What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-04-13 compared with 2025-05-02 · 584 added, 599 removed, 415 unchanged (74% of the section changed)

Management’s Discussion

and Analysis of Financial Condition and Results of Operation.

and Analysis of Financial Condition and Results of Operations.

discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange

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Trends and Recent Developments for the Company

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

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

and mass transit markets.

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

positive solutions to our customers’ requests.

Solutions Operating Segment – Within our Video Solutions Segment, we supply technology-based products utilizing our portable

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

transit markets.

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

solutions to our customers’ requests.

Our products include:

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

video systems for law enforcement and commercial markets;

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

and the FirstVU HD;

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

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

EVO Web Portal, which is our cloud-based evidence management system for

Law enforcement and commercial market;

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

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

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

We further diversified and broadened our product offerings

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

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

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

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

video solutions segment revenue encompasses video recording products and services for our law enforcement and commercial customers and

the sale of Shield disinfectant and personal protective products.

This segment generates revenues through our subscription models offering

cloud and warranty solutions, and hardware sales for video and personal protective safety products and solutions.

Revenues for product

sales are recognized upon delivery of the product, and revenues from our cloud and warranty subscription plans are deferred over the

term of the subscription, typically 3 or 5 years.

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

with the formation of our wholly owned subsidiary, Digital Ally Healthcare, Inc., and its majority-owned subsidiary Nobility

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

and has since completed three additional acquisitions of private medical billing companies, in which we will assist in providing

working capital and back-office services to healthcare organizations throughout the country.

Our assistance consists of insurance

and benefit verification, medical treatment documentation and coding, and collections.

Through our expertise and experience in this

field, we maximize our customers’ service revenues collected, leading to substantial improvements in their operating margins

and cash flows.

revenue cycle management segment consists of our medical billing subsidiaries.

Revenues of this segment are recognized after we perform

the obligations of our revenue cycle management services.

Our revenue cycle management services are services, performed and charged monthly,

generally based on a contractual percentage of total customer collections, for which we recognize our net service fees.

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

systems for law enforcement and commercial markets;

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

the FirstVU HD;

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

automatic activation for both law enforcement and commercial markets;

EVO Web Portal, which is our cloud-based evidence management system

for Law enforcement market;

the EVO Fleet, FLT-250, DVM-250, and DVM-250 Plus, which are our commercial line of digital video products

that serve as “event recorders” for the commercial fleet and mass transit markets;

and FleetVu, which is our cloud-based evidence

management systems.

Video Solutions Segment revenue encompasses sales of video recording products and related services for law enforcement and commercial

customers, as well as sales of Shield™ disinfectant and personal protective products.

This segment generates revenue through both

product sales and subscription-based models that offer cloud storage, evidence management, and extended warranty solutions.

from product sales are recognized upon delivery, while revenues associated with subscription and service plans are deferred and recognized

over the respective contract term, typically 3 to 5 years.

Recent trends reflect continued demand from law enforcement and commercial

fleet customers for integrated body-worn and in-car video solutions, offset by a decline in disinfectant-related sales compared to prior

Management continues to focus on enhancing recurring revenue through subscription and cloud-based service offerings while aligning

production and inventory levels with current demand trends

Entertainment

Operating Segment - We also entered into live entertainment and events ticketing services through the formation of our wholly owned

subsidiary, TicketSmarter and its completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC, on September 1, 2021.

Operating Segment - We continue to operate our live entertainment and ticketing services through our wholly owned subsidiary, TicketSmarter,

which was established following the Company’s acquisitions of Goody Tickets, LLC and TicketSmarter, LLC on September 1, 2021.

TicketSmarter

provides ticket sales, partnerships, and mainly, ticket resale services through its online ticketing marketplace for live events, TicketSmarter.com.

TicketSmarter offers tickets for over 125,000 live events throughout the country through its platform, including concerts, sporting events,

theatres, and performing arts.

We also offer production and promotion of live music events in third-party venues throughout the country.

These services begin with the logistical matters of an event, including artist booking and research, ticketing, staging, on-site operations,

vendor sourcing, and day of production.

entertainment operating segment consists of entertainment services provided through TicketSmarter and its online platform, TicketSmarter.com.

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

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

Entertainment direct expenses include

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

maintenance fees, as well as other administrative costs.

provides primary and secondary ticketing, partnerships, and resale services through its online ticketing marketplace, TicketSmarter.com.

The platform offers tickets to more than 125,000 live events nationwide, including concerts, sporting events, theatre productions, and

performing arts.

In addition to ticketing, we produce and promote live music and entertainment events in third-party venues across the

United States.

These services include all aspects of event logistics, such as artist booking, ticketing, staging, vendor sourcing, on-site

operations, and day-of-event production management.

Our Entertainment Segment consists of entertainment services provided through TicketSmarter and its online platform,

TicketSmarter.com.

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

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

Entertainment direct expenses include the cost of tickets purchased for resale by the Company and held as inventory, credit card

fees, ticketing platform expenses, website maintenance fees, along with other administrative costs.

Cycle Management Segment (Discontinued Operations) - The Company entered the revenue cycle management business in the second

quarter of 2021 through the formation of its wholly owned subsidiary, Digital Ally Healthcare, and its majority-owned subsidiary,

Nobility Healthcare.

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

company, and subsequently completed additional acquisitions of private medical billing companies.

Through this segment, the Company provided

end-to-end revenue cycle management services to medical providers throughout the United States, including claim reimbursement billing,

insurance and benefits verification, medical treatment documentation and coding, and collection services.

The Revenue Cycle Management Segment consisted primarily of medical billing subsidiaries.

Revenues within this segment were derived from

service arrangements performed and billed monthly, generally calculated as a contractual percentage of customer collections.

was recognized as services were performed, and net service fees were recorded in accordance with applicable revenue recognition guidance.

January 8, 2026, the Company completed the sale of Nobility Healthcare.

As a result, the operations of the Revenue Cycle Management

Segment have been classified as discontinued operations in the Company’s consolidated financial statements.

to Note 22 – Operating Segments and Note 23 – Discontinued Operations in the Notes to Consolidated

Financial Statements for additional information regarding the Company’s segments and discontinued operations, including net sales,

operating earnings and total assets by segment.

of the Year Ended December 31, 2025 and 2024

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Video Solutions

Revenue Cycle Management

Entertainment

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Video Solutions

Revenue Cycle Management

Entertainment

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Video Solutions

Revenue Cycle Management

$ (1,199,855 )

Entertainment

Total Operating Income (Loss)

$ (10,882,421 )

$ (11,382,926 )

Depreciation and Amortization:

Video Solutions

Revenue Cycle Management

Entertainment

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Video Solutions

Revenue Cycle Management

Entertainment

Total Identifiable Assets

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

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

The Company recorded a reserve for excess and obsolete inventory

in the video solutions segment of $2,037,252 and $4,355,666 and a reserve for the entertainment segment of $132,403 and $186,795 as of

December 31, 2024 and 2023.

The segments recorded noncash items affecting the gross profit and operating income (loss)

through the established inventory reserves based on estimates of excess and/or obsolete current and non-current inventory.

recorded a reserve for excess and obsolete inventory in the Video Solutions Segment of $1,849,124 and $2,037,252 and a reserve for the

Entertainment Segment of $69,817 and $132,403 as of December 31, 2025 and 2024.

segment net revenues reported above represent sales to external customers.

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assets primarily consist of cash, property, plant and equipment, accounts receivable, inventories, and other assets.

Total identifiable assets for 2025 and 2024 include amounts related to

the discontinued Revenue Cycle Management Segment, which are included in the Corporate and Other category.

See Note 23, Discontinued

Operations , for additional information.

Sheet Arrangements

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components of revenue or expenses.

are a party to operating leases and license agreements that represent commitments for future payments (described in Note 15, “Commitments

and Contingencies,” to our consolidated financial statements) and we have issued purchase orders in the ordinary course of business

that represent commitments to future payments for goods and services.

are a party to operating leases and license agreements that represent commitments for future payments (described in Note 14, Operating

Lease, and Note 15, Commitments and Contingencies, to our consolidated financial statements) and we have issued purchase orders in

the ordinary course of business that represent commitments to future payments for goods and services.

the Years Ended December 31, 2025 and 2024

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Change in fair value of derivative liabilities

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

Loss on disposal of intangible assets

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Interest income and other income, net

Loss before income tax benefit

Loss before income tax benefit from operations

Income tax expense (benefit)

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

Net loss from discontinued operations, net of tax

Net loss attributable to common stockholders

Net loss per share information:

$ (33,488.74 )

by Type and by Operating Segment

operating segments generate two types of revenues:

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

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

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

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held in inventory by our Entertainment Segment until their sale.

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

solutions segment.

Our entertainment operating segment’s secondary ticketing marketplace revenues are included in service revenue.

and other revenues consist of cloud and warranty services revenues from our subscription plan and storage offerings of our Video Solutions Segment.

Our Entertainment Segments’ secondary ticketing marketplace revenues are included in service revenue.

We recognize service revenue from sales generated through its secondary ticketing marketplace as we collect net services fees on secondary

ticketing marketplace transactions.

Lastly, our revenue cycle management segment revenues are included in the service revenues for services

provided to medical providers throughout the country.

following table presents revenues by type and segment:

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Entertainment

Revenue cycle management

Total service and other revenues

Total revenues

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

Our Video Solutions Segment sells our products and services to customers in the following manner:

Sales to domestic customers

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shipment of the repair parts and acceptance of the service or materials by the end customer.

revenue cycle management operating segment sells its services to customers in the following manner:

Our revenue cycle management

operating segment generates service revenues through relationships with medium to large healthcare organizations, in which the underlying

service revenue is recognized upon execution of services.

Service revenues are generally determined as a percentage of the dollar

amount of medical billings collected by the customer.

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

Our entertainment operating

segment generates product revenues from the sale of tickets directly to consumers for a particular event that the entertainment operating

segment has previously purchased and held in inventory for ultimate resale to the end consumer.

Entertainment Segment sells our products and services to customers in the following manner:

Our Entertainment Segment generates product revenues from the sale of tickets directly to consumers for a particular event that the Entertainment Segment has previously purchased and held in inventory for ultimate resale to the end consumer.

Service sales through TicketSmarter,

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Video Solutions

Revenue Cycle Management

Entertainment

Total Product Revenues

Product revenues for the years ended December 31,

2024 and 2023 were $5,404,317 and $9,347,945, respectively, a decrease of $3,943,628 (42.2%), due to the following factors:

Revenues generated

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

The new entertainment

operating segment generated $3,406,928 in product revenues for the year ended December 31, 2024, compared to $5,044,576 for the year

ended December 31, 2023.

This product revenue relates to the first Country Stampede music festival held by Kustom during 2024, as

well as the resale of tickets purchased for live events, sporting events, concerts, and theatre, then sold through various platforms

to customers.

The decrease in revenues is attributable to a reduction in scope of primary ticket sales by Ticketsmarter as it focuses

on higher margin events to improve its gross margins.

The Company’s video

segment operating segment generated revenues totaling $1,997,389 during the year ended December 31, 2024 compared to $4,303,369 for

the year ended December 31, 2023.

In general, our video solutions operating segment has experienced pressure on its product revenues

as our in-car and body-worn systems are facing increased competition because our competitors have released new products with advanced

Additionally, our law enforcement revenues declined compared to the same period in 2023 due to the Company not having inventory

in–stock to fulfill existing backlog orders, price-cutting and competitive actions by our competitors and adverse marketplace

effects related to our recent financial condition.

Our video solutions operating

revenues for the years ended December 31, 2025 and 2024 were $4,337,276 and $5,404,317, respectively, representing a decrease of $1,067,041

(19.7%), driven by the following factors:

The Video Solutions Segment generated product revenues of $1,184,079 for the year ended December 31, 2025, compared to $1,997,389 for the year ended

December 31, 2024.

The decrease in product revenues was primarily due to increased competitive pressure as competitors introduced

new products with advanced features, continued price competition, and adverse market conditions related to the Company’s recent

financial condition.

In addition, product revenues declined as the Company experienced inventory constraints that limited its ability

to fulfill existing backlog orders during the year.

Revenues generated by the

Entertainment Segment began with the Company’s September 2021 acquisition of TicketSmarter.

The Entertainment Segment

generated $3,153,197 in product revenues for the year ended December 31, 2025, compared to $3,406,928 for the year ended December

These revenues primarily relate to the second Country Stampede music festival held by Kustom during 2025, as well as the

resale of tickets purchased for live events, sporting events, concerts, and theatre events and sold through various platforms to

The year-over-year decrease was primarily attributable to a reduction in the scope of primary ticket sales by

TicketSmarter, as management focused on higher-margin events in an effort to improve gross margins.

Our Video Solutions

Segment management has continued to focus on migrating commercial customers, from a hardware sale to a service fee model.

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without incurring a significant upfront capital outlay.

This program has gained some traction, resulting in decreased product revenues

and increasing our service revenues.

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

span of three to five years.

This program has gained some traction, resulting in decreased product

revenues and increasing our service revenues.

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

over a span of three to five years.

and other revenues by operating segment is as follows:

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Video Solutions

Revenue Cycle Management

Entertainment

Total Service and Other Revenues

and other revenues for the years ended December 31, 2024 and 2023 were $14,246,485 and $18,900,399, respectively, a decrease of $4,653,914

(25%), due to the following factors:

Cloud revenues generated

by the video solutions operating segment were $2,557,400 and $1,994,066 for the years ended December 31, 2024 and 2023, respectively,

an increase of $563,334 (28%).

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

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

to our increased cloud revenues in the year ended December 31, 2024.

We expect this trend to continue for 2025 as the migration from

local storage to cloud storage continues in our customer base.

Video solutions operating

segment revenues from extended warranty services were $822,839 and $860,337 for the years ended December 31, 2024 and 2023, respectively,

a decrease of $37,498 (4%).

T his correlates with consistent sales of hardware and additional

extended warranties sold during the year .

entertainment operating segment generated service revenues totaling $4,356,833 and $9,018,805 for the years ended December 31, 2024

and 2023, respectively, a decrease of $4,661,972 (52%).

TicketSmarter collects fees on transactions administered through the

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

We expect our entertainment

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

Our entertainment

segment has focused on cost cutting and overall improvements in gross margin rather than top line revenues which has resulted in a

reduction in revenues for ticketing events that did not meet its gross margin goals.

Our revenue cycle management

operating segment generated service revenues totaling $6,131,650 and $6,713,678 for the years ended December 31, 2024 and 2023, respectively,

a decrease of $582,028 (9%).

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

services to healthcare organizations throughout the country.

The decrease in revenue is due

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

Total revenues for the years ended

December 31, 2024, and 2023 were $19,650,802 and $28,248,344, respectively, a decrease of $8,597,542 (30%), due to the reasons noted above.

of Product Revenue

cost of product revenue sold for the years ended December 31, 2024, and 2023 was $5,899,130 and $9,974,890, respectively, a decrease

and other revenues for the years ended December 31, 2025 and 2024 were $9,416,879 and $8,114,835, respectively, representing an increase

of $1,302,044, or 16.0%, driven by the following factors:

revenues generated by the Video Solutions Segment were $2,578,179 and $2,557,400 for the years ended December 31, 2025

and 2024, respectively, representing an increase of $20,779 (0.8%).

revenues remained relatively stable year over year, reflecting continued customer adoption of the Company’s cloud-based solutions,

including evidence management, data storage, and related subscription services for law enforcement customers.

The slight increase

was primarily attributable to a combination of contract timing, customer budget constraints, and delayed purchasing decisions by

certain municipal and law enforcement agencies during 2025.

While demand for cloud-based solutions remains strong as agencies continue

migrating from local storage to cloud environments, the Company experienced modest pressure on renewals and new deployments as customers

evaluated capital spending priorities.

Management expects cloud revenues to remain a key component of the video solutions operating

segment, with future growth dependent on new product introductions, customer conversion activity, and overall public-sector spending

Revenues from extended warranty services generated by the Video Solutions

operating segment were $1,132,491 and $822,839 for the years ended December 31, 2025 and 2024, respectively, representing an increase

of $309,652 (37.6%).

Overall cost of goods sold for products as a percentage of product revenues for the years ended December 31, 2024,

and 2023 were 109% and 107%, respectively.

Cost of products sold by operating segment is as follows:

The increase was primarily driven by stable hardware

sales and consistent warranty attach rates across the Company’s in-car and body-worn camera product offerings.

Extended warranty services

continue to provide a predictable and recurring revenue stream tied to the installed base of video solutions hardware.

The year-over-year

growth reflects customer preference for longer-term coverage agreements to manage maintenance costs and system reliability, partially

offset by competitive pricing pressure and a slower pace of new hardware deployments during the year.

The Entertainment Segment generated service revenues of $5,500,201 and $4,356,833 for the years ended December 31, 2025 and

2024, respectively, representing an increase of $1,143,368 (26.2%).

increase in service revenues was primarily attributable to higher transaction volumes on the TicketSmarter platform, as well as increased

activity related to ticket resale services and associated transaction fees.

TicketSmarter earns service revenues by facilitating

the buying and selling of tickets for live events, including concerts, sporting events, and other entertainment venues, through its

online marketplace.

Growth during 2025 reflects continued expansion of platform usage, increased consumer engagement, and improved

monetization of ticketing transactions.

While service revenues increased significantly year over year, management continues to focus

on optimizing pricing, managing marketing spend, and improving gross margins within the entertainment operating segment, which may

result in continued variability in service revenues depending on event mix, market conditions, and strategic prioritization of profitability

over top-line growth.

revenues for the years ended December 31, 2025 and 2024 were $13,754,155 and $13,519,152, respectively, representing an increase of $235,003

of Product Revenue

Overall cost of product revenues for the years ended December 31, 2025

and 2024 was $6,333,622 and $5,899,130, respectively, representing an increase of $434,492 (7.4%).

Overall cost of product revenues as

a percentage of total product revenues for the years ended December 31, 2025 and 2024 was approximately 146% and 109%, respectively.

of products sold by operating segment is as follows:

Years Ended December 31,

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Video Solutions

Revenue Cycle Management

Entertainment

Total Cost of Product Revenues

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

allowance for excess and obsolete inventory in 2024, mostly surrounding the personal protective equipment product line.

Cost of product

sold as a percentage of product revenues for the video solutions segment decreased to 89% for the year ended December 31, 2024 as compared

to 112% for the year ended December 31, 2023.

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

December 31, 2024.

Cost of Product Revenues were $4,118,846 and $5,149,923 for the year ended December 31, 2024 and 2023, a decrease

of $1,031,077 (20%).

Cost of product sold as a percentage of product revenues for the entertainment segment increased to 121% for the

year ended December 31, 2024 as compared to 102% for the year ended December 31, 2023.

recorded $2,169,655 and $4,542,461 in reserves for obsolete and excess inventories for the years ended December 31, 2024 and 2023, respectively.

Total raw materials and component parts were $2,589,804 and $3,044,653 for the years ended December 31, 2024 and 2023, respectively,

a decrease of $454,849 (15%).

Finished goods balances were $2,161,011 and $5,322,693 for the years ended December 31, 2024 and December

31, 2023, respectively, a decrease of $3,161,682 (59%) which was attributable to a reduction in inventory for the video solutions product

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

The decrease in the inventory reserve is

primarily due to the disposal of obsolete inventory that was included in the reserves during 2024.

Additionally, the Company determined

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

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

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

December 31, 2024.

decrease in Video Solutions Segment cost of product revenues to $1,523,613 for the year ended December 31, 2025 from $1,780,284

for the year ended December 31, 2024 was primarily attributable to lower product volumes and changes in inventory reserve activity, including

reduced charges related to excess and obsolete inventory compared to the prior year.

Cost of product revenues as a percentage of product

revenues for the video solutions segment increased to approximately 129% for the year ended December 31, 2025 from approximately 89%

for the year ended December 31, 2024, reflecting the decline in product revenues during the period and the impact of fixed manufacturing

and overhead costs.

increase in Entertainment Segment cost of product revenues reflects higher absolute costs, with cost of product revenues increasing

to $4,810,009 for the year ended December 31, 2025 from $4,118,846 for the year ended December 31, 2024.

This represents an increase

of $691,163 (16.8%), which was primarily driven by changes in ticket inventory mix and higher write-offs of ticket inventory sold below

cost or unsold following event dates.

Cost of product revenues as a percentage of product revenues increased to approximately 153% for

the year ended December 31, 2025 compared to approximately 121% for the year ended December 31, 2024.

The Company recorded a reserve for excess and obsolete inventory in the

Video Solutions Segment of $1,849,124 and $2,037,252 as of December 31, 2025 and 2024, respectively, representing a decrease

of $188,128, or 9.2%.

The decrease in the reserve balance was primarily attributable to the disposal and utilization of inventory that

had been fully reserved in prior periods, as well as improved inventory management and lower on-hand inventory levels during 2025.

Company also recorded a reserve for excess and obsolete inventory in the entertainment operating segment of $69,817 and $132,403 as of

December 31, 2025 and 2024, respectively, representing a decrease of $62,586 (47.3%).

The reserve relates primarily to ticket inventory,

where certain items may sell below cost or become unsellable following the related event date and therefore require write-off.

in the reserve balance reflects reduced ticket inventory levels and management’s continued evaluation of inventory recoverability within

the entertainment operating segment.

The Company evaluates inventory reserves on a regular basis, considering factors such as historical

sales activity, expected future demand, inventory aging, and realizable value.

Management believes the recorded reserves for excess and

obsolete inventories are appropriate based on inventory levels and operating conditions as of December 31, 2025.

of Service Revenue

cost of service revenue sold for the years ended December 31, 2024, and 2023 was $8,262,340 and $12,510,970, respectively, a decrease

of $4,248,630 (34%).

Overall cost of goods sold for services as a percentage of service revenues for the years ended December 31, 2024,

and 2023 were 58% and 66%, respectively.

Cost of service revenues by operating segment is as follows:

cost of service revenues for the years ended December 31, 2025 and 2024 was $6,071,478 and $4,496,004, respectively, representing an

increase of $1,575,474 (35.0%).

Cost of service revenues as a percentage of total service revenues increased to approximately 64.5% for

the year ended December 31, 2025 compared to approximately 55.4% for the year ended December 31, 2024.

Cost of service revenues by operating

segment is as follows:

Years Ended December 31,

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Video Solutions

Revenue Cycle Management

Entertainment

Total Cost of Service Revenues

decrease in cost of service revenues for our video solutions segment demonstrates the leverage we are enjoying as we increase our service

revenues during the year ended December 31, 2024 compared to the year ended December 31, 2023.

Cost of service revenues as a percentage

of service revenues for the video solutions segment decreased to 33% for the year ended December 31, 2024 as compared to 43% for the

year ended December 31, 2023.

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

loss generating services being eliminated during the year.

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

cycle management operating segment increased to 61% for the year ended December 31, 2024 as compared to 59% for the year ended December

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

The Entertainment cost of service revenue was $3,243,791 for the year ended December 31, 2024, compared to $7,213,754 for the year ended

December 31, 2023.

Cost of service revenues as a percentage of service revenues for the entertainment segment decreased to 74% for the

year ended December 31, 2024 as compared to 80% for the year ended December 31, 2023.

Overall gross profit for the years

ended December 31, 2024 and 2023 was $5,489,332 and $5,762,484, respectively, a decrease of $273,152 (5%).

Gross profit by operating segment

was as follows:

The Video Solutions Segment cost of service revenues remained relatively stable, increasing slightly to $1,259,293 for the year

ended December 31, 2025 from $1,252,213 for the year ended December 31, 2024, an increase of $7,080 (0.6%).

Cost of service revenues

as a percentage of service revenues for the Video Solutions Segment decreased to approximately 32.1% for the year ended December

31, 2025 compared to approximately 33.3% for the year ended December 31, 2024.

This improvement reflects increased operating leverage,

as service revenues grew at a faster rate than the associated service delivery costs, driven primarily by higher utilization of the Company’s

cloud-based solutions and extended warranty services.

increase in entertainment operating segment cost of service revenues was primarily driven by higher transaction volumes and increased

service activity within the TicketSmarter platform, including payment processing, fulfillment, and other transaction-based costs.

of service revenues increased to $4,812,185 for the year ended December 31, 2025 from $3,243,791 for the year ended December 31, 2024,

an increase of $1,568,394 (48.3%).

Cost of service revenues as a percentage of service revenues for the entertainment operating segment

increased to approximately 87.5% for the year ended December 31, 2025 compared to approximately 74.5% for the year ended December 31,

The increase in cost as a percentage of service revenues reflects changes in transaction mix, higher variable processing costs,

and continued investments to support platform scale.

Management is focused on right-sizing the business and improving operational efficiency

to support long-term profitability and operational stability.

Overall gross profit for the years ended December 31, 2025 and 2024 was

$1,349,055 and $3,124,018, respectively, representing a decrease of $1,774,963, or 56.8%.

Gross profit by operating segment was as follows:

Years Ended December 31,

1 unchanged sentence

Video Solutions

Revenue Cycle Management

Entertainment

Total Gross Profit

decrease is commensurate with the decrease in overall revenues offset by a decrease in cost of goods sold across our video and entertainment segment for the year ended December

There was an overall decrease in the cost of sales as a percentage of overall revenues to 72% for the year ended December

31, 2024 from 80% for the year ended December 31, 2023.

This is primarily driven by large head-count reductions in our work force during the year ended December 31,

2024, a focus on right sizing recent acquisitions to increase profitability and a transition to a service subscription-based model in

our video solutions segment.

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

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

margins from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, EVO Fleet, FLT-250, DVM-250, DVM-250 Plus and our cloud evidence storage and management offering, provided that

they gain traction in the marketplace.

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

production, quantity purchases and more effective purchasing practices.

decrease in gross profit is commensurate with the decline in overall revenues and the increase in cost of revenue across both the Video Solutions Segment and Entertainment Segment for the year ended December 31, 2025.

Cost of revenue as a percentage of overall revenues

increased to approximately 90% for the year ended December 31, 2025 compared to approximately 77% for the year ended December 31, 2024,

resulting in a corresponding decline in gross margin.

This increase was driven primarily by lower product margins within the Entertainment Segment, including ticket inventory sold below cost or written off when unsold following event dates, as well as continued

pricing pressure within the video solutions operating segment.

During the year ended December 31, 2025, the Company implemented several

cost-containment and margin improvement initiatives, including workforce reductions, right-sizing of recent acquisitions, and a continued

transition toward a service and subscription-based revenue model within the Video Solutions Segment.

Management’s longer-term

objective is to improve gross margins through a more favorable revenue mix, increased adoption of higher-margin service offerings, and

operational efficiencies across the organization.

We plan to continue initiatives focused on more efficient management of our supply

chain, including outsourcing production where appropriate, optimizing purchase quantities, and implementing more effective purchasing

General and Administrative Expenses

general and administrative expenses were $20,690,872 and $28,003,037 for the year ended December 31, 2024 and 2023, respectively, a

decrease of $7,312,165 (26%).

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

into by the Company offset by the goodwill and intangible asset impairment charge.

Our selling, general and administrative expenses

as a percentage of sales increased to 105% for the year ended December 31, 2024 compared to 99% in the same period in 2023.

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

general and administrative expenses for the years ended December 31, 2025 and 2024 were $12,231,476 and $14,506,944, respectively, representing

a decrease of $2,275,468 (15.7%).

Selling, general and administrative expenses consist primarily of research and development expenses,

selling, advertising and promotional expenses, general and administrative expenses, and goodwill and intangible asset impairment charges.

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

Year ended December 31,

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and development expense.

Our research and development expenses totaled $1,339,673 and $2,618,746 for the year ended December

31, 2024 and 2023, respectively which represents a decrease of $1,279,073 (49%).

We have focused on controlling our expenditures on bringing

new products to market, including updates and improvements to current products in response to our decline in revenues.

The decrease in

research and development expense reflects the large cut-back in our engineering staff and research activities in order to right-size

our expenses in this area with our revenues.

Our research and development expenses totaled $551,447 and $1,339,673 for the years ended December 31,

2025 and 2024, respectively, representing a decrease of $788,226, or 58.8%.

The Company focused on controlling expenditures related to

the development of new products and enhancements to existing products during the year.

Research and development activities include engineering

costs, product design, testing, and related development efforts.

advertising and promotional expenses.

Selling, advertising and promotional expense totaled $2,144,494 and $7,137,529 for the

years ended December 31, 2024 and 2023, respectively, a decrease of $4,993,035 (70%).

The decrease in selling, advertising and promotional

expenses reflects the large cut-back in selling staff and promotional and advertising activities in order to right-size our expenses

in this area with our revenues.

In addition, the decrease is attributable to the reduction in new sponsorships being entered into by

the Company and its subsidiary TicketSmarter.

Selling, advertising and promotional expenses totaled $721,690 and $2,120,965 for the years

ended December 31, 2025 and 2024, respectively, representing a decrease of $1,399,275 (66%).

The decrease in selling, advertising and

promotional expenses reflects the large cut-back in selling staff and promotional and advertising activities in order to right-size our

expenses in this area with our revenues.

In addition, the decrease is attributable to the reduction in new sponsorships being entered

into by the Company and its subsidiary TicketSmarter.

and administrative expense .

General and administrative expenses totaled $12,376,705 and $18,246,762 for the year ended

December 31, 2024 and 2023, respectively which represents a decrease of $5,870,057 (32%).

The decrease in general and administrative expenses in the year ended December 31, 2024

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

in order to right-size our expenses in this area with our revenues.

The decrease in general and administrative expenses was offset

by a substantial increase legal and professional expenses for the year ended December 31, 2024 compared to the same period in 2023

due to the failed merger with CloverLeaf and various capital raises we have undertaken.

General and administrative expenses totaled $8,424,672 and $10,538,306 for the years ended December

31, 2025 and 2024, respectively, representing a decrease of $2,113,634 (20.1%).

The decrease in general and administrative expenses in

the year ended December 31, 2025 compared to the same period in 2024 is primarily attributable to a decrease in administrative salaries

and reductions in headcount in order to right-size our expenses in this area with our revenues.

and intangible asset impairment charge.

We performed an 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

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

a result of our impairment test, we concluded that the carrying amount of the revenue cycle management and entertainment reporting units

exceeded their estimated fair value.

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

the goodwill balance for the revenue cycle management segment, which was included in goodwill and intangible asset impairment charge

on our statement of operations for the year ended December 31, 2024.

In addition, we recorded a non-cash goodwill impairment charge of

$307,000, representing a portion of the goodwill balance for the entertainment segment, which was included in goodwill and intangible

asset impairment charge on our consolidated statements of operations for the year ended December 31, 2024.

The goodwill impairment was

primarily driven by recent performance of the entertainment reporting unit since our annual impairment testing date, as well as a delay

in the projected timing of recovery.

the year ended December 31, 2024, we 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 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 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 December

During the third fiscal quarter of 2024, management determined that triggering

events had occurred, including an additional decline in demand for services, prolonged economic uncertainty, the failure of a planned

split-off transaction to occur when and as expected, and a further decrease in our stock price.

As a result, we performed an interim impairment

test as of September 30, 2024.

Based on that interim test, we recorded a non-cash goodwill impairment charge of $307,000 related to the

entertainment segment and a non-cash trademark impairment charge of $201,000 related to the entertainment segment, for total continuing

operations impairment charges of $508,000 for the year ended December 31, 2024.

An additional non-cash goodwill impairment charge of $4,322,000

related to the revenue cycle management segment was recorded within discontinued operations during the same period.

No additional impairment

was identified in the December 31, 2024 annual roll-forward assessment.

performed our annual goodwill and intangible asset impairment test as of December 31, 2025 on a full quantitative basis.

Cycle Management Segment (Nobility Healthcare) was classified as discontinued operations prior to the measurement date and excluded from

the analysis.

Based on the results of the annual test, we concluded that no impairment existed with respect to the Video Solutions Segment,

where the indicated fair value of equity of $2,580,000 exceeded the segment’s carrying value of approximately $595,000.

With respect to the Entertainment Segment, we concluded that the carrying

amounts of certain goodwill and intangible assets exceeded their estimated fair values and recorded total non-cash impairment charges

of $2,533,667 for the year ended December 31, 2025, included in goodwill and intangible asset impairment charge on our consolidated statements

of operations.

We recorded a goodwill impairment charge of $1,428,000, representing the amount by which the carrying value of the Entertainment

Segment’s equity exceeded its estimated fair value, leaving a remaining goodwill balance of $4,377,507 as of December 31, 2025.

a full impairment charge of $746,667 related to the Sponsorship Agreement Network intangible asset, which failed the ASC 360 undiscounted

cash flow recoverability test, reducing its carrying value to $0.

We also recorded a trademark impairment charge of $189,000 related to

the TicketSmarter trade name, leaving a remaining carrying value of $210,000, and a trademark impairment charge of $170,000 related to

the Country Stampede trade name, leaving a remaining carrying value of $130,000, each as of December 31, 2025.

The Entertainment Segment

impairment charges were primarily driven by the segment’s continued operating losses, the fixed cost structure of festival operations,

the structural cost challenges within certain entertainment revenue streams, and the declining revenue contribution of the Sponsorship

Agreement Network.

For the reasons previously stated, our operating loss was $10,882,421 and

$22,240,553 for the years ended December 31, 2024 and 2023, respectively, an improvement of $7,039,013 (31.6%).

Operating loss as a percentage

of revenues improved to 77% in 2024 as compared to 78% in 2023.

income decreased to $69,509 for the year ended December 31, 2024, from $95,717 in 2023, which reflects our overall decline in our cash

and cash equivalent levels in 2024 compared to 2023.

incurred interest expenses of $3,815,323 and $3,134,253 during the years ended December 31, 2024 and 2023, respectively.

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

$11,382,926 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $500,505 (4.4%).

loss as a percentage of revenues was approximately 79% for the year ended December 31, 2025 compared to approximately 84% for the year

ended December 31, 2024.

income increased to $116,545 for the year ended December 31, 2025 from $69,509 in 2024, representing an increase of $47,036 (67.7%).

incurred interest expense of $1,102,352 and $3,816,317 during the years ended December 31, 2025 and 2024, respectively, representing

a decrease of $2,713,965 (71.1%).

Interest expense primarily consists of stated interest and the amortization of debt discounts associated

with convertible debt, revolving loan arrangements, and merchant advances.

income (expense)

income (expense) decreased to $26,733 for the year ended December 31, 2024, from $144,735 during the year ended December 31, 2023,

which reflects income related to a warehouse sublease within the corporate headquarters during 2023 which ceased in 2024 upon the sale of

the building.

Other income (expense) increased to $346,024 for the year ended December

31, 2025 from $26,733 during the year ended December 31, 2024, representing an increase of $319,291 (1,194.4%).

Other income (expense)

includes items such as income related to facility subleases, gains or losses on asset disposals, and other non-operating items.

on Litigation

Company recognized a loss on litigation of $1,959,396 and $1,792,308 during the years ended December 31, 2024 and 2023, respectively.

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

Considering the loss recorded

in 2024 and prior years the Company has reduced its net exposure to zero relative to this matter at December 31, 2024.

on Conversion of Convertible Debt

Company recognized a loss on conversion of convertible debt of $-0- and $1,112,705 during the years ended December 31, 2024 and 2023,

respectively.

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

from debt to equity and cash settlement of the convertible debt during the 2023 period.

Loss on Disposal of Intangible assets

During the year ended December

31, 2024, the Company’s video solutions segment disposed of its personal protection product line which held various EPA licenses

resulting in a loss on disposal of intangible assets $125,561.

This loss was offset by a gain on disposal of certain personal seat licenses

by the Company’s entertainment segment which resulted in a gain of $5,582 during the year ended December 31, 2024.

The Company recognized a loss on

litigation of $0 and $1,959,396 during the years ended December 31, 2025 and 2024, respectively.

This relates to the lawsuit with Culp

McAuley, Inc.

and primarily the collectability of the default judgment.

Based on amounts recorded in 2024 and prior years, the Company

had reduced its net exposure related to this matter to zero as of December 31, 2025.

on Disposal of Intangible assets

the year ended December 31, 2025, the Company did not recognize any gain or loss on the disposal of intangible assets.

During the year

ended December 31, 2024, the Company’s video solutions segment disposed of its personal protection product line, which held various

EPA licenses, resulting in a loss on disposal of intangible assets of $125,561.

This loss was partially offset by a gain of $5,582 recognized

by the Company’s entertainment segment related to the disposal of certain personal seat licenses during the same period.

in Fair Value of Derivative Liabilities

The change in fair value of the

warrant derivative liabilities for the years ended December 31, 2024 and 2023, respectively totaled a loss of $1,240,407 during the year

ended December 31, 2024 as compared to a gain of $1,846,642 during the year ended December 31, 2023.

During 2024, the Company issued

Series A and Series B detachable warrants in conjunction with its June 2024 capital raise.

The underlying warrant terms under both of

the Series A and Series B warrants provide for net cash settlement outside the control of the Company in the event of tender offers under

certain circumstances and requires reset provisions which were triggered upon the approval the warrant issuances by the Company’s

shareholders.

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

value at their issuance date and at each reporting date, with any subsequent changes reported in the consolidated statement of operations

as the change in fair value of warrant derivative liabilities.

The warrants were approved by shareholders at the Company’s annual

meeting on December 17, 2024, which triggered the reset provisions which resulted in an increase in the estimated fair value of the Series

A and Series B warrants.

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

convertible notes.

The Company issued an additional 1,195,219 warrants in June 2024.

The underlying warrant terms provide for net cash

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

As such, the Company is required

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

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

in Fair Value of Contingent Consideration Promissory Notes

the year ended December 31, 2023, the Company recognized a gain on the change in fair value of contingent consideration promissory notes

This is in connection with the four acquisitions made by our revenue cycle management segment.

There was no similar transaction

during the year ended December 31, 2024.

change in fair value of the warrant derivative liabilities for the years ended December 31, 2025 and 2024, respectively totaled a gain

of $3,331,616 during the year ended December 31, 2025 as compared to a loss of $1,240,407 during the year ended December 31, 2024.

Company has issued various detachable warrants in connection with capital raises during 2024 and 2025 that were required to be treated

as warrant derivative liabilities.

Warrant derivative liabilities are required to be marked-to-market at each balance sheet date with

the change in fair value recorded as a gain or loss in the Consolidated Statement of Operations.

on Extinguishment of Liabilities

Company recorded a gain on the extinguishment of liabilities for the year ended December 31, 2025 of $2,234,658, which reflects income

related to the video solutions and entertainment segment’s ability to negotiate down payables and contract liabilities during the

related to the Video Solutions Segment’s and Entertainment Segment’s ability to negotiate down payables and contract liabilities during the

year ended December 31, 2025.

In addition, the Company negotiated a termination of its lease on its former headquarters which resulted in a gain of $9,385

on the termination during the year ended December 31, 2024.

gain on extinguishment of liabilities was $550,867 for the year ended December 31, 2023, which reflects income related to the entertainment

segment’s ability to negotiate down payables and contract liabilities 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 statement of operations for the year ended December 31, 2023.

gain on extinguishment of liabilities was $917,935 for the year ended December 31, 2024, which reflects income related to the Video Solutions Segment’s and Entertainment Segment’s ability to negotiate down payables and contract liabilities during the year ended December 31, 2024,

including a gain of $9,385 on the termination of its former headquarters lease.

on Extinguishment of Debt

3 unchanged sentences

The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss during the year ended December 31,

November 7, 2024 the Company raised sufficient funds through a private placement which closed on November 7, 2024, to repay the

short-term merchant advance for its entertainment segment in full.

The Company’s full repayment of the outstanding obligations

under such amended note which effectively cured all then existing defaults and resulted in a loss of $374,007 from the

extinguishment of this debt during the year ended December 31, 2024.

November 7, 2024 the Company raised sufficient funds through a private placement which closed on November 7, 2024, to repay the short-term

merchant advance for its entertainment segment in full.

The Company’s full repayment of the outstanding obligations under such

amended note which effectively cured all then existing defaults and resulted in a loss of $374,007 from the extinguishment of this debt

during the year ended December 31, 2024.

the year ended December 31, 2024, the Company refinanced its merchant advance loan for its video segment and determined the refinancing

3 unchanged sentences

on Sale of Property, Plant and Equipment

Company reported a gain on sale of property, plant and equipment of $— and $360,082 during the years ended December 31, 2025 and

2024, respectively.

the year ended December 31, 2024, the Company sold its building for $5,900,000 less closing costs of $36,634.

The carrying amount of the

building on the date of sale was $5,461,623.

As a result of the sale the Company recorded a gain of $401,743 in the consolidated statement

of operations during the year ended December 31, 2024.

This amount was offset by a separate loss on sale of fixed assets of $41,661 for

the year ended December 31, 2024.

before Income Tax Benefit

The carrying amount of

the building on the date of sale was $5,461,623.

As a result of the sale the Company recorded a gain of $401,743 in the consolidated

statement of operations during the year ended December 31, 2024.

This amount was offset by a separate loss on sale of fixed assets of

$41,661 for the year ended December 31, 2024, resulting in a net gain of $360,082 included in the consolidated statement of operations.

from continuing operations before Income Tax Benefit

As a result of the above, we reported a net loss before income tax benefit

of $21,715,725 and $25,463,949 for the years ended December 31, 2024 and 2023, respectively, an improvement of $3,748,224 (15%).

of $5,955,930 and $17,898,105 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $11,942,175 (66.7%).

recorded an income tax benefit of $0 for the years ended December 31, 2025 and 2024, respectively.

4 unchanged sentences

have further determined to continue providing a full valuation reserve on our net deferred tax assets as of December 31, 2025.

2024, we increased our valuation reserve on deferred tax assets by $4,680,000 whereby our deferred tax assets continue to be fully reserved

due to our recent operating losses.

had approximately $168,405,000 of federal net operating loss carryforwards and $1,685,000 of research and development tax credit carryforwards

as of December 31, 2025 available to offset future net taxable income.

As a result of the above, we reported a net loss of $21,715,725 and $25,463,949

for the years ended December 31, 2024 and 2023, respectively, an improvement of $3,748,224 (15%).

Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

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

Loss from continuing operations

As a result of the above, we reported a net loss from continuing operations

of $5,955,930 and $17,898,105 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $11,942,175 (66.7%).

Income (Loss) Attributable to Noncontrolling Interests – Discontinued Operations

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

As a result, the noncontrolling shareholders

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

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

We reported net income (loss)

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

attributable to noncontrolling interests of consolidated subsidiary of $(687,516) and $(1,871,578) for the years ended December 31, 2025

and 2024, respectively.

Nobility Healthcare was subsequently sold in January 2026.

Loss Attributable to Common Stockholders

As a result of the above, we reported a net loss of $19,844,147 and $25,688,547

for the years ended December 31, 2024 and 2023, respectively, an improvement of $5,844,400 (23%).

As a result of the above, we reported a net loss attributable to common

stockholders of $6,671,508 and $19,844,147 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of

$13,172,639 (66.4%).

and Diluted Income/(Loss) per Share

The basic and diluted income/(loss) per share was ($5.58) and ($9.22) for

the years ended December 31, 2024 and 2023, respectively, for the reasons previously noted.

All outstanding stock options and common stock

purchase warrants were considered antidilutive and therefore excluded from the calculation of diluted loss per share for the years ended

December 31, 2024 and 2023 because all potentially dilutive securities were excluded from the computation because of the net loss reported

for both 2024 and 2023.

The basic and diluted loss per share from continuing operations was $(15.38)

and $(30,204.62) for the years ended December 31, 2025 and 2024, respectively.

The basic and diluted loss per share from discontinued

operations was $(1.85) and $(3,284.12) for the years ended December 31, 2025 and 2024, respectively, resulting in a net basic and diluted

loss per share attributable to common stockholders of $(17.23) and $(33,488.74) for the years ended December 31, 2025 and 2024, respectively.

All outstanding stock options and common stock purchase warrants were considered antidilutive and therefore excluded from the calculation

of diluted loss per share for the years ended December 31, 2025 and 2024.

and Capital Resources

Liquidity Plan.

We have experienced net losses and cash outflows from operating activities since inception.

Based upon our current

operating forecast, we anticipate that we will need to restore positive operating cash flows and/or raise additional capital in the short-term

to fund operations, meet our customary payment obligations and otherwise execute our business plan over the next 12 months.

We are continuously

in discussions to raise additional capital, which may include a variety of equity and debt instruments;

however, there can be no assurance

that our capital raising initiatives will be successful.

Our recurring losses and level of cash used in operations, along with uncertainties

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

The Company has incurred net losses and negative cash flows from operating activities since inception.

on current operating forecasts, management expects that the Company will need to restore positive operating cash flows and/or obtain

additional capital in the near term to fund operations, meet ongoing obligations, and execute its business plan over the next twelve

Management is actively engaged in discussions to raise additional capital, which may include equity and debt financing arrangements;

however, there can be no assurance that such efforts will be successful.

These conditions, including recurring losses, cash used in operations,

and uncertainty regarding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s

ability to continue as a going concern.

cash equivalents:

As of December 31, 2024, we had cash and cash equivalents with an aggregate balance of $454,314, a decrease from

a balance of $778,149 (including restricted cash) at December 31, 2023.

Summarized immediately below and discussed in more detail in

the subsequent subsections are the main elements of the $323,835 net decrease in cash during the year ended December 31, 2024:

As of December 31, 2025, we had cash and cash equivalents of $1,116,673,

compared to $454,314 as of December 31, 2024, representing a net increase of $662,359.

The December 31, 2024 cash balance includes $235,003

attributable to the discontinued Revenue Cycle Management Segment.

The changes in cash during the year ended December 31, 2025 resulted

from the following consolidated cash flow activities, which include cash flows from both continuing and discontinued operations.

Operating activities :

Net cash used in operating activities was $5,114,718 and $9,893,838 for

the years ended December 31, 2024 and 2023, respectively, an improvement of $4,779,120.

The decrease is attributable to the improved net

loss, an increase in noncash expenses such as non-cash interest expense and cash provided the change in operating assets and liabilities

during the year ended December 31, 2024 compared to the same period in 2023.

$8,269,956 of net cash used in operating activities for the year ended

December 31, 2025, compared to $5,114,718 for the year ended December 31, 2024.

Net cash used in operating activities reflects the results

of both continuing and discontinued operations and was primarily impacted by the Company’s net loss, changes in operating assets and liabilities,

and non-cash items including depreciation, amortization, and non-cash interest expense.

The Company paid a significant amount of trade

payables with proceeds from the various offerings of securities completed in 2025.

Cash flows related to discontinued operations primarily

reflect working capital activity associated with Nobility Healthcare prior to its classification as discontinued operations and subsequent

sale in January 2026.

Investing activities :

Net cash provided by (used in) investing activities was $387,549 and $(240,706)

for the years ended December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024, we made expenditures or received

cash for the following:

(i) sold our corporate headquarters building for $5,900,000 and received net cash of $425,653 after paying off

the building loan and various other deductions (ii) the acquisition of Country Stampede;

and (iii) received proceeds from the sale of

our aircraft.

$367,484 of net cash used in investing activities for the year ended December

31, 2025, compared to net cash provided by investing activities of $387,549 for the year ended December 31, 2024.

Investing activities

during 2025 primarily consisted of capital expenditures for property, plant and equipment and purchases of intangible assets, and also

included cash flows associated with discontinued operations.

The Company leased new facilities in 2025 which required certain tenant finish

expenditures before occupation.

The net cash provided by investing activities in 2024 was primarily driven by proceeds from the sale of

the Company’s building and aircraft.

Financing activities :

Net cash provided by financing activities was $4,403,334 and $7,380,494

for the years ended December 31, 2024 and 2023, respectively.

During 2024, we most notably refinanced a loan resulting in proceeds of

$1,144,000, obtained an additional merchant advance providing proceeds of $1,511,826, obtained $1,475,000 in new commercial extension

of credits, issued senior promissory notes with commitment shares resulting in $2,669,250 in net cash proceeds and issued common stock

with detachable warrants resulting in $2,194,745 in net cash proceeds.

The cash proceeds were partially offset by payments on outstanding

loans including the payments on merchant advances.

net result of these activities was a decrease in cash of $323,835 to $454,314 for the year ended December 31, 2024.

We had $454,314 of cash and cash equivalents and net negative working capital

of $19,377,507 as of December 31, 2024.

Accounts receivable and other receivables balances represented $5,446,098 of our net working capital

at December 31, 2024.

We intend to collect our outstanding receivables on a timely basis and reduce the overall level during 2025, which

would help to provide positive cash flow to support our operations during 2025.

Inventory represents $2,586,066 of our net working capital

at December 31, 2024.

We are actively managing the level of inventory and our goal is to reduce such level during 2025 by our sales activities,

the decrease of which should provide additional cash flow to help support our operations during 2025.

Expenditures:

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

Total lease expense under the Company’s operating leases was approximately $627,212 during the year ended

December 31, 2024.

The following sets forth the operating

lease right of use assets and liabilities as of December 31, 2024:

$9,299,798 of net cash provided by financing activities for the year ended

December 31, 2025, compared to $4,403,334 for the year ended December 31, 2024.

Financing activities in 2025 primarily consisted of net

proceeds from the February 2025 public equity offering of $14,308,300, proceeds from the issuance of senior secured convertible notes

of $832,500, and proceeds from an unsecured promissory note of $600,000, partially offset by repayments of the senior secured promissory

notes, merchant advances, and other debt obligations.

There were no financing cash flows attributable to discontinued operations during

the year ended December 31, 2025.

net result of these activities was an increase in cash of $662,359 for the year ended December 31, 2025, reflecting consolidated cash

flows from both continuing and discontinued operations.

As of December 31, 2025, the Company had $757,369 of cash and cash equivalents

and net negative working capital of $(2,270,311) related to its continuing operations, excluding $911,753 of current assets and $138,029

of current liabilities classified as held for sale in connection with the discontinued Revenue Cycle Management Segment.

Accounts receivable

and other receivables represented $3,702,264 of net working capital at December 31, 2025.

Management intends to collect outstanding receivables

on a timely basis and reduce overall receivable balances during 2026, which is expected to provide additional cash flow to support continuing

Inventory represented $2,330,492 of net working capital as of December 31, 2025.

The Company is actively managing inventory

levels, and management’s objective is to reduce inventory during 2026 through sales activities.

A reduction in inventory levels is expected

to generate additional cash flow to support the Company’s continuing operations.

Commitments and Other Contractual Obligations:

Total lease expense under the Company’s operating leases related to continuing

operations was approximately $274,272 during the year ended December 31, 2025.

The following sets forth the operating lease right-of-use

assets and liabilities associated with continuing operations as of December 31, 2025:

Operating lease right of use assets

Prepayment of rent

Total operating lease right of use asset

Operating lease obligations-current portion

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Total operating lease obligations

Following are the minimum lease

payments for each year and in total.

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

Year ending December 31:

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Total operating lease liability

obligations - We have the following outstanding debt as of December 31, 2024 which require future principal payments:

year ended December 31, 2025, the Company incurred capital expenditures of $258,050, consisting primarily of purchases of production equipment

and building improvements.

The Company does not currently have any material commitments for capital expenditures beyond normal course

of business activity.

In January 2026,

Kustom 440, Inc.

entered into a non-cancellable artist performance agreement for the 2026 Country Stampede music festival with aggregate

payment obligations totaling $750,000, payable in installments of $187,500 upon execution, $187,500 due no later than May 27, 2026, and

$375,000 payable following the performance.

See Note 15, Commitments and Contingencies , for additional details.

obligations - We have the following outstanding debt related to continuing operations as of December 31, 2025, which requires

future principal payments:

December 31, 2025

Economic injury disaster loan (EIDL)

Unsecured Promissory note – Entertainment Segment

2025 Secured Notes

Commercial Extension of Credit- Entertainment Segment

Merchant Advances – Video Solutions Segment

Senior Secured Promissory Notes

Senior Secured Promissory Notes-Issued November 2024

Total gross principal

Unamortized debt issuance costs

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obligations mature on an annual basis as follows as of December 31, 2025:

December 31, 2024

Gross Principal

Unamortized Discount

Net Carrying Value

2030 and thereafter

The table above excludes the related party note payable to a TicketSmarter

officer trust with a net carrying value of $400,110 as of December 31, 2025 ($0 current, $400,110 long-term).

See Note 19, Related

Party Transactions , for additional details.

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

It is our policy to not disclose

the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us.

After carefully assessing

the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend

any lawsuit filed against us.

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 damages or relief demanded, we

vigorously defend any lawsuit filed against us.

We record a liability when losses are deemed probable and reasonably estimable.

When losses are deemed

reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of

possible losses for the claim, if material for disclosure.

In evaluating matters for accrual and disclosure purposes, we take into consideration

factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood

of our prevailing, the availability of insurance, and the severity of any potential loss.

We re-evaluate and update accruals as matters

progress over time.

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 re-evaluate and update accruals as matters progress over time.

the ultimate resolution is unknown, we do not expect that these lawsuits will individually, or in the aggregate, have a material adverse

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it to provide 100% matching contributions for employees, who elect to contribute up to 3% of their compensation to the plan and 50% matching

contributions for employee’s elective deferrals on the next 2% of their contributions.

The Company made matching contributions

totaling $144,589 and $207,463 for the years ended December 31, 2024 and 2023, respectively.

Each participant is 100% vested at all times

in employee and employer matching contributions.

contributions for employees’ elective deferrals on the

next 2% of their contributions.

The Company made matching contributions totaling $80,083 and $144,589 for the years ended December 31,

2025 and 2024, respectively.

Each participant is 100% vested at all times in employee and employer matching contributions.

Accounting Estimates

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Warranty Reserves;

Fair value of assets and liabilities acquired in business combinations ;

Fair value of warrant derivative

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Accounting for Income Taxes.

Discontinued Operations

Recognition / Allowances for Doubtful Accounts.

Revenue is recognized for the shipment of products or delivery of service when

all five of the following conditions are met:

Revenue is recognized for the shipment of products or delivery of service in

accordance with ASC 606 by applying the following five-step model:

Identify the contract with the customer;

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We generate all our revenue from contracts with

for our revenue cycle management segment is recorded on a net basis, as its primary source of revenue is its end-to-end service fees.

These service fees are reported as revenue monthly, upon completion of our performance obligation to provide the agreed upon services.

for our entertainment segment is recorded on a gross or net basis based on management’s assessment of whether we are acting as

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Our historical bad debts have been negligible since we commenced deliveries during 2006.

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

fees charged with the transaction.

Thus, leading to minimal risk for uncollectible accounts, to which we then consider a specific reserve

for bad debts based on their individual circumstances.

As we continue to learn more about the collectability related to this recent acquisition,

we will track historical bad debts and continue to assess appropriate reserves.

our revenue cycle management segment, our customers are mainly medium to large healthcare organizations that are charged monthly upon

the execution of our services.

Being these customers are healthcare organizations with minimal risk for uncollectible accounts, we consider

a specific reserve for bad debts based on their individual circumstances.

As we continue to learn more about the collectability related

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

For our Entertainment Segment, our customers are mainly online visitors

that pay at the time of the transaction, and we collect the service fees charged with the transaction.

This leads to minimal risk for

uncollectible accounts, and we consider a specific reserve for bad debts based on individual customer circumstances.

We continue to monitor

collectability trends and assess appropriate reserve levels based on our operating history within this segment.

for Excess and Obsolete Inventory.

We record valuation reserves on our inventory for estimated excess or obsolete inventory items.

The amount of the reserve is equal to the difference between the cost of the inventory and the estimated market value based upon assumptions

about future demand and market conditions.

On a quarterly basis, management performs an analysis of the underlying inventory to identify

reserves needed for excess and obsolescence.

Management uses its best judgment to estimate appropriate reserves based on this analysis.

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

We record valuation reserves on inventory for estimated excess or obsolete items.

of the reserve represents the difference between the cost of the inventory and its estimated net realizable value based on assumptions

regarding future demand, inventory aging, and market conditions.

Management performs a detailed review of inventory balances on a quarterly

basis to identify inventory that may be excess or obsolete and uses judgment to estimate appropriate reserve levels.

We also adjust the

carrying value of inventory when its estimated net realizable value is below cost.

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

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Total inventories

balance the need to maintain strategic inventory levels to ensure competitive delivery performance to our customers against the risk

of inventory obsolescence due to changing technology and customer requirements.

As reflected above, our inventory reserves represented

46% of the gross inventory balance at December 31, 2024, compared to 54% of the gross inventory balance at December 31, 2023.

$2,169,655 and $4,542,461 in reserves for obsolete and excess inventories at December 31, 2024 and 2023, respectively.

The decrease in

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

Additionally, the Company

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

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

We believe the reserves are appropriate given our inventory

levels as of December 31, 2024.

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

our products that are not anticipated and appropriately managed, additional inventory write-downs may be required in excess of the inventory

reserves already established.

As reflected above, inventory reserves represented approximately 45% of

gross inventory at December 31, 2025, compared to approximately 46% of gross inventory at December 31, 2024.

Total reserves for excess

and obsolete inventory were $1,918,941 and $2,169,655 at December 31, 2025 and 2024, respectively.

decrease in inventory reserves during 2025 was primarily attributable to reductions in finished goods balances, the disposition and utilization

of inventory previously reserved, and lower ticket inventory levels in the Entertainment Segment.

Inventory held within the Entertainment Segment primarily consists of event tickets, which may sell below cost or become unsellable following the related event date and therefore

require write-off.

Management evaluates inventory recoverability on an ongoing basis and believes the recorded reserves are appropriate

based on inventory levels, historical sales patterns, and current operating conditions as of December 31, 2025.

actual future demand, sales activity, or market conditions differ from management’s estimates, or if product designs or technologies

change in ways not currently anticipated, additional inventory write-downs may be required beyond the reserves recorded.

and other intangible assets.

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of our qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective

carrying amount, then we perform a two-step quantitative impairment test.

carrying amount, then we perform a quantitative impairment test.

the recoverability of goodwill requires judgments and assumptions regarding future trends and events.

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and cash flows, as well as assumptions regarding discount rates, the Company’s weighted average cost of capital and other data.

performed an 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 impairment test

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.

During the third fiscal quarter of 2024, management determined that triggering

events had occurred, including an additional decline in demand for services, prolonged economic uncertainty, the failure of a planned

split-off transaction to occur when and as expected, and a further decrease in our stock price.

As a result, we performed an interim impairment

test as of September 30, 2024.

Based on that interim test, we recorded non-cash impairment charges of $307,000 related to entertainment

segment goodwill and $201,000 related to entertainment segment trademarks, for total continuing operations impairment charges of $508,000

for the year ended December 31, 2024.

An additional non-cash goodwill impairment charge of $4,322,000 related to the revenue cycle management

segment was recorded within discontinued operations during the same period.

No additional impairment was identified in the December 31,

2024 annual roll-forward assessment.

performed our annual goodwill and intangible asset impairment test as of December 31, 2025 on a full quantitative basis, given the prior-year

impairment history and continued operating losses across certain segments.

The Revenue Cycle Management Segment (Nobility Healthcare)

was classified as discontinued operations prior to the measurement date and was excluded from the annual impairment analysis.

value of each continuing 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 multiple used is revenue.

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.

We held goodwill of $5,480,966 as of September 30, 2024 and December 31,

2023, related to businesses within our revenue cycle management segment.

We held goodwill of $6,112,507 and $5,886,548 as of September

30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment.

As a result of our impairment test,

we concluded that the carrying amount of the revenue cycle management and the entertainment reporting units exceeded its estimated fair

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 Consolidated Statements of Operations for

the year ended December 31, 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 and entertainment segment

was $1,158,966 and $5,805,507, respectively as of December 31, 2024.

We held indefinite-lived trade names/trademarks of $900,000 and $600,000

as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment.

the year ended December 31, 2024, we 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 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

applied a fair value methodology to each reporting unit based on discounted cash flows, requiring significant judgments including estimation

of future cash flows, long-term revenue growth rates, and determination of our weighted average cost of capital risk-adjusted to reflect

the specific risk profile of each reporting unit.

The weighted average cost of capital used in our December 31, 2025 impairment test

ranged from 18.4% to 22.7%.

We also applied a market approach using revenue multiples of comparable publicly traded companies.

and market approaches were equally weighted for all reporting units.

consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s carrying value at a 20% premium

Based on our December 31, 2025 annual impairment test, the Video Solutions Segment’s fair value was substantially in

excess of its carrying value, with an indicated equity fair value of $2,580,000 compared to a carrying value of approximately

The Video Solutions Segment carries no goodwill.

The Entertainment Segment was determined to be impaired.

We held total goodwill of approximately $5,805,507 related to businesses

within our Entertainment Segment prior to our December 31, 2025 annual impairment test, consisting of $5,579,548 attributable to TicketSmarter

and $225,959 attributable to Country Stampede.

As a result of our December 31, 2025 annual impairment test, we concluded that the carrying

amount of the Entertainment Segment’s equity exceeded its estimated fair value and recorded a non-cash goodwill impairment charge

of $1,428,000, which is included in goodwill and intangible asset impairment charge on our consolidated statements of operations for the

year ended December 31, 2025.

The remaining goodwill balance for the Entertainment Segment was $4,377,507 as of December 31, 2025.

goodwill impairment was primarily driven by the segment’s continued operating losses, the fixed cost structure of festival operations,

and the structural cost challenges within certain Entertainment Segment revenue streams.

held indefinite-lived trade names and trademarks of $699,000 related to businesses within our Entertainment Segment as of December 31,

2024, prior to our annual impairment test, consisting of the TicketSmarter trade name and the Country Stampede trade name.

During the year ended December 31, 2025, we concluded

that the carrying amounts of both trade names exceeded their estimated fair values and recorded non-cash impairment charges totaling

$359,000, which are included in goodwill and intangible asset impairment charge on our consolidated statements of operations for the

year ended December 31, 2025, consisting of $189,000 related to the TicketSmarter trade name and $170,000 related to the Country Stampede

The remaining carrying values of the TicketSmarter and Country Stampede trade names were $210,000 and $130,000, respectively,

as of December 31, 2025.

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

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 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 consolidated statements of operations.

We generally provide up to a two-year parts and labor standard warranty

on our products to our customers.

Provisions for estimated expenses related to product warranties are made at the time products are sold.

These estimates are established using historical information on the nature, frequency, and average cost of claims.

We actively study trends

of claims and take action to improve product quality and minimize claims.

Our warranty reserves were decreased to $11,615 as of December

31, 2024 compared to $17,699 as of December 31, 2023 due to newer products gaining a long history of claims to consider, which was slightly

offset as we began to slow our warranty exposures through the roll-off of DVM-750 and DVM-800 units from warranty coverage.

Standard warranty

exposure on the DVM-800 and DVM-250plus are the responsibility of the contract manufacturers, which reduced our overall warranty exposure

as these are very popular products in our line.

There is a risk that we will have higher warranty claim frequency rates and average cost

of claims than our history has indicated on our legacy mirror products compared to our new products for which we have limited experience.

Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods.

We also held a finite-lived Sponsorship Agreement Network (SAN) intangible

asset within our Entertainment Segment with a net carrying value of $746,667 prior to impairment testing.

Under ASC 360, we compared the

SAN carrying value to the sum of undiscounted future cash flows attributable to the asset;

as the undiscounted cash flows of $621,000

failed the recoverability test, we recorded a full non-cash impairment charge of $746,667, reducing the carrying value to $0 as of December

total non-cash goodwill and intangible asset impairment charges recorded for the year ended December 31, 2025 were $2,533,667, all attributable

to the Entertainment Segment.

Historically,

the Company recorded an assurance-type warranty liability related to hardware products sold.

As the Company has continued its transition

to a cloud-based, subscription model—where devices are typically provided as part of the service arrangement rather than sold outright—the

volume of products subject to assurance-type warranties has become insignificant.

For subscription deployments, the Company’s obligations

primarily consist of maintenance, support, and service-level commitments, which are accounted for under ASC 606 as service obligations,

with any service-level credits treated as variable consideration, rather than as assurance-type warranties.

Based on historical claims

experience and expected future costs, anticipated assurance-type warranty expenses are not material.

Accordingly, the Company’s

warranty reserve was reduced to $— as of December 31, 2025, compared to $11,615 as of December 31, 2024, reflecting the factors

derivative liabilities.

Company accounts for their derivative financial instruments in accordance with ASC 815 “Derivatives and Hedging”

therefore any embedded conversion options and warrants accounted for as derivatives are to be recorded at their fair values as of the

inception date of the agreement and at fair value as of each subsequent balance sheet date.

Company accounts for their derivative financial instruments in accordance with ASC 815 “Derivatives and Hedging” therefore

any embedded conversion options and warrants accounted for as derivatives are to be recorded at their fair values as of the inception

date of the agreement and at fair value as of each subsequent balance sheet date.

Any change in fair value is recorded as non-operating,

non-cash income or expense for each reporting period at each balance sheet date.

The Company reassesses the classification of its derivative instruments

at each balance sheet date.

If the classification changes as a result of events during the period, the contract is reclassified as of

the date of the event that caused the reclassification.

The Black-Scholes option valuation model was used to estimate the fair value of the embedded

conversion options and warrants.

The model includes subjective input assumptions that can materially affect the fair value estimates.

The Company reassesses the classification of its derivative

instruments at each balance sheet date.

If the classification changes as a result of events during the period, the contract is reclassified

as of the date of the event that caused the reclassification.

Black-Scholes option valuation model was used to estimate the fair value of the embedded conversion options and warrants.

The model includes

subjective input assumptions that can materially affect the fair value estimates.

for Income Taxes.

Accounting for income taxes requires significant estimates and judgments on the part of management.

Such estimates

and judgments include, but are not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse

in the future, the sufficiency of taxable income in future periods to realize the benefits of net deferred tax assets and net operating

losses currently recorded and the likelihood that tax positions taken in tax returns will be sustained on audit.

required by authoritative guidance, we record deferred tax assets or liabilities based on differences between financial reporting and

tax bases of assets and liabilities using currently enacted rates that will be in effect when the differences are expected to reverse.

Authoritative guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that

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

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

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

should be increased by $4,680,000 to a balance of $46,290,000 to fully reserve our deferred tax assets at December 31, 2024.

We determined

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

of the overall net operating loss carryforwards available.

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

that we can sustain a level of profitability that demonstrates our ability to realize these assets.

To the extent we determine 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.

for income taxes requires significant estimates and judgments on the part of management.

Such estimates and judgments include, but are

not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse in the future, the sufficiency

of taxable income in future periods to realize the benefits of net deferred tax assets and net operating losses currently recorded and

the likelihood that tax positions taken in tax returns will be sustained on audit.

As required by authoritative guidance, we record deferred tax assets or

liabilities based on differences between financial reporting and tax bases of assets and liabilities using currently enacted rates that

will be in effect when the differences are expected to reverse.

Authoritative guidance also requires that deferred tax assets be reduced

by a valuation allowance if it is more likely than not that all or some portion of the deferred tax asset will not be realized.

December 31, 2025 and December 31, 2024, we have fully reserved all of our deferred tax assets.

We determined that it was appropriate

to maintain a full valuation allowance on our net deferred tax assets at December 31, 2025 and December 31, 2024, as the allowance was

increased in each respective year to fully reserve all deferred tax assets based on our assessment of recoverability and continued operating

We expect to continue to maintain a full valuation allowance until we determine that we can sustain a level of profitability that

demonstrates our ability to realize these assets.

To the extent we determine 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’

required by authoritative guidance, we have performed a comprehensive review of our portfolio of uncertain tax positions in accordance

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financial reporting purposes.

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

We have no recorded liability as of December 31, 2025 and December 31, 2024 representing uncertain tax

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

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income not be realized.

of the Company’s significant accounting estimates relate to businesses that have been classified as discontinued operations.

and liabilities of discontinued operations are measured and reported in accordance with U.S.

GAAP and are presented separately from continuing

operations in the consolidated financial statements.

Management applies the same accounting policies and estimation methodologies to

discontinued operations as those applied to continuing operations, including estimates related to revenue recognition, accounts receivable

collectability, inventory valuation, impairment of long-lived assets, and contingent liabilities, where applicable.

The results of discontinued

operations are excluded from continuing operations and presented separately in the consolidated statements of operations.

and Seasonality

has not materially affected us during the past fiscal year.

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

business is seasonal in nature, however;

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

the calendar year than in the first half.

Inflation has not materially affected us during the past fiscal year.

do not believe that our Video Solutions Segment’s business is seasonal in nature, however;

the Entertainment Segment experiences

variability in revenues across quarters, with the Country Stampede music festival generating revenues in the second quarter and TicketSmarter

platform activity driven by event scheduling throughout the year.

Quantitative and Qualitative Disclosures About Market

Financial Statements and Supplementary Data.

financial statements are included in this Annual Report on Form 10-K commencing on page F-1.

Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis