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Item 1. Financial Statements

2025-11-12 compared with 2025-08-18 · 1581 added, 1555 removed, 617 unchanged (84% of the section changed)

Item 1 – Financial Statements.

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2025 AND DECEMBER 31, 2024

June 30, 2025

1 – Financial Statements.

CONSOLIDATED BALANCE SHEETS

30, 2025 AND DECEMBER 31, 2024

September 30, 2025

December 31, 2024

1 unchanged sentence

Cash and cash equivalents

Accounts receivable-trade, less allowance for doubtful accounts of $ 105,669 – June 30, 2025 and $ 200,668 – December 31, 2024

Subscriptions receivable, net of $ 75,000 allowance – June 30, 2025 and $ 25,000 – December 31, 2024

Accounts receivable-trade, less allowance for doubtful accounts of $ 110,982 – September 30, 2025 and $ 200,668 – December 31, 2024

Subscriptions receivable, net of $ 22,644 allowance – September 30, 2025 and $ 25,000 – December 31, 2024

Other receivables

23 unchanged sentences

Total liabilities

Commitments and contingencies

Commitments and contingencies [Note 9]

Stockholders’ Equity (Deficit):

Preferred stock, $ 0.001 par value per share, 10,000,000 shares authorized;

none issued or outstanding – June 30, 2025 and December 31, 2024

none issued or outstanding – September 30, 2025 and December 31, 2024

Common stock, $ 0.001 par value;

1 unchanged sentence

shares issued:

1,727,421 – June 30, 2025 and 3,204 – December 31, 2024

1,727,421 – September 30, 2025 and 3,204 – December 31, 2024

Additional paid in capital

8 unchanged sentences

Total liabilities and equity (deficit)

See Notes to Unaudited Condensed Consolidated Financial

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2025 AND 2024

For the three

months ended June 30,

Notes to Unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

THE THREE AND NINE MONTHS ENDED

30, 2025 AND 2024

the three months ended

September 30,

the nine months ended

September 30,

Service and other

8 unchanged sentences

General and administrative expense

Goodwill and intangible asset impairment charge

Total selling, general and administrative expenses

6 unchanged sentences

Interest income

Interest expense

( 1,085,063 )

( 1,733,690 )

Other income (expense)

Loss on extinguishment of debt – related party

Interest expense and debt discount amortization

( 2,505,536 )

3 unchanged sentences

Gain on sale of intangibles

Gain (loss) on sale of property, plant and equipment

Gain on sale of property, plant and equipment

Total other income (expense)

( 1,096,330 )

( 1,400,626 )

Loss before income tax benefit

6 unchanged sentences

( 14,424,531 )

Net (income) attributable to noncontrolling interests of consolidated subsidiary

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

Net loss attributable to common stockholders

9 unchanged sentences

Weighted average shares outstanding:

See Notes to Unaudited Condensed Consolidated Financial

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

2025 AND 2024

Notes to Unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Noncontrolling

23 unchanged sentences

Transition of warrant derivative liability to equity of Series A warrants issued along with February 2025 sale of common stock

Deemed capital contribution related to modification of notes payable - related party

Equity Issuances - Senior Note with detachable warrant September 2025

Restricted common stock grant

14 unchanged sentences

( 126,683,662 )

Stock-based compensation

Issuance of common stock upon exercise of prefunded warrants

Restricted common stock forfeitures

( 2,000,206 )

( 3,470,507 )

Balance, September 30, 2024

$ 128,971,707

$ ( 1,265,851 )

$ ( 130,154,169 )

$ ( 2,448,310 )

Balance, December 31, 2024

13 unchanged sentences

( 133,249,457 )

( 1,194,675 )

( 133,249,457 )

Stock-based compensation

11 unchanged sentences

( 4,489,204 )

Net income (loss)

Balance, June 30, 2025

( 1,138,678 )

( 137,794,658 )

Balance, June 30, 2025

( 1,138,678 )

( 137,794,658 )

Stock-based compensation

Equity Issuances - Senior Note with detachable warrant September 2025

Fair value of Series B warrants issued along with sale of common stock

( 1,021,867 )

Net income (loss)

( 1,021,867 )

Balance, September 30, 2025

$ 147,411,616

$ ( 1,080,153 )

See Notes to Unaudited Condensed Consolidated Financial

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2025 AND 2024

$ ( 138,816,525 )

$ 147,411,616

$ ( 1,080,153 )

$ ( 138,816,525 )

Notes to Unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Cash Flows from Operating Activities:

12 unchanged sentences

( 3,373,919 )

( 2,178,965 )

Goodwill and intangible asset impairment charge

Loss on extinguishment of debt

8 unchanged sentences

Operating lease right of use assets

( 1,026,213 )

Increase (decrease) in:

16 unchanged sentences

Proceeds from sale of land and building

Proceeds from sale of property, plant and equipment

Net cash provided by (used in) investing activities

2 unchanged sentences

Net proceeds of June 2024 private placement equity offering with detachable warrants

Net proceeds from September 2025 issuance of senior secured convertible notes with detachable warrants

Net proceeds of unsecured promissory note – entertainment segment

1 unchanged sentence

( 3,650,000 )

Proceeds of related party note payable

Payments of related party note payable

5 unchanged sentences

( 1,922,750 )

( 1,382,500 )

Proceeds from issuance of common shares upon exercise of Series B warrants

1 unchanged sentence

Payments on Merchant Advances – Entertainment Segment

( 1,215,000 )

Principal payment on contingent consideration promissory notes

18 unchanged sentences

Transition of warrant derivative liability to equity upon exercise of warrants

Fair value of detachable warrants issued with senior secured convertible notes issuance

Issuance of common stock upon exercise of pre-funded warrants

See Notes to Unaudited Condensed Consolidated Financial

DIGITAL ALLY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

Nature of Business:

Digital Ally, Inc.

was originally

incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc.

Reduction in proceeds from sale of building for loan, prepaid rent, and other accrued expenses

Payments to vendors directly from proceeds of sale of common stock

Notes to Unaudited Condensed Consolidated Financial Statements.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc.

and had no operations until 2004.

On November 30, 2004, Vegas Petra,

entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital Ally, Inc.

entity, the “Predecessor Registrant”).

The Company formed Digital Ally International, Inc.

30, 2004, Vegas Petra, Inc.

entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital

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

Company formed Digital Ally International, Inc.

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

The Company formed Nobility Healthcare, LLC (“Nobility Healthcare”) in June 2021 to facilitate the operations of its revenue

cycle management solutions and back-office services for healthcare organizations.

The Company formed

Nobility Healthcare, LLC (“Nobility Healthcare”) in June 2021 to facilitate the operations of its revenue cycle management

solutions and back-office services for healthcare organizations.

The Company formed TicketSmarter, Inc.

upon its acquisition

of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate its global ticketing operations.

The Company formed Kustom Entertainment,

and Kustom 440, Inc.

upon its acquisition of Goody

Tickets, LLC and TicketSmarter, LLC, to facilitate its global ticketing operations.

The Company formed Kustom Entertainment, Inc.

Kustom 440, Inc.

in 2022 to create unique entertainment experiences directly for consumers.

The business of the Registrant, Digital Ally,

(with its wholly-owned subsidiaries, Digital Ally International, Inc., Digital Ally Healthcare, LLC (“Digital Ally Healthcare”),

TicketSmarter, Inc.

business of the Registrant, Digital Ally, Inc.

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

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

(“TicketSmarter”), Kustom 440, Inc.

(“Kustom 440”), Kustom Entertainment, Inc., and its majority-owned

subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,” and the “Company”),

is divided into three reportable operating segments:

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

Entertainment Segment.

The Video Solutions Segment is our legacy business that produces digital video imaging, storage products, security and commercial applications.

This segment includes both service and product

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

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

the country, as a monthly service fee.

Our entertainment sector generates product revenue through our production of live events and concerts

including our annual Country Stampede music festival.

The Entertainment Segment also 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 17.

Reverse Stock Splits

On May 6, 2025, the Company,

acting pursuant to authority received at an annual meeting of its stockholders on December 17, 2024, filed with the Secretary of State

of the State of Nevada a certificate of amendment (the “Charter Amendment”) to its articles of incorporation, as amended (the

“Articles of Incorporation”), which effected a one-for-twenty reverse stock split (the “Reverse Stock Split”)

of all of the Company’s outstanding shares of common stock, par value $ 0.001 per share (the “Common Stock”).

to the Charter Amendment, the Reverse Stock Split became effective as of 5:30 p.m.

(“Kustom 440”),

Kustom Entertainment, Inc., and its majority-owned subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,”

and the “Company”), is divided into three reportable operating segments:

1) the Video Solutions Segment, 2) the Revenue Cycle

Management Segment and 3) the Entertainment Segment.

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

storage products, security and commercial applications.

This segment includes both service and product revenues through our subscription

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

The Revenue Cycle Management

Segment provides working capital and back-office services to a variety of healthcare organizations throughout the country, as a monthly

Our entertainment sector generates product revenue through our production of live events and concerts including our annual

Country Stampede music festival.

The Entertainment Segment also 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 17.

May 6, 2025, the Company, acting pursuant to authority received at an annual meeting of its stockholders on December 17, 2024, filed

with the Secretary of State of the State of Nevada a certificate of amendment (the “Charter Amendment”) to its articles of

incorporation, as amended (the “Articles of Incorporation”), which effected a one-for-twenty reverse stock split (the “Reverse

Stock Split”) of all of the Company’s outstanding shares of common stock, par value $ 0.001 per share (the “Common Stock”).

Pursuant to the Charter Amendment, the Reverse Stock Split became effective as of 5:30 p.m.

Eastern Time on May 6, 2025.

As a result of the Reverse

Stock Split, every twenty (20) shares of Common Stock were exchanged for one (1) share of Common Stock.

The Common Stock began trading

on the Nasdaq Capital Market on a split-adjusted basis at the start of trading on May 7, 2025.

The Reverse Stock Split did not affect

the total number of shares of capital stock, including the Common Stock, that the Company is authorized to issue, which remain as set

forth pursuant to the Articles of Incorporation.

No fractional shares of Common Stock were issued in connection with the Reverse Stock

Stockholders who otherwise were entitled to receive fractional shares of Common Stock were automatically entitled to receive an

additional fraction of a share of Common Stock to round up to the next whole share, at a participant level.

The Reverse Stock Split also

had a proportionate effect on all other options and warrants of the Company outstanding as of the effective date of the Reverse Stock

All historical share and per-share amounts reflected throughout the Company’s condensed consolidated financial statements

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

earliest period presented.

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

On May 22, 2025, the Company,

acting pursuant to authority received at a special meeting of its stockholders on May 6, 2025, filed with the Secretary of State of the

State of Nevada a certificate of amendment (the “May 22, 2025 Charter Amendment”) to its articles of incorporation, as

amended, to effect a one (1)-for-one hundred (100) share reverse split (the “May 22, 2025 Reverse Stock Split”) of all of

the Company’s outstanding shares of Common Stock, par value $ 0.001 per share.

Pursuant to the May 22, 2025 Charter Amendment, the

Reverse Stock Split became effective at 5:30 p.m.

of the Reverse Stock Split, every twenty (20) shares of Common Stock were exchanged for one (1) share of Common Stock.

The Common Stock

began trading on the Nasdaq Capital Market on a split-adjusted basis at the start of trading on May 7, 2025.

The Reverse Stock Split

did not affect the total number of shares of capital stock, including the Common Stock, that the Company is authorized to issue, which

remain as set forth pursuant to the Articles of Incorporation.

No fractional shares of Common Stock were issued in connection with the

Reverse Stock Split.

Stockholders who otherwise were entitled to receive fractional shares of Common Stock were automatically entitled

to receive an additional fraction of a share of Common Stock to round up to the next whole share, at a participant level.

Stock Split also had a proportionate effect on all other options and warrants of the Company outstanding as of the effective date of

the Reverse Stock Split.

All historical share and per-share amounts reflected throughout the Company’s condensed consolidated financial

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

as of the earliest period presented.

The par value per share of the Company’s Common Stock was not affected by the Reverse Stock

May 22, 2025, the Company, acting pursuant to authority received at a special meeting of its stockholders on May 6, 2025, filed with

the Secretary of State of the State of Nevada a certificate of amendment (the “May 22, 2025 Charter Amendment”) to its articles

of incorporation, as amended, to effect a one (1)-for-one hundred (100) share reverse split (the “May 22, 2025 Reverse Stock Split”)

of all of the Company’s outstanding shares of Common Stock, par value $ 0.001 per share.

Pursuant to the May 22, 2025 Charter Amendment,

the Reverse Stock Split became effective at 5:30 p.m.

Eastern Time on May 22, 2025.

As a result of the May 22, 2025 Reverse Stock Split, every

one hundred (100) shares of Common Stock were exchanged for one (1) share of Common Stock.

The Common Stock will begin trading on a split-adjusted

basis on Nasdaq effective with the open of the market on Friday, May 23, 2025.

The May 22, 2025 Reverse Stock Split did not affect the

total number of shares of capital stock, including the Common Stock, that the Company is authorized to issue, which remain as set forth

pursuant to the Articles of Incorporation.

No fractional shares of Common Stock were issued in connection with the May 22, 2025 Reverse

Stockholders who otherwise were entitled to receive fractional shares of Common Stock were automatically entitled to receive

an additional fraction of a share of Common Stock to round up to the next whole share, at a participant level.

The May 22, 2025 Reverse

Stock Split also had a proportionate effect on all other options and warrants of the Company outstanding as of the effective date of the

As a result of the May 22, 2025 Reverse Stock Split,

every one hundred (100) shares of Common Stock were exchanged for one (1) share of Common Stock.

The Common Stock will begin trading

on a split-adjusted basis on Nasdaq effective with the open of the market on Friday, May 23, 2025.

The May 22, 2025 Reverse Stock Split

did not affect the total number of shares of capital stock, including the Common Stock, that the Company is authorized to issue, which

remain as set forth pursuant to the Articles of Incorporation.

No fractional shares of Common Stock were issued in connection with the

May 22, 2025 Reverse Stock Split.

All historical share and per-share amounts reflected throughout the Company’s condensed consolidated

financial statements and other financial information in this Report have been adjusted to reflect the May 22, 2025 Reverse Stock Split

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

The par value per share of the Company’s Common Stock was not affected

by the May 22, 2025 Reverse Stock Split.

The following is a summary of the Company’s

Significant Accounting Policies:

Basis of Presentation :

The unaudited condensed consolidated

financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial

information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all the information

and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

In the opinion

of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and six-month periods ended June 30, 2025 are not necessarily indicative of the results that may be expected

for the year ending December 31, 2025.

The balance sheet as of December

31, 2024 has been derived from the audited financial statements at that date but does not include all the information and footnotes required

by generally accepted accounting principles in the United States for complete financial statements.

For further information, refer

to the audited consolidated financial statements and footnotes included in the Company’s annual report on Form 10-K for the year

ended December 31, 2024.

Basis of Consolidation :

The accompanying condensed

consolidated financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries, Digital Ally International,

Inc., Digital Ally Healthcare, LLC, TicketSmarter, Inc., Kustom Entertainment, Inc., Kustom 440, Inc., and its majority-owned subsidiary

Nobility Healthcare, LLC.

Stockholders who otherwise were entitled to receive fractional shares of Common Stock were automatically

entitled to receive an additional fraction of a share of Common Stock to round up to the next whole share, at a participant level.

May 22, 2025 Reverse Stock Split also had a proportionate effect on all other options and warrants of the Company outstanding as of the

effective date of the May 22, 2025 Reverse Stock Split.

All historical share and per-share amounts reflected throughout the Company’s

condensed consolidated financial statements and other financial information in this Report have been adjusted to reflect the May 22,

2025 Reverse Stock Split as if the split occurred as of the earliest period presented.

The par value per share of the Company’s

Common Stock was not affected by the May 22, 2025 Reverse Stock Split.

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

of Presentation:

unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles

in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete

financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for

a fair presentation have been included.

Operating results for the three and nine-month periods ended September 30, 2025 are not necessarily

indicative of the results that may be expected for the year ending December 31, 2025.

balance sheet as of December 31, 2024 has been derived from the audited financial statements at that date but does not include all the

information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

further information, refer to the audited consolidated financial statements and footnotes included in the Company’s annual report

on Form 10-K for the year ended December 31, 2024.

of Consolidation:

accompanying condensed consolidated financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries,

Digital Ally International, Inc., Digital Ally Healthcare, LLC, TicketSmarter, Inc., Kustom Entertainment, Inc., Kustom 440, Inc., and

its majority-owned subsidiary Nobility Healthcare, LLC.

All intercompany balances and transactions have been eliminated during consolidation.

Fair Value of Financial Instruments :

The carrying amounts of financial

instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated notes payable approximate fair

value because of the short-term nature of these items.

Revenue Recognition :

The Company applies the provisions

of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers , and all related appropriate guidance.

The Company recognizes revenue under the core principle to depict the transfer of control to its customers in an amount reflecting the

consideration to which it expects to be entitled.

In order to achieve that core principle, the Company applies the following five-step

(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction

price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance

obligation is satisfied.

The Company has two different

revenue streams, product and service, represented through its three segments.

The Company reports all revenues on a gross basis, other

than service revenues from the Company’s entertainment and revenue cycle management segments, Revenues generated by all segments

are reported net of sales taxes.

Video Solutions

The Company considers customer

purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the customer.

In situations where

sales are to a distributor, the Company has concluded its contracts are with the distributor as the Company holds a contract bearing enforceable

rights and obligations only with the distributor.

As part of its consideration for the contract, the Company evaluates certain factors

including the customers’ ability to pay (or credit risk).

For each contract, the Company considers the promise to transfer products,

each of which is distinct, to be the identified performance obligations.

In determining the transaction price, the Company evaluates whether

the price is subject to refunds or adjustment to determine the net consideration to which it expects to be entitled.

As the Company’s

standard payment terms are generally less than one year for product sales (although some subscriptions for services may reach out 3-5

years), it has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

The Company allocates the transaction price to each distinct product based on its relative standalone selling price.

The product price,

as specified on the purchase order, is considered the stand-alone selling price as it is an observable input which depicts the price as

if sold to a similar customer in similar circumstances.

Revenue is recognized when control of the product is transferred to the customer

when the Company’s performance obligations is satisfied), which typically occurs at shipment.

Further in determining whether

control has been transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards

of ownership having transferred to the customer.

Customers do not have a right to return the product other than for warranty reasons for

which they would only receive repair services or replacement products.

The Company has also elected the practical expedient under ASC

340-40-25-4 to expense commissions for product sales when incurred as the amortization period of the commission asset the Company would

have otherwise recognized is less than one year.

Service and other revenue

is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue.

Revenue is recognized upon shipment

of the product and acceptance of the service or materials by the end customer for repair services.

Revenue for extended warranty, cloud

service or other software-based products is over the term of the contract warranty or service period.

A time-elapsed method is used to

measure progress because the Company transfers control evenly over the contractual period.

Accordingly, the fixed consideration related

to these revenues is generally recognized on a straight-line basis over the contract term, as long as the other revenue recognition criteria

have been met.

The Company’s multiple

performance obligations may include future body-worn camera devices to be delivered at defined points within a multi-year contract,

and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year contract to future deliverables

using management’s best estimate of selling price.

Revenue Cycle Management

The Company reports revenue

cycle management revenues on a net basis, as its primary source of revenue is its end-to-end service fees which is generally determined

as a percentage of the invoice amounts collected.

These service fees are reported as monthly revenue upon completion of the Company’s

performance obligation to provide the agreed upon service.

Value of Financial Instruments:

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

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

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

related appropriate guidance.

The Company recognizes revenue under the core principle to depict the transfer of control to its customers

in an amount reflecting the consideration to which it expects to be entitled.

In order to achieve that core principle, the Company applies

the following five-step approach:

(1) identify the contract with a customer, (2) identify the performance obligations in the contract,

(3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize

revenue when a performance obligation is satisfied.

Company has two different revenue streams, product and service, represented through its three segments.

The Company reports all revenues

on a gross basis, other than service revenues from the Company’s entertainment and revenue cycle management segments, Revenues

generated by all segments are reported net of sales taxes.

Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the

In situations where sales are to a distributor, the Company has concluded its contracts are with the distributor as the Company

holds a contract bearing enforceable rights and obligations only with the distributor.

As part of its consideration for the contract,

the Company evaluates certain factors including the customers’ ability to pay (or credit risk).

For each contract, the Company

considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.

In determining the

transaction price, the Company evaluates whether the price is subject to refunds or adjustment to determine the net consideration to

which it expects to be entitled.

As the Company’s standard payment terms are generally less than one year for product sales (although

some subscriptions for services may reach out 3-5 years), it has elected the practical expedient under ASC 606-10-32-18 to not assess

whether a contract has a significant financing component.

The Company allocates the transaction price to each distinct product based

on its relative standalone selling price.

The product price, as specified on the purchase order, is considered the stand-alone selling

price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances.

Revenue is recognized

when control of the product is transferred to the customer (i.e.

when the Company’s performance obligations is satisfied), which

typically occurs at shipment.

Further in determining whether control has been transferred, the Company considers if there is a present

right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.

Customers do not have

a right to return the product other than for warranty reasons for which they would only receive repair services or replacement products.

The Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions for product sales when incurred as

the amortization period of the commission asset the Company would have otherwise recognized is less than one year.

and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue.

recognized upon shipment of the product and acceptance of the service or materials by the end customer for repair services.

extended warranty, cloud service or other software-based products is over the term of the contract warranty or service period.

A time-elapsed

method is used to measure progress because the Company transfers control evenly over the contractual period.

Accordingly, the fixed consideration

related to these revenues is generally recognized on a straight-line basis over the contract term, as long as the other revenue recognition

criteria have been met.

Company’s multiple performance obligations may include future body-worn camera devices to be delivered at defined points within

a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year

contract to future deliverables using management’s best estimate of selling price.

Cycle Management

Company reports revenue cycle management revenues on a net basis, as its primary source of revenue is its end-to-end service fees which

is generally determined as a percentage of the invoice amounts collected.

These service fees are reported as monthly revenue upon completion

of the Company’s performance obligation to provide the agreed upon service.

Entertainment

The Company reports ticketing

revenue on a gross or net basis based on management’s assessment of whether the Company is acting as a principal or agent in the

The determination is based upon the evaluation of control over the event ticket, including the right to sell the ticket,

prior to its transfer to the ticket buyer.

The Company sells tickets

held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to the buyer upon confirmation

of the order.

The Company acts as the principal in these transactions as the ticket is owned by the Company at the time of the sale, therefore

controlling the ticket prior to transferring to the customer.

In these transactions, revenue is recorded on a gross basis based on the

value of the ticket and is recognized when an order is confirmed.

Payment is typically due upon delivery of the ticket.

The Company also acts as an

intermediary between buyers and sellers through online secondary marketplace.

Revenues derived from this marketplace primarily consist

of service fees from ticketing operations, and consists of one primary performance obligation, which is facilitating the transaction between

the buyer and seller, being satisfied at the time the order has been confirmed.

As the Company does not control the ticket prior to the

transfer, the Company acts as an agent in these transactions.

Revenue is recognized on a net basis, net of the amount due to the seller

when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s listing.

due at the time of sale.

Deferred revenue includes payments

received in advance of performance under the contract and are reported separately as current liabilities and non-current liabilities in

the Condensed Consolidated Balance Sheets.

Such amounts consist of extended warranty contracts, prepaid cloud services and prepaid installation

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

During the six months ended June 30, 2025,

the Company recognized revenue of $ 3,406,003 related to its deferred revenue.

Total deferred revenue consists of the following:

Company reports ticketing revenue on a gross or net basis based on management’s assessment of whether the Company is acting as

a principal or agent in the transaction.

The determination is based upon the evaluation of control over the underlying ticket, including

the right to sell the ticket, prior to its transfer to the ticket buyer.

Company sells tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to

the buyer upon confirmation of the order.

The Company acts as the principal in these transactions as the ticket is owned by the Company

at the time of the sale, therefore controlling the ticket prior to transferring to the customer.

In these transactions, revenue is recorded

on a gross basis based on the value of the ticket and is recognized when an order is confirmed.

Payment is typically due upon delivery

of the ticket.

Company also acts as an intermediary between buyers and sellers through online secondary marketplace.

Revenues derived from this marketplace

primarily consist of service fees from ticketing operations, and consists of one primary performance obligation, which is facilitating

the transaction between the buyer and seller, being satisfied at the time the order has been confirmed.

As the Company does not control

the ticket prior to the transfer, the Company acts as an agent in these transactions.

Revenue is recognized on a net basis, net of the

amount due to the seller when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s

Payment is due at the time of sale.

revenue includes payments received in advance of performance under the contract and are reported separately as current liabilities and

non-current liabilities in the Condensed Consolidated Balance Sheets.

Such amounts consist of extended warranty contracts, prepaid cloud

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

the nine months ended September 30, 2025, the Company recognized revenue of $ 4,189,321 related to its deferred revenue.

Total deferred

revenue consists of the following:

OF DEFERRED REVENUES

June 30, 2025

September 30, 2025

September 30,

Deferred revenue, current

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Deferred revenue, non-current

Sales returns and allowances

aggregated $ 289,195 for the six months ended June 30, 2025.

Obligations for estimated sales returns and allowances are recognized at the

time of sales on an accrual basis.

The accrual is determined based upon historical return rates adjusted for known changes in key variables

affecting these return rates.

Use of Estimates :

The preparation of the condensed

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 condensed consolidated balance sheets and the reported amount of revenues and expenses during the reporting

returns and allowances aggregated $ 516,208 for the nine months ended September 30, 2025.

Obligations for estimated sales returns and

allowances are recognized at the time of sales on an accrual basis.

The accrual is determined based upon historical return rates adjusted

for known changes in key variables affecting these return rates.

of Estimates:

preparation of the condensed 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 condensed consolidated balance sheets and the reported amount of revenues

and expenses during the reporting period.

Actual results could differ from those estimates.

Management utilizes various other estimates, including but not limited to, determining

the estimated lives of long-lived assets, determining the potential impairment of long-lived assets, the fair value of warrants, options,

the recognition of revenue, inventory valuation reserve, allowances for doubtful accounts and other receivables, incremental borrowing

rate on leases, the valuation allowance for deferred tax assets and other legal claims and contingencies.

The results of any changes in

accounting estimates are reflected in the condensed consolidated 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.

Cash and cash equivalents :

Cash and cash equivalents

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

The Company maintains its

cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess

of the federally insured limit of $ 250,000 per bank.

The Company minimizes this risk by placing its cash deposits with major financial

institutions.

At June 30, 2025 and December 31, 2024, the uninsured balance amounted to $- 0 -.

Restricted Cash :

Restricted cash of $- 0 - and

$ 97,600 was included in other assets as of June 30, 2025 and 2024, respectively.

Restricted cash consists of bank deposits that collateralize

a debt obligation.

Management utilizes various other estimates,

including but not limited to, determining the estimated lives of long-lived assets, determining the potential impairment of long-lived

assets, the fair value of warrants, options, the recognition of revenue, inventory valuation reserve, allowances for doubtful accounts

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

contingencies.

The results of any changes in accounting estimates are reflected in the condensed consolidated 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.

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

at times may be in excess of the federally insured limit of $ 250,000 per bank.

The Company minimizes this risk by placing its cash deposits

with major financial institutions.

At September 30, 2025 and December 31, 2024, the uninsured balance amounted to $- 0 -.

cash of $- 0 - was included in other assets as of September 30, 2025 and 2024, respectively.

Restricted cash consists of bank deposits

that collateralize a debt obligation.

Such debt obligation was paid off as of December 31, 2024.

The following table provides a reconciliation

of cash and cash equivalents in the condensed consolidated balance sheets to cash, cash equivalents and restricted cash in the condensed

consolidated statements of cash flows:

following table provides a reconciliation of cash and cash equivalents in the condensed consolidated balance sheets to cash, cash equivalents

and restricted cash in the condensed consolidated statements of cash flows:

SCHEDULE OF RECONCILIATION OF CASH AND CASH EQUIVALENTS

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Total cash, cash equivalents and restricted cash in the statements of cash flows

Goodwill and Other Intangibles :

Goodwill - In connection

with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting.

excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.

In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of December 31st,

and more frequently if events and circumstances indicate that goodwill might be impaired.

Goodwill impairment testing

is performed at the reporting unit level.

Goodwill is assigned to reporting units at the date the goodwill is initially recorded.

goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities

within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.

Traditionally, goodwill impairment

testing is a two-step process.

Step one involves comparing the fair value of the reporting units to its carrying amount.

If the carrying

amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment.

reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment,

and Other Intangibles:

- In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method

of accounting.

The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded

In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of

December 31st, and more frequently if events and circumstances indicate that goodwill might be impaired.

impairment testing is performed at the reporting unit level.

Goodwill is assigned to reporting units at the date the goodwill is initially

Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and

all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.

Traditionally,

goodwill impairment testing is a two-step process.

Step one involves comparing the fair value of the reporting units to its carrying

If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there

is no impairment.

If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to

measure the amount of impairment, if any.

Step two involves calculating an implied fair value of goodwill.

The Company has adopted ASU 2017-04 which simplifies subsequent

goodwill measurement by eliminating step two from the goodwill impairment test.

As a result, the Company compares the fair value of a

reporting unit with its respective carrying value and recognizes an impairment charge for the amount by which the carrying amount exceeded

the reporting unit’s fair value.

The Company determines the

fair value of its reporting units using a weighting of the income and market valuation approaches.

The income approach applies a fair

value methodology to each reporting unit based on discounted cash flows.

This analysis requires significant judgments, including estimation

of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate

of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average

cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

Under the market approach,

we estimate the fair value based on multiples of comparable public companies and precedent transactions.

Significant estimates in the

income and market approach include:

future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free

debt-free net working capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate, selection of

guideline public companies and revenue market multiples.

Long-lived and Other Intangible

Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC

360, Accounting for the Impairment or Disposal of Long-lived Assets.

An impairment review is performed whenever events or changes in circumstances

indicate that the carrying value of the assets may not be recoverable.

The Company groups its assets at the lowest level for which identifiable

cash flows are largely independent of the cash flows of the other assets and liabilities.

The Company has determined that the lowest level

for which identifiable cash flows are available is the operating segment level.

Factors considered by the

Company include, but are not limited to, significant underperformance relative to historical or projected operating results;

changes in the manner of use of the acquired assets or the strategy for the overall business;

and significant negative industry or economic

When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators

of impairment, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual

If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the

asset, the Company recognizes an impairment loss.

An impairment loss is reflected as the amount by which the carrying amount of the asset

exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows, if fair value is not available.

Company assessed potential impairments of its long-lived assets as of an interim date of September 30, 2024 and concluded that there was

an impairment which was recorded during the year ended December 31, 2024.

After completing our 2023 annual impairment test, no

events or changes in circumstances were noted that required an interim goodwill impairment test until the fiscal third quarter of 2024,

when events occurred that we considered triggering events.

During the third fiscal

quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in demand for our

services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease in our

The Company has adopted ASU

2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test.

As a result, the

Company compares the fair value of a reporting unit with its respective carrying value and recognizes an impairment charge for the amount

by which the carrying amount exceeded the reporting unit’s fair value.

Company determines the fair value of its reporting units using a weighting of the income and market valuation approaches.

approach applies a fair value methodology to each reporting unit based on discounted cash flows.

This analysis requires significant judgments,

including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation

of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of

our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

Under the market approach, we estimate the fair value based on multiples of comparable public companies and precedent transactions.

estimates in the income and market approach include:

future levels of revenue growth, gross profit margin, EBITDA as a percentage of

revenue, cash-free debt-free net working capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount

rate, selection of guideline public companies and revenue market multiples.

and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with

the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets.

An impairment review is performed whenever

events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.

The Company groups its assets

at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities.

The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level.

considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating

significant changes in the manner of use of the acquired assets or the strategy for the overall business;

and significant negative

industry or economic trends.

When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or

more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use

of the asset and its eventual disposition.

If the sum of the expected future undiscounted cash flows and eventual disposition is less

than the carrying amount of the asset, the Company recognizes an impairment loss.

An impairment loss is reflected as the amount by which

the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows,

if fair value is not available.

The Company assessed potential impairments of its long-lived assets as of an interim date of September

30, 2024 and concluded that there was an impairment which was recorded during the year ended December 31, 2024.

After completing our

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

the fiscal third quarter of 2024, when events occurred that we considered triggering events.

the third fiscal quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in

demand for our services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease

in our stock price.

Therefore, we performed an interim impairment test as of September 30, 2024.

1 unchanged sentence

Goodwill and Other

Intangible Assets for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value

measurements.

The Company also assessed potential impairments of its long-lived assets as of December 31, 2024 and concluded that

there was no additional impairment as compared to its September 30, 2024 interim assessment.

After completing our annual impairment

test as of December 31, 2024, no events or changes in circumstances were noted that triggered the requirement for an interim

goodwill impairment test for the fiscal first and second quarters of 2025.

Intangible 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.

These sublicense agreements generally require upfront payments

to obtain 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.

Fair value of assets and liabilities acquired

in business combinations :

The Company allocates the

amount it pays for each acquisition to the assets acquired and liabilities assumed based on their fair values at the date of acquisition,

including identifiable intangible assets which arise from a contractual or legal right or are separable from goodwill.

The Company bases

the fair value of identifiable intangible assets acquired in a business combination on detailed valuations that use information and assumptions

provided by management to valuation specialists, which consider management’s best estimates of inputs and assumptions that a market

participant would use.

The Company allocates any excess purchase price that exceeds the fair value of the net tangible and identifiable

intangible assets acquired to goodwill.

The use of alternative valuation assumptions, including estimated growth rates, cash flows, discount

rates and estimated useful lives could result in different purchase price allocations and amortization expense in current and future periods.

Transaction costs associated with these acquisitions are expensed as incurred through selling, general and administrative expense on the

condensed consolidated statement of operations.

In those circumstances where an acquisition involves a contingent consideration arrangement,

the Company recognizes a liability equal to the fair value of the contingent payments expected to be made as of the acquisition date.

The Company re-measures this liability each reporting period and records changes in the fair value through operating income within the

Intangible Assets for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value measurements.

The Company also assessed potential impairments of its long-lived assets as of December 31, 2024 and concluded that there was no additional

impairment as compared to its September 30, 2024 interim assessment.

After completing our annual impairment test as of December 31, 2024,

no events or changes in circumstances were noted that triggered the requirement for an interim goodwill impairment test for the nine months ended September 30, 2025.

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.

These sublicense agreements generally require

upfront payments to obtain 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.

value of assets and liabilities acquired in business combinations:

Company allocates the amount it pays for each acquisition to the assets acquired and liabilities assumed based on their fair values at

the date of acquisition, including identifiable intangible assets which arise from a contractual or legal right or are separable from

The Company bases the fair value of identifiable intangible assets acquired in a business combination on detailed valuations

that use information and assumptions provided by management to valuation specialists, which consider management’s best estimates

of inputs and assumptions that a market participant would use.

The Company allocates any excess purchase price that exceeds the fair

value of the net tangible and identifiable intangible assets acquired to goodwill.

The use of alternative valuation assumptions, including

estimated growth rates, cash flows, discount rates and estimated useful lives could result in different purchase price allocations and

amortization expenses in current and future periods.

Transaction costs associated with these acquisitions are expensed as incurred through

selling, general and administrative expenses on the condensed consolidated statement of operations.

In those circumstances where an acquisition

involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the contingent payments

expected to be made as of the acquisition date.

The Company re-measures this liability for each reporting period and records changes

in the fair value through operating income within the condensed consolidated statements of operations.

Derivative Liabilities:

accordance with FASB ASC 815-40, Derivatives and Hedging:

Contracts in an Entities Own Equity, entities must consider whether to classify

contracts that may be settled in its own stock, such as warrants to purchase shares of Common Stock, as equity of the entity or as an

asset or liability.

If an event that is not within the entity’s control could require net cash settlement, then the contract should

be classified as an asset or a liability rather than as equity.

We have determined that because the terms of the various warrants issued

and remain outstanding, include a provision that entitles all the warrant holders to receive cash for their warrants in the event of

a qualifying cash tender offer, while only certain of the holders of the underlying shares of Common Stock would be entitled to cash,

our warrants should be classified as liability measured at fair value, with changes in fair value each period reported in earnings.

in the price of our Common Stock may result in significant changes in the value of the derivatives and resulting gains and losses on

our condensed consolidated statement of operations.

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 the condensed consolidated financial statements.

segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation

by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how

to allocate resources and assess performance.

The Company’s three operating segments are Video Solutions, Revenue Cycle Management,

and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM.

Corporate expenses capture

the Company’s corporate administrative activities, is also to be reported in the segment information.

Therefore, its operations

are eliminated in consolidation and is not considered a separate business segment for financial reporting purposes.

Company adopted ASU 2023-07 in 2024 and applied the amendment retrospectively to all periods presented in the Company’s condensed

consolidated financial statements.

See Note 17, Operating Segments, for more information.

Non-Controlling

Non-controlling

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

The venture partners hold noncontrolling interests in the Company’s consolidated subsidiary Nobility Healthcare, LLC.

Company consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share

of each subsidiary’s results of operations are deducted and reported as net income attributable to noncontrolling interest in the

Condensed Consolidated Statements of Operations.

Warrant Derivative Liabilities :

In accordance with FASB ASC

815-40, Derivatives and Hedging:

Contracts in an Entities Own Equity, entities must consider whether to classify contracts that may be

settled in its own stock, such as warrants to purchase shares of Common Stock, as equity of the entity or as an asset or liability.

an event that is not within the entity’s control could require net cash settlement, then the contract should be classified as an

asset or a liability rather than as equity.

We have determined that because the terms of the various warrants issued and remain outstanding,

include a provision that entitles all the warrant holders to receive cash for their warrants in the event of a qualifying cash tender

offer, while only certain of the holders of the underlying shares of Common Stock would be entitled to cash, our warrants should be classified

as liability measured at fair value, with changes in fair value each period reported in earnings.

Volatility in the price of our Common

Stock may result in significant changes in the value of the derivatives and resulting gains and losses on our condensed consolidated statement

of operations.

Segment Reporting

The accounting guidance on

Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires

selected information of those segments to be presented in the condensed consolidated financial statements.

Operating segments are identified

as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision

maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess

The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which

has specific personnel responsible for that business and reports to the CODM.

Corporate expenses capture the Company’s corporate

administrative activities, is also to be reported in the segment information.

Therefore, its operations are eliminated in consolidation

and is not considered a separate business segment for financial reporting purposes.

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

As a result, the noncontrolling

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

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

Accounting Standards

Adopted Accounting Standard Updates.

- ASU 2023-07, Improvements to Reportable Segment Disclosures , which requires companies

to disclose significant segment expenses provided to the chief operating decision maker (“CODM”) and a description of other

segment items.

Additionally, all existing annual disclosures must be provided on an interim basis.

This ASU is effective for annual periods

beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

This ASU is required to

be applied retrospectively to all prior periods presented in the condensed consolidated financial statements.

The Company adopted ASU

in 2024 and applied the amendment retrospectively to all periods presented in the Company’s condensed consolidated financial statements.

2023-07 in 2024 and applied the amendment retrospectively to all periods presented in the Company’s condensed consolidated financial

See Note 17, Operating Segments, for more information.

Non-Controlling Interests

Non-controlling interests

in the Company’s Condensed Consolidated Financial Statements represent the interest in subsidiaries held by venture partners.

venture partners hold noncontrolling interests in the Company’s consolidated subsidiary Nobility Healthcare, LLC.

Since the Company

consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share of each

subsidiary’s results of operations are deducted and reported as net income attributable to noncontrolling interest in the Condensed

Consolidated Statements of Operations.

New Accounting Standards

Recently Adopted Accounting

Standard Updates.

- ASU 2023-07, Improvements to Reportable Segment Disclosures , which requires companies to disclose significant

segment expenses provided to the chief operating decision maker (“CODM”) and a description of other segment items.

Additionally,

all existing annual disclosures must be provided on an interim basis.

This ASU is effective for annual periods beginning after December

15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

This ASU is required to be applied retrospectively

to all prior periods presented in the condensed consolidated financial statements.

The Company adopted ASU 2023-07 in 2024 and applied

the amendment retrospectively to all periods presented in the Company’s condensed consolidated financial statements.

Operating Segments, for more information.

Recently Issued Accounting

Pronouncements.

- ASU 2023-09, Improvements to Income Tax Disclosures, requires improved disclosures related to the rate reconciliation

and income taxes paid.

This ASU requires companies to reconcile the income tax expense attributable to continuing operations to the U.S.

Issued Accounting Pronouncements.

- ASU 2023-09, Improvements to Income Tax Disclosures, requires improved disclosures related

to the rate reconciliation and income taxes paid.

This ASU requires companies to reconcile the income tax expense attributable to continuing

operations to the U.S.

statutory federal income tax rate applied to pre-tax income from continuing operations.

Additionally, this ASU requires companies to disclose

the total amount of income taxes paid during the period.

This ASU is effective for annual periods beginning after December 15, 2024, with

Additionally, this ASU

requires companies to disclose the total amount of income taxes paid during the period.

This ASU is effective for annual periods beginning

after December 15, 2024, with early adoption permitted.

The guidance is required to be applied on a prospective basis with the option

to apply retrospectively to all prior periods presented in the consolidated financial statements.

The Company has evaluated the impact and determined there was no impact to the condensed consolidated financial statements

as of September 30, 2025.

2024-03, Disaggregation of Income Statement Expenses, requires disaggregated disclosures in the notes to the consolidated financial

statements of certain categories of expenses that are included in expense line items on the Consolidated Statement of Income.

is effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with

early adoption permitted.

3 unchanged sentences

condensed consolidated financial statements.

ASU 2024-03, Disaggregation

of Income Statement Expenses, requires disaggregated disclosures in the notes to the consolidated financial statements of certain

categories of expenses that are included in expense line items on the Consolidated Statement of Income.

This ASU is effective for annual

periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The guidance is required to be applied on a prospective basis with the option to apply retrospectively to all prior periods presented

in the consolidated financial statements.

The Company is currently evaluating the impact to the Company’s condensed consolidated

financial statements.

ASU 2024-04, Induced

Conversions of Convertible Debt Instruments, clarifies the requirement for determining whether certain settlements of

convertible debt instruments should be accounted for as induced conversions or extinguishments.

This ASU is effective for annual

periods beginning after December 15, 2025.

Early adoption is permitted and can be applied either on a prospective basis or

retrospective basis.

The Company is currently evaluating the impact of this ASU to the Company’s condensed consolidated

financial statements, however the Company does not anticipate this guidance having a material impact to the condensed consolidated

financial statements.

The other recent accounting

pronouncements issued by the Financial Accounting Standards Board (“FASB”) are not expected to have a significant impact on

the Company’s consolidated financial statements and related disclosures.

Going Concern Matters and Management’s

The accompanying condensed

consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business.

The Company incurred substantial operating losses in the years ended December 31, 2024

and year to date June 30, 2025 primarily due to reduced gross margins caused by a combination of competitors’ introduction of newer products with more

advanced features together with significant price cutting of their products and the recent acquisitions with much smaller margins than

the video solutions segment, historically.

The Company incurred operating losses of approximately $ 15.2 million for the year ended December

31, 2024 and $ 5.1 million during the six months ended June 30, 2025 and it had an accumulated deficit of $ 137.8 million as of June 30,

These matters raise substantial doubt about Company’s ability to continue as a going concern.

In recent years the Company

has accessed the public and private capital markets to raise funding through the issuance of debt and equity.

In that regard, the Company

raised approximately $ 14.3 million during the six months ended June 30, 2025 and $ 4.9 million in the year ended December 31, 2024 through

a private placement transaction and two underwritten public offerings.

During February 2025, the Company raised net proceeds of approximately

$ 14.3 million through an underwritten public offering which has provided adequate levels of liquidity for the Company to execute its business

These equity raises were utilized to fund the repayment of debt obligations, payment of accounts payable and its operations.

expects this pattern to continue until it achieves positive cash flow from operations on a consistent basis, although it can offer no

assurance in this regard.

The Company will have to restore

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

its customary payment obligations and otherwise execute its business plan.

There can be no assurance that it will be successful in restoring

positive cash flows and profitability, or that it can raise additional financing when needed, and obtain it on terms acceptable or favorable

to the Company.

During the six months ended

June 30, 2025 the Company completed a program to reduce costs and expenditures and raised its short and long-term liquidity position through

the completion of the February 2025 public equity offering.

In that regard, the Company has significantly cut costs in its entertainment

segment through the removal of several large partnerships and sponsorships.

These partnerships and sponsorships did not yield the results

management expected;

thus, it is not expected that these costs will significantly hinder total revenues in 2025 and beyond.

the Company has significantly cut costs in its video segment through the reduction in headcount and relocating to smaller and less costly

facilities after completing the sale of its warehouse/office building.

The Company has increased

its deferred revenue to nearly $ 8.9 million as of June 30, 2025, which results in recurring revenue during the period of 2025 to 2028.

The Company believes that its quality control and cost-cutting initiatives, expansion to non-law enforcement sales channels and new product

introduction will eventually restore positive operating cash flows and profitability, although it can offer no assurances in this regard.

As a result of the

Company’s implementation of cost-cutting measures and liquidity generated by the recent public equity offerings, the Company

has significantly improved its financial position.

During the six months ended June 30, 2025, the Company incurred a net loss of $ 222,122 , improved its working capital position to a positive balance of $ 119,506 and improved its stockholders’ equity to a

positive balance of $ 8,151,705 .

These represent improvements from the negative working capital position of $ 19,377,507 and

stockholders’ deficit balance of $ 9,013,430 reported at December 31, 2024.

Based on the uncertainties

described above and the corrective actions implemented by management, the Company believes its business plan including the implementation

of corrective actions mitigates the existence of substantial doubt about its ability to continue as a going concern within one year from

the date of the issuance of these condensed consolidated financial statements.

The accompanying condensed consolidated financial statements

do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities

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

Inventories consisted of the

following at June 30, 2025 and December 31, 2024:

2024-04, Induced Conversions of Convertible Debt Instruments, clarifies the requirement for determining whether certain settlements

of convertible debt instruments should be accounted for as induced conversions or extinguishments.

This ASU is effective for annual periods

beginning after December 15, 2025.

Early adoption is permitted and can be applied either on a prospective basis or retrospective basis.

The Company is currently evaluating the impact of this ASU to the Company’s condensed consolidated financial statements, however

the Company does not anticipate this guidance having a material impact to the condensed consolidated financial statements.

other recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) are not expected to have

a significant impact on the Company’s consolidated financial statements and related disclosures.

Concern Matters and Management’s Plans

accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization

of assets and the satisfaction of liabilities in the normal course of business.

The Company incurred substantial operating losses in

the years ended December 31, 2024 and year to date September 30, 2025 primarily due to reduced gross margins caused by a combination

of competitors’ introduction of newer products with more advanced features together with significant price cutting of their products

and the recent acquisitions with much smaller margins than the video solutions segment, historically.

The Company incurred operating

losses of approximately $ 15.2 million for the year ended December 31, 2024 and $ 6.2 million during the nine months ended September 30,

2025 and it had an accumulated deficit of $ 138.8 million as of September 30, 2025.

These matters raise substantial doubt about Company’s

ability to continue as a going concern.

recent years the Company has accessed the public and private capital markets to raise funding through the issuance of debt and equity.

In that regard, the Company raised approximately $ 15.5 million during the nine months ended September 30, 2025 and $ 4.9 million in the

year ended December 31, 2024 through private placement transactions and an underwritten public offering.

In February 2025, the Company

completed an underwritten public offering for net proceeds of approximately $ 14.3 million and issued an unsecured promissory note, generating

an additional $ 600,000 in net cash proceeds.

In September 2025, the Company issued senior secured convertible notes with detachable warrants,

resulting in $ 610,000 of net cash proceeds.

These financing activities provided additional liquidity to execute the Company’s business

plans and were used to repay debt obligations, settle accounts payable, and fund operations.

Management expects to continue accessing

the capital markets until the Company achieves consistent positive cash flow from operations;

however, there can be no assurance as to

the timing or availability of such financing.

Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund

its operational plans, meet its customary payment obligations and otherwise execute its business plan.

There can be no assurance that

it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing when needed, and

obtain it on terms acceptable or favorable to the Company.

the nine months ended September 30, 2025, the Company implemented a cost-reduction program and enhanced its short- and long-term liquidity

through (i) the February 2025 public equity offering, (ii) the issuance of senior secured convertible notes, and (iii) entry into a committed

equity facility (the “ELOC”).

Within the entertainment segment, the Company exited several large partnerships and sponsorships

that did not meet expected returns;

management does not expect discontinuing these arrangements to materially hinder total revenues in

2025 or thereafter.

In the video segment, the Company reduced headcount and relocated to smaller, lower-cost facilities following the

sale of its warehouse/office building.

Company has successfully recorded $ 8.93 million in deferred revenue as of September 30, 2025, which results in recurring revenue during

the period of 2025 to 2028.

The Company believes that its quality control and cost-cutting initiatives, expansion to non-law enforcement

sales channels and new product introduction will eventually restore positive operating cash flows and profitability, although it can

offer no assurances in this regard.

a result of the Company’s implementation of cost-cutting measures and liquidity generated by the recent public equity offerings,

the Company has significantly improved its financial position.

During the nine months ended September 30, 2025, the working capital deficit

improved significantly to $ 115,393 from $ 19,377,507 as of December 31, 2024, and stockholders’ equity increased to a positive $ 7,516,665

from a $ 9,013,430 deficit;

the Company nonetheless recorded a net loss attributable to common stockholders of $ 1,303,597 .

on the uncertainties described above and the corrective actions implemented by management, the Company believes its business plan including

the implementation of corrective actions mitigates the existence of substantial doubt about its ability to continue as a going concern

within one year from the date of the issuance of these condensed consolidated financial statements.

The accompanying condensed consolidated

financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification

of liabilities that might be necessary should the Company be unable to continue as a going concern.

consisted of the following at September 30, 2025 and December 31, 2024:

SCHEDULE OF INVENTORIES

September 30,

Raw material and component parts– video solutions segment

8 unchanged sentences

PREPAID EXPENSES

Prepaid expenses were the

following at June 30, 2025 and December 31, 2024:

expenses were the following at September 30, 2025 and December 31, 2024:

SCHEDULE OF PREPAID EXPENSE

September 30,

Prepaid inventory

3 unchanged sentences

GOODWILL AND OTHER INTANGIBLE ASSETS

Intangible assets consisted of the following as

of June 30, 2025 and December 31, 2024:

assets consisted of the following as of September 30, 2025 and December 31, 2024:

SCHEDULE OF INTANGIBLE ASSETS

June 30, 2025

September 30, 2025

Accumulated amortization

24 unchanged sentences

Patents and trademarks pending (video solutions segment)

Patents and trademarks pending

will be amortized beginning at the time they are issued by the appropriate authorities.

If issuance of the final patent or trademark is

denied, then the amount deferred will be immediately charged to expense.

Amortization for the three

months ended June 30, 2025 and 2024 was $ 409,550 and $ 346,889 , respectively, and $ 774,743 and $ 735,167 for the six months ended June 30,

2025 and 2024, respectively.

Estimated amortization for intangible assets with definite lives for the next five years ending December

31 and thereafter is as follows:

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.

Other intangible assets consist of sponsorship agreement network, SEO

content, personal seat licenses, website enhancements and client agreements.

These assets are recorded at cost and amortized on a straight-line

basis over their estimated useful lives.

OF INTANGIBLE ASSETS USEFUL LIFE

Intangible Asset Useful Life

Patents and trademarks (video solutions segment)

Sponsorship agreement network (entertainment segment)

SEO content (entertainment segment)

Personal seat licenses (entertainment segment)

Website enhancements (entertainment segment)

Client agreements (revenue cycle management segments)

for the three months ended September 30, 2025 and 2024 was $ 350,535 and $ 371,772 , respectively, and $ 1,125,278 and $ 1,106,939 for the

nine months ended September 30, 2025 and 2024, 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:

2025 (July 1, 2025 to December 31, 2025)

2025 (October 1, 2025 to December 31, 2025)

2030 and thereafter

Annual impairment test

We performed an annual impairment

test as of December 31, 2024 for each of our reporting units with remaining goodwill.

Subsequent to completing our annual impairment test

as of December 31, 2024, no events or changes in circumstances were noted that triggered the requirement for an interim goodwill impairment

test for the fiscal first and second quarters of 2025.

The fair value of each reporting

unit was estimated using a weighting of the income and market valuation approaches.

The income approach applied a fair value methodology

to each reporting unit based on discounted cash flows.

This analysis requires significant judgments, including estimation of future cash

flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for

our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital,

which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

The weighted average cost of capital used

in our most recent impairment test ranged from 18.3 % to 21.3 %.

We also applied a market approach, which develops a value correlation based

on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the

reporting units.

The primary market multiples used are revenue and earnings before interest, taxes, depreciation, and amortization.

income and market approaches were equally weighted in our most recent annual impairment test, for all of the reporting units.

The combined fair values for

all reporting units were then reconciled to our aggregate market value of our shares of Common Stock on the date of valuation, while considering

a reasonable control premium.

We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s

carrying value at a 25 % premium or greater.

Based on our most recent impairment test, the video solutions reporting unit’s fair

value was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined

not to be impaired, as well.

Interim impairment test at September 30,

We performed an interim impairment

test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from

the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur

when and as expected and a further decrease in our stock price.

Therefore, we performed an interim impairment test as of September 30,

2024 for our reporting units with remaining goodwill.

The fair value of each reporting

unit was estimated using a weighting of the income and market valuation approaches.

The income approach applied a fair value methodology

to each reporting unit based on discounted cash flows.

This analysis requires significant judgments, including estimation of future cash

flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for

our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital,

which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

The weighted average cost of capital used

in our most recent impairment test ranged from 20.9 % to 32.5 %.

We also applied a market approach, which develops a value correlation based

on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the

reporting units.

The primary market multiples used are revenue and earnings before interest, taxes, depreciation, and amortization.

income and market approaches were equally weighted in our most recent annual impairment test, for all of the reporting units.

The combined fair values for

all reporting units were then reconciled to our aggregate market value of our shares of Common Stock on the date of valuation, while considering

a reasonable control premium.

We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s

carrying value at a 25 % premium or greater.

Based on our most recent impairment test, the video solutions reporting unit’s fair

value was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined

to be impaired.

We held goodwill of

as of September 30, 2024, related to businesses within our revenue cycle management segment.

We held goodwill of $ 6,112,507

as of September 30, 2024, respectively, related to businesses within our entertainment segment.

impairment test

performed an annual impairment test as of December 31, 2024 for each of our reporting units with remaining goodwill.

Subsequent to completing

our annual impairment test as of December 31, 2024, no events or changes in circumstances were noted that triggered the requirement for

an interim goodwill impairment test for the nine months ended September 30, 2025.

fair value of each reporting unit was estimated using a weighting of the income and market valuation approaches.

The income approach

applied a fair value methodology to each reporting unit based on discounted cash flows.

This analysis requires significant judgments,

including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation

of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of

our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

The weighted average cost of capital used in our most recent impairment test ranged from 20.9 % to 32.5 %.

We also applied a market approach,

which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple,

to apply to the operating results of the reporting units.

The primary market multiples used are revenue and earnings before interest,

taxes, depreciation, and amortization.

The income and market approaches were equally weighted in our most recent annual impairment test,

for all of the reporting units.

combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of Common Stock on the

date of valuation, while considering a reasonable control premium.

We consider a reporting unit’s fair value to be substantially

in excess of the reporting unit’s carrying value at a 25 % premium or greater.

Based on our most recent impairment test, the video

solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and

entertainment segments were determined not to be impaired, as well.

impairment test at September 30, 2024

performed an interim impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering

event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the

split-off transaction did not occur when and as expected and a further decrease in our stock price.

Therefore, we performed an interim

impairment test as of September 30, 2024 for our reporting units with remaining goodwill.

fair value of each reporting unit was estimated using a weighting of the income and market valuation approaches.

The income approach

applied a fair value methodology to each reporting unit based on discounted cash flows.

This analysis requires significant judgments,

including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation

of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of

our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

The weighted average cost of capital used in our most recent impairment test ranged from 20.9 % to 32.5 %.

We also applied a market approach,

which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple,

to apply to the operating results of the reporting units.

The primary market multiples used are revenue and earnings before interest,

taxes, depreciation, and amortization.

The income and market approaches were equally weighted in our most recent annual impairment test,

for all of the reporting units.

combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of Common Stock on the

date of valuation, while considering a reasonable control premium.

We consider a reporting unit’s fair value to be substantially

in excess of the reporting unit’s carrying value at a 25 % premium or greater.

Based on our most recent impairment test, the video

solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and

entertainment segments were determined to be impaired.

held goodwill of $ 5,480,966 as of September 30, 2024, related to businesses within our revenue cycle management segment.

We held goodwill

of $ 6,112,507 as of September 30, 2024, respectively, related to businesses within our entertainment segment.

As a result of our September

1 unchanged sentence

units exceeded its estimated fair values.

Thus, we recorded a non-cash goodwill impairment charge of $ 4,322,000 ,

related to the goodwill carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of

related to the goodwill carrying balance for the entertainment segment, both of which was included in goodwill and intangible asset

impairment charge on our Condensed Consolidated Statements of Operations for the three months ended September 30, 2024.

impairment was primarily driven by recent performance of the revenue cycle management and entertainment reporting units since our

annual impairment testing date, as well as a delay in the projected timing of recovery.

The remaining balance for the goodwill

carrying balance related to businesses within our revenue cycle management segment was $ 1,158,966

and within the entertainment segment was $ 5,805,507 , as of June 30, 2025 and December 31, 2024.

Indefinite-lived intangible assets

We held indefinite-lived trade

names/trademarks of $ 699,000 as of June 30, 2025 and December 31, 2024, respectively, related to businesses within our entertainment segment.

As a result of our interim

impairment test as of the last day of the fiscal third quarter of 2024 management concluded that the carrying amount of a trade name/trademark

related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $ 201,000 , which

was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the year ended

December 31, 2024.

The charge was primarily driven by the split-off transaction not being completed when and as expected and our recent

revenue and operating performance of the related business given a decline in demand and overall economic uncertainty.

The remaining balance

for this trade name/trademark was $ 699,000 as of June 30, 2025 and December 31, 2024.

Thus, we recorded a non-cash goodwill impairment charge of $ 4,322,000 , related to the goodwill

carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of $ 307,000 , related to the goodwill

carrying balance for the entertainment segment, both of which was included in goodwill and intangible asset impairment charge on our

Condensed Consolidated Statements of Operations for the three months ended September 30, 2024.

The goodwill impairment was primarily

driven by recent performance of the revenue cycle management and entertainment reporting units since our annual impairment testing date,

as well as a delay in the projected timing of recovery.

The remaining balance for the goodwill carrying balance related to businesses

within our revenue cycle management segment was $ 1,158,966 and within the entertainment segment was $ 5,805,507 , as of September 30, 2025

and December 31, 2024.

Indefinite-lived

intangible assets

held indefinite-lived trade names/trademarks of $ 699,000 as of September 30, 2025 and December 31, 2024, respectively, related to businesses

within our entertainment segment.

a result of our interim impairment test as of the last day of the fiscal third quarter of 2024 management concluded that the carrying

amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment

charge of $ 201,000 , which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of

Operations for the year ended December 31, 2024.

The charge was primarily driven by the split-off transaction not being completed when

and as expected and our recent revenue and operating performance of the related business given a decline in demand and overall economic

The remaining balance for this trade name/trademark was $ 699,000 as of September 30, 2025 and December 31, 2024.

DEBT OBLIGATIONS

Debt obligations are comprised of the following:

obligations are comprised of the following:

SCHEDULE OF DEBT OBLIGATIONS

September 30,

Economic injury disaster loan (EIDL)

Unsecured Promissory note – Entertainment Segment

Secured convertible note

Commercial Extension of Credit- Entertainment Segment

5 unchanged sentences

Debt obligations, long-term

Debt obligations mature on an annual basis as

follows as of June 30, 2025:

obligations mature on an annual basis as follows as of September 30, 2025:

SCHEDULE OF MATURITY OF DEBT OBLIGATIONS

2025 (July 1, 2025 to December 31, 2025)

(October 1, 2025 to December 31, 2025)

and thereafter

Small Business Administration Notes .

On 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.

Under the terms of the note

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

The term of such note is

thirty years, though it may be payable sooner upon an event of default under such note.

Monthly principal and interest payments began

in November 2022, after being deferred for thirty months after the date of disbursement and total $ 731 per month thereafter.

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.

Unsecured Promissory Note

On February 1, 2025, the Company’s

Entertainment Segment entered into a $ 600,000 unsecured promissory note with a third party.

The promissory note bears an interest rate

of 10.0 % per annum, compounded monthly.

Payments of principal and interest were originally due on May 5, 2025 , however the parties agreed

to extend the term for payments of principal and interest to begin July 1, 2025.

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.

term of such note is thirty years, though it may be payable sooner upon an event of default under such note.

Monthly principal and interest

payments began in November 2022, after being deferred for thirty months after the date of disbursement and total $ 731 per month thereafter.

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.

Promissory Note

February 1, 2025, the Company’s Entertainment Segment entered into a $ 600,000 unsecured promissory note with a third party.

promissory note bears an interest rate of 10.0 % per annum, compounded monthly.

Payments of principal and interest were originally due

on May 5, 2025 , however the parties agreed to extend the term for payments of principal and interest to begin July 1, 2025 .

Commercial Extension of Credit

On January 22, 2024, the Company’s

Entertainment segment entered an extension of credit in the form of a loan to use in marketing 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, an advance for a sum of $ 75,000 with monthly advances of $ 100,000 .

The advances made are recoupable

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

The Company paid the remaining balance in full during

the six months ended June 30, 2025.

The outstanding balance as of June 30, 2025 and December 31, 2024 was $- 0 - and $ 100,000 , respectively.

Merchant Cash Advances – Video Solutions

In November 2023, the Company

obtained a short-term merchant advance, which totaled $ 1,050,000 , from a single lender to fund operations.

These advances included origination

fees totaling $ 50,000 for net proceeds of $ 1,000,000 .

The advance is, for the most part, 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 % per week.

January 22, 2024, the Company’s Entertainment segment entered an extension of credit in the form of a loan to use in marketing

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, an advance for a 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 Company paid the

remaining balance in full during the nine months ended September 30, 2025.

The outstanding balance as of September 30, 2025 and December

31, 2024 was $- 0 - and $ 100,000 , respectively.

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 basis.

The Company will repay an aggregate of

$ 1,512,000 to the lender.

The loan bears interest at 2.9 % per week.

the year ended December 31, 2024, the Company made repayments totaling $ 1,551,250 and received additional proceeds of $ 1,144,000 and

recorded additional discount of $ 980,000 .

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

during the year ended December 31, 2024.

31, 2024, the Company made repayments totaling $ 1,551,250 and received additional proceeds of $ 1,144,000 and recorded additional discount

of $ 980,000 .

The Company refinanced this loan in April 2024 resulting in the additional proceeds received during the year ended December

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

ended December 31, 2024 of $ 68,827 .

As of December 31, 2024 the

outstanding principal balance was $ 1,922,750 which was paid in full during the six months ended June 30, 2025.

The remaining balance is

$- 0 - as of June 30, 2025.

Securities Purchase Agreement and Senior

Secured Promissory Notes

On November 6, 2024, the Company

entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Purchasers”),

pursuant to which the Company agreed to issue and sell to such Purchasers, in a private placement transaction, (i) senior secured promissory

notes in aggregate principal amount of $ 3,600,000 (the “Notes”), and (ii) 404 shares (the “Commitment Shares”)

of the Company’s Common Stock, for aggregate gross proceeds of approximately $ 3.0 million, before deducting placement agent fees

and other offering expenses payable by the Company.

This private placement closed on November 7, 2024 (the “Closing Date”).

Pursuant to the SPA, the Company

is required to file within 30 days of the Closing Date a registration statement with the SEC for a public offering and use its reasonable

best efforts to pursue and consummate a follow-on financing transaction within 90 days of the Closing Date.

The proceeds of the public

offering shall be first used for the repayment of the principal amounts of the Notes.

The Company is also required to file within 30 days

of the Closing Date a registration statement on Form S-1 (or other appropriate form if the Company is not then S-1 eligible) providing

for the resale by the Purchasers of the Commitment Shares issued under the SPA.

The Company is required to use commercially reasonable

efforts to cause such registration statement to become effective within 60 days following the filing thereof and to keep such registration

statement effective at all times until no Purchaser owns any Commitment Shares.

Furthermore, pursuant to the

SPA, the Company was required to complete the following:

(i) the Company’s board of directors shall approve an amendment to the

Company’s bylaws setting the quorum required for a special meeting of stockholders to one-third of all stockholders entitled to

vote at such special meeting and (ii) the Company shall file with the SEC a preliminary proxy statement on Schedule 14A announcing a meeting

of stockholders for the purpose of approving the Series A and Series B warrants issued by the Company on June 25, 2024.

The senior secured promissory

notes mature ninety (90) days following their issuance date (the “Maturity Date”) and shall accrue no interest unless and

until an Event of Default (as defined in the senior secured promissory notes) has occurred, in which case interest shall accrue at a rate

of 14% per annum during the pendency of such Event of Default.

In addition, upon customary Events of Default, the Purchasers may require

the Company to redeem all or any portion of the senior secured promissory notes in cash with a 125% redemption premium.

The Purchasers

may also require the Company to redeem all or any portion of the senior secured promissory notes in cash upon a Change of Control, as

defined in the senior secured promissory notes, at the prices set forth therein.

Upon a Bankruptcy Event of Default (as defined in the

senior secured promissory notes), the Company shall immediately pay to the Purchasers an amount in cash representing 100% of all outstanding

principal, accrued and unpaid interest , if any, in addition to any and all other amounts due under the senior secured promissory notes,

without the requirement for any notice or demand or other action by the Purchaser or any other person.

If the Company engages in

one or more subsequent financings while the senior secured promissory notes are outstanding, the Company will be required to use at least

100 % of the gross proceeds of such financing to redeem all or any portion of the senior secured promissory notes outstanding.

may also prepay the senior secured promissory notes in whole or in part at any time or from time to time.

The senior secured promissory

notes also contain customary representations and warranties and covenants of each of the parties.

Subject to certain exceptions, the senior

secured promissory notes are secured by a first lien and continuing security interest in and to the Collateral (as defined in the senior

secured promissory notes).

The net proceeds of the private

placement on November 7, 2024 was $ 2,669,250 (after $ 330,750 deduction of costs of the offering).

The Company allocated the net proceeds

from the private placement of the senior secured promissory notes and the commitment shares based upon their relative fair values as of

the date of issuance as follows:

The refinancing was deemed to be an extinguishment of debt and a loss on extinguishment of debt

was recorded during the year ended December 31, 2024 of $ 68,827 .

of December 31, 2024 the outstanding principal balance was $ 1,922,750 which was paid in full during the nine months ended September 30,

The remaining balance is $- 0 - as of September 30, 2025.

Purchase Agreement and Senior Secured Promissory Notes

November 6, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors

(the “Purchasers”), pursuant to which the Company agreed to issue and sell to such Purchasers, in a private placement transaction,

(i) senior secured promissory notes in aggregate principal amount of $ 3,600,000 (the “Notes”), and (ii) 404 shares (the “Commitment

Shares”) of the Company’s Common Stock, for aggregate gross proceeds of approximately $ 3.0 million, before deducting placement

agent fees and other offering expenses payable by the Company.

This private placement closed on November 7, 2024 (the “Closing

to the SPA, the Company is required to file within 30 days of the Closing Date a registration statement with the SEC for a public offering

and use its reasonable best efforts to pursue and consummate a follow-on financing transaction within 90 days of the Closing Date.

proceeds of the public offering shall be first used for the repayment of the principal amounts of the Notes.

The Company is also required

to file within 30 days of the Closing Date a registration statement on Form S-1 (or other appropriate form if the Company is not then

S-1 eligible) providing for the resale by the Purchasers of the Commitment Shares issued under the SPA.

The Company is required to use

commercially reasonable efforts to cause such registration statement to become effective within 60 days following the filing thereof

and to keep such registration statement effective at all times until no Purchaser owns any Commitment Shares.

pursuant to the SPA, the Company was required to complete the following:

(i) the Company’s board of directors shall approve an

amendment to the Company’s bylaws setting the quorum required for a special meeting of stockholders to one-third of all stockholders

entitled to vote at such special meeting and (ii) the Company shall file with the SEC a preliminary proxy statement on Schedule 14A announcing

a meeting of stockholders for the purpose of approving the Series A and Series B warrants issued by the Company on June 25, 2024.

senior secured promissory notes mature ninety (90) days following their issuance date (the “Maturity Date”) and shall accrue

no interest unless and until an Event of Default (as defined in the senior secured promissory notes) has occurred, in which case interest

shall accrue at a rate of 14% per annum during the pendency of such Event of Default.

In addition, upon customary Events of Default,

the Purchasers may require the Company to redeem all or any portion of the senior secured promissory notes in cash with a 125% redemption

The Purchasers may also require the Company to redeem all or any portion of the senior secured promissory notes in cash upon

a Change of Control, as defined in the senior secured promissory notes, at the prices set forth therein.

Upon a Bankruptcy Event of Default

(as defined in the senior secured promissory notes), the Company shall immediately pay to the Purchasers an amount in cash representing

100% of all outstanding principal, accrued and unpaid interest , if any, in addition to any and all other amounts due under the senior

secured promissory notes, without the requirement for any notice or demand or other action by the Purchaser or any other person.

the Company engages in one or more subsequent financings while the senior secured promissory notes are outstanding, the Company will

be required to use at least 100 % of the gross proceeds of such financing to redeem all or any portion of the senior secured promissory

notes outstanding.

The Company may also prepay the senior secured promissory notes in whole or in part at any time or from time to time.

The senior secured promissory notes also contain customary representations and warranties and covenants of each of the parties.

to certain exceptions, the senior secured promissory notes are secured by a first lien and continuing security interest in and to the

Collateral (as defined in the senior secured promissory notes).

net proceeds of the private placement on November 7, 2024 was $ 2,669,250 (after $ 330,750 deduction of costs of the offering).

allocated the net proceeds from the private placement of the senior secured promissory notes and the commitment shares based upon their

relative fair values as of the date of issuance as follows:

SCHEDULE OF ALLOCATED NET PROCEEDS FROM PRIVATE PLACEMENT OF SENIOR SECURED PROMISSORY NOTES AND COMMITMENT SHARES

2 unchanged sentences

Commitment shares

The Company paid the senior

secured promissory notes off in full on February 13, 2025 with funds generated by the February 2025 public equity offering (See Note 12).

Company paid the senior secured promissory notes off in full on February 13, 2025 with funds generated by the February 2025 public equity

offering (See Note 12).

Following is an analysis of the senior secured promissory notes balance:

9 unchanged sentences

( 3,600,000 )

Balance, as of June 30, 2025

Balance, as of September 30, 2025

Secured Convertible Note and Committed Equity Financing

September 15, 2025, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Purchaser”),

pursuant to which the Company issued Senior Secured Convertible Notes (the “September 2025 Notes”)with an aggregate original

principal amount of $ 806,451 and detachable common stock purchase warrants to purchase 476,569 shares of the Company’s common stock

at an exercise price of $ 2.124 per share.

The September 2025 Notes were issued at a 7 % original issue discount, providing gross proceeds

of $ 750,000 , and bear interest at 8 % per annum.

September 2025 Notes are convertible at the investor’s option at any time at a conversion price equal to a 10 % discount to the

five-day volume-weighted average price (VWAP) preceding conversion, subject to customary anti-dilution and price-based adjustment provisions.

The Company may, subject to certain conditions, redeem all or a portion of the Notes at 110 % of the outstanding principal amount.

closing of $250,000 in additional September 2025 Notes and Detachable Warrants may occur upon the effectiveness of a resale registration

September 2025 Notes are senior secured obligations, ranking senior to all existing and future indebtedness of the Company, except for

specified subsidiaries that provide either a second-priority or no security interest.

The Notes are secured by substantially all of the

Company’s assets and guaranteed by certain subsidiaries.

In connection with the transaction, the Company also entered into a Registration

Rights Agreement and a Leak-Out Agreement with customary terms and conditions.

Company allocated the proceeds between the debt and equity components of the September 2025 Notes based on their relative fair values,

recorded a debt discount for the value of the warrants, conversion feature, and original issue discount, and recognized a derivative

liability for the variable conversion feature.

The debt discount will be amortized to interest expense over the term of the September

2025 Notes using the effective-interest method, and the derivative liability will be remeasured at each reporting date, with changes

in fair value recognized in earnings.

net proceeds of the private placement on September 15, 2025 was $ 610,000 (after $ 140,000 deduction for the costs of the offering).

Company allocated the net proceeds from the private placement of the September 2025 Notes and the detachable warrants based upon their

relative fair values as of the date of issuance as follows:

SCHEDULE OF ALLOCATED NET PROCEEDS FROM PRIVATE PLACEMENT OF DETACHABLE WARRANTS

Allocated to the following:

Senior secured promissory notes

Detachable warrants

Equity Financing (ELOC)

September 15, 2025 (the “Closing Date”), the Company entered into a Common Stock Purchase Agreement (the “ELOC Purchase

Agreement”) with an institutional investor (the “ELOC Investor”), providing a committed equity financing facility of

up to $ 25 million (the “Total Commitment”) over a 36-month term.

Under the agreement, and subject to certain conditions and

limitations, the Company may, at its sole discretion, direct the ELOC Investor to purchase shares of its common stock (“Purchase

Shares”) from time to time during the term of the facility.

with the execution of the ELOC Purchase Agreement, the Company entered into a Registration Rights Agreement (the “ELOC Registration

Rights Agreement”) with the investor, pursuant to which the Company agreed to file one or more registration statements under the

Securities Act of 1933, as amended, to register the resale of shares issuable under the facility.

The initial registration statement

must be declared effective before any sales under the facility may occur.

effectiveness of the registration statement and satisfaction of other customary conditions (the “Commencement Date”), the

Company may, from time to time and at its discretion, deliver written purchase notices (“ELOC Purchase Notices”) directing

the ELOC Investor to purchase shares of common stock.

The purchase price per share will be equal to 92 % of the lowest daily trading price

of the Company’s common stock during the three-trading-day valuation period following each ELOC Purchase Notice.

Each purchase

is subject to specified volume and timing restrictions, including that an ELOC Purchase Notice may not be delivered within twenty-four

(24) hours of a prior purchase.

ELOC Investor may not beneficially own more than 4.99% of the Company’s outstanding common stock at any time.

Under Nasdaq Capital

Market rules, the Company may not issue to the ELOC Investor a number of shares exceeding 19.99% of the Company’s outstanding common

stock as of the execution date (the “Exchange Cap”) unless shareholder approval is obtained or certain pricing exceptions

consideration for the ELOC Investor’s commitment, the Company agreed to pay a 3% commitment fee, payable through a combination

of (i) shares of common stock valued based on the five-day VWAP following the effectiveness of the resale registration statement and

(ii) cash funded from up to 30% of proceeds from future financings, including drawdowns under the ELOC facility .

The Company also reimbursed

the investor $ 30,000 for legal expenses.

ELOC Purchase Agreement includes customary restrictions on entering into other variable-rate transactions during its 36-month term and

prohibits the investor from engaging in short sales or hedging transactions involving the Company’s common stock.

may be terminated upon the earlier of (i) the first day of the month following the 36-month anniversary of the Closing Date, (ii) the

aggregate purchase price of $ 25 million having been reached, or (iii) other termination events specified in the agreement.

may also terminate the facility at any time after commencement upon five (5) trading days’ written notice.

of September 30, 2025, the Company has not received shareholder approval of the transactions, nor has the underlying Registration Statement

been declared effective and therefore the Company has not sold any shares under the ELOC facility.

The Company will record the related

commitment fee and transaction costs as deferred equity issuance costs within Additional Paid-In Capital, to be amortized against proceeds

from future ELOC drawdowns at such time as the Company has received shareholder approval of the transactions and the underlying Registration

Statement has been declared effective.

The Company intends to use any future proceeds from sales under the ELOC facility for general

corporate and working capital purposes.

FAIR VALUE MEASUREMENT

In accordance with ASC Topic

820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the market approach to measure

fair value for its financial assets and liabilities.

The market approach uses prices and other relevant information generated by market

transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.

ASC 820 utilizes a fair value

hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

The following is a brief

description of those three levels:

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

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

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

The following table represents

the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2025

and December 31, 2024:

accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the

market approach to measure fair value for its financial assets and liabilities.

The market approach uses prices and other relevant information

generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a

820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

The following is a brief description of those three levels:

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

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

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

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

basis as of September 30, 2025 and December 31, 2024:

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

June 30, 2025

September 30, 2025

Warrant derivative liabilities

1 unchanged sentence

Warrant derivative liabilities

The following table represents the change in Level

3 tier value measurements for the six months ended June 30, 2025:

following table represents the change in Level 3 tier value measurements for the nine months ended September 30, 2025:

SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS

11 unchanged sentences

( 3,373,919 )

Balance, June 30, 2025

Balance, September 30, 2025

ACCRUED EXPENSES

Accrued expenses consisted

of the following at June 30, 2025 and December 31, 2024:

expenses consisted of the following at September 30, 2025 and December 31, 2024:

SCHEDULE OF ACCRUED EXPENSES

September 30,

Accrued warranty expense

5 unchanged sentences

Customer deposits

Total accrued expenses

The effective tax rate for

the three and six months ended June 30, 2025, and 2024 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, 2025, primarily because of the recent operating losses.

The Company incurred operating

losses in recent years, and it continues to be in a three-year cumulative loss position at June 30, 2025.

Accordingly, the Company determined

there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year

cumulative loss position under the guidance provided in ASC 740.

Therefore, it determined to fully reserve its deferred tax assets at

June 30, 2025.

The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level

of profitability that demonstrates its ability to realize these assets.

To the extent the Company determines that the realization of some

or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance

will be reversed.

Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option

exercises, an increase in shareholders’ equity.

As of June 30, 2025, the Company

had the following estimated Federal net operating loss carry-forwards available to offset future taxable income:

OF FEDERAL NET OPERATING LOSS CARRY FORWARDS

accrued expenses

effective tax rate for the three and nine months ended September 30, 2025, and 2024 varied from the expected statutory rate due to the

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

The Company determined that it was appropriate to

continue the full valuation allowance on net deferred tax assets as of September 30, 2025, primarily because of the recent operating

Company incurred operating losses in recent years, and it continues to be in a three-year cumulative loss position at September 30, 2025.

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

the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740.

Therefore, it determined to

fully reserve its deferred tax assets at September 30, 2025.

The Company expects to continue to maintain a full valuation allowance until

it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets.

To the extent the Company

determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a

portion or all of the valuation allowance will be reversed.

Such a reversal would be recorded as an income tax benefit and, for some

portion related to deductions for stock option exercises, an increase in shareholders’ equity.

of September 30, 2025, the Company had the following estimated Federal net operating loss carry-forwards available to offset future taxable

SCHEDULE OF FEDERAL NET OPERATING LOSS CARRY FORWARDS

Tax years generated:

3 unchanged sentences

$ 159,965,000

Such tax net operating loss

carry-forwards expire between 2025 and 2043 relative to Federal net operating loss carry-forwards generated in tax years 2017 and prior.

Federal net operating loss carry-forwards generated in tax years 2018 and after cannot be carried back to prior years and have an indefinite

life since the enactment of the Tax Cuts and Jobs Act of 2017.

The Tax Cuts and Jobs Act of 2017 further provides for an annual limitation

on usage equivalent to 80% of taxable income.

In addition, the Company had research and development tax credit carry-forwards totaling

$ 1,742,000 available as of June 30, 2025, which expire between 2025 and 2040.

The Company’s 2022 federal

tax return was recently examined by the Internal Revenue Service resulting in no proposed adjustments.

tax net operating loss carry-forwards expire between 2025 and 2043 relative to Federal net operating loss carry-forwards generated in

tax years 2017 and prior.

Federal net operating loss carry-forwards generated in tax years 2018 and after cannot be carried back to prior

years and have an indefinite life since the enactment of the Tax Cuts and Jobs Act of 2017.

The Tax Cuts and Jobs Act of 2017 further

provides for an annual limitation on usage equivalent to 80% of taxable income.

In addition, the Company had research and development

tax credit carry-forwards totaling $ 1,796,111 available as of September 30, 2025, which expire between 2025 and 2040.

Company’s 2023 federal tax return was recently examined by the Internal Revenue Service resulting in no proposed adjustments.

COMMITMENTS AND CONTINGENCIES

From time to time, we are

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

It is our policy not to disclose the specifics

of any claim or threatened lawsuit until the summons and complaint are actually served on us.

After carefully assessing the claim, and

assuming we determine that we are not at fault or we disagree with the damage or relief demanded, we vigorously defend any lawsuit filed

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

It is our policy not to disclose

the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us.

After carefully assessing

the claim, and assuming we determine that we are not at fault or we disagree with the damage or relief demanded, we vigorously defend

any lawsuit filed against us.

We record a liability when losses are deemed probable and reasonably estimable.

When losses are deemed reasonably possible

but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for

the claim, if material for disclosure.

In evaluating matters for accrual and disclosure purposes, we take into consideration factors such

as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing,

the availability of insurance, and the severity of any potential loss.

We reevaluate and update accruals as matters progress over time.

On May 31, 2022, the Company

filed a lawsuit against Culp McAuley, Inc.

(“Culp McAuley”) and four individuals (Brandon Culp, Campbell McAuley, Mark Depew

and Larry Roberts) (collectively the “defendants”) in the United States District Court for the District of Kansas, seeking

monetary damages and injunctive relief based on certain conduct by the defendants.

On July 18, 2022, Culp McAuley filed its Answer to

the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages.

8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and

any and all liability.

On December 20, 2022, the

Company filed a motion for leave to file a second amended complaint to add additional claims against the defendants to avoid fraudulent

transfers, to pierce the corporate veil of Culp McAuley, and for remedies related to the claims for fraudulent transfers and piercing

the corporate veil.

On December 22, 2022, the Court issued an Order granting the Company’s motion for leave to file a second amended

complaint, which was filed with the Court on December 27, 2022.

Because Culp McAuley’s original counsel withdrew, Culp McAuley was

ordered to obtain new counsel on or before December 2, 2022.

On December 5, 2022, the Court ordered that Culp McAuley show cause in writing

by December 21, 2022, why the Court should not direct the Clerk to enter default against it.

On December 22, 2022, the Court directed

the Clerk to enter default against Culp McAuley.

On February 21, 2023, the Clerk entered default against Culp McAuley.

In February and March, 2023,

defendants Larry Roberts and Mark Depew filed separate motions to dismiss, respectively.

The Company opposed both motions.

2023, the Court issued an Order granting Roberts’ motion to dismiss and denying Depew’s motion to dismiss.

When losses are deemed

reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of

possible losses for the claim, if material for disclosure.

In evaluating matters for accrual and disclosure purposes, we take into consideration

factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood

of our prevailing, the availability of insurance, and the severity of any potential loss.

We reevaluate and update accruals as matters

progress over time.

May 31, 2022, the Company filed a lawsuit against Culp McAuley, Inc.

(“Culp McAuley”) and four individuals (Brandon Culp,

Campbell McAuley, Mark Depew and Larry Roberts) (collectively the “defendants”) in the United States District Court for the

District of Kansas, seeking monetary damages and injunctive relief based on certain conduct by the defendants.

On July 18, 2022, Culp

McAuley filed its Answer to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking

monetary damages.

On August 8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things,

denying the allegations and any and all liability.

December 20, 2022, the Company filed a motion for leave to file a second amended complaint to add additional claims against the defendants

to avoid fraudulent transfers, to pierce the corporate veil of Culp McAuley, and for remedies related to the claims for fraudulent transfers

and piercing the corporate veil.

On December 22, 2022, the Court issued an Order granting the Company’s motion for leave to file

a second amended complaint, which was filed with the Court on December 27, 2022.

Because Culp McAuley’s original counsel withdrew,

Culp McAuley was ordered to obtain new counsel on or before December 2, 2022.

On December 5, 2022, the Court ordered that Culp McAuley

show cause in writing by December 21, 2022, why the Court should not direct the Clerk to enter default against it.

On December 22, 2022,

2023, the Company filed an application for the Clerk’s entry of default against defendant Brandon Culp.

On December 13, 2023, the

Clerk entered default against Brandon Culp.

On January 5, 2024, the Company

filed a motion for summary judgment against defendants Campbell McAuley and Mark Depew.

On the same date, the Company also filed separate

motions for default judgment against Culp McAuley and Brandon Culp, respectively.

On January 5, 2024, defendant Mark Depew filed a motion

for summary judgment against the Company.

On May 17, 2024, the Court issued Orders which, respectively, (i) granted defendant Mark Depew’s

motion for summary judgment against the Company;

(ii) denied the Company’s motion for summary judgment against Depew;

(iii) granted

the Company’s motion for summary judgment against defendant Campbell McAuley;

and (iv) granted the Company’s motions for default

judgment against defendants Culp McAuley and Brandon Culp.

Finding that defendants Brandon Culp and Campbell McAuley were each the alter

ego of Culp McAuley, on June 4, 2024, the Court entered judgment in favor of the Company in the amount of $ 3,999,984 against Culp McAuley,

Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”).

The Company is currently uncertain as to what

amount, if any, of the judgment amount it will ultimately be able to recover.

On June 14, 2024, the Company

filed a Notice of Appeal to the United States Court of Appeals for the Tenth Circuit from the Court’s May 17, 2024 Order that granted

summary judgment in favor of Mark Depew.

On December 10, 2024, the Company and Depew filed a Stipulation of Dismissal in the Tenth Circuit

that ended the appeal after the Company and Depew reached a settlement.

In March 2024, the Company

filed a complaint against Larry Roberts (“defendant”) in the Superior Court of the State of California, County of Orange.

the Court directed the Clerk to enter default against Culp McAuley.

On February 21, 2023, the Clerk entered default against Culp McAuley.

February and March, 2023, defendants Larry Roberts and Mark Depew filed separate motions to dismiss, respectively.

The Company opposed

both motions.

On July 7, 2023, the Court issued an Order granting Roberts’ motion to dismiss and denying Depew’s motion to

On December 7, 2023, the Company filed an application for the Clerk’s entry of default against defendant Brandon Culp.

On December 13, 2023, the Clerk entered default against Brandon Culp.

January 5, 2024, the Company filed a motion for summary judgment against defendants Campbell McAuley and Mark Depew.

On the same date,

the Company also filed separate motions for default judgment against Culp McAuley and Brandon Culp, respectively.

On January 5, 2024,

defendant Mark Depew filed a motion for summary judgment against the Company.

On May 17, 2024, the Court issued Orders which, respectively,

(i) granted defendant Mark Depew’s motion for summary judgment against the Company;

(ii) denied the Company’s motion for

summary judgment against Depew;

(iii) granted the Company’s motion for summary judgment against defendant Campbell McAuley;

(iv) granted the Company’s motions for default judgment against defendants Culp McAuley and Brandon Culp.

Finding that defendants

Brandon Culp and Campbell McAuley were each the alter ego of Culp McAuley, on June 4, 2024, the Court entered judgment in favor of the

Company in the amount of $ 3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”).

The Company is currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover.

June 14, 2024, the Company filed a Notice of Appeal to the United States Court of Appeals for the Tenth Circuit from the Court’s

May 17, 2024 Order that granted summary judgment in favor of Mark Depew.

On December 10, 2024, the Company and Depew filed a Stipulation

of Dismissal in the Tenth Circuit that ended the appeal after the Company and Depew reached a settlement.

March 2024, the Company filed a complaint against Larry Roberts (“defendant”) in the Superior Court of the State of California,

County of Orange.

The lawsuit arises from the defendant’s multiple breaches of his obligations to the Company.

The Company seeks monetary damages

based on certain conduct by the defendant.

On May 28, 2024, the defendant filed a motion to strike portions of the complaint and a motion

for demurrer.

The Company seeks

monetary damages based on certain conduct by the defendant.

On May 28, 2024, the defendant filed a motion to strike portions of the complaint

and a motion for demurrer.

On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer.

The Court further

denied the defendant’s motion to strike in its entirety.

The Court further denied the defendant’s motion to strike in its entirety.

A jury trial has been scheduled for October 19, 2026.

As of June 30, 2025 and December

31, 2024, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case (when taking into account, among

other things, the uncertainty of recovering the judgment amount owed to the Company by Culp McAuley, Brandon Culp and Campbell McAuley,

jointly and severally), our estimate of the aggregate reasonably possible loss could be the entire balance of the judgment.

has recorded an additional loss of $ 1,959,396 on this matter as of December 31, 2024 which together with the previously recorded losses

in prior years, reduces the Company’s net exposure to zero at June 30, 2025 and December 31, 2024.

Our estimate with respect to

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

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

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

Also, the matters underlying the reasonably

possible loss will change from time to time.

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

While the ultimate resolution

is unknown, based on the information currently available, we do not expect that the pending lawsuit or the enforcement of the judgment

will have a material adverse effect on our operations, financial condition or cash flows.

However, the outcome of any litigation is inherently

uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of the pending

lawsuit or enforcement of the judgment will be covered by our insurance or will not be in excess of amounts recognized or provided by

insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.

Notices of Failure to Satisfy a Continued

Minimum Bid Price Requirement

– On December 20, 2024, the Company received a written notification from The Nasdaq Stock Market LLC indicating that the Company

was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), as the Company’s closing

bid price for its Common Stock was below $ 1.00 per share for the prior thirty (30) consecutive business days.

The Company has been granted

a 180-calendar day compliance period, or until June 18, 2025, to regain compliance with the Minimum Bid Price Requirement.

If the Company

is not in compliance by June 18, 2025, the Company may be afforded a second 180-calendar day compliance period.

If the Company does not

regain compliance within such compliance period, including any granted extensions, its Common Stock may be subject to delisting, which

delisting may be appealed to a Nasdaq hearings panel.

Minimum Stockholders’

Equity Standard - On January 2, 2025, the Company received a notice (the “Notice”) from the staff of the Listing Qualifications

department (the “Staff”) of Nasdaq, which indicated that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1)

(the “Stockholders’ Equity Requirement”), as the Company’s stockholders’ equity of ($ 2,448,310 ) , as reported

in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, was below the required minimum

of $ 2.5 million, and the Company did not meet either the alternative compliance standards relating to market value of listed securities

of at least $ 35 million or net income from continuing operations of at least $ 500,000 in the most recently completed fiscal year or in

two of the last three most recently completed fiscal years.

Under Nasdaq listing rules

and as specified in the Notice, the Company has 45 calendar days from the date of the Notice to submit to the Staff a plan to regain compliance

of September 30, 2025 and December 31, 2024, we are able to estimate a range of reasonably possible loss related to the Culp McCauley

case (when taking into account, among other things, the uncertainty of recovering the judgment amount owed to the Company by Culp McAuley,

Brandon Culp and Campbell McAuley, jointly and severally), our estimate of the aggregate reasonably possible loss could be the entire

balance of the judgment.

The Company has recorded an additional loss of $ 1,959,396 on this matter as of December 31, 2024 which together

with the previously recorded losses in prior years, reduces the Company’s net exposure to zero at September 30, 2025 and December

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

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

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

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

As a result, actual results may vary significantly

from the current estimate.

the ultimate resolution is unknown, based on the information currently available, we do not expect that the pending lawsuit or the enforcement

of the judgment will have a material adverse effect on our operations, financial condition or cash flows.

However, the outcome of any

litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from

the resolution of the pending lawsuit or enforcement of the judgment will be covered by our insurance or will not be in excess of amounts

recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition

or cash flows.

of Failure to Satisfy a Continued Listing Rule

Bid Price Requirement – On December 20, 2024, the Company received a written notification from The Nasdaq Stock Market LLC

indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”),

as the Company’s closing bid price for its Common Stock was below $ 1.00 per share for the prior thirty (30) consecutive business

The Company has been granted a 180-calendar day compliance period, or until June 18, 2025, to regain compliance with the Minimum

Bid Price Requirement.

If the Company is not in compliance by June 18, 2025, the Company may be afforded a second 180-calendar day compliance

If the Company does not regain compliance within such compliance period, including any granted extensions, its Common Stock may

be subject to delisting, which delisting may be appealed to a Nasdaq hearings panel.

Stockholders’ Equity Standard - On January 2, 2025, the Company received a notice (the “Notice”) from the staff

of the Listing Qualifications department (the “Staff”) of Nasdaq, which indicated that the Company was not in compliance

with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”), as the Company’s stockholders’

equity of ($ 2,448,310 ) , as reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30,

2024, was below the required minimum of $ 2.5 million, and the Company did not meet either the alternative compliance standards relating

to market value of listed securities of at least $ 35 million or net income from continuing operations of at least $ 500,000 in the most

recently completed fiscal year or in two of the last three most recently completed fiscal years.

Nasdaq listing rules and as specified in the Notice, the Company has 45 calendar days from the date of the Notice to submit to the Staff

a plan to regain compliance with the Stockholders’ Equity Requirement.

If the Company’s plan to regain compliance is accepted,

Nasdaq may grant an extension of up to 180 calendar days from the date of the Notice for the Company to evidence compliance.

Company submitted its plan to Nasdaq to regain compliance with the Stockholders’ Equity Requirement on February 17, 2025.

can be no assurance that the Company’s plan will be accepted or that if it is, that the Company will be able to regain compliance

with the Stockholders’ Equity Requirement.

If the Company’s plan to regain compliance is accepted, Nasdaq may grant an extension

of up to 180 calendar days from the date of the Notice for the Company to evidence compliance.

The Company submitted its

plan to Nasdaq to regain compliance with the Stockholders’ Equity Requirement on February 17, 2025.

There can be no assurance that

the Company’s plan will be accepted or that if it is, that the Company will be able to regain compliance with the Stockholders’

Equity Requirement.

If the Company does not regain

compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice

that the Common Stock will be subject to delisting from the Nasdaq Capital Market.

At that time, the Company may appeal any such delisting

determination to a Nasdaq hearings panel.

Minimum Bid Price

Requirement - On March 6, 2025, the Company received notice (the “March 6 Letter”) from the Nasdaq Staff that the

Staff had determined that as of March 5, 2025, the Company’s securities had a closing bid price of $ 0.10 or less for ten

consecutive trading days triggering application of Listing Rule 5810(c)(3)(A)(iii) which states in part:

if during any compliance

period specified in Rule 5810(c)(3)(A), a company’s security has a closing bid price of $ 0.10 or less for ten consecutive

trading days, the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that

security (the “Low Priced Stocks Rule”).

As a result, the Staff determined to delist the Company’s securities from

Nasdaq, unless the Company timely requests an appeal of the Staff’s determination to a Hearings Panel (the

“Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.

The Company must request a

hearing no later than 4:00 p.m.

the Company does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq,

Nasdaq will provide notice that the Common Stock will be subject to delisting from the Nasdaq Capital Market.

At that time, the Company

may appeal any such delisting determination to a Nasdaq hearings panel.

Bid Price Requirement - On March 6, 2025, the Company received notice (the “March 6 Letter”) from the Nasdaq Staff that

the Staff had determined that as of March 5, 2025, the Company’s securities had a closing bid price of $ 0.10 or less for ten consecutive

trading days triggering application of Listing Rule 5810(c)(3)(A)(iii) which states in part:

if during any compliance period specified

in Rule 5810(c)(3)(A), a company’s security has a closing bid price of $ 0.10 or less for ten consecutive trading days, the Listing

Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security (the “Low Priced

Stocks Rule”).

As a result, the Staff determined to delist the Company’s securities from Nasdaq, unless the Company timely

requests an appeal of the Staff’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth

in the Nasdaq Listing Rule 5800 Series.

The Company must request a hearing no later than 4:00 p.m.

Eastern Time on March 13, 2025.

The Company timely requested

a hearing before the Panel to appeal the March 6 Letter and to address all outstanding matters, including compliance with the Minimum

Bid Price Requirement, the Low-Priced Stocks Rule and the Stockholders’ Equity Requirement, which hearing date has not been set

as of the date of this Form 10-K.

While the appeal process is pending, the suspension of trading of the Company’s Common Stock,

will be stayed and the Common Stock will continue to trade on the Nasdaq Capital Market until the hearing process concludes, and the Panel

issues a written decision.

Company timely requested a hearing before the Panel to appeal the March 6 Letter and to address all outstanding matters, including compliance

with the Minimum Bid Price Requirement, the Low-Priced Stocks Rule and the Stockholders’ Equity Requirement, which hearing date

has not been set as of the date of this Form 10-K.

While the appeal process is pending, the suspension of trading of the Company’s

Common Stock, will be stayed and the Common Stock will continue to trade on the Nasdaq Capital Market until the hearing process concludes,

and the Panel issues a written decision.

The Company held its hearing with the Panel as scheduled on April 17, 2025.

On May 1, 2025, the Panel rendered its decision

which granted the Company’s request for continued listing on the Nasdaq Exchange.

May 1, 2025, the Panel rendered its decision which granted the Company’s request for continued listing on the Nasdaq Exchange.

Such decision is subject to the following conditions:

On or before May 2, 2025, the Company shall file Form 10-K for 2024 in compliance with Listing Rule 5250(c)(1).

On or before May 20, 2025, the Company must file a public disclosure describing any transactions undertaken by the Company to increase its equity and provide an indication of its equity following those transactions.

In addition, on or before May 20, 2025, the Company must provide the Panel with an update on its fundraising plans, and updated income projections for the next 12 months, with all underlying assumptions clearly stated.

On or before June 6, 2025, the Company shall demonstrate compliance with the Minimum Bid Price Requirement.

If, prior to September 2, 2025, the Company becomes non-compliant with any Listing Rule, the Company will be delisted.

The Company continues to work

diligently to regain and maintain compliance with the Minimum Bid Price Requirement and Stockholders’ Equity Requirement as promptly

In that regard, management believes that it has achieved compliance with the Stockholders’ Equity Requirement as reported

in the accompanying Statement of Stockholders’ Equity (Deficit) as of June 30, 2025.

Furthermore, management believes that it has

achieved compliance with the Minimum Bid Price Requirement prior to June 6, 2025, as required by the Panel.

Management believes that it

has met all other requirements as requested by the Panel.

There are no assurances however, that the Company will be able to meet and maintain

all such conditions required by the Panel.

or before May 2, 2025, the Company shall file Form 10-K for 2024 in compliance with Listing Rule 5250(c)(1).

or before May 20, 2025, the Company must file a public disclosure describing any transactions undertaken by the Company to increase

its equity and provide an indication of its equity following those transactions.

addition, on or before May 20, 2025, the Company must provide the Panel with an update on its fundraising plans, and updated income

projections for the next 12 months, with all underlying assumptions clearly stated.

or before June 6, 2025, the Company shall demonstrate compliance with the Minimum Bid Price Requirement.

prior to September 2, 2025, the Company becomes non-compliant with any Listing Rule, the Company will be delisted.

Company continues to work diligently to regain and maintain compliance with the Minimum Bid Price Requirement and Stockholders’

Equity Requirement as promptly as possible.

In that regard, management believes that it has achieved compliance with the Stockholders’

Equity Requirement as reported in the accompanying Statement of Stockholders’ Equity (Deficit) as of September 30, 2025.

management believes that it has achieved compliance with the Minimum Bid Price Requirement prior to June 6, 2025, as required by the

Management believes that it has met all other requirements as requested by the Panel.

There are no assurances however, that the

Company will be able to meet and maintain all such conditions required by the Panel.

October 17, 2025, the Company received notice from Nasdaq that notified the Company that it had regained full compliance with the Minimum

Bid Price Requirement and Stockholders’ Equity Requirement.

The Nasdaq has now placed the Company under a one-year Discretionary

Panel Monitor.

Under the Discretionary Panel Monitor, the Company will not be permitted to request additional time to regain compliance

with any deficiencies that occur within the one-year period regarding noncompliance with the Periodic Filing or Bid Price Rules.

one-year period expires on July 31, 2026 with regard to the Periodic Filing Rules and September 2, 2026 regarding the Bid Price Rules.

STOCK-BASED COMPENSATION

Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $ 32,450 and $ 101,467

$ 101,467 for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, the Company

had adopted ten separate stock option and restricted stock plans:

(i) the 2005 Stock Option and Restricted Stock Plan (the “2005

Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted

Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the

2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013

Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”), (viii) the 2018 Stock Option and Restricted

Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”), and (x)

the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”).

The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan,

2013 Plan, 2015 Plan, 2018 Plan, 2020 Plan and 2022 Plan are referred to as the “Plans.”

Stock option grants.

for the nine months ended September 30, 2025 and 2024, respectively.

of September 30, 2025, the Company had adopted ten separate stock option and restricted stock plans:

(i) the 2005 Stock Option and Restricted

Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the

2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the

“2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option

and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”),

(viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock

Plan (the “2020 Plan”), and (x) the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”).

The 2005 Plan,

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

option grants.

The Company believes that such awards better align the interests of our employees with those of its stockholders.

Option awards have been

granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting based

on the completion of continuous service and having ten-year contractual terms.

These option awards typically provide for accelerated vesting

if there is a change in control (as defined in the Plans).

The Company has registered all shares of Common Stock that are issuable under

its Plans with the SEC.

A total of 69 shares remained available for awards under the various Plans as of June 30, 2024.

The fair value of each option

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

Activity in the various Plans

during the six months ended June 30, 2025 and 2024 is reflected in the following table:

Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards

generally vesting based on the completion of continuous service and having ten-year contractual terms.

These option awards typically

provide for accelerated vesting if there is a change in control (as defined in the Plans).

The Company has registered all shares of Common

Stock that are issuable under its Plans with the SEC.

A total of 69 shares remained available for awards under the various Plans as of

September 30, 2024.

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

in the various Plans during the nine months ended September 30, 2025 and 2024 is reflected in the following table:

SCHEDULE OF STOCK OPTIONS OUTSTANDING

1 unchanged sentence

Outstanding at January 1, 2025

Outstanding at June 30, 2025

Exercisable at June 30, 2025

Outstanding at September 30, 2025

Exercisable at September 30, 2025

Exercise Price

Outstanding at January 1, 2024

Outstanding at June 30, 2024

Exercisable at June 30, 2024

The fair value of each option

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

The Plans allow for the cashless

exercise of stock options.

This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the

purchase/exercise price of other options exercised.

There were no shares surrendered pursuant to cashless exercises during the three months

ended June 30, 2025 and 2024.

At June 30, 2025 and December

31, 2024, the aggregate intrinsic value of options outstanding was approximately $- 0 - and $- 0 -, respectively, and the aggregate intrinsic

value of options exercisable was approximately $- 0 - and $- 0 -, respectively.

The following table summarizes

the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s

option plans as of June 30, 2025:

Outstanding at September 30, 2024

Exercisable at September 30, 2024

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

Plans allow for the cashless exercise of stock options.

This provision allows the option holder to surrender/cancel options with an intrinsic

value equivalent to the purchase/exercise price of other options exercised.

There were no shares surrendered pursuant to cashless exercises

during the nine months ended September 30, 2025 and 2024.

September 30, 2025 and December 31, 2024, the aggregate intrinsic value of options outstanding was approximately $- 0 - and $- 0 -, respectively,

and the aggregate intrinsic value of options exercisable was approximately $- 0 - and $- 0 -, respectively.

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 September 30, 2025:

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

Outstanding options

Weighted average

Exercisable options

Exercise price

Weighted average

Exercise price

contractual life

Weighted average

contractual life

4 unchanged sentences

$ 130,000 to $ 159,999

Restricted stock grants.

stock grants.

The Board of Directors has granted restricted stock awards under the Plans.

Restricted stock awards are valued on the date of grant and

have no purchase price for the recipient.

Restricted stock awards typically vest over one to four years corresponding to the anniversaries

of the grant date.

Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination of service to or

employment with the Company, depending upon the circumstances of termination.

Except for restrictions placed on the transferability of

restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to

receive cash dividends.

A summary of all restricted

stock activity under the equity compensation plans for the six months ended June 30, 2025 and 2024 is as follows:

OF RESTRICTED STOCK ACTIVITY

Nonvested balance, January 1, 2025

Nonvested balance, June 30, 2025

Restricted stock awards are valued

on the date of grant and have no purchase price for the recipient.

Restricted stock awards typically vest over one to four years corresponding

to the anniversaries of the grant date.

Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination

of service to or employment with the Company, depending upon the circumstances of termination.

Except for restrictions placed on the

transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights

and the right to receive cash dividends.

summary of all restricted stock activity under the equity compensation plans for the nine months ended September 30, 2025 and 2024 is

SCHEDULE OF RESTRICTED STOCK ACTIVITY

Nonvested balance, January 1, 2025

( 20,120.00 )

( 44,400.00 )

Nonvested balance, June 30, 2024

The Company estimated the

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

As of June 30, 2025, there

was $ 34,969 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized

over the next thirty-one months in accordance with their respective vesting scale.

The nonvested balance of restricted

stock vests as follows:

Nonvested balance, September 30, 2025

balance, January 1, 2024

balance, September 30, 2024

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

As of September 30, 2025, there was $ 26,084 representing total unrecognized compensation costs related to all remaining non-vested restricted

stock grants, which will be amortized over the next thirty-one months in accordance with their respective vesting scale.

nonvested balance of restricted stock vests as follows:

SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK

2025 (July 1, 2025 to December 31, 2025)

2025 (October 1, 2025 to December 31, 2025)

COMMON STOCK PURCHASE WARRANTS

The following table summarizes

information about shares issuable under warrants outstanding during the six months ended June 30, 2025 and 2024:

following table summarizes information about shares issuable under warrants outstanding during the nine months ended September 30, 2025

SCHEDULE OF WARRANT ACTIVITY

3 unchanged sentences

Issuance/activation of February 2025 – Series A Warrants

Issuance of September 2025 – Detachable Warrants

Issuance/activation of February 2025 – Series B Warrants

4 unchanged sentences

Terminated/Cancelled

Balance, June 30, 2025

Balance, September 30, 2025

exercise price

1 unchanged sentence

Terminated/Cancelled

Balance, June 30, 2024

The total intrinsic value

of all outstanding warrants aggregated $ 88 and $ 2,128,320 as of June 30, 2025 and December 31, 2024, respectively and the weighted average

remaining term was 45.6 and 42.6 months as of June 30, 2025 and 2024, respectively.

The following table summarizes

the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase shares

of Common Stock as of June 30, 2025:

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

Balance, September 30, 2024

total intrinsic value of all outstanding warrants aggregated $ 88 and $ 2,128,320 as of September 30, 2025 and December 31, 2024, respectively

and the weighted average remaining term was 45.6 and 42.6 months as of September 30, 2025 and 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 September 30, 2025:

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

Outstanding and exercisable warrants

2 unchanged sentences

contractual life

2025 Detachable Purchase Warrants

September 15, 2025, the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company

issued Senior Secured Convertible Notes (the “September 2025 Notes”) with an aggregate original principal amount of $ 806,451

and detachable common stock purchase warrants to purchase 476,569 shares of the Company’s common stock at an exercise price of

$ 2.124 per share.

The detachable common stock purchase warrants have a term of 5 years from the date of issuance.

2025 Purchase Warrants

On February 13, 2025, the

Company issued pre-funded units, each consisting of one-prefunded warrant (to purchase a total of 49,075 shares of Common Stock), one

Series A warrant and one Series B warrant along with the sale of units, each consisting of one share of Common Stock, one Series A warrant

and one Series B warrant.

The Series A and Series B warrants were exercisable only upon receipt of stockholder approval to approve each

of (i) certain terms in the Series A warrants and Series B warrants and the issuance of the shares of Common Stock issuable upon the exercise

of such warrants, as may be required by the applicable rules and regulations of The Nasdaq Stock Market LLC and (ii) if necessary, a proposal

to amend the Company’s Articles of Incorporation, as amended, to increase the authorized share capital of the Company to an amount

sufficient to cover the shares of Common Stock issuable upon the exercise of the Series A warrants and Series B warrants.

Warrants were exercisable commencing upon the date of public notice of the Stockholder Approval (the “Warrant Stockholder Approval

Date”) until five years after the Warrant Stockholder Approval Date, and the Series B Warrants were exercisable commencing upon

the Warrant Stockholder Approval Date until two and one-half years after the Warrant Stockholder Approval Date.

Both the Series A and

Series B warrants contain reset provisions that are activated upon the date Stockholder Approval is obtained.

The Company’s Shareholders

approved the issuance of the Series A and B warrants at a Special Meeting of Shareholders on May 6, 2025 which serves as the Warrant Stockholder

Approval Date.

The Series A and B warrant terms provide for net cash settlement outside the control of the Company under certain circumstances.

As such, the Company is required to treat the Series A and B warrants as derivative liabilities until such time as the circumstances which

allow for settlement outside the control of the Company are terminated or no longer applicable.

Warrant derivative liabilities treatment

of the Series A and B warrants to be valued at their estimated fair value at their issuance/activation date and at each reporting date

with any subsequent changes reported in the condensed consolidated statements of operations as the change in fair value of warrant derivative

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 condensed

consolidated statement of operations.

The pre-funded warrants were

all exercised within days of their issuance therefore their total fair value was estimated to be $ 1,803 at the time of their exercise

which remained the same as their fair value as of the date of issuance.

The following are the assumptions used in calculating the estimated

fair value of the pre-funded warrants to purchase Common Stock which were effective and exercisable upon issuance on February 13, 2025:

February 13, 2025, the Company issued pre-funded units, each consisting of one-prefunded warrant (to purchase a total of 49,075 shares

of Common Stock), one Series A warrant and one Series B warrant along with the sale of units, each consisting of one share of Common

Stock, one Series A warrant and one Series B warrant.

The Series A and Series B warrants were exercisable only upon receipt of stockholder

approval to approve each of (i) certain terms in the Series A warrants and Series B warrants and the issuance of the shares of Common

Stock issuable upon the exercise of such warrants, as may be required by the applicable rules and regulations of The Nasdaq Stock Market

LLC and (ii) if necessary, a proposal to amend the Company’s Articles of Incorporation, as amended, to increase the authorized

share capital of the Company to an amount sufficient to cover the shares of Common Stock issuable upon the exercise of the Series A warrants

and Series B warrants.

The Series A Warrants were exercisable commencing upon the date of public notice of the Stockholder Approval (the

“Warrant Stockholder Approval Date”) until five years after the Warrant Stockholder Approval Date, and the Series B Warrants

were exercisable commencing upon the Warrant Stockholder Approval Date until two and one-half years after the Warrant Stockholder Approval

Both the Series A and Series B warrants contain reset provisions that are activated upon the date Stockholder Approval is obtained.

The Company’s Shareholders approved the issuance of the Series A and B warrants at a Special Meeting of Shareholders on May 6,

2025 which serves as the Warrant Stockholder Approval Date.

The Series A and B warrant terms provide for net cash settlement outside

the control of the Company under certain circumstances.

As such, the Company is required to treat the Series A and B warrants as derivative

liabilities until such time as the circumstances which allow for settlement outside the control of the Company are terminated or no longer

Warrant derivative liabilities treatment of the Series A and B warrants to be valued at their estimated fair value at their

issuance/activation date and at each reporting date with any subsequent changes reported in the condensed 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 condensed consolidated statement of operations.

pre-funded warrants were all exercised within days of their issuance therefore their total fair value was estimated to be $ 1,803 at the

time of their exercise which remained the same as their fair value as of the date of issuance.

The following are the assumptions used

in calculating the estimated fair value of the pre-funded warrants to purchase Common Stock which were effective and exercisable upon

issuance on February 13, 2025:

SCHEDULE OF WARRANT MODIFICATION

5 unchanged sentences

Common stock issuable under the warrants

During the six months ended

June 30, 2025, the pre-funded warrants to purchase 49,075 shares of Common Stock were fully exercised.

In conjunction with the exercise

of the pre-funded warrants, the Company transitioned the related warrant derivative liability totaling $ 1,803 to equity as of their exercise

The warrant derivative liability related to the pre-funded warrants was $- 0 - as of June 30, 2025.

The Series A warrants were

issued/activated on Warrant Shareholder Approval Date of May 6, 2025 and their total fair value was estimated to be $ 1,340,214

at the time of their issuance/activation.

The following are the assumptions used in calculating the estimated fair value of the Series

A warrants to purchase Common Stock which were effective and exercisable upon the Warrant Shareholder Approval Date of May 6, 2025:

Series A warrants

issuance/activation date – May 6, 2025

the nine months ended September 30, 2025, the pre-funded warrants to purchase 49,075 shares of Common Stock were fully exercised.

conjunction with the exercise of the pre-funded warrants, the Company transitioned the related warrant derivative liability totaling

$ 1,803 to equity as of their exercise date.

The warrant derivative liability related to the pre-funded warrants was $- 0 - as of September

Series A warrants were issued/activated on Warrant Shareholder Approval Date of May 6, 2025 and their total fair value was estimated

to be $ 1,340,214 at the time of their issuance/activation.

The following are the assumptions used in calculating the estimated fair value

of the Series A warrants to purchase Common Stock which were effective and exercisable upon the Warrant Shareholder Approval Date of

Series A warrants issuance/activation date – May 6, 2025

Volatility – range

3 unchanged sentences

Common stock issuable under the warrants

On June 27, 2025, the

circumstances under which the Series A warrant terms allow for settlement outside the control of the Company were terminated and no

longer applicable.

Therefore, the Company determined the fair value of the warrant liability as of that date ($ 530,101 ) and

transitioned that value to equity as the Series A warrants were no longer treated as warrant derivative liabilities.

June 27, 2025, the circumstances under which the Series A warrant terms allow for settlement outside the control of the Company were

terminated and no longer applicable.

Therefore, the Company determined the fair value of the warrant liability as of that date ($ 530,101 )

and transitioned that value to equity as the Series A warrants were no longer treated as warrant derivative liabilities.

In conjunction

with change in warrant liability treatment of the Series A warrant on June 27, 2025, the Company transitioned the related warrant

derivative liability totaling $ 530,101 to equity.

The following are the assumptions used in calculating the estimated fair value of

the Series A warrants to purchase Common Stock as of transition date of June 27, 2025:

Series A warrants

transition date – June 27, 2025

with change in warrant liability treatment of the Series A warrant on June 27, 2025, the Company transitioned the related warrant derivative

liability totaling $ 530,101 to equity.

The following are the assumptions used in calculating the estimated fair value of the Series A

warrants to purchase Common Stock as of transition date of June 27, 2025:

Series A warrants transition date – June 27, 2025

Volatility – range

3 unchanged sentences

Common stock issuable under the warrants

The Series B warrants were issued/activated on Warrant Shareholder Approval

Date of May 6, 2025 which based on the reset provisions a total of 1,669,357 Series B were issued at a zero exercise price and their total

fair value was estimated to be $ 5,406,408 .

The Series B Warrants contain a zero-exercise price option at the holder’s election.

Under the zero-exercise price option, a holder of the Series B Warrant has the right to receive an aggregate number of shares equal to

the product of (x) the aggregate number of shares of common stock that would be issuable upon a cash exercise of the Series B Warrant

and (y) three (3.0).

As a result of this feature, we did not receive nor did we expect to receive any cash proceeds from the exercise

of the Series B Warrants because it is highly unlikely that a Series B Warrant holder would elect to pay an exercise price in cash to

receive one share of common stock when they could elect the alternate cashless exercise option and pay no exercise price to receive more

shares of common stock than they would receive if they did pay an exercise price.

The following are the assumptions used in calculating

the estimated fair value of the Series B warrants to purchase Common Stock which were effective and exercisable upon the Warrant Shareholder

Approval Date of May 6, 2025:

Series B warrants were issued/activated on Warrant Shareholder Approval Date of May 6, 2025 which based on the reset provisions a total

of 1,669,357 Series B were issued at a zero exercise price and their total fair value was estimated to be $ 5,406,408 .

The Series B Warrants

contain a zero-exercise price option at the holder’s election.

Under the zero-exercise price option, a holder of the Series B Warrant

has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that

would be issuable upon a cash exercise of the Series B Warrant and (y) three (3.0).

As a result of this feature, we did not receive nor

did we expect to receive any cash proceeds from the exercise of the Series B Warrants because it is highly unlikely that a Series B Warrant

holder would elect to pay an exercise price in cash to receive one share of common stock when they could elect the alternate cashless

exercise option and pay no exercise price to receive more shares of common stock than they would receive if they did pay an exercise

The following are the assumptions used in calculating the estimated fair value of the Series B warrants to purchase Common Stock

which were effective and exercisable upon the Warrant Shareholder Approval Date of May 6, 2025:

Series B warrants issuance/activation date – May 6, 2025

4 unchanged sentences

Common stock issuable under the warrants

Of the 1,669,357 total Series B warrants issued on May 6, 2025 a total

of 1,669,320 warrants valued at $ 5,406,320 were immediately exercised by their holders and transitioned to equity during the three and

six months ended June 30, 2025.

There remain 37 Series B warrants issued and outstanding at June 30, 2025 which were valued at $ 88 .

the 1,669,357 total Series B warrants issued on May 6, 2025 a total of 1,669,320 warrants valued at $ 5,406,320 were immediately exercised

by their holders and transitioned to equity during the three and nine months ended September 30, 2025.

There remain 37 Series B warrants

issued and outstanding at September 30, 2025 which were valued at $ 88 .

Purchase Warrants

On June 25, 2024, the Company

issued Series A and prefunded warrants to purchase a total of 88,411 shares of Common Stock along with the sale of Common Stock.

also issued Series B Warrants that will be issuable and exercisable at any time or times on or after the date that relevant stockholder

approval is obtained in addition to the Series A warrants that are not included in outstanding warrants until such time as relevant stockholder

approval is obtained.

Both the Series A and Series B warrants have reset provisions that are activated upon the date relevant 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 condensed 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 condensed consolidated statement of operations.

The Series B warrants issued

in this transaction become issuable and exercisable on the date that relevant stockholder approval is obtained, if ever.

Relevant stockholder

approval was obtained on December 17, 2024 which activated the Series A and B warrants.

Both the Series A and Series B warrants also contain

price and warrant reset provisions that were activated upon the date of relevant stockholder approval.

The reset provisions increased

the number of common shares issuable under the Series A warrant from 59,761 to 298,805 shares and the exercise price per Series A warrant

was reduced from $ 50.20 to $ 10.04 per share effective December 17, 2024.

In addition, the Series B warrants became effective and exercisable

upon relevant stockholder approval on December 17, 2024 which resulted in 238,339 common shares issuable under the Series B warrants with

an exercise price of $ 0.001 per share effective December 17, 2024.

The Company recognized the full Series B warrant derivative liability

value of $ 2,865,727 as of the date of relevant stockholder approval when it became effective and exercisable of which $ 454,150 was recorded

in equity and $ 2,411,577 was charged as a loss in the consolidated statement of operations for the year ended December 31, 2024.

The following

are the assumptions used in calculating the estimated fair value of the detachable Series B warrants to purchase Common Stock which became

effective and exercisable upon relevant stockholder approval on December 17, 2024 and on December 31, 2024:

June 25, 2024, the Company issued Series A and prefunded warrants to purchase a total of 88,411 shares of Common Stock along with the

sale of Common Stock.

The Company also issued Series B Warrants that will be issuable and exercisable at any time or times on or after

the date that relevant stockholder approval is obtained in addition to the Series A warrants that are not included in outstanding warrants

until such time as relevant stockholder approval is obtained.

Both the Series A and Series B warrants have reset provisions that are

activated upon the date relevant 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

condensed 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 condensed consolidated statement of operations.

Series B warrants issued in this transaction become issuable and exercisable on the date that relevant stockholder approval is obtained,

Relevant stockholder approval was obtained on December 17, 2024 which activated the Series A and B warrants.

Both the Series

A and Series B warrants also contain price and warrant reset provisions that were activated upon the date of relevant stockholder approval.

The reset provisions increased the number of common shares issuable under the Series A warrant from 59,761 to 298,805 shares and the

exercise price per Series A warrant was reduced from $ 50.20 to $ 10.04 per share effective December 17, 2024.

In addition, the Series

B warrants became effective and exercisable upon relevant stockholder approval on December 17, 2024 which resulted in 238,339 common

shares issuable under the Series B warrants with an exercise price of $ 0.001 per share effective December 17, 2024.

The Company recognized

the full Series B warrant derivative liability value of $ 2,865,727 as of the date of relevant stockholder approval when it became effective

and exercisable of which $ 454,150 was recorded in equity and $ 2,411,577 was charged as a loss in the consolidated statement of operations

for the year ended December 31, 2024.

The following are the assumptions used in calculating the estimated fair value of the detachable

Series B warrants to purchase Common Stock which became effective and exercisable upon relevant stockholder approval on December 17,

2024 and on December 31, 2024:

Series B issuance date - December 17, 2024

5 unchanged sentences

Common stock issuable under the warrants

During the year ended December

31, 2024, prefunded warrants to purchase 28,650 shares of Common Stock were fully exercised.

No pre-funded warrants were exercised during

the three months ended June 30, 2025.

In conjunction with the exercise of the Series B warrants, the Company transitioned the related

warrant derivative liability totaling $ 584,955 to equity as of their exercise date in 2024.

The warrant derivative liability related to

the remaining unexercised Series B warrants was $ 1,989,806 as of December 31, 2024.

The change in fair value of the Series B warrant derivative

liability from their issuance date through December 31, 2024 totaled $ 290,965 which was included as a loss in the condensed consolidated

statement of operations for the year ended December 31, 2024.

During the six months ended

June 30, 2025, Series B warrants to purchase 1,897 shares of Common Stock were fully exercised.

In conjunction with the exercise of the

Series B warrants, the Company transitioned the related warrant derivative liability totaling $ 1,989,806 to equity as of their exercise

The warrant derivative liability related to the Series B warrants was $- 0 - as of June 30, 2025, as they are now fully exercised.

The Company has utilized the

following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the derivative liability relative

to the prefunded warrants and Series A warrants as of their date of issuance and as of December 31, 2024 and June 30, 2025:

the year ended December 31, 2024, prefunded warrants to purchase 28,650 shares of Common Stock were fully exercised.

No pre-funded warrants

were exercised during the three months ended September 30, 2025.

In conjunction with the exercise of the Series B warrants, the Company

transitioned the related warrant derivative liability totaling $ 584,955 to equity as of their exercise date in 2024.

The warrant derivative

liability related to the remaining unexercised Series B warrants was $ 1,989,806 as of December 31, 2024.

The change in fair value of

the Series B warrant derivative liability from their issuance date through December 31, 2024 totaled $ 290,965 which was included as a

loss in the condensed consolidated statement of operations for the year ended December 31, 2024.

the nine months ended September 30, 2025, Series B warrants to purchase 1,897 shares of Common Stock were fully exercised.

In conjunction

with the exercise of the Series B warrants, the Company transitioned the related warrant derivative liability totaling $ 1,989,806 to

equity as of their exercise date.

The warrant derivative liability related to the Series B warrants was $- 0 - as of September 30, 2025,

as they are now fully exercised.

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

derivative liability relative to the prefunded warrants and Series A warrants as of their date of issuance and as of December 31, 2024

and September 30, 2025:

date assumptions

December 31, 2024

June 30, 2025

September 30, 2025

Volatility – range

72.1 - 101.1 %

Risk-free rate

1 unchanged sentence

Remaining contractual term

0.1 - 5.0 years

Exercise price

Common stock issuable under the warrants

The Company recognized the

fair value of the Series A warrants of $ 1,998,074 as a warrant derivative liability as of the date of issuance.

There have been no Series

A warrants exercised through June 30, 2025.

The fair value of the warrant derivative liability related to the Series A warrants was $ 1,853

and $ 2,408,598 as of June 30, 2025 and December 31, 2024, respectively.

The change in fair value of the Series A warrant derivative liability

from December 31, 2024 to June 30, 2025 totaled $ 2,406,745 which was included as a gain in the condensed consolidated statements of operations

for the six months ended June 30, 2025.

Company recognized the fair value of the Series A warrants of $ 1,998,074 as a warrant derivative liability as of the date of issuance.

There have been no Series A warrants exercised through September 30, 2025.

The fair value of the warrant derivative liability related

to the Series A warrants was $ 1,853 and $ 2,408,598 as of September 30, 2025 and December 31, 2024, respectively.

The change in fair value

of the Series A warrant derivative liability from December 31, 2024 to September 30, 2025 totaled $ 2,406,745 which was included as a

gain in the condensed consolidated statements of operations for the nine months ended September 30, 2025.

Purchase Warrants

On April 5, 2023, the Company

issued warrants to purchase a total of 562 shares of Common Stock.

The warrant terms provide for net cash settlement outside the control

of the Company under certain circumstances.

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

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

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 condensed consolidated statement of operations.

The Company has utilized the

following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the warrant derivative liabilities

as of June 30, 2025 and as of December 31, 2024:

April 5, 2023, the Company issued warrants to purchase a total of 562 shares of Common Stock.

The warrant terms provide for net cash

settlement outside the control of the Company under certain circumstances.

As such, the Company is required to treat these warrants as

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

changes reported in the condensed 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 condensed 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 September 30, 2025 and as of December 31, 2024:

December 31, 2024

June 30, 2025

September 30, 2025

Volatility – range

5 unchanged sentences

Common stock issuable under the warrants

NOTE 12 - STOCKHOLDERS’ EQUITY

February 2025 Public Equity Offering

On February 13, 2025, the

Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp.

(the “Underwriter”)

for the sale and issuance of (i) 3,925 units at a public offering price per unit of $ 300.00 with each Unit consisting of one share of

Common Stock, one Series A warrant to purchase one share of Common Stock at an exercise price of $ 375.00 per share and one Series B warrant

to purchase one share of Common Stock at an exercise price of $ 600.00 and (ii) 46,075 pre-funded units at a public offering price of $ 298.00

per pre-funded unit, with each pre-funded unit consisting of one pre-funded warrant exercisable for one share of Common Stock at an exercise

price of $ 0.001 per share, one Series A warrant and one Series B warrant.

The pre-funded warrants were immediately exercisable and may

be exercised at any time until all of the pre-funded warrants are exercised in full.

The Series A and Series B

warrants are exercisable only upon receipt of stockholder approval of (i) certain terms in the Series A and B warrants and the issuance

of the shares of Common Stock issuable upon the exercise of such Series A and Series B warrants, as may be required by the applicable

rules and regulations of The Nasdaq Stock Market LLC and (ii) if necessary, a proposal to amend the Company’s Articles of Incorporation,

to increase the authorized share capital of the Company to an amount sufficient to cover the shares of Common Stock issuable upon the

exercise of the Series A and Series B warrants.

The Series A warrants will be exercisable commencing upon the date of public notice of

Stockholder Approval until five years after such date, and the Series B Warrants will be exercisable commencing upon the date of public

notice of Stockholder Approval until two and one-half years after such date.

The offering closed on February

The net proceeds to the Company from the offering were approximately $ 13.48 million, after deducting underwriter’s fees

and the payment of other offering expenses associated with the offering payable by the Company.

The Company intends to use the net proceeds

from the offering for working capital and other general corporate purposes, to pay amounts owed under a short-term merchant advance and

to pay in full the aggregate face value of senior secured promissory notes that were previously issued as part of a private placement

that the Company entered into with certain institutional investors on November 6, 2024.

The Company granted the Underwriter

an option to purchase additional shares of Common Stock and/or Series A and Series B warrants of (i) up to 15.0 % of the number of shares

of Common Stock sold in the offering, (ii) up to 15.0% of the number of Series A warrants sold in the offering and (iii) up to 15.0 % of

the number of Series B warrants sold in the offering.

The Underwriter may exercise this option in whole or in part at any time within

forty-five calendar days after the date of the final prospectus relating to the offering.

The Underwriter may exercise the over-allotment

option with respect to shares of Common Stock only, Series A and Series B warrants only, or any combination thereof.

The purchase price

to be paid per additional share of Common Stock will be equal to the public offering price of one Unit (less $ 0.00001 allocated to each

Series A and Series B warrants), as applicable, less the underwriting discount, and the purchase price to be paid per over-allotment Series

A and Series B warrants will be $ 0.00001 .

On February 14, 2025, the Underwriter exercised its over-allotment option with respect to 3,000

pre-funded warrants/common shares, 7,500 Series A warrants and 7,500 Series B warrants.

12 - STOCKHOLDERS’ EQUITY

Secured Convertible Note and Committed Equity Financing

September 15, 2025, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Purchaser”),

pursuant to which the Company issued Senior Secured Convertible Notes with an aggregate original principal amount of $ 806,451 and Warrants

to purchase 476,569 shares of the Company’s common stock at an exercise price of $ 2.124 per share.

The Notes were issued at a 7 %

original issue discount, providing gross proceeds of $ 750,000 , and bear interest at 8 % per annum.

net proceeds of the private placement on September 15, 2025 was $ 610,000 (after $ 140,000 deduction of costs of the offering).

allocated the net proceeds from the private placement of the senior secured promissory notes and the detachable warrants based upon their

relative fair values as of the date of issuance as follows:

SCHEDULE OF NET PROCEEDS FROM THE PRIVATE PLACEMENT

Allocated to the following:

Senior secured promissory notes

Detachable warrants

Equity Financing (ELOC)

September 15, 2025 (the “Closing Date”), the Company entered into a Common Stock Purchase Agreement (the “ELOC Purchase

Agreement”) with an institutional investor (the “ELOC Investor”), providing a committed equity financing facility of

up to $ 25 million (the “Total Commitment”) over a 36-month term.

Under the agreement, and subject to certain conditions and

limitations, the Company may, at its sole discretion, direct the ELOC Investor to purchase shares of its common stock (“Purchase

Shares”) from time to time during the term of the facility.

2025 Public Equity Offering

February 13, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp.

(the “Underwriter”) for the sale and issuance of (i) 3,925 units at a public offering price per unit of $ 300.00 with each

Unit consisting of one share of Common Stock, one Series A warrant to purchase one share of Common Stock at an exercise price of $ 375.00

per share and one Series B warrant to purchase one share of Common Stock at an exercise price of $ 600.00 and (ii) 46,075 pre-funded units

at a public offering price of $ 298.00 per pre-funded unit, with each pre-funded unit consisting of one pre-funded warrant exercisable

for one share of Common Stock at an exercise price of $ 0.001 per share, one Series A warrant and one Series B warrant.

The pre-funded

warrants were immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full.

Series A and Series B warrants are exercisable only upon receipt of stockholder approval of (i) certain terms in the Series A and B warrants

and the issuance of the shares of Common Stock issuable upon the exercise of such Series A and Series B warrants, as may be required

by the applicable rules and regulations of The Nasdaq Stock Market LLC and (ii) if necessary, a proposal to amend the Company’s

Articles of Incorporation, to increase the authorized share capital of the Company to an amount sufficient to cover the shares of Common

Stock issuable upon the exercise of the Series A and Series B warrants.

The Series A warrants will be exercisable commencing upon the

date of public notice of Stockholder Approval until five years after such date, and the Series B Warrants will be exercisable commencing

upon the date of public notice of Stockholder Approval until two and one-half years after such date.

offering closed on February 14, 2025.

The net proceeds to the Company from the offering were approximately $ 13.48 million, after deducting

underwriter’s fees and the payment of other offering expenses associated with the offering payable by the Company.

intends to use the net proceeds from the offering for working capital and other general corporate purposes, to pay amounts owed under

a short-term merchant advance and to pay in full the aggregate face value of senior secured promissory notes that were previously issued

as part of a private placement that the Company entered into with certain institutional investors on November 6, 2024.

Company granted the Underwriter an option to purchase additional shares of Common Stock and/or Series A and Series B warrants of (i)

up to 15.0 % of the number of shares of Common Stock sold in the offering, (ii) up to 15.0% of the number of Series A warrants sold in

the offering and (iii) up to 15.0 % of the number of Series B warrants sold in the offering.

The Underwriter may exercise this option

in whole or in part at any time within forty-five calendar days after the date of the final prospectus relating to the offering.

Underwriter may exercise the over-allotment option with respect to shares of Common Stock only, Series A and Series B warrants only,

or any combination thereof.

The purchase price to be paid per additional share of Common Stock will be equal to the public offering price

of one Unit (less $ 0.00001 allocated to each Series A and Series B warrants), as applicable, less the underwriting discount, and the

purchase price to be paid per over-allotment Series A and Series B warrants will be $ 0.00001 .

On February 14, 2025, the Underwriter exercised

its over-allotment option with respect to 3,000 pre-funded warrants/common shares, 7,500 Series A warrants and 7,500 Series B warrants.

Settlement occurred on April 17, 2025.

Aegis Capital Corp.

as the sole book-running manager in the offering, pursuant to the terms of the Underwriting Agreement, and received seven percent ( 7 %)

of the aggregate purchase price paid by investors in the offering, a one percent ( 1 %) non-accountable expense and reimbursement of the

legal fees of its counsel.

The units and pre-funded units

were offered by the Company pursuant to an effective registration statement on Form S-1, as amended, which was declared effective by the

SEC on February 12, 2025.

Capital Corp.

served as the sole book-running manager in the offering, pursuant to the terms of the Underwriting Agreement, and received

seven percent ( 7 %) of the aggregate purchase price paid by investors in the offering, a one percent ( 1 %) non-accountable expense and

reimbursement of the legal fees of its counsel.

units and pre-funded units were offered by the Company pursuant to an effective registration statement on Form S-1, as amended, which

was declared effective by the SEC on February 12, 2025.

The final prospectus relating to the offering was filed with the SEC on February

The aggregate net proceeds

to the Company from the offering including the underwriters exercise of their overallotment option were approximately $ 14,308,300 , after

deducting underwriter’s fees and the payment of other offering expenses associated with the offering payable by the Company.

aggregate net proceeds to the Company from the offering including the underwriters exercise of their overallotment option were approximately

$ 14,308,300 , after deducting underwriter’s fees and the payment of other offering expenses associated with the offering payable

by the Company.

Issuance of Restricted Common Stock

In January 2024, the board

of directors approved the grant of 27 shares of Common Stock to officers of the Company.

Such shares will generally vest over a period

of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee remains an officer

or employee on such dates.

Additionally, the board of directors approved the grant of 13 restricted common shares to certain new employees

of the Company.

Such shares will generally vest over a period of one 1 to two years on their respective anniversary dates from January through

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

January 2024, the board of directors approved the grant of 27 shares of Common Stock to officers of the Company.

Such shares will generally

vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee

remains an officer or employee on such dates.

Additionally, the board of directors approved the grant of 13 restricted common shares

to certain new employees of the Company.

Such shares will generally vest over a period of one 1 to two years on their respective anniversary

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

Private Placement Transaction

On 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 to the placement agent and other expenses payable by the Company in connection with the Private Placement.

As part of the Private Placement,

the Company issued an aggregate of 60 units and pre-funded units (collectively, the “June Units”) at a purchase price of $ 5020.00

per unit (less $ 0.001 per pre-funded unit).

Each June Unit consists of (i) one share of 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”).

Securities Purchase Agreement and Senior

Secured Promissory Notes

On November 6, 2024, the Company

entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors, pursuant to which the Company

agreed to issue and sell to such investors, in a private placement transaction, (i) senior secured promissory notes in aggregate principal

amount of $ 3,600,000 , and (ii) 404 shares (the “Commitment Shares”) of the Company’s Common Stock, for aggregate gross

proceeds of approximately $ 3.0 million, before deducting placement agent fees and other offering expenses payable by the Company.

private placement closed on November 7, 2024.

The net proceeds of the private

placement on November 7, 2024 was $ 2,669,250 (after $ 330,750 deduction of costs of the offering).

The Company allocated the net proceeds

from the private placement of the senior secured promissory notes and the commitment shares based upon their relative fair values as of

the date of issuance as follows:

SCHEDULE OF NET PROCEEDS FROM THE PRIVATE PLACEMENT

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 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 60 units and pre-funded units (collectively, the “June Units”)

at a purchase price of $ 5020.00 per unit (less $ 0.001 per pre-funded unit).

Each June Unit consists of (i) one share of 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”).

Purchase Agreement and Senior Secured Promissory Notes

November 6, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors,

pursuant to which the Company agreed to issue and sell to such investors, in a private placement transaction, (i) senior secured promissory

notes in aggregate principal amount of $ 3,600,000 , and (ii) 404 shares (the “Commitment Shares”) of the Company’s Common

Stock, for aggregate gross proceeds of approximately $ 3.0 million, before deducting placement agent fees and other offering expenses

payable by the Company.

This private placement closed on November 7, 2024.

net proceeds of the private placement on November 7, 2024 was $ 2,669,250 (after $ 330,750 deduction of costs of the offering).

allocated the net proceeds from the private placement of the senior secured promissory notes and the commitment shares based upon their

relative fair values as of the date of issuance as follows:

Allocated to the following:

1 unchanged sentence

Commitment shares

Cancellation of Restricted Stock

During the six months ended

June 30, 2025 and 2024, the Company cancelled - 0 - and 1 shares due to termination of employees, respectively.

Exercise of Prefunded Warrants

During the three months ended

June 30, 2025, prefunded warrants to purchase 49,075 shares of Common Stock that were issued in conjunction with the February 2025 public

equity offering of Common Stock, were fully exercised at an exercise price of $ 0.001 per share.

During the three months ended

June 30, 2025, Series B warrants to purchase 1,897 shares of Common Stock that were issued in conjunction with the June 2024 public equity

offering of Common Stock, were fully exercised for total proceeds of $ 3,793 .

In conjunction with the exercise of the Series B warrants,

the Company transitioned the related warrant derivative liability totaling $ 1,989,806 to equity as of their exercise date.

Noncontrolling Interests

The Company has 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 condensed consolidated statement of operations as “net income

(loss) attributable to noncontrolling interests of consolidated subsidiary”.

of Restricted Stock

the nine months ended September 30, 2025 and 2024, the Company cancelled - 0 - and 1 shares due to termination of employees, respectively.

of Prefunded Warrants

the three months ended September 30, 2025, prefunded warrants to purchase 49,075 shares of Common Stock that were issued in conjunction

with the February 2025 public equity offering of Common Stock, were fully exercised at an exercise price of $ 0.001 per share.

the three months ended September 30, 2025, Series B warrants to purchase 1,897 shares of Common Stock that were issued in conjunction

with the June 2024 public equity offering of Common Stock, were fully exercised for total proceeds of $ 3,793 .

In conjunction with the

exercise of the Series B warrants, the Company transitioned the related warrant derivative liability totaling $ 1,989,806 to equity as

of their exercise date.

Noncontrolling

Company has 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 condensed consolidated statement

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

We reported net

(loss) income attributable to noncontrolling interests of consolidated subsidiary of $ 55,997 and $ 73,310 for the three months ended June

30, 2025 and 2024, respectively and $ 59,608 and $ 61,063 for the six months ended June 30, 2025 and 2024, respectively.

(loss) income attributable to noncontrolling interests of consolidated subsidiary of $ ( 58,525 ) and $ 2,000,206 for the three months ended

September 30, 2025 and 2024, respectively and $ ( 118,133 ) and $ 1,939,143 for the nine months ended September 30, 2025 and 2024, respectively.

RELATED PARTY TRANSACTIONS

Transactions with Managing Member of Nobility

The Company accrued reimbursable

expenses payable to Nobility, LLC totaling $ 42,082 and $ 245,716 as of June 30, 2025 and December 31, 2024, respectively.

Total management

fees accrued and payable in accordance with the operating agreement totaled $ 20,933 and $ 38,625 as of June 30, 2025 and December 31, 2024,

with Managing Member of Nobility Healthcare

Company accrued reimbursable expenses payable to Nobility, LLC totaling $ 42,082 and $ 245,716 as of September 30, 2025 and December 31,

2024, respectively.

The company recorded management fee expense of $ 30,255 and $ 22,403 for the six months ended June 30, 2025 and 2024, respectively.

Transactions with Related Party of TicketSmarter

On September 22, 2023, a

trust, the beneficiaries of which are an officer of TicketSmarter’s 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

The TicketSmarter Related Party Note bears interest of 13.25 %

per annum with repayment beginning January 2, 2024.

As of December 31, 2024 the entire TicketSmarter Related Party note balance

totaled $ 2,700,000 ,

and was classified as current, with an accrued interest balance of $ 488,711 .

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

discount received to resolve such outstanding payables is recognized as a gain on extinguishment of liabilities on the condensed

Total management fees accrued and payable in accordance with the operating agreement totaled $ 20,933 and $ 38,625

as of September 30, 2025 and December 31, 2024, respectively.

The company recorded management fee expense of $ 30,255 and $ 22,403 for

the nine months ended September 30, 2025 and 2024, respectively.

with Related Party of TicketSmarter

September 22, 2023, a trust, the beneficiaries of which are an officer of TicketSmarter’s 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”).

TicketSmarter Related Party Note bears interest of 13.25 % per annum with repayment beginning January 2, 2024.

As of December 31, 2024

the entire TicketSmarter Related Party note balance totaled $ 2,700,000 , and was classified as current, with an accrued interest balance

of $ 488,711 .

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

rate, the discount received to resolve such outstanding payables is recognized as a gain on extinguishment of liabilities on the condensed

consolidated statement of operations.

Additionally, these negotiations relieved TicketSmarter of numerous future obligations

following fiscal year 2023.

On August 19, 2024, the parties

agreed to amend the note whereby the repayment dates were extended to begin on January 2, 2025 and continue at $ 54,000 for 50 consecutive

weeks plus interest.

Additionally, these negotiations relieved TicketSmarter of numerous future obligations following

fiscal year 2023.

August 19, 2024, the parties agreed to amend the note whereby the repayment dates were extended to begin on January 2, 2025 and continue

at $ 54,000 for 50 consecutive weeks plus interest.

The parties did not change any other provisions or terms of the note.

The amendment was determined to be a modification

of the note rather than an extinguishment and reissuance of a new note.

Payments totalling $ 22,000 have been made through June 30, 2025.

On March 20, 2025, the

parties agreed to a second modification of the TicketSmarter Related Party Note.

The modification eliminated all accrued interest

totaling $ 582,203

as of the date of the second modification, reduced the interest rate from 13.25 %

per annum to 8 %

per annum, and extended and reduced the repayment amount from $ 54,000

per week to $ 11,000

per week beginning April 1, 2025.

The modification was deemed to be an extinguishment of debt resulting in a gain on

extinguishment of note payable – related party of $ 1,249,372

The amendment

was determined to be a modification of the note rather than an extinguishment and reissuance of a new note.

Payments totaling $ 22,000

have been made through September 30, 2025.

March 20, 2025, the parties agreed to a second modification of the TicketSmarter Related Party Note.

The modification eliminated all

accrued interest totaling $ 582,203 as of the date of the second modification, reduced the interest rate from 13.25 % per annum to 8 % per

annum, and extended and reduced the repayment amount from $ 54,000 per week to $ 11,000 per week beginning April 1, 2025.

The modification

was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable – related party of $ 1,249,372

during the three months ended March 31, 2025.

At the time of the modification, management considered the officer’s lack Company-wide policy making authority

and de-minimis beneficial ownership in the Company to determine that in its estimation the officer did not act in his capacity as an equity

holder in the Company when negotiating the March 20, 2025 debt modification.

On June 4, 2025, the parties

agreed to a third modification of the TicketSmarter Related Party Note.

The modification reduced the outstanding principal amount from

$ 2,678,000 to $ 2,000,000 , eliminated all accrued interest totaling $ 43,515 as of the date of the third modification, the interest rate

remained at 8 % per annum, and extended and reduced the repayment amount from $ 11,000 per week to $ 9,600 per week beginning January 1, 2026.

The modification was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable – related party

of $ 622,622 during the three and six months ended June 30, 2025.

At the time of the June

4, 2025 modification, management considered the repetitive nature of the modifications as an indication that the Officer was acting

more in his capacity as an equity holder than as a creditor.

In addition, management reconsidered the accounting treatment for the

March 20, 2025 modification and changed its estimate whereby, the officer was more likely than not acting in his capacity as an

equity holder in the Company when negotiating the March 20, 2025 debt modification, as well.

At the time of the modification, management considered the officer’s lack Company-wide

policy making authority and de-minimis beneficial ownership in the Company to determine that in its estimation the officer did not act

in his capacity as an equity holder in the Company when negotiating the March 20, 2025 debt modification.

June 4, 2025, the parties agreed to a third modification of the TicketSmarter Related Party Note.

The modification reduced the outstanding

principal amount from $ 2,678,000 to $ 2,000,000 , eliminated all accrued interest totaling $ 43,515 as of the date of the third modification,

the interest rate remained at 8 % per annum, and extended and reduced the repayment amount from $ 11,000 per week to $ 9,600 per week beginning

January 1, 2026.

The modification was deemed to be an extinguishment of debt resulting in a gain on extinguishment of note payable –

related party of $ 622,622 during the three and nine months ended September 30, 2025.

the time of the June 4, 2025 modification, management considered the repetitive nature of the modifications as an indication that the

Officer was acting more in his capacity as an equity holder than as a creditor.

In addition, management reconsidered the accounting treatment

for the March 20, 2025 modification and changed its estimate whereby, the officer was more likely than not acting in his capacity as

an equity holder in the Company when negotiating the March 20, 2025 debt modification, as well.

As a result, the Company determined to

treat the $622,622 gain on the June 4, 2025 modification as a deemed contribution of capital rather than a gain recognized in the

condensed consolidated statement of operations.

In addition, the Company reconsidered the accounting treatment for the $1,249,372

gain on the March 20, 2025 modification and determined to treat it as a deemed contribution of capital rather than a gain recognized

in the condensed consolidated statement of operations.

Therefore the $1,249,372 gain on the March 20, 2025 modification was reversed

during the quarter ended June 30, 2025 and recorded as a deemed contribution of capital rather than a gain recognized in the

condensed consolidated statement of operations.

Company Related Party Note

On August 22, 2024, Digital

Ally’s Chief Executive Officer, made a loan in the amount of $ 100,000 to the Company to support its operations.

In addition, on

October 24, 2024, Digital Ally’s Chief Executive Officer, made an additional loan in the amount of $ 40,000 to the Company to support

its operations.

These transactions were recorded as related party notes payable (the “Company Related Party Notes”).

Related Party Notes bear interest at prime rate ( 8.00 % as of June 30, 2025 and December 31, 2024) per annum with repayment due on demand.

The Company paid off the Company Related Party Notes in full during the six months ended June 30, 2025.

As of December 31, 2024, the entire

Company Related Party note of $ 140,000 , is classified as current, with an accrued interest balance of $ 3,465 .

The Company Related Party

Notes balance is $- 0 - and $ 140,000 and an accrued interest balance of $- 0 - and $ 3,465 as of June 30, 2025 and December 31, 2024, respectively.

Master Distribution Agreement

On June 11, 2025 the Company entered

into an exclusive global Master Distribution Agreement with Redwood Scientific Technologies, (“Redwood”) granting the Company

the rights to distribute Redwood’s nicotine cessation products, including TBX-Free and TBX Vape-Free.

This strategic partnership

positions Digital Ally as the commercialization partner for products aimed at helping Americans overcome addiction to cigarettes and vape

Redwood is preparing to validate the efficacy of these products as it prepares to submit its products for clinical trials utilizing

a double-blind, randomized scientific study to support the efficacy of such products No sales or marketing of the product will occur until

the clinical study concludes and the efficacy is evaluated and confirmed.

There can be no assurance whether and when the clinical study will be concluded and what the ultimate results

The agreement provides the Company

with comprehensive rights to Redwood’s technologies, brands, trademarks, manufacturing processes, vendor relationships, and additional

The two key products, TBX-Free and TBX Vape-Free, are designed to address significant health concerns.

TBX-Free targets traditional

cigarette smokers, while TBX Vape-Free is the first-of-its-kind oral thin-film solution specifically designed for vape users, addressing

a critical gap in addiction treatment options.

The Company paid $50,000 on July

8, 2025 to enter into the global Master Distribution Agreement with Redwood which included warrants to acquire a minority ownership position

in Redwood for a period of 5 years.

The Company’s CEO and CFO are minority beneficial shareholders of Redwood.

There have been no

other transactions during the three and six months ended June 30, 2025, between the Company and Redwood.

treat the $ 622,622 gain on the June 4, 2025 modification as a deemed contribution of capital rather than a gain recognized in the condensed

consolidated statement of operations.

In addition, the Company reconsidered the accounting treatment for the $ 1,249,372 gain on the March

20, 2025 modification and determined to treat it as a deemed contribution of capital rather than a gain recognized in the condensed consolidated

statement of operations.

Therefore the $ 1,249,372 gain on the March 20, 2025 modification was reversed during the quarter ended June

30, 2025 and recorded as a deemed contribution of capital rather than a gain recognized in the condensed consolidated statement of operations.

Related Party Note

August 22, 2024, Digital Ally’s Chief Executive Officer, made a loan in the amount of $ 100,000 to the Company to support its operations.

In addition, on October 24, 2024, Digital Ally’s Chief Executive Officer, made an additional loan in the amount of $ 40,000 to the

Company to support its operations.

These transactions were recorded as related party notes payable (the “Company Related Party

The Company Related Party Notes bear interest at prime rate ( 8.00 % as of September 30, 2025 and December 31, 2024) per

annum with repayment due on demand.

The Company paid off the Company Related Party Notes in full during the nine months ended September

As of December 31, 2024, the entire Company Related Party note of $ 140,000 , is classified as current, with an accrued interest

balance of $ 3,465 .

The Company Related Party Notes balance is $- 0 - and $ 140,000 and an accrued interest balance of $- 0 - and $ 3,465 as

of September 30, 2025 and December 31, 2024, respectively.

Distribution Agreement

June 11, 2025 the Company entered into an exclusive global Master Distribution Agreement with Redwood Scientific Technologies, (“Redwood”)

granting the Company the rights to distribute Redwood’s nicotine cessation products, including TBX-Free and TBX Vape-Free.

strategic partnership positions Digital Ally as the commercialization partner for products aimed at helping Americans overcome addiction

to cigarettes and vape devices.

Redwood is preparing to validate the efficacy of these products as it prepares to submit its products

for clinical trials utilizing a double-blind, randomized scientific study to support the efficacy of such products No sales or marketing

of the product will occur until the clinical study concludes and the efficacy is evaluated and confirmed.

There can be no assurance whether

and when the clinical study will be concluded and what the ultimate results will be.

agreement provides the Company with comprehensive rights to Redwood’s technologies, brands, trademarks, manufacturing processes,

vendor relationships, and additional assets.

The two key products, TBX-Free and TBX Vape-Free, are designed to address significant health

TBX-Free targets traditional cigarette smokers, while TBX Vape-Free is the first-of-its-kind oral thin-film solution specifically

designed for vape users, addressing a critical gap in addiction treatment options.

Company paid $ 50,000 on July 8, 2025 to enter into the global Master Distribution Agreement with Redwood which included warrants to acquire

a minority ownership position in Redwood for a period of 5 years.

The Company’s CEO and CFO are minority beneficial shareholders

There have been no other transactions during the three and nine months ended September 30, 2025, between the Company and

GAIN ON EXTINGUISHMENT OF LIABILITIES

The Company recorded gains

on the extinguishment of liabilities for the three months ended June 30, 2025 and 2024 of $ 10,619 , and $- 0 -, respectively, and $ 2,230,716 ,

and $ 682,345 for the six months ended June 30, 2025 and 2024, respectively.

The gains reflect income related to the video solutions and

entertainment segment’s ability to negotiate down payables and other contract obligations during the three months ended June 30,

2025 utilizing funds generated by the closing of the February 2025 public equity offering on February 13, 2025.

The discount received

was recognized as a gain on extinguishment of liabilities in the condensed consolidated statement of operations for the three and six

months ended June 30, 2024.

The gain on extinguishment

of liabilities was $ 682,345 for the six months ended June 30, 2024, reflects income related to the entertainment segment’s ability

to negotiate down payables and other contract obligations during the period.

The Company utilized funds from the related party note payable

to resolve numerous outstanding payables at a discounted rate, the discount received was recognized as a gain on extinguishment of liabilities

in the condensed consolidated statement of operations for the six months ended June 30, 2024.

Company recorded gains on the extinguishment of liabilities for the three months ended September 30, 2025 and 2024 of $ 13,275 , and $ 9,385 ,

respectively, and $ 2,243,991 , and $ 691,730 for the nine months ended September 30, 2025 and 2024, respectively.

The gains reflect income

related to the video solutions and entertainment segment’s ability to negotiate down payables and other contract obligations during

the three months ended September 30, 2025 utilizing funds generated by the closing of the February 2025 public equity offering on February

The discount received was recognized as a gain on extinguishment of liabilities in the condensed consolidated statement of

operations for the three and nine months ended September 30, 2024.

gain on extinguishment of liabilities was $ 691,730 for the nine months ended September 30, 2024, reflects income related to the entertainment

segment’s ability to negotiate down payables and other contract obligations during the period.

The Company utilized funds from

the related party note payable to resolve numerous outstanding payables at a discounted rate, the discount received was recognized as

a gain on extinguishment of liabilities in the condensed consolidated statement of operations for the nine months ended September 30,

NET LOSS PER SHARE

The calculations of the weighted

average number of shares outstanding and loss per share outstanding for the three and six months ended June 30, 2025 and 2024

are as follows:

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

September 30, 2025 and 2024 are as follows:

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

Three Months Ended

Six months ended

September 30,

Nine months ended

September 30,

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

12 unchanged sentences

$ ( 7,793.63 )

Basic loss per share is

based upon the weighted average number of shares of Common Stock outstanding during the period.

For the three and six months ended

June 30, 2025 and 2024, all shares issuable upon the exercise of outstanding stock options and warrants were antidilutive, and,

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

loss per share is based upon the weighted average number of shares of Common Stock outstanding during the period.

For the three and nine

months ended September 30, 2025 and 2024, all shares issuable upon the exercise of outstanding stock options and warrants were antidilutive,

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

COUNTRY STAMPEDE ACQUISITION

On March 1, 2024, Kustom 440,

entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment, LLC, a Kansas limited liability

company (“JC Entertainment”).

Pursuant to the Acquisition Agreement, Kustom 440 acquired certain assets associated with a

music entertainment event (“Country Stampede”), including all intellectual property arising out of and relating to Country

Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment is a party to host and

operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede Intellectual Property,

the “Purchased Assets”).

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.

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 all claims, liabilities, costs, suits, or the like relating to such

refund request.

The Company accounts for business

combinations using the acquisition method and 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 condensed

consolidated 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) in relation 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.

of operations of acquired businesses are included in the condensed consolidated statement of operations from the acquisition date.

The 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 has finalized the estimated fair value of assets

acquired, and liabilities assumed in the Country Stampede Acquisition which are as follows:

March 1, 2024, Kustom 440, entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment,

LLC, a Kansas limited liability company (“JC Entertainment”).

Pursuant to the Acquisition Agreement, Kustom 440 acquired

certain assets associated with a music entertainment event (“Country Stampede”), including all intellectual property arising

out of and relating to Country Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment

is a party to host and operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede

Intellectual Property, the “Purchased Assets”).

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 all claims, liabilities, costs, suits, or the like relating

to such refund request.

Company accounts for business combinations using the acquisition method and 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 condensed consolidated 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) in relation 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 condensed consolidated

statement of operations 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 has finalized the estimated

fair value of assets acquired, and liabilities assumed in the Country Stampede Acquisition which are as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

9 unchanged sentences

Total Country Stampede Acquisition purchase price

During the measurement period

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

is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts

of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that

existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date.

There were no additional assets or liabilities recognized during the measurement period that ended March 1, 2025, the amounts of assets

or liabilities previously recognized on a preliminary basis are now final.

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

conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there

could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained

about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these

assets or liabilities as of that date.

There were no additional assets or liabilities recognized during the measurement period that ended

March 1, 2025, the amounts of assets or liabilities previously recognized on a preliminary basis are now final.

OPERATING SEGMENTS

The Company adopted ASU 2023-07

in 2024 and applied the amendment retrospectively to all periods presented in the Company’s condensed consolidated financial statements.

Segment financial information is prepared in accordance with GAAP and our significant accounting policies described in Note 1.

are allocated and performance is assessed using segment operating income by our Chief Executive Officer, whom we have determined to be

our Chief Operating Decision Maker (“CODM”).

Our CODM utilizes segment operating income when making decisions about allocating

capital and personnel to the segments, predominantly in the annual budget and quarterly forecasting processes.

In addition, our CODM uses

operating income, including comparison of actual results to budget and forecast, in assessing the performance of each segment and in evaluating

product pricing, distribution strategies and marketing investments.

Our CODM reviews balance sheet information at a consolidated level.

We compute segment operating income based on net sales revenue, less cost of goods sold, SG&A, asset impairment charges and restructuring

The SG&A used to compute each segment’s operating income is directly associated with the segment.

We do not allocate

non-operating income and expense, including interest or income taxes, to operating segments.

We operate in three strategic

business segments.

Company adopted ASU 2023-07 in 2024 and applied the amendment retrospectively to all periods presented in the Company’s condensed

consolidated financial statements.

Segment financial information is prepared in accordance with GAAP and our significant accounting policies

described in Note 1.

Resources are allocated and performance is assessed using segment operating income by our Chief Executive Officer,

whom we have determined to be our Chief Operating Decision Maker (“CODM”).

Our CODM utilizes segment operating income when

making decisions about allocating capital and personnel to the segments, predominantly in the annual budget and quarterly forecasting

In addition, our CODM uses operating income, including comparison of actual results to budget and forecast, in assessing the

performance of each segment and in evaluating product pricing, distribution strategies and marketing investments.

Our CODM reviews balance

sheet information at a consolidated level.

We compute segment operating income based on net sales revenue, less cost of goods sold, SG&A,

asset impairment charges and restructuring charges.

The SG&A used to compute each segment’s operating income is directly associated

with the segment.

We do not allocate non-operating income and expense, including interest or income taxes, to operating segments.

operate in three strategic business segments.

The Video Solutions Segment encompasses our law, commercial, and shield divisions.

This segment includes both service

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

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

throughout the country, as a monthly service fee.

The Entertainment Segment acts as an intermediary between ticket buyers and sellers

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

The Company’s corporate

administration activities are reported in the corporate line item.

These activities primarily include expense related to certain corporate

officers and support staff, certain accounting staff, expense related to the Company’s Board of Directors, stock option expense

for options granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of

the Company’s legal, auditing and professional fee expenses.

Corporate identifiable assets primarily consist of cash, invested cash

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

Summarized financial information

for the Company’s reportable business segments is provided for the three months ended June 30, 2025, and 2024:

segment includes both service and product revenues through our subscription models offering cloud and warranty solutions, and hardware

sales for video and health safety solutions.

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

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

The Entertainment Segment acts as an intermediary

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

sellers to then sell through various platforms.

Company’s corporate administration activities are reported in the corporate line item.

These activities primarily include expense

related to certain corporate officers and support staff, certain accounting staff, expense related to the Company’s Board of Directors,

stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities,

and a portion of the Company’s legal, auditing and professional fee expenses.

Corporate identifiable assets primarily consist of

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

financial information for the Company’s reportable business segments is provided for the three months ended September 30, 2025,

SCHEDULE OF SEGMENT REPORTING

Three months ended June 30, 2025

Video Solutions

2 unchanged sentences

Corporate and other

Three months ended September 30, 2025

Video Solutions

Entertainment

cycle Management

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Less significant segment expense

Cost of Revenue - Product

Cost of Revenue – Service and

Cost of Revenue – Service and other

Research and development expense

Selling, advertising and

promotional expense

General and administrative

Selling, advertising and promotional expense

Goodwill and intangible asset impairment charge

General and administrative expense

Total segment operating income (loss)

2 unchanged sentences

( 1,121,782 )

$ ( 4,095,073 )

Non-operating (expenses) income:

Interest income

Interest expense

2 unchanged sentences

Gain on extinguishment of debt – related party

Gain on sale of property, plant and equipment

Gain on sale of intangibles

Other non-operating income (loss)

4 unchanged sentences

Total identifiable assets, net of

Three months ended June 30, 2024

Video Solutions

2 unchanged sentences

Corporate and other

Three months ended September 30, 2024

Video Solutions

Entertainment

cycle Management

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Less significant segment expenses:

Cost of Revenue - Product

Cost of Revenue – Service and

Research and development

Selling, advertising and

promotional expense

General and administrative

Total segment operating

income (loss)

Cost of Revenue – Service and other

Research and development expense

Selling, advertising and promotional expense

Goodwill and intangible asset impairment charge

General and administrative expense

Total segment operating income (loss)

$ ( 1,516,934 )

3 unchanged sentences

Non-operating (expenses) income:

Interest income

Interest expense

( 1,085,063 )

Change in fair value of derivative liabilities

Other Other income (expense)

Gain on the extinguishment of debt

Other non-operating income (loss), net

Loss on extinguishment of debt

Gain on sale of property, plant and equipment

Total non-operating income (loss)

( 1,096,330 )

Loss before income tax benefit (provision)

$ ( 5,470,712 )

Depreciation and amortization

Total identifiable assets, net of

Summarized financial information

for the Company’s reportable business segments is provided for the six months ended June 30, 2025, and 2024:

Six months ended June 30, 2025

Depreciation and amortization expense

Total identifiable assets, net of eliminations

financial information for the Company’s reportable business segments is provided for the nine months ended September 30, 2025,

Video Solutions

2 unchanged sentences

Corporate and other

Nine months ended September 30, 2025

Video Solutions

Entertainment

cycle Management

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Less significant segment expenses:

Cost of Revenue - Product

Cost of Revenue – Service and

Cost of Revenue – Service and other

Research and development expense

Selling, advertising and

promotional expense

General and administrative

Selling, advertising and promotional expense

General and administrative expense

Total segment operating income (loss)

3 unchanged sentences

Non-operating (expenses) income:

Interest income

Interest expense

5 unchanged sentences

Income before income tax benefit (provision)

$ ( 1,185,464 )

Depreciation and amortization expense

Total identifiable assets, net of

Six months ended June

Total identifiable assets, net of eliminations

Video Solutions

2 unchanged sentences

Corporate and other

Nine months ended September 30, 2024

Video Solutions

Entertainment

cycle Management

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Less significant segment expenses:

Cost of Revenue - Product

Cost of Revenue – Service and

Research and development

Selling, advertising and

promotional expense

General and administrative

Total segment operating

income (loss)

Cost of Revenue – Service and other

Cost of Revenue

Research and development expense

Selling, advertising and promotional expense

Goodwill and intangible asset impairment charge

General and administrative expense

( 3,260,740 )

Total segment operating income (loss)

$ ( 1,909,246 )

$ ( 3,987,415 )

$ ( 3,955,761 )

$ ( 5,083,070 )

$ ( 14,935,492 )

Non-operating (expenses) income:

Interest income

Interest expense

( 2,505,536 )

Change in fair value of derivative liabilities

Other Other income (expense)

Gain on the extinguishment of liabilities

Other non-operating income (loss), net

Loss on extinguishment of debt

Gain on sale of intangibles

Gain on sale of property, plant and equipment

Total non-operating income (loss)

Loss before income tax benefit (provision)

Depreciation and amortization

Total identifiable assets, net of

The segment net revenues reported

above represent sales to external customers.

Segment gross profit represents net revenues less cost of revenues.

Segment operating income,

which is used in management’s evaluation of segment performance, represents net revenues, less cost of revenues, less all operating

$ ( 14,424,531 )

Depreciation and amortization expense

Total identifiable assets, net of eliminations

segment net revenues reported above represent sales to external customers.

Segment gross profit represents net revenues less cost of

Segment operating income, which is used in management’s evaluation of segment performance, represents net revenues, less

cost of revenues, less all operating expenses.

Identifiable assets are those assets used by each segment in its operations.

Corporate assets primarily consist of cash, property,

plant and equipment, accounts receivable, inventories, and other assets.

assets primarily consist of cash, property, plant and equipment, accounts receivable, inventories, and other assets.

SUBSEQUENT EVENTS

On July 31, 2025, the Company

received notification of partial compliance (the “Letter) from Nasdaq regarding the deficiencies identified in Note 9 – Commitments

and Contingencies.

The Letter advised the Company that the Nasdaq Hearings Panel found that the Company had regained compliance with Listing

Rules regarding the Bid Price Rule and the Periodic Report Rule, and the Equity Rule as required by the Panel’s decision dated May

The Letter noted that in

the Panel’s May 1, 2025 decision, should the company fail to maintain compliance with any listing rule prior to September 2, 2025,

it will remain subject to delisting.

In addition, the Letter advised the Company that if the Company remains in compliance with all continued

listing requirements through September 2, 2025, the Panel intends to impose a Discretionary Panel Monitor to monitor the Company’s

ongoing compliance with the Nasdaq’s continued listing standards for a period of time.

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

Notifications

October 17, 2025, the Company received notice from Nasdaq that notified the Company that it had regained full compliance with the Minimum

Bid Price Requirement and Stockholders’ Equity Requirement.

The Nasdaq has now placed the Company under a one-year Discretionary

Panel Monitor.

Under the Discretionary Panel Monitor, the Company will not be permitted to request additional time to regain compliance

with any deficiencies that occur within the one-year period regarding noncompliance with the Periodic Filing or Bid Price Rules.

one-year period expires on July 31, 2026 with regard to the Periodic Filing Rules and September 2, 2026 regarding the Bid Price Rules.

Meeting (scheduled)

Company’s annual meeting of stockholders was originally scheduled to occur on November 3, 2025, however it has been postponed pending resolution of the US Government

shutdown including the re-opening of the Securities and Exchange Commission.

The Company’s annual meeting of stockholders will be

held for the following

elect four directors.

ratify the appointment of Victor Mokuolu CPA PLLC as our independent registered public accounting firm;

approve the transactions contemplated by the securities purchase agreement, entered into as of September 15, 2025, by and between the

Company and a certain institutional investor, including, the issuance of 20 % or more of our outstanding shares of our Common Stock, par

value $ 0.001 per share (“Common Stock”) upon (i) conversion of the senior secured convertible notes due September 15, 2026,

and (ii) exercise of the Common Stock Purchase Warrants dated September 15, 2025.

approve the transactions contemplated by the Common Stock purchase agreement, entered into as of September 15, 2025 (the “ELOC

Purchase Agreement”), by and between the Company and a certain institutional investor, including, the issuance of 20 % or more of

our outstanding shares of Common Stock pursuant to the ELOC Purchase Agreement.

approve the amendment to the 2022 Digital Ally, Inc.

Stock Option and Restricted Stock Plan which increases the number of shares reserved

for issuance under such Plan by 375,000 shares of Common Stock;

approve a non-binding advisory proposal to approve the compensation paid to the Company’s named executive officers;

approve a non-binding advisory proposal on the frequency of the stockholder advisory vote on executive compensation;

consider and act upon such other business as may properly come before the Annual Meeting or any adjournment thereof.

Issuance of restricted common stock

7, 2025, the Company issued an aggregate of 171,015 shares of the Company’s common stock to the ELOC Investor (see Note 5) as part

of the 3 % commitment fee owed under the ELOC Purchase Agreement.

The shares were issued in book-entry form as Rule 144 restricted stock

however the Company is expected to file a Registration Statement on Form S-1 to register these shares.

this issuance, the Company’s total shares outstanding increased from 1,727,421 to 1,898,436 .

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