, an decrease of $887,964 (36%),

revenues for the three months ended June 30, 2024 and 2023 were $2,207,601 and $3,077,661 respectively, a decrease of $870,060 (28%),

due to the following factors:

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

entertainment operating segment generated $844,658 in product revenues for the three months ended March 31, 2024, compared to $1,260,789

for the three months ended March 31, 2023.

This product revenue relates to the resale of tickets purchased for live events, including

sporting events, concerts, and theatre, then sold through various platforms to customers.

Company’s video segment operating segment generated revenues totaling $721,188 during the three months ended March 31, 2024

compared to $1,193,021 for the three months ended March 31, 2023.

In general, our video solutions operating segment has experienced

pressure on its product revenues as our in-car and body-worn systems are facing increased competition because our competitors have

released new products with advanced features.

Additionally, our law enforcement revenues declined compared to the same period in

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

proceedings and our recent financial condition.

entertainment operating segment generated $1,586,662 in product revenues for the three months ended June 30, 2024, compared to $1,929,059

for the three months ended June 30, 2023, a decrease of $342,397 (18%).

This product revenue relates to the first Kustom 440 music

festival in 2023 that did not recur in 2024, the initial Country Stampede music festival in 2024, as well as the resale of tickets

purchased for live events, including sporting events, concerts, and theatre, then sold through various platforms to customers.

Company’s video segment operating segment generated revenues totaling $620,939 during the three months ended June 30, 2024

compared to $1,148,602 for the three months ended June 30, 2023, a decrease of $527,663 (46%).

In general, our video solutions operating

segment has experienced pressure on its product revenues as our in-car and body-worn systems are facing increased competition because

our competitors have released new products with advanced features.

Additionally, our law enforcement revenues declined compared to

the same period in 2023 due to price-cutting and competitive actions by our competitors, adverse marketplace effects related to our

patent litigation proceedings and our recent financial condition.

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

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revenues over a span of three to five years.

and other revenues by operating segment are as follows:

Three Months Ended March 31,

and other revenues by operating segment is as follows:

For the three months ended

Service and Other Revenues:

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Total Service and Other Revenues

and other revenues for the three months ended March 31, 2024 and 2023 were $3,963,505 and $5,243,380, respectively, a decrease of $1,279,875

and other revenues for the three months ended June 30, 2024 and 2023 were $3,408,634 and $5,201,971, respectively, a decrease of $1,793,337

(34%), due to the following factors:

revenues generated by the video solutions operating segment were $616,488 and $422,823 for the three months ended March 31, 2024

and 2023, respectively, an increase of $193,665 (46%).

revenues generated by the video solutions operating segment were $637,786 and $471,949 for the three months ended June 30, 2024 and

2023, respectively, an increase of $165,837 (35%).

We have experienced increased interest in our cloud solutions for law enforcement

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

contributed to our increased cloud revenues in the three months ended March 31, 2024.

contributed to our increased cloud revenues in the three months ended June 30, 2024.

We expect this trend to continue throughout

2024 as the migration from local storage to cloud storage continues in our customer base.

solutions operating segment revenues from extended warranty services and other services were $380,618 and $283,520 for the three

months ended March 31, 2024 and 2023, respectively, an increase of $97,098 (34%).

This correlates with the increase in sales of DVM-800

hardware systems resulting in an increase in their associated extended warranty.

entertainment operating segment generated service revenues totaling $1,531,801 and $2,755,447 for the three months ended March 31,

solutions operating segment revenues from extended warranty services were $233,031 and $221,228 for the three months ended June 30,

2024 and 2023, respectively, an increase of $11,803 (5%).

entertainment operating segment generated service revenues totaling $879,549 and $2,726,211 for the three months ended June 30, 2024

and 2023, respectively, a decrease of $1,846,662 (68%).

TicketSmarter collects fees on transactions administered through the

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

We expect our entertainment

operating segment to continue to present a strong revenue outlook moving forward.

TicketSmarter collects fees on transactions administered through the TicketSmarter.com

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

We expect our entertainment operating segment

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

revenue cycle management operating segment generated service revenues totaling $1,564,354 and $1,724,772 for the three months ended

March 31, 2024 and 2023, respectively, a decrease of $346,991 (20%).

June 30, 2024 and 2023, respectively, a decrease of $160,418 (9%).

Our revenue cycle management operating segment provides revenue

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management segment to continue to present a strong revenue outlook moving forward.

revenues for the three months ended March 31, 2024 and 2023 were $5,529,351 and $7,697,190, respectively, a decrease of $2,167,839 (28%),

revenues for the three months ended June 30, 2024 and 2023 were $5,616,235 and $8,279,632, respectively, a decrease of $2,663,397 (32%),

due to the reasons noted above.

of Product Revenue

cost of product revenue sold for the three months ended March 31, 2024, and 2023 was $1,567,393 and $2,301,100, respectively, a decrease

cost of product revenue sold for the three months ended June 30, 2024, and 2023 was $3,419,254 and $2,219,515, respectively, an increase

of $1,199,739 (54%).

Overall cost of goods sold for products as a percentage of product revenues for the three months ended March 31, 2024,

Overall cost of goods sold for products as a percentage of product revenues for the three months ended June 30,

2024, and 2023 were 155% and 72%, respectively.

Cost of products sold by operating segment is as follows:

Three Months Ended March 31,

For the three months ended

Cost of Product Revenues:

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Total Cost of Product Revenues

decrease in cost of goods sold for our video solutions segment products is directly correlated with the decrease in product sales for

the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

In addition, the Video Solutions Segment recorded

valuation allowances for its older product lines and a portion of its Shield™ products during the first quarter of 2023.

Cost of product

sold as a percentage of product revenues for the video solutions segment increased to 111% for the three months ended March 31, 2024

as compared to 87% for the three months ended March 31, 2023.

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

months ended March 31, 2024 compared to March 31, 2023, resulting in cost of product revenue of $769,899 for the three months ended March

31, 2024, compared to $1,263,506 for the three months ended March 31, 2023.

increase in cost of goods sold for our video solutions segment products was primarily driven by inventory adjustments and returns as

compared to the same period in the prior year.

Cost of product sold as a percentage of product revenues for the video solutions segment

increased to 154% for the three months ended June 30, 2024 as compared to 70% for the three months ended June 30, 2023.

increase in entertainment operating segment cost of product sold was driven by the costs of the Country Stampede music festival for the

three months ended June 30, 2024 compared to June 30, 2023, resulting in cost of product revenue of $2,460,792 for the three months ended

June 30, 2024, compared to $1,414,126 for the three months ended June 30, 2023.

Cost of product sold as a percentage of product revenues

for the entertainment segment was 91% for the three months ended March 31, 2024 as compared to 100% for the three months ended March

recorded $4,486,389 and $4,542,461 in reserves for obsolete and excess inventories at March 31, 2024 and December 31, 2023, respectively.

Total raw materials, component parts, and work-in-progress were $2,964,525 and $3,065,049 at March 31, 2024 and December 31, 2023, respectively,

for the entertainment segment was 155% for the three months ended June 30, 2024 as compared to 73% for the three months ended June 30,

recorded $4,135,001 and $4,542,461 in reserves for obsolete and excess inventories at June 30, 2024 and December 31, 2023, respectively.

Total raw materials, component parts, and work-in-progress were $2,630,162 and $3,065,049 at June 30, 2024 and December 31, 2023, respectively,

a decrease of $434,887 (14%).

Finished goods balances were $4,670,553 and $5,322,693 at March 31, 2024 and December 31, 2023, respectively,

Finished goods balances were $3,722,972 and $5,322,693 at June 30, 2024 and December 31, 2023, respectively,

a decrease of $1,599,721 (30%) which was attributable to a decrease in finished goods from our entertainment segment.

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in reserve at the entertainment segment.

We believe the reserves are appropriate given our inventory levels as of March 31, 2024.

We believe the reserves are appropriate given our inventory levels as of June 30, 2024.

of Service Revenue

cost of service revenue sold for the three months ended March 31, 2024, and 2023 was $2,438,259 and $3,851,298, respectively, a decrease

cost of service revenue sold for the three months ended June 30, 2024, and 2023 was $1,954,589 and $3,323,077, respectively, a decrease

of $1,368,488 (41%).

Overall cost of goods sold for services as a percentage of service revenues for the three months ended March 31,

2024, and 2023 was 62% and 73%, respectively.

Overall cost of goods sold for services as a percentage of service revenues for the three months ended June 30,

2024, and 2023 were 57% and 64%, respectively.

Cost of service revenues by operating shipment is as follows:

Three Months Ended March 31,

For the three months ended

Cost of Service Revenues:

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increase in cost of service revenues for our video solutions segment is commensurate with the increase in service revenues in the three

months ended March 31, 2024 compared to the three months ended March 31, 2023.

months ended June 30, 2024 compared to the three months ended June 30, 2023.

Cost of service revenues as a percentage of service revenues

for the video solutions segment decreased to 36% for the three months ended March 31, 2024 as compared to 46% for the three months ended

March 31, 2023.

for the video solutions segment decreased to 35% for the three months ended June 30, 2024 as compared to 42% for the three months ended

June 30, 2023.

of service revenues as a percentage of service revenues for the revenue cycle management operating segment was 62% for the three months

ended March 31, 2024 as compared to 56% for the three months ended March 31, 2023.

ended June 30, 2024 as compared to 53% for the three months ended June 30, 2023.

decrease in entertainment operating segment cost of service revenues is commensurate with the decrease in service revenues in the three

months ended March 31, 2024, compared to the three months ended March 31, 2023.

months ended June 30, 2024, compared to the three months ended June 30, 2023.

Cost of service revenues as a percentage of service revenues

for the entertainment segment was 73% for the three months ended March 31, 2024 as compared to 91% for the three months ended March 31,

gross profit for the three months ended March 31, 2024 and 2023 was $1,523,699 and $1,544,792, respectively, a decrease of $21,093 (1%).

for the entertainment segment was 74% for the three months ended June 30, 2024 as compared to 77% for the three months ended June 30,

gross profit for the three months ended June 30, 2024 and 2023 was $242,392 and $2,737,040, respectively, a decrease of $2,494,648 (91%).

Gross profit by operating segment was as follows:

Three Months Ended March 31,

For the three months ended

Gross Profit:

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Total Gross Profit

overall decrease is attributable to the decrease in revenues for the three months ended March 31, 2024 and a decrease in the overall

cost of sales as a percentage of overall revenues to 72% for the three months ended March 31, 2024 from 80% for the three months ended

March 31, 2023.

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

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

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

offering, provided that they gain traction in the marketplace.

In addition, if revenues from the video solutions segment increase, we

will seek to further improve our margins from this segment through expansion and increased efficiency utilizing fixed manufacturing overhead

We plan to continue our initiative to more efficient management of our supply chain through outsourcing production, quantity

purchases and more effective purchasing practices.

overall decrease is attributable to the decrease in gross profit for the entertainment segment for the three months ended June 30, 2024

along with a decrease in the overall cost of sales as a percentage of overall revenues to 96% for the three months ended June 30, 2024

from 67% for the three months ended June 30, 2023.

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

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

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

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

In addition, if revenues from the

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

utilizing fixed manufacturing overhead components.

We plan to continue our initiative to more efficiently management of our supply chain

through outsourcing production, quantity purchases and more effective purchasing practices.

General and Administrative Expenses

general and administrative expenses were $5,162,732 and $7,717,598 for the three months ended March 31, 2024 and 2023, respectively,

general and administrative expenses were $4,156,613 and $7,677,744 for the three months ended June 30, 2024 and 2023, respectively, a

decrease of $3,521,131 (46%).

The decrease was primarily attributable to the reduction in new sponsorships being entered into by the

Our selling, general and administrative expenses as a percentage of sales decreased to 74% for the three months ended June 30,

2024 compared to 93% in the same period in 2023.

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

For the three months ended June 30,

Research and development expense

Selling, advertising and promotional expense

General and administrative expense

and development expense.

We continue to focus on bringing new products to market, including updates and improvements to current

Our research and development expenses totaled $545,776 and $540,276 for the three months ended June 30, 2024 and 2023, respectively.

Most of our engineers are dedicated to research and development activities for new products, primarily the new generation of body-worn

cameras, EVO-HD and EVO Fleet that can be located in multiple places in a vehicle.

We expect our research and development activities

will continue to trend higher in future quarters as we continue to expand our product offerings based on our new body-worn camera and

EVO-HD product platform and as we outsource more development projects.

We consider our research and development capabilities and new

product focus to be a competitive advantage and intend to continue to invest in this area on a prudent basis and consistent with our

financial resources.

advertising and promotional expenses.

Selling, advertising and promotional expense totaled $728,906 and $2,104,625 for the three

months ended June 30, 2024 and 2023, respectively, a decrease of $1,357,719 (65%).

Promotional and advertising expenses represent the

primary component of these costs and totaled $387,179 during the three months ended June 30, 2024, compared to $1,654,593 during the

three months ended June 30, 2023, a decrease of $1,267,414 (77%).

The decrease is primarily attributable to the reduction in new sponsorships

being entered into by the Company.

Additionally, TicketSmarter remains active in sponsorship and advertising, as it continues to build

its brand and gain recognition.

and administrative expense .

General and administrative expenses totaled $2,881,931 and $5,032,843 for the three months ended

June 30, 2024 and 2023, respectively.

The decrease in general and administrative expenses in the three months ended June 30, 2024 compared

to the same period in 2023 is primarily attributable to a decrease in administrative salaries and reductions in headcount.

administrative expenses also decreased due to a decline in travel expenses and legal and professional expenses for the three months ended

June 30, 2024 compared to the same period in 2023.

the reasons stated above, our operating loss was $3,914,221 and $4,940,704 for the three months ended June 30, 2024 and 2023, respectively,

an improvement of $1,026,483 (21%).

Operating loss as a percentage of revenues increased to 70% in the three months ended June 30, 2024

from 60% in the same period in 2023.

income decreased to $29,933 for the three months ended June 30, 2023, from $55,730 in the same period of 2024, which reflects our change

in cash and cash equivalent levels in the second quarter of 2024 compared to the second quarter of 2023.

incurred interest expenses of $1,085,063 and $1,515,509 during the three months ended June 30, 2024 and 2023, respectively.

is attributable to the convertible note issued in the second quarter of 2023, along with a reduction in the contingent earn-out notes

associated with the four Nobility Healthcare acquisitions partially offset by merchant advances issued in 2024.

in Fair Value of Derivative Liabilities

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

with the two secured convertible notes previously described.

The Company issued an additional 1,768,227 warrants in June 2024.

The underlying

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

circumstances.

As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated

fair value at their issuance date and at each reporting date with any subsequent changes reported in the condensed consolidated statement

of operations as the change in fair value of warrant derivative liabilities.

The change in fair value of the warrant derivative liabilities

from March 31, 2024, to June 30, 2024, totaled $2,818, as a result a loss was recognized in the income statement for the three months ended June 30, 2024.

on Extinguishment of debt

the second quarter of 2024, the Company refinanced its merchant advance loan and determined the refinancing of the debt should be treated

as a debt extinguishment.

As a result, the Company recorded a loss of $68,827 on the extinguishment during the three months ended June

on accrual for legal settlement

Company recognized a loss on accrual for legal settlement of $-0- and $1,792,308 during the three months ended June 30, 2024 and 2023,

respectively.

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

on conversion of convertible debt

Company recognized a loss on conversion of convertible debt of $-0- and $93,386 during the three months ended June 30, 2024 and 2023,

respectively.

This is in connection with the convertible note issued during the three months ended June 30, 2023 and the conversion from

debt to equity during the period.

income (loss)

income (loss) increased to $30,445 for the three months ended June 30, 2024, from $25,394 during the three months ended June 30, 2023,

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

before Income Tax Benefit

a result of the above results of operations, we reported a loss before income tax benefit of $5,010,551, and $8,320,549 for the three

months ended June 30, 2024 and 2023, respectively, a decrease of $3,309,998 (40%).

did not record an income tax expense related to our income for the three months ended June 30, 2024 due to our overall net operating

loss carryforwards available.

We have further determined to continue providing a full valuation reserve on our net deferred tax assets

as of June 30, 2023.

We had approximately $113.3 million of net operating loss carryforwards and $1.8 million of research and development

tax credit carryforwards as of June 30, 2024 available to offset future net taxable income.

a result of the above results of operations, we reported a net loss of $5,010,551 and $8,320,549 for the three months ended June 30,

2024 and 2023, respectively, a decrease of $3,309,998 (40%).

Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

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 of Nobility Healthcare which is reflected in the statement of income as “net

income attributable to noncontrolling interests of consolidated subsidiary”.

We reported net income attributable to noncontrolling

interests of consolidated subsidiary of $73,310 and $72,755 for the three months ended June 30, 2024 and 2023, respectively.

Loss Attributable to Common Stockholders

a result of the above, we reported a net loss attributable to common stockholders of $5,083,861 and $8,393,304 for the three months

June 30, 2024 and 2023, respectively, an improvement of $3,309,443 (39%).

and Diluted Loss per Share

basic and diluted loss per share was $1.74 and $3.01 for the three months ended June 30, 2024 and 2023, respectively.

Basic loss per

share is based upon the weighted average number of common shares outstanding during the period.

For the three 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 loss per share.

the Six Months Ended June 30, 2024 and 2023

of Operations

immediately below and discussed in more detail in the subsequent subsections is an analysis of our operating results for the six months

ended June 30, 2024 and 2023, represented as a percentage of total revenues for each such quarter:

For the six months ended June 30,

Cost of revenue

Selling, general and administrative expenses:

Research and development expense

Selling, advertising and promotional expense

General and administrative expense

Total selling, general and administrative expenses

Operating loss

Loss on accrual for legal settlement

Change in fair value of contingent consideration promissory notes

Change in fair value of derivative liabilities

Gain on extinguishment of liabilities

Other income and interest income (expense), net

Income (loss) before income tax benefit

Income tax (provision)

Net loss attributable to noncontrolling interests of consolidated subsidiary

Net loss attributable to common stockholders

Net loss per share information:

revenues by operating segment is as follows:

For the six months ended June 30,

Product Revenues:

Video Solutions

Revenue Cycle Management

Entertainment

Total Product Revenues

revenues for the six months ended June 30, 2024 and 2023 were $3,773,447 and $5,531,469 respectively, a decrease of $1,758,022 (32%),

due to the following factors:

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

new entertainment operating segment generated $2,431,320 in product revenues for the six months ended June 30, 2024, compared to

$3,189,847 for the six months ended June 30, 2023.

This product revenue relates to the first Country Stampede music festival held

by Kustom, as well as the resale of tickets purchased for live events, including sporting events, concerts, and theatre, then sold

through various platforms to customers.

Company’s video segment operating segment generated revenues totaling $1,342,127 during the six months ended June 30, 2024

compared to $2,341,622 for the six months ended June 30, 2023.

In general, our video solutions operating segment has experienced

pressure on its product revenues as our in-car and body-worn systems are facing increased competition because our competitors have

released new products with advanced features.

Additionally, our law enforcement revenues declined compared to the same period in

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

proceedings and our recent financial condition.

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

service fee model.

Therefore, we expect a reduction in commercial hardware sales (principally DVM-250’s, FLT-250’s, and

a portion of our body-worn camera line) as we convert these customers to a service model under which we provide the hardware as part

of a recurring monthly service fee.

In that respect, we introduced a monthly subscription agreement plan for our body worn cameras

and related equipment during the second quarter of 2020 that allowed law enforcement agencies to pay a monthly service fee to obtain

body worn cameras without incurring a significant upfront capital outlay.

This program has gained some traction, resulting in decreased

product revenues and increasing our service revenues.

We expect this program to continue to hold traction, resulting in recurring

revenues over a span of three to five years.

and other revenues by operating segment is as follows:

For the six months ended

Service and Other Revenues:

Video Solutions

Revenue Cycle Management

Entertainment

Total Service and Other Revenues

and other revenues for the six months ended June 30, 2024 and 2023 were $7,372,139 and $10,445,351, respectively, a decrease of $3,073,212

(29%), due to the following factors:

revenues generated by the video solutions operating segment were $1,254,275 and $894,773 for the six months ended June 30, 2024 and

2023, respectively, an increase of $359,502 (40%).

We have experienced increased interest in our cloud solutions for law enforcement

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

contributed to our increased cloud revenues in the six months ended June 30, 2023.

We expect this trend to continue throughout 2024

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

solutions operating segment revenues from extended warranty services were $464,007 and $433,074 for the six months ended June 30,

2024 and 2023, respectively, an increase of $30,933 (7%).

This correlates with the increase in sales of DVM-800 hardware systems

resulting in an increase in their associated extended warranty.

entertainment operating segment generated service revenues totaling $2,411,351 and $5,481,659 for the six months ended June 30, 2024

and 2023, respectively, a decrease of $3,070,308 (56%).

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

LLC on September 1, 2021, thus resulting in the new revenue stream for the Company.

TicketSmarter collects fees on transactions administered

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

We expect our

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

revenue cycle management operating segment generated service revenues totaling $2,998,952 and $3,506,361 for the six months ended

June 30, 2024 and 2023, respectively, a decrease of $507,409 (15%).

Our revenue cycle management operating segment has completed

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

June 30, 2023.

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

to healthcare organizations throughout the country.

The slight decrease in revenue is due to refinement within one of the recent

acquisitions, as they strive to maximize profitability rather than focus on top line revenue.

revenues for the six months ended June 30, 2024 and 2023 were $11,145,586 and $15,976,820, respectively, a decrease of $4,831,234 (30%),

due to the reasons noted above.

of Product Revenue

cost of product revenue sold for the six months ended June 30, 2024, and 2023 was $4,986,647 and $4,520,616, respectively, an increase

of $466,031 (10%).

Overall cost of goods sold for products as a percentage of product revenues for the six months ended June 30, 2024,

and 2023 were 132% and 82%, respectively.

Cost of products sold by operating segment is as follows:

For the six months ended

Cost of Product Revenues:

Video Solutions

Revenue Cycle Management

Entertainment

Total Cost of Product Revenues

decrease in cost of goods sold for our video solutions segment products is directly correlated with the decrease in product sales for

the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

In addition, the video solutions segment recorded

valuation allowances for its older product lines and a portion of its Shield products during the first six months of 2023, directly increasing

cost of goods sold for the period.

Cost of product sold as a percentage of product revenues for the video solutions segment improved

to 131% for the six months ended June 30, 2024 as compared to 79% for the six months ended June 30, 2023.

increase in entertainment operating segment cost of product sold was driven by the costs of the Country Stampede music festival for the

six months ended June 30, 2024 compared to June 30, 2023, resulting in cost of product revenue of $3,230,691 for the six months ended

June 30, 2024, compared to $2,677,633 for the six months ended June 30, 2023.

Cost of product sold as a percentage of product revenues

for the entertainment segment was 133% for the three months ended June 30, 2024 as compared to 84% for the six months ended June 30,

recorded $4,135,001 and $4,542,461 in reserves for obsolete and excess inventories at June 30, 2024 and December 31, 2023, respectively.

Total raw materials, component parts, and work-in-progress were $2,630,162 and $3,065,049 at June 30, 2024 and December 31, 2023, respectively,

a decrease of $434,887 (14%).

The decrease was primarily attributable to the reduction in sponsorships and advertising being by the

Our selling, general and administrative expenses as a percentage of sales increased to 93% for the three months ended March

Finished goods balances were $3,722,972 and $5,322,693 at June 30, 2024 and December 31, 2023, respectively,

a decrease of $1,599,721 (30%) which was attributable to a decrease in finished goods from our entertainment segment.

The small decrease

in the inventory reserve is primarily due to the reduction in finished goods and movement of excess inventory, offset by the decrease

in reserve at the entertainment segment.

We believe the reserves are appropriate given our inventory levels as of June 30, 2024.

of Service Revenue

cost of service revenue sold for the six months ended June 30, 2024, and 2023 was $4,395,109 and $7,174,375, respectively, a decrease

of $2,779,266 (39%).

Overall cost of goods sold for services as a percentage of service revenues for the six months ended June 30, 2024,

and 2023 were 60% and 69%, respectively.

Cost of service revenues by operating segment is as follows:

For the six months ended

Cost of Service Revenues:

Video Solutions

Revenue Cycle Management

Entertainment

Total Cost of Service Revenues

increase in cost of service revenues for our video solutions segment is commensurate with the increase in service revenues in the six

months ended June 30, 2024 compared to the six months ended June 30, 2023.

Cost of service revenues as a percentage of service revenues

for the video solutions segment decreased to 35% for the six months ended June 30, 2024 as compared to 44% for the six months ended June

revenue cycle management operating segment cost of service revenue was consistent with the prior period.

Cost of service revenues as

a percentage of service revenues for the revenue cycle management operating segment was 65% for the six months ended June 30, 2024 as

compared to 55% for the six months ended June 30, 2023.

decrease in entertainment operating segment cost of service revenues is commensurate with the decrease in service revenues in the six

months ended June 30, 2024 compared to the six months ended June 30, 2023.

Cost of service revenues as a percentage of service revenues

for the entertainment operating segment was 73% for the six months ended June 30, 2024 as compared to 84% for the six months ended June

gross profit for the six months ended June 30, 2024 and 2023 was $1,763,830 and $4,281,829, respectively, a decrease of $2,517,999 (59%).

Gross profit by operating segment was as follows:

For the six months ended

Gross Profit:

Video Solutions

Revenue Cycle Management

Entertainment

Total Gross Profit

overall decrease is attributable to the overall decrease in revenues for the six months ended June 30, 2024 and an increase in the overall

cost of sales as a percentage of overall revenues to 84% for the six months ended June 30, 2024 from 73% for the six months ended June

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

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

EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, ShieldTM disinfectants and our cloud evidence storage and management offering, provided

that they gain traction in the marketplace.

In addition, if revenues from the video solutions segment increase, we will seek to further

improve our margins from this segment through expansion and increased efficiency utilizing fixed manufacturing overhead components.

plan to continue our initiative to more efficient management of our supply chain through outsourcing production, quantity purchases and

more effective purchasing practices.

General and Administrative Expenses

general and administrative expenses were $9,317,023 and $15,395,340 for the six months ended June 30, 2024 and 2023, respectively, a

decrease of $6,078,317 (39%).

The decrease was primarily attributable to the reduction in new sponsorships being entered into by the

Our selling, general and administrative expenses as a percentage of sales decreased to 84% for the six months ended June 30,

2024 compared to 96% in the same period in 2023.

The significant components of selling, general and administrative expenses are

Three months ended March 31,

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

For the six months ended

Research and development expense

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We continue to focus on bringing new products to market, including updates and improvements to current

Our research and development expenses totaled $487,466 and $934,939 for the three months ended March 31, 2024 and 2023, respectively,

Our research and development expenses totaled $1,033,242 and $1,475,215 for the six months ended June 30, 2024 and 2023, respectively,

a decrease of $441,973 (30%).

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advertising and promotional expenses.

Selling, advertising and promotional expense totaled $761,118 and $1,847,489 for the three

months ended March 31, 2024 and 2023, respectively, a decrease of $1,086,371 (59%).

Promotional and advertising expenses represent the

primary component of these costs and totaled $377,231 during the three months ended March 31, 2024, compared to $1,460,823 during the

three months ended March 31, 2023, a decrease of $1,083,592 (74%).

The decrease is primarily attributable to the reduction in sponsorships

being entered into by the Company.

Selling, advertising and promotional expense totaled $1,487,762 and $3,952,115 for the

six months ended June 30, 2024 and 2023, respectively, a decrease of $2,464,353 (62%).

The decrease is primarily attributable to the

reduction in new sponsorships being entered into by the Company.

Additionally, TicketSmarter remains active in sponsorship and advertising,

as it continues to build its brand and gain recognition.

and administrative expense .

General and administrative expenses totaled $3,914,149 and $4,935,170 for the three months ended

March 31, 2024 and 2023, respectively, a decrease of $1,021,021 (21%).

The decrease in general and administrative expenses in the three

months ended March 31, 2024 compared to the same period in 2023 is primarily attributable to a decrease in administrative salaries, as

payroll begins to adjust from the new acquisitions completed by the Company and reductions in headcount.

General and administrative expenses

also decreased due to a decline in rent expenses for the three months ended March 31, 2024 compared to the same period in 2023.

the reasons stated above, our operating loss was $3,639,034 and $6,172,806 for the three months ended March 31, 2024 and 2023, respectively,

a decrease of $2,533,772 (41%).

Operating loss as a percentage of revenues decreased to 66% in the three months ended March 31, 2024

from 80% in the same period in 2023.

income decreased to $14,938 for the three months ended March 31, 2024, from $15,477 in the same period of 2023, which primarily represents

interest charges on our subscription receivables.

incurred interest expenses of $648,567 and $5,664 during the three months ended March 31, 2024 and 2023, respectively.

The increase is

attributable to interest charges and the amortization of debt issuance and discounts associated with several debt issuances.

in Fair Value of Contingent Consideration Promissory Notes

Company recognized a gain on the change in fair value of contingent consideration promissory notes of $-0- compared to a loss of $158,021

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

This is in connection with the four acquisitions made by our revenue

cycle management segment.

General and administrative expenses totaled $6,796,019 and $9,968,010 for the six months ended June

30, 2024 and 2023, respectively, a decrease of $3,171,991 (32%).

The decrease in general and administrative expenses in the six months

ended June 30, 2024 compared to the same period in 2023 is primarily attributable to a decrease in administrative salaries and headcount.

General and administrative expenses also decreased due to a decline in rent expenses, and legal and professional expenses for the six

months ended June 30, 2024 compared to the same period in 2023.

the reasons stated above, our operating loss was $7,553,193 and $11,113,511 for the six months ended June 30, 2024 and 2023, respectively,

an improvement of $3,560,318 (32%).

Operating loss as a percentage of revenues changed to 68% in the six months ended June 30, 2024 from

70% in the same period in 2023.

income decreased to $49,289 for the six months ended June 30, 2024, from $71,085 in the same period of 2023, which reflects our change

in cash and cash equivalent levels in the second quarter of 2024 compared to the second quarter of 2023.

The Company held significant

cash and cash equivalents throughout the second quarter of 2023, allowing a full six months of interest income.

incurred interest expense of $1,733,690 and $1,521,049 during the six months ended June 30, 2024 and 2023, respectively.

is attributable additional debt issued in the second half of 2023 and 2024 partially offset by the convertible note entered into in the

second quarter of 2023, and the contingent earn-out notes associated with the four Nobility Healthcare acquisitions.

in Fair Value of Derivative Liabilities

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with the two secured convertible notes previously described.

The underlying warrant agreement terms provide for net cash settlement outside

the control of the Company in the event of tender offers under certain circumstances.

As such, the Company is required to treat these

warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with

any subsequent changes reported in the consolidated statement of operations as the change in fair value of warrant derivative liabilities.

The change in fair value of the warrant derivative liabilities during three months ended March 31, 2024 totaled $348,891, compared to

$-0- for the three months March 31, 2023, which was recognized as a loss on the Consolidated Statements of Operations.

The Company issued an additional 1,768,227 warrants in June 2024.

The underlying

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

circumstances.

As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated

fair value at their issuance date and at each reporting date with any subsequent changes reported in the condensed consolidated statement

of operations as the change in fair value of warrant derivative liabilities.

The change in fair value of the warrant derivative liabilities

from December 31, 2023, to June 30, 2024, totaled $351,710 which was recognized as expense in the second quarter of 2024.

on Extinguishment of Liabilities

on extinguishment of liabilities increased to $682,345 for the period ended March 31, 2024, from $-0- during the period ended March 31,

2023, which reflects income related to the video segment’s ability to negotiate down payables and contract liabilities during the

the second quarter of 2024, the Company recorded a gain on the extinguishment of liabilities for the six months ended June 30,

2024 of $682,345, which reflects income related to the video segment’s ability to negotiate down payables and contract

liabilities during the period.

on Extinguishment of debt

the second quarter of 2024, the Company refinanced its merchant advance loan and determined the refinancing of the debt should be treated

as a debt extinguishment.

As a result, the Company recorded a loss of $68,827 on the extinguishment during the six months ended June

on sale of fixed asset

Company recorded a loss on sale of fixed assets of $41,661 and $-0- for the three months ended March 31, 2024 and 2023.

income increased to $27,602 for the three months ended March 31, 2024, from $25,393 during the three months ended March 31, 2023, which

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

Company recorded a loss on sale of fixed assets of $41,661 and $-0- for the six months ended June 30, 2024 and 2023.

on accrual for legal settlement

Company recognized a loss on accrual for legal settlement of $-0- and $1,792,308 during the six months ended June 30, 2024 and 2023,

respectively.

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

on conversion of convertible debt

Company recognized a loss on conversion of convertible debt of $-0- and $93,386 during the six months ended June 30, 2024 and 2023, respectively.

This is in connection with the convertible note issued during the six months ended June 30, 2023 and the conversion from debt to equity

during the period.

income increased to $58,046 for the six months ended June 30, 2024, from $50,786 during the six months ended June 30, 2023, which reflects

income related to a warehouse lease within the corporate headquarters.

before Income Tax Benefit

a result of the above results of operations, we reported a loss before income tax benefit of $3,943,268 and $5,979,579 for the three

months ended March 31, 2024 and 2023, respectively, a decrease of $2,036,311 (34%).

did not record an income tax expense related to our income for the three months ended March 31, 2024 due to our overall net operating

loss carryforwards available.

We have further determined to continue providing a full valuation reserve on our net deferred tax assets

as of March 31, 2024.

a result of the above results of operations, we reported a loss before income tax benefit of $8,953,819 and $14,300,128 for the six

months ended June 30, 2024 and 2023, respectively, an improvement of $5,346,309 (37%).

did not record an income tax expense related to our income for the six months ended June 30, 2024 due to our overall net operating loss

carryforwards available.

We have further determined to continue providing a full valuation reserve on our net deferred tax assets as

of June 30, 2024.

We had approximately $113.3 million of net operating loss carryforwards and $1.8 million of research and development

tax credit carryforwards as of March 31, 2024 available to offset future net taxable income.

a result of the above results of operations, we reported a net loss of $3,943,268 and $5,979,579 for the three months ended March 31,

2024 and 2023, respectively, a decrease of $2,036,311 (34%).

Income/(Loss) Attributable to Noncontrolling Interests of Consolidated Subsidiary

tax credit carryforwards as of June 30, 2024 available to offset future net taxable income.

a result of the above results of operations, we reported a net loss of $8,953,819 and $14,300,128 for the six months ended June

30, 2024 and 2023, respectively, an improvement of $5,346,309 (37%).

Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

Company owns a 51% equity interest in its consolidated subsidiary, Nobility Healthcare.

As a result, the noncontrolling shareholders

or minority interest is allocated 49% of the income/(loss) of Nobility Healthcare which is reflected in the statement of income (loss)

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

We reported net income/(loss)

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

and 2023, respectively.

or minority interest is allocated 49% of the income of Nobility Healthcare which is reflected in the statement of income as “net

income attributable to noncontrolling interests of consolidated subsidiary”.

We reported net income attributable to noncontrolling

interests of consolidated subsidiary of $61,063 and $198,994 for the six months ended June 30, 2024 and 2023, respectively.

Loss Attributable to Common Stockholders

a result of the above, we reported a net loss attributable to common stockholders of $3,931,020 and $6,105,818 for the three months March

31, 2024 and 2023, respectively, a decrease of $2,174,798 (36%).

a result of the above, we reported a net loss attributable to common stockholders of $9,014,882 and $14,499,122 for the six months June

30, 2024 and 2023, respectively, an improvement of $5,484,240 (38%).

and Diluted Loss per Share

basic and diluted loss per share was $1.37 and $2.22 for the three months ended March 31, 2024 and 2023, respectively.

Basic 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 and warrants were

antidilutive, and, therefore, not included in the computation of diluted loss per share.

basic and diluted loss per share was $3.12 and $5.24 for the six months ended June 30, 2024 and 2023, respectively.

Basic loss per share

is based upon the weighted average number of common shares outstanding during the period.

For the 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 loss per share.

and Capital Resources

10 unchanged sentences

concerning our ability to raise additional capital, raise substantial doubt about our ability to continue as a going concern.

Common Stock is currently listed on The Nasdaq Capital Market.

In order to maintain our listing, we must satisfy minimum financial and

other continued listing requirements and standards, including those regarding director independence and independent committee requirements,

minimum stockholders’ equity, minimum share price, and certain corporate governance requirements.

There can be no assurances that

we will be able to comply with the applicable listing standards.

See “Nasdaq Listing” below.

cash equivalents, and restricted cash:

As of March 31, 2024, we had cash, cash equivalents, and restricted cash with an aggregate balance of $1,025,461, an increase from

a balance of $778,149 at December 31, 2023.

Summarized immediately below and discussed in more detail in the subsequent subsections are

the main elements of the $247,312 net increase in cash during the three months ended March 31, 2024:

cash equivalents:

As of June 30, 2024, we had cash, cash equivalents and restricted cash with an aggregate balance of $614,713,

a decrease from a balance of $778,149 at December 31, 2023.

Summarized immediately below and discussed in more detail in the

subsequent subsections are the main elements of the $163,436 net decrease in cash during the six months ended June 30,

of net cash used in operating activities.

Net cash used in operating activities was $918,545 and $1,216,876 for the three months

ended March 31, 2024 and 2023, respectively, a decrease of $298,331.

The decrease is attributable to the decrease in net loss and a

decrease in the usage of cash for operating assets during the three months ended March 31, 2024 compared to the same period in

Net cash used in operating activities was $3,408,757 and $3,109,986 for the six months

ended June 30, 2024 and 2023, respectively, an increase of $298,771.

The increase is attributable to the net loss and the usage of

cash for operating assets during the six months ended June 30, 2024 compared to the same period in 2023.

of net cash provided by investing activities.

Cash provided by investing activities was $160,830 for the three months ended March

31, 2024 compared to cash used in investing activities of $70,645 for the three months ended March 31, 2023.

During the three months

ended March 31, 2024, we made capital expenditures for:

(i) acquired Country Stampede;

(ii) sold an aircraft;

and (iii) sold

personal seat licenses.

of net cash provided by financing activities.

Cash provided by financing activities was $1,005,027 and $615,045 for the three months

ended March 31, 2024 and 2023, respectively.

During the first three months of 2024, we most notably made principal payments on

contingent consideration promissory notes and merchant advances, received additional funds from the merchant advance and entered

into an additional advance agreement.

During the first three months of 2023 we received proceeds from a Commercial Extension of

Credit agreement and the Company made principal payments on contingent consideration promissory notes and the credit

had $1,025,461 of cash and cash equivalents, including restricted cash of $97,600, and net negative working capital $9,624,118 as of

March 31, 2024.

Accounts receivable and other receivables balances represented $4,421,492 of our net working capital at March 31, 2024.

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

positive cash flow to support our operations during 2024.

Inventory represents $3,148,689 of our net working capital at March 31, 2024.

We are actively managing the level of inventory and our goal is to reduce such level during the balance of 2024 by our sales activities,

the increase of which should provide additional cash flow to help support our operations during 2024.

Cash provided by investing activities was $36,504 compared to cash used in investing

activities of $126,946 for the six months ended June 30, 2024 and 2023, respectively.

During the six months ended June 30, 2024, we

made expenditures for:

(i) the acquisition of Country Stampede;

and (ii) received proceeds from the sale of our aircraft.

expenditures were partially offset by acquisitions of certain intangibles and property, plant and equipment.

net cash provided by financing activities.

Cash provided by financing activities was $3,208,817 and $2,628,614 for the six months

ended June 30, 2024 and 2023, respectively.

During the first six months of 2024, we most notably refinanced a loan resulting in proceeds

of $1,144,000, obtained an additional merchant advance providing proceeds of $915,000 and issued common stock with detachable warrants

resulting in $2,194,742 in net cash proceeds.

The cash proceeds were partially offset by payments on outstanding loans.

had $614,713 of cash and cash equivalents, including restricted cash of $97,600 and net negative working capital of $13,431,836 as of June 30, 2024.

Accounts receivable and

other receivables balances represented $4,889,038 of our net working capital at June 30, 2024.

We intend to collect our outstanding receivables

on a timely basis and reduce the overall level during 2024, which would help to provide positive cash flow to support our operations

Inventory represents $2,218,133 of our net working capital at June 30, 2024.

We are actively managing the level of inventory

and our goal is to reduce such level during the balance of 2024 by our sales activities, the increase of which should provide additional

cash flow to help support our operations during 2024.

Expenditures:

had the following material commitments for capital expenditures at March 31, 2024:

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

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

had the following material commitments for capital expenditures at June 30, 2024:

Total lease expense under the five operating leases was approximately $117,810 and $226,695, during the three and

six months ended June 30, 2024, respectively.

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

Operating lease right of use assets

2 unchanged sentences

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:

Selling, general and administrative expenses

1 unchanged sentence

Year ending December 31:

2023 (April 1, to December 31, 2024)

2024 (July 1, to December 31, 2024)

Total undiscounted minimum future lease payments

1 unchanged sentence

Total operating lease liability

obligations is comprised of the following:

obligations – Outstanding debt obligations comprises the following:

June 30, 2024

December 31, 2023

Economic injury disaster loan (EIDL)

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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:

June 30, 2024

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

2028 and thereafter

8 unchanged sentences

for Excess and Obsolete Inventory;

Goodwill, other intangible assets, fair value of assets and liabilities acquired in business combinations;

and other intangible assets;

value of warrant derivative liabilities;

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In addition, we adjust the carrying value of inventory if the current market value of that inventory is below its cost.

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

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

Raw material and component parts– video solutions segment

8 unchanged sentences

As reflected above, our inventory reserves represented

59% of the gross inventory balance at March 31, 2024, compared to 54% of the gross inventory balance at December 31, 2023.

65% of the gross inventory balance at June 30, 2024, compared to 54% of the gross inventory balance at December 31, 2023.

We had $4,135,001

and $4,542,461 in reserves for obsolete and excess inventories at March 31, 2024 and December 31, 2023, respectively.

and $4,542,461 in reserves for obsolete and excess inventories at June 30, 2024 and December 31, 2023, respectively.

Total raw materials,

component parts, and work-in-process were $2,964,525 and $3,065,049 at March 31, 2024 and December 31, 2023, respectively, a decrease

component parts, and work-in-process were $2,630,162 and $3,065,049 at June 30, 2024 and December 31, 2023, respectively, a decrease

of $434,887 (14%).

Finished goods balances were $4,670,553 and $5,322,693 at March 31, 2024 and December 31, 2023, respectively, a decrease

Finished goods balances were $3,722,972 and $5,322,693 at June 30, 2024 and December 31, 2023, respectively, a decrease

of $1,599,721 (30%).

The small decrease in the inventory reserve is primarily due to the reduction in finished goods and movement of excess

The decrease in the inventory reserve is primarily due to the reduction in finished goods and movement of excess

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

1 unchanged sentence

We believe the reserves are

appropriate given our inventory levels as of March 31, 2024.

appropriate given our inventory levels as of June 30, 2024.

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

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quality and minimize claims.

Our warranty reserves were increased to $20,529 as of March 31, 2024 compared to $17,699 as of December

31, 2023 due to newer products gaining a long history of claims to consider, which was slightly offset as we begin to slow our warranty

exposures through the roll-off of DVM-750 and DVM-800 units from warranty coverage.

Standard warranty exposure on the DVM-800 and DVM-250plus

are the responsibility of the contract manufacturers which reduced our overall warranty exposure as these are very popular products in

Our warranty reserves were decreased to $11,615 as of June 30, 2024 compared to $17,699 as of December 31,

2023 due to newer products gaining a long history of claims to consider, which was slightly offset as we begin to slow our warranty exposures

through the roll-off of DVM-750 and DVM-800 units from warranty coverage.

Standard warranty exposure on the DVM-800 and DVM-250plus are

the responsibility of the contract manufacturers which reduced our overall warranty exposure as these are very popular products in our

There is a risk that we will have higher warranty claim frequency rates and average cost of claims than our history has indicated

10 unchanged sentences

as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to equity.

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:

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.

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

March 31, 2024

Volatility - range

Risk-free rate

Remaining contractual term

contractual term

Exercise price

Common stock issuable under the warrants

issuable under the warrants

The following table summarizes

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

exercise price

Vested Balance,

December 31, 2023

Forfeited/cancelled

Balance, June 30, 2024

Compensation Expense .

2 unchanged sentences

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

and there were no stock options granted during the three months ended March 31, 2024.

and there were no stock options granted during the three or six months ended June 30, 2024.

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

21 unchanged sentences

all or some portion of the deferred tax asset will not be realized.

As of March 31, 2024, we have fully reserved all of our deferred

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

should be increased by $7,410,000 to a balance of $41,610,000 to fully reserve our deferred tax assets at December 31, 2023.

As of June 30, 2023, we have fully reserved all of our deferred tax

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

be increased by $17,220,000 to a balance of $34,200,000 to fully reserve our deferred tax assets at December 31, 2023.

We determined

that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of March 31, 2024, because

of the overall net operating loss carryforwards available.

that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of June 30, 2024, because of

the overall net operating loss carryforwards available.

We expect to continue to maintain a full valuation allowance until we determine

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financial reporting purposes.

We have no recorded liability as of March 31, 2024 representing uncertain tax positions.

We have no recorded liability as of June 30, 2024 representing uncertain tax positions.

have generated substantial deferred income tax assets related to our operations primarily from the charge to compensation expense taken

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We do not believe that our Video Solutions and Revenue Cycle Management segments

business are seasonal in nature, however;

business is seasonal in nature, however;

the Entertainment Segment is expected to generate higher revenues during the second half of

2 unchanged sentences

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 2. Management’s Discussion and Analysis