What changed in this filing

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Item 9A. Controls and Procedures

2026-04-13 compared with 2025-05-02 · 2596 added, 2560 removed, 1404 unchanged (79% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

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with the policies or procedures may deteriorate.

connection with the filing of this Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over

financial reporting as of December 31, 2024.

In making this assessment, our management used the criteria set forth by 2013 Internal Control

– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment

using the framework in 2013 Internal Control – Integrated Framework, management believes that, as of December 31, 2024, our internal

control over financial reporting is not effective.

In connection with the audit of our consolidated financial statements as

of December 31, 2024 and 2023, we identified a material weakness in our internal control over financial reporting related to timely review

and detection of potential accounting misstatements and a lack of segregation of duties, which in the aggregate, constitute a material

part of our plan to remediate this material weakness, we are performing a full review of our internal control procedures.

We have implemented,

and plan to continue to implement, new controls and new processes.

We have hired and plan to continue to hire additional qualified personnel

and establish more robust processes to support our internal control over financial reporting, including clearly defined roles and responsibilities.

The Company anticipates time being required to complete the implementation and to assess and ensure the sustainability of these controls.

The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management

has concluded, through testing, that these controls are operating effectively.

In connection with the filing of this Annual Report on Form 10-K, our management

assessed the effectiveness of our internal control over financial reporting as of December 31, 2025.

In making this assessment, our management

used the criteria set forth by the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations

of the Treadway Commission.

Based on our assessment using the framework in the 2013 Internal Control – Integrated Framework, management

believes that, as of December 31, 2025, our internal control over financial reporting is not effective.

connection with the audit of our consolidated financial statements as of December 31, 2025 and 2024, we identified a material weakness

in our internal control over financial reporting related to timely review and detection of potential accounting misstatements, which

in the aggregate, constitute a material weakness.

As part of our plan to remediate this material weakness, we are performing

a full review of our internal control procedures.

We have implemented, and plan to continue to implement, new controls and new processes.

We have established and plan to continue to develop more robust processes to support our internal control over financial reporting, including

clearly defined roles and responsibilities.

The Company anticipates time being required to complete the implementation and to assess and

ensure the sustainability of these controls.

The material weakness will not be considered remediated until the applicable controls operate

for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

in Internal Control Over Financial Reporting

have completed the process of integrating our recent business acquisition into our overall

internal control over the financial reporting process.

Other than this integration, there have been no changes in our internal control

over financial reporting during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

We are continually monitoring and assessing our internal controls to ensure the

appropriate design and operating effectiveness.

During the year ended December 31, 2025, the Company completed the divestiture of its Revenue Cycle Management Segment

through the sale of Nobility Healthcare, which resulted in changes to the scope of entities subject to the Company’s internal control

over financial reporting.

Other than matters related to this divestiture, there have been no changes in our internal control over financial

reporting during the year ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal

control over financial reporting.

We are continually monitoring and assessing our internal controls to ensure the appropriate design and

operating effectiveness.

Other Information.

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Foreign Jurisdictions that Prevent Inspections.

Directors, Executive

Officers and Corporate Governance.

The names of the members of our Board and our executive officers and certain

information about them as of December 31, 2024 are set forth below:

Directors, Executive Officers and Corporate Governance .

names of the members of our Board and our executive officers and certain information about them as of December 31, 2025, are set forth

of Board of Director Member (4)

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of Nominating Committee

The address of each executive officer and director listed is 6366 College

Blvd., Overland Park, Kansas 66211.

address of each executive officer and director listed is 6366 College Blvd., Overland Park, Kansas 66211.

Board has determined that Messrs.

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Information - Directors

Ross has served as Chairman, President and Chief Executive Officer (“CEO”) since September 2005.

From March 1992

to June 2005, Mr.

Ross has served as Chairman, President and Chief Executive Officer (“CEO”) of the Company since September 2005.

From March 1992 to June 2005, Mr.

Ross was the Chairman and President of American Noble Gas Inc.

(formerly known as Infinity Energy Resources, Inc.),

a publicly held oil and gas exploration and development company (“AMGAS”) and served as an officer and director of each of

AMGAS’s subsidiaries.

He resigned from all his positions with AMGAS in June 2005, except Chairman, but was reappointed President

in October 2006.

From 1991 until March 1992, he founded and served as President of Midwest Financial, a financial services corporation

involved in mergers, acquisitions, and financing for corporations in the Midwest.

(formerly known as Infinity Energy Resources,

Inc.), a publicly held oil and gas exploration and development company (“AMGAS”) and served as an officer and director of

each of AMGAS’s subsidiaries.

He resigned from all his positions with AMGAS in June 2005, except Chairman, but was reappointed

President in October 2006.

From 1991 until March 1992, he founded and served as President of Midwest Financial, a financial services

corporation involved in mergers, acquisitions, and financing for corporations in the Midwest.

From 1990 to 1991, Mr.

Ross was employed by Duggan

Securities, Inc., an investment banking firm in Lenexa, Kansas, where he primarily worked in corporate finance.

From 1989 to 1990, he

was employed by Stifel, Nicolaus & Co., a member of the New York Stock Exchange, where he was an investment executive.

Ross was employed

by Duggan Securities, Inc., an investment banking firm in Lenexa, Kansas, where he primarily worked in corporate finance.

1990, he was employed by Stifel, Nicolaus & Co., a member of the New York Stock Exchange, where he was an investment executive.

1987 to 1989, Mr.

Ross was self-employed as a business consultant.

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Executive Officer give him the qualifications and skills to serve as a Director.

Richie has been the Lead Independent Director of Digital Ally since September 2005.

Richie has been the Lead Independent Director of the Company since September 2005.

He is also the Chairman of the Compensation

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skills to serve as a Director.

Duke Daughtery joined the board of directors of Digital Ally in October 2023 and he is

also the chairman of the Audit Committee, and a member of the Compensation Committee and Nominating Committee.

Duke Daughtery joined the board of directors of the Company in October 2024 and he is also the chairman of the Audit Committee,

and a member of the Compensation Committee and Nominating Committee.

From 1987 to 2019, Mr.

Daughtery was an assurance partner and audit practice leader with Grant Thornton and Deloitte & Touche in Kansas City.

was instrumental in the significant growth of Grant Thornton’s Kansas City audit practice.

Daughtery served numerous companies

ranging from high growth private equity backed clients, to multi-billion dollar revenue private companies, as well as public companies

ranging from smaller public companies to the Fortune 500.

Daughtery brings to the board of directors many years of leadership experience

as an assurance partner at major accounting firms and extensive experience in developing and executing growth strategies, acquisitions

and capital transactions.

The Company considers Mr.

Daughtery was an assurance partner and audit

practice leader with Grant Thornton and Deloitte & Touche in Kansas City.

Daughtery was instrumental in the significant growth

of Grant Thornton’s Kansas City audit practice.

Daughtery served numerous companies ranging from high growth private equity

backed clients, to multi-billion revenue private companies to public companies ranging from smaller public companies to the Fortune 500.

Daughtery brings to the board of directors many years of leadership experience as an assurance partner at major accounting firms

and extensive experience in developing and executing growth strategies, acquisitions and capital transactions.

The Company considers

Daughtery to be an audit committee financial expert.

Daughtery obtained his Bachelor

of Arts in Accounting and in Management and Business Administration from Saint Ambrose University.

Daughtery holds no public company

directorships other than with the Company and has only held the aforementioned position in Digital Ally during the previous five years.

Daughtery obtained his Bachelor of Arts in Accounting and in Management

and Business Administration from Saint Ambrose University.

Daughtery holds no public company directorships other than with the Company

and has only held the aforementioned position in Digital Ally during the previous five years.

From 2019 to 2024 Mr.

Daughtery was not employed by any company.

Daughtery was not

employed by any company.

The Company believes that Mr.

Daughtery’s extensive experience

as an accountant of public companies gives him the qualifications and skills to serve as a director.

“Chopper” Anderson joined the board of directors of Digital Ally in December 2024.

Anderson has served as

Chief Executive Officer at Alien Audio since 2007.

He is a renowned bass player known for his exceptional talent and versatility in

the music industry.

Anderson graduated from Belmont College in 1977 as one of the first graduates of their newly founded music

Moving to Nashville, Tennessee in 1975, Mr.

Anderson became a sought-after session musician, collaborating with a wide

range of artists across genres like rock, pop, country, and R&B.

Daughtery’s extensive experience as an accountant of public companies gives

him the qualifications and skills to serve as a director.

“Chopper” Anderson joined the board of directors of the Company in December 2024.

Anderson has served as Chief

Executive Officer at Alien Audio since 2007.

He is a renowned bass player known for his exceptional talent and versatility in the music

Anderson graduated from Belmont College in 1977 as one of the first graduates of their newly found music program.

to Nashville, Tennessee in 1975, Mr.

Anderson became a sought-after session musician, collaborating with a wide range of artists across

genres like rock, pop, country, and R&B.

Through a variety of tours, records, and sessions, Mr.

played the bass guitar with numerous notable artists such as Dolly Parton, Dottie West, Kenny Rogers, Marie Osmond, Lee Roy Parnell,

and Edwin McCain.

From 1991 to 2001 Mr.

Anderson played the bass guitar with

numerous notable artists such as Dolly Parton, Dottie West, Kenny Rogers, Marie Osmond, Lee Roy Parnell, and Edwin McCain.

Anderson was on tour with Reba McIntire.

In 2007, he founded his own bass guitar

manufacturing company, Alien Audio, which is still doing business to date.

His dynamic bass lines have featured on numerous hit

albums, earning him a reputation for innovation and reliability.

His contributions to music have earned him several awards and

accolades, celebrating his technical proficiency and creative approach.

His lasting impact on the music world continues to inspire

both current and future generations of musicians.

Anderson holds no public company directorships, nor has he held any public

company directorships within the past five years, and the Company believes that Mr.

Anderson’s extensive experience in the

entertainment industry gives him the qualifications and skills to serve as a director.

In 2007, he founded his own bass guitar manufacturing company, Alien Audio, still

doing business to date.

His dynamic bass lines have featured on numerous hit albums, earning him a reputation for innovation and reliability.

His contributions to music have earned him several awards and accolades, celebrating his technical proficiency and creative approach.

His lasting impact on the music world continues to inspire both current and future generations of musicians.

Anderson holds no public

company directorships, nor has he held any public company directorships within the past five years, and the Company believes that Mr.

Anderson’s extensive experience in the entertainment industry gives him the qualifications and skills to serve as a director.

Directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are elected

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Han has served as Chief Operating Officer since November 2021.

Joining Digital Ally in February 2010, Mr.

Han served as Lead

Software Engineer, Software Manager, Vice President of Engineering, and CTO.

With over two decades of experience in spearheading the

development of innovative and cutting-edge software and hardware products, Mr.

Han’s expertise lies in large-scale software development,

video technology, real-time embedded systems, telecommunications, and intellectual property management.

Joining the Company in February 2010, Mr.

Han served as Lead Software

Engineer, Software Manager, Vice President of Engineering, and CTO.

With over two decades of experience in spearheading the development

of innovative and cutting-edge software and hardware products, Mr.

Han’s expertise lies in large-scale software development, video

technology, real-time embedded systems, telecommunications, and intellectual property management.

From 2005 to 2010, Mr.

as Senior Staff Engineer for Ingenient Technologies, a leading provider of embedded multimedia system solutions.

Han worked as

Senior Staff Engineer for Ingenient Technologies, a leading provider of embedded multimedia system solutions.

From 2004 to 2005, Mr.

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of Directors and Committee Meetings

Board held four meetings and acted a number of times by unanimous consent resolutions during the fiscal year ended December 31, 2024.

Each of our directors attended at least 75% of the meetings of the Board and the committees on which he was appointed and served in the

fiscal year ended December 31, 2024.

Our directors are expected, absent exceptional circumstances, to attend all Board meetings and meetings

of committees on which they serve and are also expected to attend our annual meeting of stockholders.

All directors then in office attended

the 2024 annual meeting of stockholders.

Board of Directors held four meetings and acted a number of times by unanimous consent resolutions during the fiscal year ended December

Each of our directors attended at least 75% of the meetings of the Board of Directors and the committees on which he served

in the fiscal year ended December 31, 2025.

Our directors are expected, absent exceptional circumstances, to attend all Board meetings

and meetings of committees on which they serve and are also expected to attend our annual meeting of stockholders.

All directors then

in office attended the 2025 annual meeting of stockholders.

of the Board of Directors

Board currently has three committees:

an Audit Committee, a Compensation Committee and a Nominating Committee.

Each committee has a written

charter approved by the Board, outlining the principal responsibilities of the committee.

These charters are also available on the Investor

Relations page of our website.

All of our directors, other than our Chairman and Chief Executive Officer, have met in executive sessions

without management present on a regular basis in 2024 and year-to-date 2025.

Board of Directors currently has three committees:

an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.

Each committee has a written charter approved by the Board of Directors outlining the principal responsibilities of the committee.

of our directors, other than our Chairman and Chief Executive Officer, have met in executive sessions without management present on a

regular basis in 2025 and year-to-date 2026.

Audit Committee appoints the Company’s independent auditors, reviews audit reports and plans, accounting policies, financial statements,

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in our annual proxy statement for 2024.

Audit Committee is comprised of three Directors, each of whom is independent, as defined by the rules and regulations of the SEC and

Nasdaq Rule 5605(a)(2).

The Audit Committee held four meetings during the year ended December 31, 2024.

The members of our Audit Committee

Duke Daughtery (Chairman), Leroy C.

Audit Committee is currently comprised of three Directors, each of whom is independent, as defined by the rules and regulations of the

SEC and The Nasdaq Stock Market LLC (“Nasdaq”) Rule 5605(a)(2).

The Audit Committee held four meetings during the year-ended

December 31, 2025.

On September 22, 2005, the Company created the Audit Committee and adopted a written charter for it.

The current members

of our Audit Committee are D.

Duke Daughtery, who serves as Chairman, Leroy C.

Richie, and Charles M.

The Board determined that Mr.

Daughtery qualifies as an “audit

committee financial expert,” as defined under the applicable rules and listing standards of Nasdaq and SEC rules and regulations

and is independent as noted above.

The Board determined

Daughtery qualifies as an “audit committee financial expert,” as defined under the applicable rules and listing

standards of Nasdaq and SEC rules and regulations and is independent as noted above.

the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the Company’s independent registered public accounting

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authority to pre-approve audit and non-audit services to any member of the Audit Committee but may not delegate such authority to management.

Compensation Committee assists our Board in determining the development plans and compensation of our officers, directors and employees.

Compensation Committee assists our Board of Directors in determining the development plans and compensation of our officers, directors

and employees.

Specific responsibilities include approving the compensation and benefits of our executive officers;

reviewing the performance objectives

and actual performance of our officers;

reviewing the performance

objectives and actual performance of our officers;

administering our stock option and other equity compensation plans;

and reviewing and discussing

with management the compensation discussion and analysis that the SEC requires in our future Form 10-Ks and proxy statements.

Compensation Committee is comprised of three Directors, whom the Board considers to be independent under the applicable rules and listing

standards of Nasdaq and SEC rules and regulations.

The members of our Compensation Committee are Leroy C.

Richie (Chairman), D.

Daughtery and Charles M.

The Compensation Committee held two meetings and acted several times by unanimous written consent

resolutions during the year ended December 31, 2024.

Ross, our Chief Executive Officer, does not participate in the determination

of his own compensation or the compensation of directors.

However, he makes recommendations to the Compensation Committee regarding the

amount and form of the compensation of the other executive officers and key employees, and he often participates in the Compensation

Committee’s deliberations about such persons’ compensation.

Heckman, our Chief Financial Officer (“CFO”),

and reviewing

and discussing with management the compensation discussion and analysis that the SEC requires in our future Form 10-Ks and proxy statements.

Compensation Committee is currently comprised of three Directors, whom the Board considers to be independent under the applicable rules

and listing standards of Nasdaq and the SEC rules and regulations.

The current members of our Compensation Committee are Leroy C.

Duke Daughtery, and Charles M.

The Compensation Committee held two meetings and acted several times by unanimous

written consent resolutions during the year ended December 31, 2025.

Ross, our Chief Executive Officer, does not participate in the

determination of his own compensation or the compensation of directors.

However, he makes recommendations to the Compensation Committee

regarding the amount and form of the compensation of the other executive officers and key employees, and he often participates in the

Compensation Committee’s deliberations about such persons’ compensation.

Heckman, our Chief Financial Officer,

also assists the Compensation Committee in its deliberations regarding executive officer, director and employee compensation.

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and director compensation.

Nominating Committee assists our Board by identifying and recommending individuals qualified to become members of our Board, reviewing

correspondence from our stockholders, and establishing, evaluating, and overseeing our corporate governance guidelines.

Specific responsibilities

include the following:

evaluating the composition, size and governance of our Board and its committees and making recommendations regarding

future planning and appointing directors to our committees;

establishing a policy for considering stockholder nominees for election to

and evaluating and recommending candidates for election to our Board.

Nominating Committee strives for a Board composed of individuals who bring a variety of complementary skills, expertise, or background

and who, as a group, will possess the appropriate skills and experience to oversee our business.

The diversity of the members of the

Board relates to the selection of its nominees.

While the Committee considers diversity and variety of experiences and viewpoints to

be important factors, it does not believe that a director nominee should be chosen or excluded solely or largely because of race, color,

gender, national origin or sexual orientation or identity.

In selecting a director nominee for recommendation to our Board, our Nominating

Committee focuses on skills, expertise or background that would complement the existing members on the Board.

Accordingly, although diversity

may be a consideration in the Committee’s process, the Committee and the Board do not have a formal policy regarding the consideration

of diversity in identifying director nominees.

the Nominating Committee has either identified a prospective nominee or determined that an additional or replacement director is required,

the Nominating Committee may take such measures as it considers appropriate in connection with its evaluation of a director candidate,

including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside search

firm to gather additional information, or reliance on the knowledge of the members of the Board or management.

In its evaluation of director

candidates, including the members of the Board eligible for re-election, the Nominating Committee considers a number of factors, including:

the current size and composition of the Board, the needs of the Board and the respective committees of the Board, and such factors as

judgment, independence, character and integrity, age, area of expertise, diversity of experience, length of service and potential conflicts

Nominating Committee of the Board selects director nominees and recommends them to the full Board.

In relation to such nomination process,

the Nominating Committee:

On September 22, 2007, the Board of Directors adopted a written charter for the Compensation Committee.

and Governance Committee

Nominating and Governance Committee assists our Board of Directors by identifying and recommending individuals qualified to become members

of our Board of Directors, reviewing correspondence from our stockholders, and establishing, evaluating, and overseeing our corporate

governance guidelines.

Specific responsibilities include the following:

evaluating the composition, size and governance of our Board

of Directors and its committees and making recommendations regarding future planning and appointing directors to our committees;

a policy for considering stockholder nominees for election to our Board of Directors;

and evaluating and recommending candidates for

election to our Board of Directors.

Nominating and Governance Committee strives for a Board composed of individuals who bring a variety of complementary skills, expertise,

or background and who, as a group, will possess the appropriate skills and experience to oversee our business.

The diversity of the members

of the Board relates to the selection of its nominees.

While the Committee considers diversity and variety of experiences and viewpoints

to be important factors, it does not believe that a director nominee should be chosen or excluded solely or largely because of race,

color, gender, national origin or sexual orientation or identity.

In selecting a director nominee for recommendation to our Board, our

Nominating and Governance Committee focuses on skills, expertise or background that would complement the existing members on the Board.

Accordingly, although diversity may be a consideration in the Committee’s process, the Committee and the Board of Directors do

not have a formal policy regarding the consideration of diversity in identifying director nominees.

the Nominating and Governance Committee has either identified a prospective nominee or determined that an additional or replacement director

is required, the Nominating and Governance Committee may take such measures as it considers appropriate in connection with its evaluation

of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement

of an outside search firm to gather additional information, or reliance on the knowledge of the members of the Board of Directors or

In its evaluation of director candidates, including the members of the Board eligible for re-election, the Nominating and

Governance Committee considers a number of factors, including:

the current size and composition of the Board of Directors, the needs

of the Board of Directors and the respective committees of the Board, and such factors as judgment, independence, character and integrity,

age, area of expertise, diversity of experience, length of service and potential conflicts of interest.

Nominating and Governance Committee selects director nominees and recommends them to the full Board of Directors.

In relation to such

nomination process, the Nominating and Governance Committee:

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

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

Nominating Committee has specified the following minimum qualifications that it believes must be met by a nominee for a position on the

Nominating and Governance Committee has specified the following minimum qualifications that it believes must be met by a nominee for

a position on the Board:

the highest personal and professional ethics and integrity;

proven achievement and competence in the nominee’s field and

the ability to exercise sound business judgment;

proven achievement and competence in the nominee’s

field and the ability to exercise sound business judgment;

skills that are complementary to those of the existing Board;

the ability to assist

and support management and make significant contributions to our success;

to assist and support management and make significant contributions to our success;

the ability to work well with the other directors;

of the person’s familiarity with the issues affecting our business;

an understanding of the fiduciary responsibilities that are

required of a member of the Board;

the extent of the person’s familiarity with the issues affecting our business;

an understanding of the fiduciary responsibilities

that are required of a member of the Board;

and the commitment of time and energy necessary to diligently carry out those responsibilities.

candidate for director must agree to abide by our Code of Ethics and Conduct.

completing its evaluation, the Nominating Committee makes a recommendation to the full Board as to the persons who should be nominated

to the Board, and the Board determines the nominees after considering the recommendation and report of the Committee.

Nominating Committee is comprised of two Directors, whom the Board considers to be independent under the applicable rules and listing

standards of Nasdaq and SEC rules and regulations.

The Nominating Committee held one meeting during the year ended December 31, 2024.

The members of our Nominating Committee are Leroy C.

Richie (Chairman), D.

A candidate for director must agree to abide by our Code of Ethics and Conduct.

completing its evaluation, the Nominating and Governance Committee makes a recommendation to the full Board of Directors as to the persons

who should be nominated to the Board, and the Board determines the nominees after considering the recommendation and report of the Committee.

Nominating and Governance Committee is currently comprised of three Directors, whom the Board considers to be independent under the applicable

rules and listing standards of Nasdaq and the SEC rules and regulations.

The Nominating and Governance Committee held one meeting during

the year ended December 31, 2025.

The current members of our Nominating and Governance Committee are Leroy C.

Richie, who serves as Chairman,

Duke Daughtery, and Charles M.

The Committee was created by our Board of Directors on December 27, 2007, when the Board

of Directors adopted a written charter, which was amended in February 2010.

of Directors’ Role in the Oversight of Risk Management

face a variety of risks, including credit, liquidity, and operational risks.

In fulfilling its risk oversight role, our Board focuses

on the adequacy of our risk management process and overall risk management system.

Our Board believes that an effective risk management

system will (i) adequately identify the material risks that we face in a timely manner;

(ii) implement appropriate risk management strategies

that are responsive to our risk profile and specific material risk exposures;

(iii) integrate consideration of risk and risk management

into our business decision-making;

and (iv) include policies and procedures that adequately transmit necessary information regarding

material risks to senior executives and, as appropriate, to the Board or relevant committee.

Board has designated the Audit Committee to take the lead in overseeing risk management at the Board level.

Accordingly, the Audit Committee

schedules time for periodic review of risk management, in addition to its other duties.

In this role, the Audit Committee receives reports

from management, independent registered public accounting firm, outside legal counsel, and other advisors, and strives to generate serious

and thoughtful attention to our risk management process and system, the nature of the material risks we face, and the adequacy of our

policies and procedures designed to respond to and mitigate these risks.

the Board has assigned the primary risk oversight to the Audit Committee, it also periodically receives information about our risk management

system and the most significant risks that we face.

This is principally accomplished through Audit Committee reports to the Board and

summary versions of the briefings provided by management and advisors to the Audit Committee.

addition to the formal compliance program, our Board and the Audit Committee encourage management to promote a corporate culture that

understands risk management and incorporates it into our overall corporate strategy and day-to-day business operations.

Our risk management

structure also includes an ongoing effort to assess and analyze the most likely areas of future risk for us.

As a result, the Board and

the Audit Committee periodically ask our executives to discuss the most likely sources of material future risks and how we are addressing

any significant potential vulnerability.

In fulfilling its risk oversight role, our Board of Directors

focuses on the adequacy of our risk management process and overall risk management system.

Our Board of Directors believes that an effective

risk management system will (i) adequately identify the material risks that we face in a timely manner;

(ii) implement appropriate risk

management strategies that are responsive to our risk profile and specific material risk exposures;

(iii) integrate consideration of

risk and risk management into our business decision-making;

and (iv) include policies and procedures that adequately transmit necessary

information regarding material risks to senior executives and, as appropriate, to the Board or relevant committee.

Board of Directors has designated the Audit Committee to take the lead in overseeing risk management at the Board of Directors level.

Accordingly, the Audit Committee schedules time for periodic review of risk management, in addition to its other duties.

In this role,

the Audit Committee receives reports from management, independent registered public accounting firm, outside legal counsel, and other

advisors, and strives to generate serious and thoughtful attention to our risk management process and system, the nature of the material

risks we face, and the adequacy of our policies and procedures designed to respond to and mitigate these risks.

the Board of Directors has assigned the primary risk oversight to the Audit Committee, it also periodically receives information about

our risk management system and the most significant risks that we face.

This is principally accomplished through Audit Committee reports

to the Board of Directors and summary versions of the briefings provided by management and advisors to the Audit Committee.

addition to the formal compliance program, our Board of Directors and the Audit Committee encourage management to promote a corporate

culture that understands risk management and incorporates it into our overall corporate strategy and day-to-day business operations.

Our risk management structure also includes an ongoing effort to assess and analyze the most likely areas of future risk for us.

result, the Board of Directors and the Audit Committee periodically ask our executives to discuss the most likely sources of material

future risks and how we are addressing any significant potential vulnerability.

Leadership Structure

Board does not have a policy on whether the roles of Chief Executive Officer and Chairman of the Board should be separate and, if they

are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee.

believes that it should be free to make a choice from time to time in any manner that is in the best interest of us and our stockholders.

The Board believes that Mr.

Ross’s service as both Chief Executive Officer and Chairman of the Board is in the best interest of

us and our stockholders.

Ross possesses detailed and in-depth knowledge of the issues, opportunities and challenges we face and is

thus best positioned to develop agendas, with the input of Mr.

Richie, the lead independent director, to ensure that the Board’s

time and attention are focused on the most critical matters.

His combined role enables decisive leadership, ensures clear accountability,

and enhances our ability to communicate our message and strategy clearly and consistently to our stockholders, employees, customers,

and suppliers, particularly during times of turbulent economic and industry conditions.

Board also believes that a lead independent director is part of an effective Board leadership structure.

To this end, the Board has appointed

Board of Directors does not have a policy on whether the roles of Chief Executive Officer and Chairman of the Board of Directors should

be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or

be an employee.

Our Board of Directors believes that it should be free to make a choice from time to time in any manner that is in the

best interest of us and our stockholders.

The Board of Directors believes that Mr.

Ross’s service as both Chief Executive Officer

and Chairman of the Board is in the best interest of us and our stockholders.

Ross possesses detailed and in-depth knowledge of the

issues, opportunities and challenges we face and is thus best positioned to develop agendas, with the input of Mr.

Richie, the lead independent

director, to ensure that the Board’s time and attention are focused on the most critical matters.

His combined role enables decisive

leadership, ensures clear accountability, and enhances our ability to communicate our message and strategy clearly and consistently to

our stockholders, employees, customers, and suppliers, particularly during times of turbulent economic and industry conditions.

Board of Directors also believes that a lead independent director is part of an effective Board leadership structure.

To this end, the

Board has appointed Leroy C.

Richie as the lead independent director.

The independent directors meet regularly in executive sessions at which only they are present,

and the lead independent director chairs those sessions.

The independent directors meet regularly in executive sessions

at which only they are present, and the lead independent director chairs those sessions.

As the lead independent director, Mr.

Richie calls meetings of the independent

directors as needed;

calls meetings of the independent directors as needed;

sets the agenda for meetings of the independent directors;

presides at meetings of the independent directors;

the principal liaison on Board issues between the independent directors and the Chairman and between the independent directors and management;

provides feedback to the Chairman and management on the quality, quantity and timeliness of information sent to the Board;

of the Compensation Committee that evaluates the CEO’s performance;

and oversees the directors’ evaluation of the Board’s

overall performance.

The Nominating Committee and the Board believe that its leadership structure, which includes the appointment of

a lead independent director, is appropriate because it, among other things, provides for an independent director who gives board member

leadership and each of the directors, other than Mr.

presides at meetings

of the independent directors;

is the principal liaison on Board issues between the independent directors and the Chairman and between

the independent directors and management;

provides feedback to the Chairman and management on the quality, quantity and timeliness of

information sent to the Board;

is a member of the Compensation Committee that evaluates the CEO’s performance;

and oversees the

directors’ evaluation of the Board’s overall performance.

The Nominating and Governance Committee and the Board believe that

its leadership structure, which includes the appointment of a lead independent lead director, is appropriate because it, among other

things, provides for an independent director who gives board member leadership and each of the directors, other than Mr.

Ross, is independent.

Our Board believes that the independent directors provide

effective oversight of management.

Our Board of Directors believes that the independent directors provide effective oversight of management.

Communications with the Board of Directors

Stockholders may communicate with the Board by writing to us as follows:

Digital Ally, Inc., attention:

Corporate Secretary, 6366 College Blvd., Overland Park, Kansas 66211.

Stockholders who would like their

submission directed to a member of the Board may so specify and the communication will be forwarded as appropriate.

may communicate with the Board of Directors by writing to us as follows:

Kustom Entertainment, Inc., attention:

Corporate Secretary,

6366 College Blvd., Overland Park, KS 66211.

Stockholders who would like their submission directed to a member of the Board of Directors

may so specify and the communication will be forwarded as appropriate.

for Director Recommendations and Nominations

Nominating Committee will consider candidates for Board membership suggested by Board members, management and our stockholders.

of our Nominating Committee is to consider recommendations for candidates to the Board from any stockholder of record in accordance with

the Company’s bylaws (the “Bylaws”).

A director candidate recommended by our stockholders will be considered in the

same manner as a nominee recommended by a Board member, management or other sources.

In addition, a stockholder may nominate a person

directly for election to the Board at an annual meeting of stockholders, provided the stockholder meets the requirements set forth in

Nominating and Governance Committee will consider candidates for Board membership suggested by Board members, management and our stockholders.

The policy of our Nominating and Governance Committee is to consider recommendations for candidates to the Board of Directors from any

stockholder of record in accordance with our Bylaws.

A director candidate recommended by our stockholders will be considered in the same

manner as a nominee recommended by a Board member, management or other sources.

In addition, a stockholder may nominate a person directly

for election to the Board of Directors at an annual meeting of stockholders, provided the stockholder meets the requirements set forth

in our Bylaws.

We do not pay a fee to any third party to identify or evaluate or assist in identifying or evaluating potential nominees.

Recommendations for Director Nominations.

Stockholder recommendations for director nominations may be submitted to

the Company at the following address:

Digital Ally, Inc., Attention:

Corporate Secretary, 6366 College Blvd., Overland

Park, Kansas 66215.

Such recommendations will be forwarded to the Nominating Committee for consideration, provided that they are accompanied

by sufficient information to permit the Board to evaluate the qualifications and experience of the nominees, and they are in time for

the Nominating Committee to do an adequate evaluation of the candidate before the Annual Meeting.

The submission must be accompanied by

a written consent of the individual to stand for election if nominated by the Board and to serve if elected and to cooperate with a background

Stockholder recommendations for director nominations may be submitted to the Company

at the following address:

Kustom Entertainment, Inc., Attention:

Corporate Secretary, 6366 College Blvd., Overland Park, KS 66211.

recommendations will be forwarded to the Nominating and Governance Committee for consideration, provided that they are accompanied by

sufficient information to permit the Board to evaluate the qualifications and experience of the nominees, and they are in time for the

Nominating and Governance Committee to do an adequate evaluation of the candidate before the Annual Meeting.

The submission must be accompanied

by a written consent of the individual to stand for election if nominated by the Board of Directors and to serve if elected and to cooperate

with a background check.

Nominations of Directors.

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have in such business or with such nominee.

At the request of the Board, any person nominated for election as a director shall furnish

to our Secretary the information required to be set forth in a stockholder’s notice of nomination that pertains to the nominee.

At the request of the Board of Directors, any person nominated for election as a director

shall furnish to our Secretary the information required to be set forth in a stockholder’s notice of nomination that pertains to

be timely in the case of a special meeting or if the date of the annual meeting is changed by more than thirty (30) days from such anniversary

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of Ethics and Conduct

Board has adopted a Code of Ethics and Conduct that is applicable to all of our employees, officers and directors.

of Ethics and Conduct is intended to ensure that our employees, officers and directors act in accordance with the highest ethical

The Code of Ethics and Conduct is available on the Investor Relations page of our website at http://www.digitalally.com

and the Code of Ethics and Conduct was filed as an exhibit to our Annual Report on Form 10-KSB filed March 4, 2008.

Board of Directors has adopted a Code of Ethics and Conduct that is applicable to all of our employees, officers and directors.

Our Code of Ethics and Conduct is intended to ensure that our employees, officers and directors act in accordance with the highest

ethical standards.

The Code of Ethics and Conduct is available on the Investor Relations page of our website at https://kustoment.com/

and the Code of Ethics and Conduct was filed as an exhibit to our Annual Report on Form 10-K filed on March 4, 2008.

Section 16(a) Reports

the securities laws of the United States, our directors, executive (and certain other) officers, and any persons holding ten percent

or more of our common stock must report on their ownership of the common stock and any changes in that ownership to the SEC.

due dates for these reports have been established.

During the fiscal year ended December 31, 2023, we believe the following reports listed

in the table below were required to be filed by such persons pursuant to Section 16(a) and were not filed on a timely basis for each

such reporting person:

of Late Reports

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

Ross’ Form 4 was not filed on timely basis.

or more of our outstanding shares of Common Stock must report on their ownership of the Company’s securities and any changes in

such ownership to the SEC.

Specific due dates for these reports have been established.

During such fiscal year, we believe that all reports

required to be filed by such persons pursuant to Section 16(a) were filed on a timely basis, with the exception of the reports listed

in the table below:

Anderson’s Form 3 was not filed on a timely basis;

Charles Anderson’s Form 4 was not filed on a timely basis.

Heckman’s Form 4 was not filed on a timely basis.

Trading Arrangements and Policies

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terms of our insider trading policy.

Compensation.

The Company’s Policies and Practices Related

to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information

We do not have any formal policy that requires the

Company to grant, or avoid granting, equity-based compensation at certain times.

We do not grant equity awards in anticipation of the

release of material nonpublic information that is likely to result in changes to the price of our common stock, and do not time the public

release of such information based on award grant dates.

The timing of any equity grants to executive officers or directors in connection

with new hires, promotions, or other non-routine grants is tied to the event giving rise to the award (such as an executive officer’s

commencement of employment or promotion effective date).

During the year ended December 31, 2024, there were

no equity grants made to our executive officers during any period beginning four business days before the filing of a periodic report

or current report disclosing material non-public information and ending one business day after the filing or furnishing of such report

with the Securities and Exchange Commission.

Executive Compensation.

Company’s Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material

Nonpublic Information

do not have any formal policy that requires the Company to grant, or avoid granting, equity-based compensation at certain times.

not grant equity awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price

of our Common Stock, and do not time the public release of such information based on award grant dates.

The timing of any equity grants

to executive officers or directors in connection with new hires, promotions, or other non-routine grants is tied to the event giving

rise to the award (such as an executive officer’s commencement of employment or promotion effective date).

the year ended December 31, 2025, there were no equity grants made to our executive officers during any period beginning four business

days before the filing of a periodic report or current report disclosing material non-public information and ending one business day

after the filing or furnishing of such report with the Securities and Exchange Commission.

following table presents information concerning the total compensation of the Company’s Chief Executive Officer, Chief Financial

Officer and Chief Operating Officer (“COO”) (collectively, the “Named Executive Officers”) for services rendered

to the Company in all capacities for the years ended December 31, 2024 and 2023:

Officer and Chief Operating Officer (the “Named Executive Officers”) for services rendered to the Company in all capacities

for the years ended December 31, 2025 and 2024:

Compensation Table

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CFO, Treasurer and Secretary

aggregate grant date fair value pursuant to ASC Topic 718 for the respective year for stock options granted.

included in all other compensation include the following items:

Represents aggregate grant date fair value pursuant to ASC Topic 718 for the respective year for stock options granted.

Amounts included in all other compensation include the following items:

the employer contribution to the Company’s 401(k) Retirement

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We are required to provide a 100% matching contribution

for all who elect to contribute up to 3% of their compensation to the plan and a 50% matching contribution for all employees’

elective deferral between 4% and 5%.

The employee (i) is 100% vested at all times in the employee contributions and employer matching

contributions;

for all who elect to contribute up to 3% of their compensation to the plan and a 50% matching contribution for all employees’ elective

deferral between 4% and 5%.

The employee (i) is 100% vested at all times in the employee contributions and employer matching contributions;

(ii) receives Company paid healthcare insurance;

(iii) receives Company paid contributions to health savings accounts;

and (iv) receives Company paid life, accident and disability insurance.

and (iv) receives

Company paid life, accident and disability insurance.

See “All Other Compensation Table” below.

Stock awards include the following restricted stock granted during 2024

20,000 shares at $2.13 per share that vest 100% on January 31, 2025, subject to Mr.

Ross remaining an employee of the Company

at that point in time.

Stock awards include the following restricted stock granted during 2024

15,000 shares at $2.13 per share, of which 3,000 shares vested immediately on January 31, 2024 at $2.13 per share and the

remaining to vest 3,000 shares annually beginning on January 31, 2025 through January 31, 2028, subject to Mr.

Han remaining an employee

of the Company at that point in time.

awards include the following restricted stock granted during 2023 to Mr.

17,500 shares at $4.99 per share that vested 50% on

January 10, 2024 and 50% on January 10, 2025, subject to Mr.

Stock awards include the following restricted stock granted during 2024 to Mr.

4 shares at $10,650.00 per share that vested 100%

on January 31, 2025, subject to Mr.

Ross remaining an employee of the Company at that point in time.

awards include the following restricted stock granted during 2023 to Mr.

3,750 shares at $4.99 per share that vested on

April 1, 2023.

awards include the following restricted stock granted during 2023 to Mr.

5,000 shares at $4.99 per share that vest 20% annually

on the anniversary of January 10 from 2024 to 2028, subject to Mr.

Stock awards include the following restricted stock granted during 2024 to Mr.

3 shares at $10,650.00 per share, of which 1 shares

vested immediately on January 31, 2024 at $10,650.00 per share and the remaining to vest annually beginning on January 31, 2025 through

January 31, 2028, subject to Mr.

Han remaining an employee of the Company at that point in time.

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The review is generally on an annual basis but may take place more often in the discretion of the Compensation

On January 31, 2024, the Compensation Committee approved the annual base

salaries of Stanton E.

January 31, 2024, the Compensation Committee approved the annual base salaries of Stanton E.

Ross, Chief Executive Officer, Thomas J.

Heckman, Chief Financial Officer, Treasurer and Secretary, and Peng Han,

Chief Operating Officer, at $250,000, $120,000, and $250,000, respectively, for 2024.

However, the officers voluntarily reduced their

salaries throughout 2024 to the amounts indicated in the Summary Compensation Table to support the Company’s cash flow position.

Heckman, Chief Financial Officer, Treasurer and Secretary, and Peng Han, Chief Operating Officer, at $250,000, $120,000, and $250,000,

respectively, for 2024.

However, the officers voluntarily reduced their salaries throughout 2024 to the amounts indicated in the Summary

Compensation Table to support the Company’s cash flow position.

During 2025, the officers voluntarily reduced their salaries throughout

2025 to the amounts indicated in the Summary Compensation Table to support the Company’s cash flow position.

January 27, 2026, the Compensation Committee approved the annual base salaries of Stanton E.

Ross, Chief Executive Officer, Thomas J.

Heckman, Chief Financial Officer, Treasurer and Secretary, and Peng Han, Chief Operating Officer, at $200,000, $90,000, and $200,000,

respectively, for 2026.

Compensation Committee plans to review the base salaries for possible adjustments on an annual basis.

Base salary adjustments will be

based on both individual and our performances and will include both objective and subjective criteria specific to each executive’s

based on both the individual and our performances and will include both objective and subjective criteria specific to each executive’s

role and responsibility with us.

Options and Restricted Stock Awards.

The Compensation Committee determined stock option and restricted stock

awards based on numerous factors, some of which include responsibilities incumbent with the role of each executive with us, tenure with

us, as well as our performance.

The vesting period of options and restricted stock is also tied, in some instances, to our performance

directly related to certain executive’s responsibilities with us.

The Compensation Committee determined stock option and restricted stock awards based on

numerous factors, some of which include responsibilities incumbent with the role of each executive with us, tenure with us, as well as

our performance.

The vesting period of options and restricted stock is also tied, in some instances, to our performance directly related

to certain executives’ responsibilities with us.

The Compensation Committee determined that Messrs.

were eligible for awards of stock options or restricted stock in 2024 based on their performance.

Refer to the “Grants of Plan-Based

Awards” table below for restricted stock awards made in 2024.

Ross and Han were eligible

for awards of stock options or restricted stock in 2025 based on their performance however, no awards were made during 2025 based on

the Company’s financial results and cash flow position, Refer to the “Grants of Plan-Based Awards” table below for

restricted stock awards made in 2025.

The Committee also determined that Messrs.

Ross, Heckman, and Han

would be eligible in 2024 for awards of restricted stock or stock options.

On January 31, 2024, the Compensation Committee awarded Stanton

Ross 20,000 shares of restricted common stock that will vest 100% on January 31, 2025 provided that he remains an officer on such dates.

Peng Han was awarded 15,000 shares of restricted common stock, of which 3,000 shares vested immediately on January 31, 2024 at $2.13 per

share and the remaining to vest 3,000 shares annually beginning on January 31, 2025 through January 31, 2028, provided that he remains

an officer on such dates.

The Compensation Committee determined to award no bonuses to each of the executive officers in 2023 and 2024, as set forth in the foregoing

Ross, Heckman, and Han would be eligible in 2025 for

awards of restricted stock or stock options, however, no awards were made during 2025 based on the Company’s financial results

and cash flow position.

During the year ended December 31, 2025, a discretionary bonus of $150,000 was paid to Stanton E.

No bonuses were awarded

Heckman or Han for 2025, or to any executive officer for 2024.

Refer to the “Summary Compensation Table” above.

In July 2008, we amended and restated our 401(k) Plan.

The amended 401(k) Plan requires us to provide a 100% matching contribution for

employees who elect to contribute up to 3% of their compensation to the plan and a 50% matching contribution for employees’ elective

deferrals between 4% and 5%.

We have made matching contributions for executives who elected to contribute to the 401(k) Plan during 2024.

The amended 401(k) Plan requires us to provide a 100% matching contribution

for employees who elect to contribute up to 3% of their compensation to the plan and a 50% matching contribution for employees’

elective deferrals between 4% and 5%.

We have made matching contributions for executives who elected to contribute to the 401(k) Plan

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

Heckman, as trustee of the 401(k) Plan,

holds the voting power as to the shares of our common stock held in the 401(k) Plan.

We have no profit-sharing plan in place for our

However, we may consider adding such a plan to provide yet another level of compensation to our compensation plan.

Heckman, as trustee of

the 401(k) Plan, holds the voting power as to the shares of our Common Stock held in the 401(k) Plan.

We have no profit-sharing plan

in place for our employees.

However, we may consider adding such a plan to provide yet another level of compensation to our compensation

following table presents information concerning the grants of plan-based awards to the Named Executive Officers during the year ended

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Chairman and CEO

January 31, 2024

CFO, Treasurer and Secretary

January 31, 2024

These restricted stock awards were made under the Digital Ally, Inc.

Stock Option and Restricted Stock Plans and vest over a one-year

period (100% on January 31, 2025) contingent upon whether the individual is still employed by us at that point.

Stock awards noted represent the aggregate amount of grant date fair value as determined under ASC Topic 718.

Please refer to Note 16

to the consolidated financial statements that appear in our Annual Report on Form 10-K, filed with the SEC on April 1, 2024, for a further

description of the awards and the underlying assumptions utilized to determine the amount of grant date fair value related to such grants.

Termination of Employment and Change-in-Control Arrangements

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following table sets forth for each named executive officer potential post-employment payments and payments on a change in control and

assumes that the triggering event took place on January 1, 2024 and that the amendments to the retention agreements of each person were

assumes that the triggering event took place on December 31, 2025 and that the amendments to the retention agreements of

each person were in effect.

Agreement Compensation

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payment due based

upon successful completion of transaction

upon successful

completion of

Severance payment

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officer voluntarily terminates employment for Good Reason or is involuntarily terminated without Cause.

Under the retention agreements, a “Change in Control” means

(i) one party alone, or acting with others, has acquired or gained control over more than 50% of the voting shares of the Company;

the Company merges or consolidates with or into another entity or completes any other corporate reorganization, if more than 50% of the

combined voting power of the surviving entity’s securities outstanding immediately after such merger, consolidation or other reorganization

is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization;

(iii) a majority of the Board is replaced and/or dismissed by the stockholders of the Company without the recommendation of or nomination

by the Company’s current Board;

(iv) the Company’s CEO is replaced and/or dismissed by stockholders without the approval of

or (v) the Company sells, transfers or otherwise disposes of all or substantially all of the consolidated assets of the Company

and the Company does not own stock in the purchaser or purchasers having more than 50% of the voting power of the entity owning all or

substantially all of the consolidated assets of the Company after such purchase.

the retention agreements, a “Change in Control” means (i) one party alone, or acting with others, has acquired or gained

control over more than 50% of the voting shares of the Company;

(ii) the Company merges or consolidates with or into another entity or

completes any other corporate reorganization, if more than 50% of the combined voting power of the surviving entity’s securities

outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the

Company immediately prior to such merger, consolidation or other reorganization;

(iii) a majority of the Board of Directors is replaced

and/or dismissed by the stockholders of the Company without the recommendation of or nomination by the Company’s current Board

of Directors;

(iv) the Company’s Chief Executive Officer the CEO is replaced and/or dismissed by stockholders without the approval

of the Board of Directors;

or (v) the Company sells, transfers or otherwise disposes of all or substantially all of the consolidated

assets of the Company and the Company does not own stock in the purchaser or purchasers having more than 50% of the voting power of the

entity owning all or substantially all of the consolidated assets of the Company after such purchase.

Reason” means either (i) a material adverse change in the executive’s status as an executive or other key employee of the

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CFO, Treasurer and Secretary

These stock option and restricted stock awards were made under the Digital Ally, Inc.

Stock Option and Restricted Stock Plans and vest

over the prescribed period contingent upon whether the individual is still employed by the Company at that point.

These stock option and restricted stock awards were made under the Kustom Entertainment, Inc.

Stock Option and Restricted Stock Plans

and vest over the prescribed period contingent upon whether the individual is still employed by the Company at that point.

Market value based upon the closing market price of $1.88 on December 31, 2025.

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Chairman and CEO

$ 12,957.73 (1)

CFO, Treasurer and Secretary

on the closing market price of our common stock of $2.19 on January 10, 2024, the date of vesting for 8,750 shares of common stock,

and the closing market price of our common stock of $2.09 on January 7, 2024, the date of vesting for 8,750 shares of common stock

$ 6,585.67 (2)

on the closing market price of our Common Stock of $2,580.03 on January 10, 2025, the date of vesting for 3 shares of Common Stock,

the closing market price of our common stock of $2.09 on January 7, 2024, the date of vesting for and the closing market price of

our common stock of $2.19 on January 10, 2024, the date of vesting for 1,000 shares of common stock for Mr.

and the closing market price of our Common Stock of $1,304.41on January 31, 2025, the date of vesting for 4 share of Common Stock

on the closing market price of our Common Stock of $1,304.41 on January 31, 2025, the date of vesting for 1 share of Common Stock,

the closing market price of our Common Stock of $2,701.23 on January 7, 2025, the date of vesting for and the closing market price

of our Common Stock of $2,580.03 on January 10, 2025, the date of vesting for 1 share of Common Stock for Mr.

number of stock options and restricted stock awards that an employee, director, or consultant may receive under our Plans (defined below

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The Board’s policy in 2024 was to grant officers an award of 10

restricted shares of common stock to our CEO and 15,000 restricted shares of common stock to our COO and each non-employee director no

award of options or restricted stock, all subject to vesting requirements.

restricted shares of Common Stock to our CEO and 8 restricted shares of Common Stock to our COO and each non-employee director no award

of options or restricted stock, all subject to vesting requirements.

following table sets forth (a) the aggregate number of shares of Common Stock subject to options granted under the Plans during the year

ended December 31, 2025 and (b) the average per share exercise price of such options.

Share Exercise

Name of Individual or Group

Stock Granted

Option and Restricted Stock Grants

of Individual or Group

Ross, Chairman of the Board of Directors & CEO

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Heckman, Vice President, CFO, Treasurer & Secretary

Peng Han, COO

All executive officers, as a group

All directors who are not executive officers, as a group

All employees who are not executive officers, as a group

non-employee directors received no stock option or restricted stock grants as noted in the “Director Compensation” table

below for their service on the Board in 2024, including on the Audit, Nominating and Compensation Committees.

executive officers, as a group

directors who are not executive officers, as a group

employees who are not executive officers, as a group

non-employee directors received the stock option grants noted in the “Director Compensation” table below for their service

on the Board of Directors in 2025, including on the Audit, Nominating and Governance, and Compensation Committees.

compensation for the year ended December 31, 2025 was as follows:

Fees earned or paid in cash

Option awards

Ross, Chairman of the Board of Directors (1)

D Duke Daughtery (2)

Charles M Anderson (3)

Duke Daughtery (2)

a Named Executive Officer, Mr.

Ross’s compensation and option awards are fully reflected in the “Summary Compensation”

table, and elsewhere under “Executive Compensation.” He did not receive compensation, stock awards or options for his

services as a director.

Board suspended their cash fees for the second, third and fourth quarters of 2024.

The amounts shown represent the respective Director’s

accrued but unpaid fees for the first quarter of 2024.

Anderson was appointed to the Board on December 17, 2024.

Therefore, he received no director fees or stock-based compensation for

services as a director during the year ended December 31, 2024.

November 17, 2023, our Board adopted a clawback policy (the “Clawback Policy”) permitting the Company to seek the recovery

of incentive compensation received by any of the Company’s current and former executive officers (as determined by the board in

accordance with Section 10D of the Exchange Act) and such other senior executives/employees who may from time to time be deemed subject

to the Clawback Policy by the board (collectively, the “Covered Executives”).

The amount to be recovered will be the excess

of the incentive compensation paid to the Covered Executive based on the erroneous data over the incentive compensation that would have

been paid to the Covered Executive had it been based on the restated results, as determined by the board.

If the board cannot determine

the amount of excess incentive compensation received by the Covered Executive directly from the information in the accounting restatement,

then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.

table, and elsewhere under “Executive Compensation.” He did not receive compensation or stock options for his services

as a director.

amounts shown include payments of director fees that were accrued and unpaid as of December 31, 2024, cash fees paid during the first

and second quarters of 2025, and accrued but unpaid fees for the third and fourth quarters of 2025.

Stock Options Held by Directors

following table presents information concerning the outstanding equity awards for the Board as of December 31, 2024:

following table presents information concerning the outstanding equity awards for the Directors as of December 31, 2025:

Equity Awards at Fiscal Year-End

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Charles M Anderson

March 23, 2026, Mr.

Richie and the Company mutually agreed to cancel/forfeit all of his outstanding options to acquire Common Stock

that were outstanding as of December 31, 2025.

Therefore, Mr.

Richie no longer holds these outstanding options to acquire Common

Stock as of the date of this Annual Report on Form 10-K.

Richie did not receive any compensation for the forfeiture and cancellation

of these outstanding options to acquire Common Stock.

Versus Performance

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regulations, for the fiscal years ended December 31, 2025 and 2024.

Table Total for

Average Summary

Average Compensation

Actually Paid

$ (7,359,024 )

$ (21,715,725 )

dollar amounts reported are the amounts of total compensation reported for Mr.

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from and added to (as applicable) our PEO’s “Total” compensation as reported in the Summary Compensation Table:

Actually Paid

the grant date fair value of the equity awards to our PEO, as reported in the Summary Compensation Table.

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were deducted from and added to (as applicable) the “Total” compensation of our Non-PEO NEOs as reported in the Summary Compensation

Reported Value of Equity

Fair Value as of Year End

for Awards Granted

Fair Value Year over Year

Increase or Decrease in

Fair Value Increase or Decrease from Prior Year end for Awards

Actually Paid

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the grant date fair value of the equity awards to our Non-PEO NEOs, as reported in the Summary Compensation Table.

Security Ownership of

Certain Beneficial Owners and Management and Related Stockholder Matters.

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

following table sets forth, as of April 10, 2026, information regarding beneficial ownership of our Common Stock for:

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

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of our current executive officers and directors as a group.

ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if

he, she or it possesses sole or shared voting or investment power of that security, including securities that are currently exercisable

or exercisable within sixty (60) days of April 30, 2025.

Except as indicated by the footnotes below, we believe, based on the information

furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common

stock shown that they beneficially own, subject to community property laws where applicable.

stock subject to securities currently exercisable or exercisable within sixty (60) days of April 30, 2025 are deemed to be outstanding

for computing the percentage ownership of the person holding such securities and the percentage ownership of any group of which the holder

ownership is determined according to the rules of the United States Securities and Exchange Commission (the “SEC”) and generally

means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that

security, including securities that are currently exercisable or exercisable within sixty (60) days of April 10, 2026.

Except as indicated

by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting

and investment power with respect to all shares of Common Stock shown that they beneficially own, subject to community property laws

where applicable

Stock subject to securities currently exercisable or exercisable within sixty (60) days April 10, 2026 are deemed to be outstanding for

computing the percentage ownership of the person holding such securities and the percentage ownership of any group of which the holder

is a member but are not deemed outstanding for computing the percentage of any other person.

Unless otherwise indicated, the address of each beneficial owner listed

in the table below is c/o Digital Ally, Inc., 6366 College Blvd., Overland Park, KS 66211

otherwise indicated, the address of each beneficial owner listed in the table below is c/o Kustom Entertainment, Inc., 6366 College

Blvd., Overland Park, KS, 66211.

Number of Shares of Common

5 unchanged sentences

Represents less than 1%.

on 115,601,371 shares of common stock issued and outstanding as of April 30, 2025 and, with respect only to the ownership by all

executive officers and directors as a group.

Ross’s total shares of common stock include 17,500 restricted shares that are subject to forfeiture to us.

Richie’s total shares of common stock include 16,250 shares of common stock to be received upon the exercise of vested options.

Heckman’s total shares of common stock include 85,401 shares of common stock held in the Company’s 401(k) Retirement

Savings Plan (the “401(k) Plan”) (on December 31, 2024) as to which Mr.

Heckman has voting power as trustee of the 401(k)

Han’s total shares of common stock include (i) 17,000 restricted shares that are subject to forfeiture to us and (ii) 331 shares

of common stock to be received upon the exercise of vested options.

Securities Authorized for Issuance Under Equity

Compensation Plans

As of December 31, 2024, the Company

had adopted ten separate stock option and restricted stock plans:

(i) the 2005 Stock Option and Restricted Stock Plan (the “2005

Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted

Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the

2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013

Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”), (viii) the 2018 Stock Option and Restricted

Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”), and (x)

the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”).

The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan,

2013 Plan, 2015 Plan, 2018 Plan, 2020 Plan and 2022 Plan are referred to as the “Plans.”

Stock option grants.

on 2,633,063 shares of Common Stock issued and outstanding as of April 10, 2026 and, with respect only to the ownership by all executive

officers and directors as a group

Heckman’s total shares of Common Stock include 602 shares of common stock held in the Company’s 401(k) Retirement Savings

Plan the 401(k) Plan (on April 6, 2026) as to which Mr.

Heckman has voting power as trustee of the 401(k) Plan.

Han’s total shares of Common Stock include 5 restricted shares that are subject to forfeiture to us.

Authorized for Issuance under Equity Compensation Plans

of December 31, 2025, the Company had adopted ten separate stock option and restricted stock plans:

(i) the 2005 Stock Option and Restricted

Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the

2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the

“2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option

and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”),

(viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock

Plan (the “2020 Plan”), and (x) the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”).

The 2005 Plan,

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

option grants .

The Company believes that such awards better align the interests of our employees with those of its stockholders.

Option awards have been

granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting based

on the completion of continuous service and having ten-year contractual terms.

These option awards typically provide for accelerated vesting

if there is a change in control (as defined in the Plans).

The Company has registered all shares of common stock that are issuable under

its Plans with the SEC.

A total of 137,042 shares remained available for awards under the various Plans as of December 31, 2024.

The Plans authorize us to grant

(i) to the key employees incentive stock options (except for the 2007 Plan) to purchase shares of Common Stock and non-qualified stock

options to purchase shares of Common Stock and restricted stock awards, and (ii) to non-employee directors and consultants’ non-qualified

stock options and restricted stock.

The Compensation Committee of our Board (the “Compensation Committee”) administers the

Plans by making recommendations to the Board or determinations regarding the persons to whom options or restricted stock should be granted

and the amount, terms, conditions and restrictions of the awards.

The Plans allow for the grant

of incentive stock options (except for the 2007 Plan), non-qualified stock options and restricted stock awards.

Incentive stock options

granted under the Plans must have an exercise price at least equal to 100% of the fair market value of the Common Stock as of the date

Incentive stock options granted to any person who owns, immediately after the grant, stock possessing more than 10% of the combined

voting power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise price at least equal to 110%

of the fair market value of the Common Stock on the date of grant.

Non-statutory stock options may have exercise prices as determined

by our Compensation Committee.

The Compensation Committee is

also authorized to grant restricted stock awards under the Plans.

A restricted stock award is a grant of shares of the Common Stock that

is subject to restrictions on transferability, risk of forfeiture and other restrictions and that may be forfeited in the event of certain

terminations of employment or service prior to the end of a restricted period specified by the Compensation Committee.

We have filed various registration

statements on Form S-8 and amendments to previously filed Form S-8’s with SEC, which registered a total of 408,750 shares of Common

Stock issued or to be issued underlying the awards under the Plans.

The following table sets forth

certain information regarding the Plans as of December 31, 2024:

Equity Compensation Plan Information

Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards

generally vesting based on the completion of continuous service and having ten-year contractual terms.

These option awards typically

provide for accelerated vesting if there is a Change in Control (as defined in the Plans).

The Company has registered all shares of Common

Stock that are issuable under its Plans with the SEC.

A total of 125,021 shares remained available for awards under the various Plans

as of December 31, 2025.

Plans authorize us to grant (i) to the key employees incentive stock options (except for the 2007 Plan) to purchase shares of Common

Stock and non-qualified stock options to purchase shares of Common Stock and restricted stock awards, and (ii) to non-employee directors

and consultants’ non-qualified stock options and restricted stock.

The Compensation Committee of our Board (the “Compensation

Committee”) administers the Plans by making recommendations to the Board or determinations regarding the persons to whom options

or restricted stock should be granted and the amount, terms, conditions and restrictions of the awards.

Plans allow for the grant of incentive stock options (except for the 2007 Plan), non-qualified stock options and restricted stock awards.

Incentive stock options granted under the Plans must have an exercise price at least equal to 100% of the fair market value of the Common

Stock as of the date of grant.

Incentive stock options granted to any person who owns, immediately after the grant, stock possessing

more than 10% of the combined voting power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise

price at least equal to 110% of the fair market value of the Common Stock on the date of grant.

Non-statutory stock options may have

exercise prices as determined by our Compensation Committee.

Compensation Committee is also authorized to grant restricted stock awards under the Plans.

A restricted stock award is a grant of shares

of the Common Stock that is subject to restrictions on transferability, risk of forfeiture and other restrictions and that may be forfeited

in the event of certain terminations of employment or service prior to the end of a restricted period specified by the Compensation Committee.

have filed various registration statements on Form S-8 and amendments to previously filed Form S-8’s with SEC, which registered

Common Stock issued or to be issued underlying the awards under the Plans.

following table sets forth certain information regarding the Plans as of December 31, 2025:

Compensation Plan Information

Plan category

5 unchanged sentences

Total all plans

Certain Relationships

and Related Transactions, and Director Independence.

Transactions with Managing Member of Nobility

The Company accrued reimbursable

expenses payable to Nobility, LLC totaling $245,716 and $619,301 as of December 31, 2024 and 2023, respectively.

Total management fees

accrued and payable in accordance with the operating agreement totaled $38,625 and $49,014 as of December 31, 2024 and 2023, respectively.

The company recorded management fee expense of $67,905 and $169,075 for the years ended December 31, 2024 and 2023, respectively.

Transactions with Related Party of TicketSmarter

On September 22, 2023, a trust,

the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse, made a loan in the amount of $2,325,000 to

TicketSmarter to support TicketSmarter’s operations.

On October 2, 2023 an additional $375,000 was advanced to Ticketsmarter.

transaction was recorded as a related party note payable (the “TicketSmarter Related Party Note”).

The TicketSmarter Related

Party Note bears interest of 13.25% per annum with repayment beginning January 2, 2024.

As of December 31, 2024 and 2023, the entire TicketSmarter

Related Party note balance totaled $2,700,000, and is classified as current, with an accrued interest balance of $488,711 and $95,031,

Certain Relationships and Related Transactions, and Director Independence.

than compensation arrangements for our directors and executive officers, the following is a summary of transactions since the beginning

of the last two fiscal years ended December 31, 2025 and 2024 to which we have been a party in which the amount involved exceeded the

lesser of (i) $120,000 or (ii) one percent of the average of our total assets at year-end for the last two completed fiscal years, and

in which any of our then directors, executive officers or holders of more than 5% of any class of our stock at the time of such transaction,

or any members of their immediate family, had or will have a direct or indirect material interest.

with Managing Member of Nobility Healthcare

Company accrued reimbursable expenses payable to Nobility, LLC totaling $0 and $245,716 as of December 31, 2025 and 2024, respectively.

Total management fees accrued and payable in accordance with the operating agreement totaled $19,496 and $38,625 as of December 31, 2025

and 2024, respectively.

The Company recorded management fee expense of $0 and $67,905 for the years ended December 31, 2025 and 2024,

respectively.

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

rate, the discount received to resolve such outstanding payables is recognized as a gain on extinguishment of liabilities on the statement

of operations.

Additionally, these negotiations relieved TicketSmarter of numerous future obligations following fiscal year 2023.

On August 19, 2024, the parties

agreed to amend the note whereby the repayment dates were extended to begin on January 2, 2025 and continue at $54,000 for 50 consecutive

weeks plus interest.

The parties did not change any other provisions or terms of the note.

The amendment was determined to be a modification

of the note rather than an extinguishment and reissuance of a new note.

No payments have been made to date in 2025.

Company Related Party Note

On August 22, 2024, Digital Ally’s

Chief Executive Officer, made a loan in the amount of $100,000 to the Company to support its operations.

In addition, on October 24,

2024, Digital Ally’s Chief Executive Officer, made an additional loan in the amount of $40,000 to the Company to support its operations.

These transactions were recorded as related party notes payable (the “Company Related Party Notes”).

The Company Related

Party Notes bear interest at prime rate (8.00% as of December 31, 2024) per annum with repayment due on demand.

Healthcare was classified as a discontinued operation as of December 31, 2025.

Accordingly, amounts reflected for 2025 represent the

full year of Nobility Healthcare’s operations, presented as discontinued operations following its classification as of December

31, 2025 and subsequent sale in January 2026.

See Note 23, Discontinued Operations , to the Consolidated Financial Statements included

in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the discontinued operation.

with Related Party of TicketSmarter

payable – related party is comprised of the following:

Note payable – related party

Unamortized discount

Debt obligations

current maturities of note payable-related party

Note payable -related party, long-term

interest – related party was $0 and $492,176 at December 31, 2025 and 2024, respectively.

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

Gross Principal

Unamortized Discount

Net Carrying Value

2030 and thereafter

$ (1,599,890 )

Loan and Amendments

September 22, 2023 and October 2, 2023, a trust (the “Goodman Trust”), the beneficiaries of which are an officer of TicketSmarter,

(“TicketSmarter”) and his spouse, advanced a total of $2,700,000 to TicketSmarter to resolve outstanding payables at

discounted rates.

The officer serves as CEO of TicketSmarter and continues in that capacity as of December 31, 2025.

The officer has

no role at the parent company and is not an officer or director of Kustom Entertainment, Inc.

The note originally bore interest at 13.25%

per annum with weekly principal payments of $54,000 beginning January 2, 2024.

The proceeds were used to settle outstanding vendor payables

at negotiated discounts;

the discounts received were recognized as a gain on extinguishment of liabilities in the consolidated statement

of operations for the year ended December 31, 2023.

note was amended four times between August 2024 and June 2025:

1 (August 19, 2024).

The repayment start date was extended to January 2, 2025.

All other terms, including the 13.25% interest rate

and $54,000 weekly payment, remained unchanged.

The Company determined the change in present value of cash flows was less than 10% and

accordingly accounted for the amendment as a modification with no gain or loss recognized.

The effective interest rate was adjusted prospectively.

Payments of $22,000 were made during the year ended December 31, 2024.

2 (March 20, 2025).

The interest rate was reduced from 13.25% to 8% per annum, weekly payments were reduced from $54,000 to $11,000,

the repayment term was extended to 247 weeks, and all accrued interest of $582,203 was eliminated.

The change in present value of cash

flows exceeded 10% and accordingly the amendment was accounted for as an extinguishment and reissuance of a new note.

The new note was

recorded at its estimated fair value of $2,032,831, determined as the present value of future cash flows discounted at 13.5%, resulting

in a debt discount of $667,169.

Because the holder is a related party, the difference between the carrying amount of the old note and

the fair value of the new note, together with the forgiven accrued interest, was recognized as a deemed capital contribution of $1,249,372

to additional paid-in capital rather than as a gain in earnings.

3 (April 18, 2025) and Amendment 4 (June 4,2025).

On April 18, 2025, the outstanding principal was reduced from $2,678,000 to $2,000,000,

weekly payments were reduced from $11,000 to $9,600, all accrued interest was eliminated, and the interest rate remained at 8%.

4, 2025, a subordination clause was added providing that the note will only be repaid once the Company’s intercompany line of credit

with TicketSmarter has been fully satisfied, effectively deferring all payments until satisfaction of that obligation (see “Subordination”

Both amendments were accounted for as extinguishments and recorded as a combined entry on June 4, 2025, resulting in a deemed

capital contribution of $622,622 to additional paid-in capital.

Subordination

and Fair Value

4 subordinated all payments on the Goodman Trust note to the Company’s $3,000,000 line of credit with TicketSmarter, which was

established in connection with the September 2021 acquisition and is secured by a first lien on all TicketSmarter assets.

As of December

the entire Company Related Party note of $140,000, is classified as current, with an accrued interest balance of $3,465.

Principal Accountant

Fees and Services.

31, 2025, $2,743,179 was outstanding on the line of credit.

Based on management’s cash flow projections for TicketSmarter, the

line of credit is not expected to be fully satisfied until approximately 2036.

Accordingly, the first payment on the Goodman Trust note

is not expected until January 2037.

fair value of the note as of the modification date was determined to be $372,548, calculated as the present value of $9,600 per week

for 209 weeks beginning January 2037, discounted at 13.25% per annum, which represents the Company’s estimated incremental borrowing

rate for a subordinated obligation of similar credit quality and term.

The resulting debt discount of $1,627,452 is being amortized to

non-cash interest expense using the effective interest method over the remaining term of the note through 2041.

An additional deemed

capital contribution of $1,111,304 was recognized to additional paid-in capital to reflect the increase in discount resulting from the

deferral of all payments to 2037.

Interest Expense

the year ended December 31, 2025, the Company recognized total non-cash interest expense of $35,332 related to amortization of the debt

discount on the Goodman Trust note, consisting of $7,770 for the period prior to the March 2025 amendment and $27,562 for the period

following the June 2025 amendment.

The unamortized discount balance was $1,599,890 as of December 31, 2025.

Capital Contributions

the year ended December 31, 2025, the Company recognized total deemed capital contributions of $2,983,298 to additional paid-in capital

arising from the modifications of the Goodman Trust note.

The second amendment on March 20, 2025 resulted in a deemed capital contribution

of $1,249,372, representing the forgiveness of $582,203 in accrued interest and the economic benefit of the reduced interest rate.

combined third and fourth amendments, recorded on June 4, 2025, resulted in a deemed capital contribution of $622,622, representing the

excess of the carrying value of the extinguished note over the fair value of the restructured note after giving effect to the $678,000

principal reduction and $43,515 in accrued interest forgiveness.

An additional deemed capital contribution of $1,111,304 was recognized

at December 31, 2025 to reflect the increase in debt discount resulting from the subordination of all payments to 2037.

Because the holder

of the note is a related party, all amounts were recognized as equity contributions rather than gains in earnings, consistent with the

accounting treatment for related party transactions.

Sheet Classification

all payments under the note are subordinated to the intercompany line of credit and deferred to 2037, no amounts are classified as current

as of December 31, 2025.

The note is presented entirely within long-term liabilities at its net carrying value of $400,110.

interest was outstanding as of December 31, 2025, as all previously accrued interest was eliminated pursuant to the amendments described

Related Party Note

August 22, 2024, the Company’s Chief Executive Officer, made a loan in the amount of $100,000 to the Company to support its operations.

In addition, on October 24, 2024, the Company’s Chief Executive Officer, made an additional loan in the amount of $40,000 to the

Company to support its operations.

These transactions were recorded as related party notes payable (the “Company Related Party

The Company Related Party Notes bear interest at prime rate (8.00% as of December 31, 2025 and 2024) per annum with repayment

due on demand.

The Company paid off the Company Related Party Notes in full during the year ended December 31, 2025.

Person Transaction Policy

Audit Committee considers and approves or disapproves any related person transaction as required by Nasdaq regulations.

The Company’s

policies and procedures on related party transactions cover any transaction, arrangement or relationship or series of similar transactions,

arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:

(i) the Company (or any subsidiary)

is a participant;

(ii) any related party has or will have a direct or indirect interest;

and (iii) the aggregate amount involved (including

any interest payable with respect to indebtedness) will or may be expected to exceed $120,000, except that there is no $120,000 threshold

for members of the Audit Committee.

A related party is any:

(i) person who is or was (since the beginning of the two fiscal years preceding

the last fiscal year, even if they do not presently serve in that role) an executive officer, director or nominee for election as a director;

(ii) greater than five percent (5%) beneficial owner of the Company’s Common Stock or any other class of the Company’s voting

equity securities;

or (iii) immediate family member of any of the foregoing.

An immediate family member includes a person’s spouse,

parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law

and any person (other than a tenant or employee) sharing the same household as such person.

determining whether to approve or ratify a related party transaction, the Audit Committee, or disinterested directors, as applicable,

will take into account, among other factors it deems appropriate:

(i) whether the transaction is on terms no less favorable than terms

generally available to an unaffiliated third party under the same or similar circumstances;

(ii) the nature and extent of the related

party’s interest in the transaction;

(iii) the material terms of the transactions;

(iv) the importance of the transaction both

to the Company and to the related party;

(v) in the case of a transaction involving an executive officer or director, whether the transaction

would interfere with the performance of such person’s duties to the Company;

and (vi) in the case of a transaction involving a

non-employee director or a nominee for election as a non-employee director (or their immediate family member), whether the transaction

would disqualify the director or nominee from being deemed an “independent” director, as defined by Nasdaq, and whether the

transaction would disqualify the individual from serving on the Audit Committee or the Compensation Committee or other committees of

the Board under applicable Nasdaq and other regulatory requirements.

Audit Committee only approves those related party transactions that are on terms comparable to, or more beneficial to us than, those

that could be obtained in arm’s length dealings with an unrelated third party.

Principal Accountant Fees and Services.

and Related Fees

following table is a summary of the fees billed to us by RBSM LLP for the fiscal years ended December 31, 2024 and 2023:

following table is a summary of the fees for the fiscal years ended December 31, 2025 and 2024:

Audit-related fees

All other fees

year 2025 fees were billed by Victor Mokuolu CPA PLLC (“VMCPA”), the Company’s current independent registered public accounting

Fiscal year 2024 fees were billed by RBSM LLP, the Company’s former independent registered public accounting firm.

engaged VMCPA as its independent registered public accounting firm effective May 5, 2025.

Such amount consists of fees billed for professional services rendered in connection with the audit of our annual

26 unchanged sentences

statements or notes in this Annual Report on Form 10-K.

Description of Exhibit

Agreement and Plan of Merger, dated August 23, 2022, between Digital Ally, Inc.

and DGLY Subsidiary.

Mutual Termination and Release Agreement, dated November 7, 2024, by and among Clover Leaf Capital Corp., CL Merger Sub, Inc., Yntegra Capital Investments LLC, in the capacity as the Purchaser Representative, Kustom Entertainment, Inc.

Agreement and Plan of Merger, dated June 1, 2024, by and among Clover Leaf Capital Corp., CL Merger Sub, Inc., Yntegra Capital Investments LLC, in the capacity as the Purchaser Representative, Kustom Entertainment, Inc.

and Digital Ally, Inc.

1 unchanged sentence

Articles of Merger.

Certificate of Amendment to Digital Ally, Inc.’s Articles of Incorporation, dated December 8, 2022.

Certificate of Amendment to the Registrant’s Articles of Incorporation, effective December 8, 2022.

Certificate of Amendment to Articles of Incorporation of Digital Ally, Inc., dated February 6, 2024.

Certificate of Correction to Articles of Incorporation of Digital Ally, Inc., dated October 28, 2024.

Certificate of Correction to Articles of Incorporation of Digital Ally, Inc., dated October 30, 2024.

Amendment to Bylaws

Certificate of Amendment to Articles of Incorporation of the Registrant, effective May 6, 2025.

Certificate of Amendment to Articles of Incorporation of the Registrant, effective May 23, 2025.

Certificate of Change to the Articles of Incorporation of the Registrant, effective January 8, 2026.

Certificate of Amendment to the Articles of Incorporation of the Registrant, effective January 8, 2026.

Amended and Restated Bylaws

Amendment to the Amended and Restated Bylaws of the Registrant, effective January 8, 2026.

Form of Common Stock Certificate.

Form of Registration Rights Agreement, dated October 13, 2022, by and among Digital Ally, Inc.

and the investors named therein.

Form of Registration Rights Agreement, dated April 5, 2023, between Digital Ally, Inc.

and certain Purchasers, who are signatories thereto.

Form of Certificate of Designation of Series A Convertible Redeemable Preferred Stock.

Form of Certificate of Designation of Series B Convertible Redeemable Preferred Stock.

Form of Common Stock Purchase Warrant of Digital Ally, Inc., dated August 5, 2019.

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

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

Form of Senior Secured Convertible Note, issued by Digital Ally, Inc., dated April 5, 2024.

Form of Warrant of Digital Ally, Inc., dated April 5, 2024.

Revolving Note, dated October 26, 2024, issued by Digital Ally, Inc.to Kompass Kapital Funding, LLC.

Form of Senior Secured Promissory Note, issued by Digital Ally, Inc., dated March 1, 2024

Certificate of Withdrawal of Certificate of Designation of Series A Convertible Redeemable Preferred Stock

Certificate of Withdrawal of Certificate of Designation of Series B Convertible Redeemable Preferred Stock

Form of Series A Warrant of Digital Ally, Inc., dated June 25, 2024.

Form of Series B Warrant of Digital Ally, Inc., dated June 25, 2024.

Form of Pre-Funded Warrant of Digital Ally, Inc., dated June 25, 2024.

Form of Series A Warrant of Digital Ally, Inc., dated February 14, 2025.

Form of Series B Warrant of Digital Ally, Inc., dated February 14, 2025.

Form of Pre-Funded Warrant of Digital Ally, Inc., dated February 14, 2025.

Form of Pre-Funded Warrant, dated February 14, 2025

Form of Series A Warrant, dated February 14, 2025

Form of Series B Warrant, dated February 14, 2025

Form of Senior Secured Convertible Note, issued by Digital Ally, Inc., dated September 15, 2025

Form of Warrant issued by Digital Ally, Inc., dated September 15, 2025

Form of Senior Secured Convertible Note, issued by Digital Ally, Inc., dated December 19, 2025

Form of Warrant issued by Digital Ally, Inc., dated December 19, 2025

Promissory Note dated January 8, 2026.

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

23 unchanged sentences

and Brickell Key Investments LP.

Form of Securities Purchase Agreement, dated as of January 11, 2021, by and between Digital Ally, Inc.

and the Investors.

Form of Placement Agency Agreement, dated January 27, 2021, by and between Digital Ally, Inc.

and Kingswood Capital Markets, division of Benchmark Investments, Inc.

Form of Securities Purchase Agreement, dated as of January 27, 2021, by and between Digital Ally, Inc.

and the Investors.

Commercial Real Estate Sales Contract, dated February 24, 2021, between Digital Ally, Inc.

1 unchanged sentence

Form of Operating Agreement of Nobility Healthcare, LLC, dated June 1, 2021.

Warrant Exchange Agreement, dated August 19, 2021, by and among Digital Ally, Inc.

and the warrant holders who are signatories thereto.

Unit Purchase Agreement, dated September 2, 2021.

2 unchanged sentences

and the investors thereto.

Form of Registration Rights Agreement, dated October 13, 2022, by and among Digital Ally, Inc.

and the investors named therein.

Form of Securities Purchase Agreement, dated April 5, 2024, between Digital Ally, Inc.

9 unchanged sentences

and its direct and indirect subsidiaries and a lender.

Form of Registration Rights Agreement, dated April 5, 2024, between Digital Ally, Inc.

and certain Purchasers, who are signatories thereto.

Loan and Security Agreement, dated October 26, 2024, by and between Digital Ally, Inc., Digital Ally Healthcare, LLC, and Kompass Kapital Funding, LLC.

2 unchanged sentences

Lock-Up Agreement, dated June 1, 2024, by and between Clover Leaf Capital Corp., Yntegra Capital Investments, LLC, and Digital Ally, Inc.

Amendment to Lock-Up Agreement, dated June 24, 2024, by and between Clover Leaf Capital Corp., Yntegra Capital Investments, LLC, and Digital Ally, Inc.

Form of Note Purchase Agreement, dated March 1, 2024, by and between Digital Ally, Inc., Kustom Entertainment, Inc., and Mosh Man LLC

Amendment to Note Purchase Agreement, dated September 25, 2024, by and between Digital Ally, Inc., Kustom Entertainment, Inc., and Mosh Man LLC

Form of Security Agreement, dated March 1, 2024, by and between Digital Ally, Inc., Kustom Entertainment, Inc., and any Additional Grantor

Form of Asset Purchase Agreement, dated March 1, 2024, by and between JC Entertainment, LLC, and Kustom 440, Inc.

Form of Securities Purchase Agreement, dated June 25, 2024, between Digital Ally, Inc.

and the investors thereto.

Letter Agreement, dated July 13, 2024, by and between Digital Ally, Inc., Kustom Entertainment, Inc., and Mosh Man LLC

Letter Agreement, dated September 12, 2024, by and between Digital Ally, Inc., Kustom Entertainment, Inc., and Mosh Man LLC

Purchase and Sale Agreement, dated August 2, 2024, by and between Digital Ally, Inc.

and Serenity Now, LLC

Form of Securities Purchase Agreement, dated November 6, 2024, between Digital Ally, Inc.

and the investors thereto.

Amendment to Securities Purchase Agreement, dated December 11, 2024, between Digital Ally, Inc.

and the investors thereto.

Form of Subsidiary Guaranty, dated November 13, 2024, by and among Digital Ally, Inc.

and its direct and indirect subsidiaries.

Form of Underwriting Agreement by and between Digital Ally, Inc.

and Aegis Capital Corp., dated February 13, 2025

Form of Securities Purchase Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025, relating to the Notes and Warrants

Form of Security Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025

Form of Trademark Security Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025

Form of Patent Security Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025

Form of Subsidiary Guaranty by and among Digital Ally, Inc.

and its direct and indirect subsidiaries, dated September 15, 2025

Form of Registration Rights Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025, relating to the Notes and Warrants

Form of Leak-Out Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025

Form of Common Stock Purchase Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025, relating to the ELOC

Form of Registration Rights Agreement between Digital Ally, Inc.

and a certain Purchaser, dated September 15, 2025, relating to the ELOC

Form of First Amendment to Common Stock Purchase Agreement between Digital Ally, Inc.

and a certain Purchaser, dated November 7, 2025

Unit Purchase Agreement dated January 8, 2026, by and among Digital Ally Healthcare, Inc., Nobility LLC, and Nobility Healthcare, LLC

Code of Ethics and Code of Conduct.

Subsidiaries of Registrant

Consent of Victor Mokuolu, CPA PLLC

Consent of RBSM LLP

8 unchanged sentences

Heckman, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Digital Ally, Inc.

Clawback Policy

XBRL Instance Document **

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The XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed” for purposes of

2 unchanged sentences

by specific reference in such filing or document.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Filed as an Exhibit to the Company’s Form 8-K filed March 5, 2024

Filed as an Exhibit to the Company’s Form 8-K filed April 5, 2024

Filed as an Exhibit to the Company’s Form 8-K filed June 28, 2024

Filed as an Exhibit to the Company’s Form 8-K filed July 18, 2024

Filed as an Exhibit to the Company’s Form 8-K filed August 6, 2024

Filed as an Exhibit to the Company’s Form 8-K filed September 13, 2024

Filed as an Exhibit to the Company’s Form 8-K filed September 27, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 1, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 7, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 8, 2024

Filed as an Exhibit to the Company’s Form 8-K filed December 11, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 15, 2024

Filed as an Exhibit to the Company’s Form 8-K filed February 19, 2025

Filed as an Exhibit to the Company’s Annual Report on Form 10-K filed April 1, 2024

financial statement schedules have been provided because the information is not required or is shown either in the financial statements

or the notes thereto.

Filed as an exhibit to

the Company’s Annual Report on Form 10KSB for the Year ended December 31, 2007.

Filed as an exhibit to

the Company’s October 2006 Form SB-2.

Filed as an exhibit to

the Company’s Annual Report on Form 10K for the Year ended December 31, 2009.

Filed as an exhibit to

the Company’s Form 8-K filed June 1, 2011.

Filed as an exhibit to

the Company’s Form S-8 filed May 23, 2016.

Filed as an exhibit to

the Company’s Form 8-K filed August 25, 2017.

Filed as an exhibit to

the Company’s Form 8-K filed April 4, 2018.

Filed as an exhibit to

the Company’s Form 8-K filed August 2, 2018.

Filed as an exhibit to

the Company’s Registration Statement on Form S-8 filed August 20, 2018.

Filed as an exhibit to

the Company’s Form 8-K filed August 5, 2019.

Filed as an exhibit to

the Company’s Registration Statement on Form S-8 filed November 16, 2020.

Filed as an exhibit to

the Company’s Form 8-K filed January 12, 2021.

Filed as an exhibit to

the Company’s Form 8-K filed January 28, 2021.

Filed as Appendix A to

the Company’s Definitive Proxy Statement on Schedule 14A filed April 27, 2021.

Filed as an exhibit to

the Company’s Form 8-K filed May 3, 2021.

Filed as an exhibit to

the Company’s Form 8-K filed June 9, 2021.

Filed as an exhibit to

the Company’s Form 8-K filed August 19, 2021.

Filed as an exhibit to

the Company’s Form 8-K filed September 9, 2021.

Filed as an exhibit to

the Company’s Form 8-K filed August 23, 2022.

Filed as an exhibit to

the Company’s Form 8-K filed October 19, 2022.

Filed as Appendix A to

the Company’s Definitive Proxy Statement on Schedule 14A filed October 28, 2022.

Filed as an exhibit to

the Company’s Form 8-K filed December 8, 2022.

Filed as an exhibit to

the Company’s Form 8-K filed February 7, 2023.

Filed as an exhibit to

the Company’s Registration Statement on Form S-8 filed February 28, 2024.

Filed as an exhibit to

the Company’s Annual Report on Form 10K for the Year ended December 31, 2022.

Filed as an exhibit to

the Company’s Form 8-K filed April 7, 2023.

Filed as an exhibit to

the Company’s Form 8-K filed June 6, 2023.

Filed as an exhibit to

the Company’s Form 8-K filed October 27, 2023.

Filed as an Exhibit to

the Company’s Annual Report on Form 10-K filed April 1, 2024

as an Exhibit to the Company’s Form 8-K filed February 19, 2025.

as an Exhibit to the Company’s Form 8-K filed May 7, 2025.

as an Exhibit to the Company’s Form 8-K filed May 23, 2025.

as an Exhibit to the Company’s Form 8-K filed September 17, 2025.

as an Exhibit to the Company’s Form 8-K filed November 7, 2025.

as an Exhibit to the Company’s Form 8-K filed December 22, 2025.

as an Exhibit to the Company’s Form 8-K filed January 8, 2026.

as an Exhibit to the Company’s Form 8-K filed January 12, 2026.

No financial statement

schedules have been provided because the information is not required or is shown either in the financial statements or the notes

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized.

DIGITAL ALLY, INC.,

KUSTOM ENTERTAINMENT, INC.,

a Nevada corporation

1 unchanged sentence

Executive Officer)

April 10, 2026

person whose signature appears below authorizes Stanton E.

5 unchanged sentences

registrant and in the capacities and on the dates indicated.

Ross, Director

and Chief Executive Officer

Signature and Title

/s/ Stanton E.

April 10, 2026

Ross, Director and Chief Executive Officer

April 10, 2026

Richie, Director

Duke Daughtery

April 10, 2026

Duke Daughtery

Heckman, Chief Financial Officer, Secretary, Treasurer and

Accounting Officer

Financial Officer and Principal Accounting Officer)

/s / Charles M.

April 10, 2026

/s/ Thomas J.

April 10, 2026

Heckman, Chief Financial Officer, Secretary,

Treasurer and

Principal Accounting Officer

(Principal Financial Officer and Principal Accounting Officer)

ENTERTAINMENT, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Registered Public Accounting Firm (PCAOB ID No:

Report of Independent Registered Public Accounting Firm (PCAOB ID No:

Financial Statements:

Consolidated Balance Sheets – December 31, 2024 and 2023

Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

Balance Sheets – December 31, 2025 and 2024

Statements of Operations for the Years Ended December 31, 2025 and 2024

Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2025 and 2024

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

Notes to the Consolidated Financial Statements

York, NY 10022

Statements of Cash Flows for the Years Ended December 31, 2025 and 2024

to the Consolidated Financial Statements

of Independent Registered Public Accounting Firm

To the Board of Directors

and Stockholders

Kustom Entertainment, Inc.

(formerly Digital Ally, Inc.

and Subsidiaries)

on the Financial Statements

have audited the accompanying consolidated balance sheet of Kustom Entertainment, Inc.

(the “Company”) as of December 31,

2025, and the related consolidated statement of operations, stockholders’ equity (deficit), and cash flows for the year ended December

31, 2025, and the related notes (collectively referred to as the financial statements).

In our opinion, the 2025 financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations

and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States

also have audited the adjustments to the 2024 financial statements to retrospectively apply the change in the reverse stock split that

became effective in 2025 and to reclassify certain assets and liabilities as held for sale related to the discontinued operations entered

into on January 8, 2026, as described in Note 18 and Note 23.

We have considered these adjustments as part of our audit of the

2025 consolidated financial statements.

In our opinion, such adjustments are appropriate and have been properly applied.

engaged to audit, review, or apply any procedures to the 2024 financial statements of the Company other than with respect to the adjustments

and, accordingly, we do not express an opinion or any other form of assurance on the 2024 financial statements taken as a whole.

doubt about the Company’s ability to continue as a Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

1, Going Concern Matters and Management’s Plan, to the financial statements, the Company incurred substantial operating losses

in the years ended December 31, 2025.

The Company incurred operating losses of approximately $10,882,421 for the year ended December

31, 2025, and had an accumulated deficit of $144,184,436 as of December 31, 2025.

Management’s plans in regard to these matters are also

described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

and Intangible Assets

of the Critical Audit Matter

described in Note 8 to the consolidated financial statements, the Company recognized goodwill and intangible asset impairment charges

of $2,533,667 during the year ended December 31, 2025, consisting of a $1,428,000 goodwill impairment charge, a $746,667 full write-off

of the Sponsorship Agreement Network intangible asset, and $359,000 of trademark impairment, all attributable to the Entertainment reporting

The charges followed total impairment charges of $4,830,000 in the prior year.

determined the fair value of the Entertainment reporting unit using an equal weighting of the income approach (discounted cash flow)

and the market approach (guideline public company multiples).

The income approach required management to estimate future revenue growth

rates, gross margin improvement, a weighted average cost of capital ranging from 18.4% to 22.7%, and a terminal growth rate.

unobservable inputs for which management has significant estimation latitude, and the terminal value — which represents a substantial

portion of the total indicated value — is highly sensitive to small changes in the terminal growth rate and discount rate assumptions.

identified this as a critical audit matter because of the significant and subjective judgment required to evaluate these unobservable

inputs, the consecutive-year impairment history of the Entertainment reporting unit, and the adverse performance indicators present during

the year ended December 31, 2025

We Addressed the Critical Audit Matter

audit procedures included the following :

obtained management’s complete impairment analysis and agreed all base-year historical financial

data used as Discounted Cash Flow (“DCF”) inputs to the audited financial statements,

including the Country Stampede revenue, cost of revenue, and gross loss for year ended December

evaluated management’s forecast and assessed whether the assumptions were consistent with

the observable forward indicators available at December 31, 2025.

independently recomputed the DCF outputs —using both management’s inputs and our independently

derived inputs and compared the results to management’s indicated value and to the impairment

charge recorded in the financial statements.

evaluated the guideline company selection for the market approach, assessed the comparability

of each selected company to the Entertainment reporting unit, and evaluated whether weighting

of the income and market approaches was appropriate given the characteristics of the reporting

of the Critical Audit Matter

described in Notes 10, 11, and 17 to the consolidated financial statements, the Company’s derivative liabilities consist of warrant derivative

liabilities and a bifurcated embedded derivative liability arising from the 2025 Senior Secured Convertible Notes.

Warrant derivative

liabilities arise from warrants issued in the 2023, June 2024, and February 2025 equity offerings, as well as detachable warrants issued

in connection with the September and December 2025 closings of the 2025 Senior Secured Convertible Notes.

These warrants are classified

as derivative liabilities at fair value under ASC 815-40 because their terms include provisions that could require net cash settlement

upon a qualifying tender offer.

The embedded conversion feature of the 2025 Senior Secured Convertible Notes, which carries a variable

conversion price that does not meet the fixed-for-fixed requirement under ASC 815-40, was bifurcated from the host debt instrument and

recognized as a derivative liability at fair value under ASC 815-15.

derivative liabilities are classified as Level 3 and measured at fair value using the Black-Scholes option pricing model at each reporting

date, with changes recognized in the consolidated statements of operations.

The aggregate fair value of the derivative liabilities recognized

upon issuance of the 2025 Senior Secured Convertible Notes was $852,675.

The aggregate Level 3 derivative liability balance decreased

from $4,554,640 at December 31, 2024 to $852,844 at December 31, 2025, reflecting new issuances, reclassifications to equity upon exercise

or termination of applicable warrant provisions, a gain of $3,331,616 from the change in fair value of warrant derivative liabilities,

and a gain of $43,250 from the change in fair value of the bifurcated embedded derivative liability.

identified this as a critical audit matter because the income statement impact of fair value changes was material, and the Level 3 measurement

required especially subjective auditor judgment in evaluating significant unobservable inputs, principally expected volatility, used

in the Black-Scholes option pricing model.

We Addressed the Critical Audit Matter

audit procedures included the following:

independently recalculated the fair value of the bifurcated embedded conversion feature and

each warrant series at relevant measurement dates using the Binomial Option pricing model.

We agreed market-observable inputs to independent data sources and independently developed

expected volatility estimates from historical price data, comparing our results to management’s

inputs and evaluating any differences.

independently evaluated the requirement to bifurcate the embedded conversion feature under

ASC 815-15 and the classification of each warrant series as a derivative liability under

We agreed all reclassifications from warrant derivative liabilities to additional

paid-in capital to underlying exercise notices and warrant agreement terms and confirmed

that each reclassification was recorded at fair value as of the applicable date, consistent

with ASC 815.

evaluated the completeness and accuracy of the Level 3 fair value rollforward in Note 11,

agreeing the beginning balance, additions, reclassifications to equity, and fair value changes

to underlying computations and transaction documentation, and confirmed the ending balance

of $852,844 to the remaining outstanding derivative liability positions.

Victor Mokuolu, CPA PLLC

have served as the Company’s auditor since 2025

April 10, 2026

PCAOB ID Number 6771

New York Office:

805 Third Avenue

New York, NY 10022

www.rbsmllp.com

2 unchanged sentences

of Directors of

Digital Ally, Inc.

and subsidiaries

1 unchanged sentence

on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Digital Ally, Inc.

We have audited, before the effects of the adjustments

to retrospectively apply (1) the effects of the reverse stock splits described in Note 1 – Nature of Business and Summary of Significant

Accounting Policies – Reverse Stock Splits and (2) the effects of the reclassifications for Discontinued operations described in

Note 1 – Nature of Business and Summary of Significant Accounting Policies – Discontinued Operations and Held for Sale and

Note 23 – Discontinued Operations, the accompanying consolidated balance sheet of Digital Ally, Inc.

and its subsidiaries (the Company)

as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ (deficit) equity and cash flows

for each of the years in the two year period ended December 31, 2024, and the related notes (collectively referred to as the consolidated

financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flow for each of the years in the two

year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

as of December 31, 2024, the related consolidated statement of operations, stockholders’ deficit and cash flow for the year ended

December 31, 2024, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, before the

effects of the adjustments to retrospectively apply (1) the effects of the reverse stock splits described in Note 1 – Nature of

Business and Summary of Significant Accounting Policies – Reverse Stock Splits and (2) the effects of the reclassifications for

Discontinued operations described in Note 1 – Nature of Business and Summary of Significant Accounting Policies – Discontinued

Operations and Held for Sale and Note 23 – Discontinued Operations, the consolidated financial statements present fairly, in all

material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flow

for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Retrospective Adjustment for Reverse Stock

Split and Discontinued Operations

We were not engaged to audit, review, or apply any procedures to the adjustments for

the retrospective effect of the reverse stock-split or discontinued operations described in Note 1, accordingly, we do not express an

opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments

were audited by Victor Mokuolu, CPA PLLC.

(The 2024 consolidated financial statements before the effects of the adjustments discussed

in Note 1 – Reverse Stock Splits, Note 1 – Discontinued Operations and Held for Sale, Note 3 – Accounts Receivable and

Subscription Receivables, Note 6 – Prepaid Expenses, Note 7 – Property, Plant and Equipment, Note 8 – Goodwill and Other

Intangible Assets, Note 12 – Accrued Expenses, Note 14 – Operating Leases, Note 16 – Stock Based Compensation, Note

17 – Common Stock Purchase Warrants, Note 18 – Stockholders’ Equity, Note 19 – Related Party Transactions, Note

20 – Net Loss Per Share, Note 22 – Operating Segments and Note 23 – Discontinued Operations are not presented herein).

Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as

a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred substantial operating losses

and will require additional capital to continue as a going concern.

This raises substantial doubt about the Company’s ability to

continue as a going concern.

The accompanying consolidated financial statements have been prepared assuming

that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred

substantial operating losses and will require additional capital to continue as a going concern.

This raises substantial doubt about the

Company’s ability to continue as a going concern.

Management’s plans regarding these matters are also described in Note 1.

The consolidated financial

statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or

the amounts and classification of liabilities that may result from the outcome of this uncertainty.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility

is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm

registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect

to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform

the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether

due to error or fraud.

The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and

classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the

applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to

error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for

the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial

statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining,

on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating

the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated

financial statements.

We believe that our audits provide a reasonable basis for our opinion.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements.

We believe that our audit provide a reasonable basis for our opinion.

Audit Matters

5 unchanged sentences

accounts or disclosures to which they relate.

Indefinite Life Intangibles and Other Intangibles Impairment Assessments – Entertainment Segment – Refer to Notes 1 and 8

to the consolidated financial statements

Goodwill, Indefinite Life Intangibles and Other Intangibles Impairment

Assessments – Entertainment Segment – Refer to Notes 1 and 8 to the consolidated financial statements

Audit Matter Description

described in Note 8 to the financial statements, the Company’s goodwill and indefinite life intangible asset balance was $5,805,507

and $699,000, respectively as of December 31, 2024.

The Company also has amortizable identifiable intangible assets of $1,866,667 –

sponsorship agreement network and $100,000 – SEO content, which are being amortized over 5 years and 4 years, respectively, and

are related to the entertainment segment.

Management tests these assets annually for impairment or more frequently when potential impairment

triggering events are present.

Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying

Management uses a weighting of income and market approaches to estimate the fair value of its reporting unit.

The key assumptions

and estimates utilized in the weighting of income and market approaches primarily include future levels of revenue growth, gross profit

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

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

As described in Note 8 to the financial statements, the Company’s

goodwill and indefinite life intangible asset balance was $5,805,507 and $699,000, respectively as of December 31, 2024.

The Company also

has amortizable identifiable intangible assets of $1,866,667 – sponsorship agreement network and $100,000 – SEO content, which

are being amortized over 5 years and 4 years, respectively, and are related to the entertainment segment.

Management tests these assets

annually for impairment or more frequently when potential impairment triggering events are present.

Goodwill is tested for impairment

by comparing the estimated fair value of a reporting unit to its carrying value.

Management uses a weighting of income and market approaches

to estimate the fair value of its reporting unit.

The key assumptions and estimates utilized in the weighting of income and market approaches

primarily include future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free debt-free net working

capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate, selection of guideline public companies

and revenue market multiples.

principal considerations for our determination that performing procedures relating to the goodwill and intangible asset impairment assessments

of the entertainment reporting unit is a critical audit matter because (i) the significant judgment used by management when determining

the fair value estimates of the reporting units;

(ii) the high degree of auditor judgment, subjectivity and effort in performing procedures

and evaluating the significant assumptions used in management’s fair value estimates;

and (iii) the audit effort involved in the

use of professionals with specialized skill and knowledge.

of the entertainment reporting unit is a critical audit matter because (i) the significant judgment used by management when

determining the fair value estimates of the reporting units;

(ii) the high degree of auditor judgment, subjectivity and effort in performing

procedures and evaluating the significant assumptions used in management’s fair value estimates;

and (iii) the audit effort involved

in the use of professionals with specialized skill and knowledge.

the Critical Audit Matter Was Addressed in the Audit

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

These procedures included,

among others, (i) testing management’s process for determining the fair value estimates of the entertainment segment;

testing the completeness and accuracy of the underlying data used in the income and market approach;

and (iii) evaluating the reasonableness

of the significant assumptions used by management related to future levels of revenue growth, gross profit margin, EBITDA as a percentage

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

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

Evaluating management’s

assumptions related to the future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free debt-free

net working capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate, selection of guideline

public companies and revenue market multiples and involved evaluating whether the assumptions were reasonable considering (i) current

and past performance of the entertainment segment;

(ii) the consistency with external market and industry data;

and (iii) whether these

assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized

skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market approach and (ii) the reasonableness

of significant assumptions related to the future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue,

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

selection of guideline public companies and revenue market multiples.

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

These procedures included, among others, (i) testing management’s

process for determining the fair value estimates of the entertainment segment;

(ii) testing the completeness and accuracy of the underlying

data used in the income and market approach;

and (iii) evaluating the reasonableness of the significant assumptions used by management

related to future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free debt-free net working capital

as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate, selection of guideline public companies and

revenue market multiples.

Evaluating management’s assumptions related to the future levels

of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free debt-free net working capital as a percentage of

revenue, capital expenditures as a percentage of revenue, discount rate, selection of guideline public companies and revenue market multiples

and involved evaluating whether the assumptions were reasonable considering (i) current and past performance of the reporting units;

the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in

other areas of the audit.

Professionals with specialized skill and knowledge were used to assist

in evaluating (i) the appropriateness of the income and market approach and (ii) the reasonableness of significant assumptions related

to the future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free debt-free net working capital

as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate, selection of guideline public companies and

revenue market multiples.

and Other Intangibles arising from the acquisition of Country Stampede – Refer to Notes 1 and 21 to the consolidated financial

28 unchanged sentences

ID Number 587

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

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

ANTEA International with affiliated offices worldwide

ENTERTAINMENT, INC.

Digital Ally, Inc.)

BALANCE SHEETS

31, 2024 AND 2023

Current assets:

Cash and cash equivalents

Accounts receivable-trade, less allowance for doubtful accounts of $ 314,304 – 2024 and $ 200,668 – 2023

Other receivables, net of $ 25,000 allowance – 2024 and $ 5,000 - 2023

Cash and cash

Accounts receivable-trade,

less allowance for doubtful accounts of $ 10,262 – 2025 and $ 208,458 – 2024

Subscriptions receivables,

net of $ 75,000 allowance – 2025 and $ 25,000 – 2024

Other receivables

Inventories, net

Prepaid expenses

Total current assets

of revenue-cycle management business held-for-sale

current assets

Property, plant, and equipment, net

1 unchanged sentence

Operating lease right of use assets, net

Liabilities and Equity (Deficit)

Subscriptions receivables – long term

Assets of revenue-cycle

management business held-for-sale

Liabilities and Equity

Current liabilities:

1 unchanged sentence

Accrued expenses

Current portion of operating lease obligations

Contract liabilities – current

Notes payable – related party – current portion

Debt obligations – current

Current portion of operating

lease obligations

Deferred revenue –

Notes payable – related

party – current

Debt obligations –

Warrant derivative liabilities

Income taxes payable

Total current liabilities

of revenue-cycle management business held for sale

current liabilities

Long-term liabilities:

Debt obligations – long term

Operating lease obligation – long term

Contract liabilities – long term

Lease deposit

Debt obligations –

Operating lease obligation

Deferred revenue –

Notes payable – related

party – long term

of revenue-cycle management business held for sale

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 15)

Stockholders’ Equity (Deficit):

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

Preferred stock, $ 0.001

par value per share, 10,000,000 shares authorized;

none issued or outstanding – 2025 and 2024

Common stock, $ 0.001 par value;

200,000,000 shares authorized;

Common stock, $ 0.001 par

66,666,667 – 2025 and 200,000,000 – 2024 shares authorized;

shares issued:

1 unchanged sentence

Additional paid in capital

Noncontrolling interest in consolidated subsidiary

Noncontrolling interest

in consolidated subsidiary

( 1,885,802 )

Accumulated deficit

( 1,198,286 )

( 144,184,436 )

Total equity (deficit)

( 137,512,928 )

Total liabilities and equity (deficit)

Notes to Consolidated Financial Statements.

equity (deficit):

( 9,013,430 )

Total liabilities and

equity (deficit)

The accompanying notes are an integral part of these financial statements

ENTERTAINMENT, INC.

Digital Ally, Inc.)

STATEMENTS OF OPERATIONS

THE YEARS ENDED

31, 2024 AND 2023

Service and other

Total revenue

Cost of revenue:

Service and other

Total cost of revenue

cost of revenue

Selling, general and administrative expenses:

Research and development expense

Selling, advertising and promotional expense

General and administrative expense

Goodwill and intangible asset impairment charge

Total selling, general and administrative expenses

Operating loss

Research and development

Selling, advertising and

promotional expense

General and administrative

and intangible asset impairment charge

Total selling, general

and administrative expenses

( 10,882,421 )

7 unchanged sentences

( 1,959,396 )

( 1,792,308 )

Loss on extinguishment of convertible debt

( 1,112,705 )

Loss on disposal of intangibles

Change in fair value of warrant derivative liabilities

Change in fair value of warrant derivative

( 1,240,407 )

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

Gain on the extinguishment of liabilities

Loss on extinguishment of debt

Gain on sale of property, plant and equipment

Total other expense

( 6,514,185 )

Gain on sale of property,

plant and equipment

Total other income (expense)

from continuing operations

( 6,515,179 )

Loss before income tax benefit (provision)

from continuing operations

( 5,955,930 )

( 17,898,105 )

Income tax expense benefit (provision)

Income tax expense benefit

Net loss from continuing operations

( 5,955,930 )

( 17,898,105 )

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

Net loss attributable to common stockholders

Discontinued operations:

Loss from discontinued

operations (including impairment charge on disposal of $ 1,527,634 as of December 31, 2025)

( 1,403,094 )

( 3,817,620 )

Net loss per share attributable to common information:

tax expense benefit (provision)

Net loss from

discontinued operations

( 1,403,094 )

( 3,817,620 )

( 7,359,024 )

( 21,715,725 )

Net income attributable

to noncontrolling interests

Net loss attributable

to common stockholders

$ ( 6,671,508 )

$ ( 19,844,147 )

Net loss per share attributable to common stockholders’

Continuing operations

$ ( 30,204.62 )

Discontinued operations

Net loss attributable

to common stockholders per share – basic

$ ( 33,488.74 )

Continuing operations

$ ( 30,204.62 )

Discontinued operations

Net loss attributable to common

stockholders per share – diluted

$ ( 33,488.74 )

Weighted average shares outstanding:

Notes to Consolidated Financial Statements.

accompanying notes are an integral part of these financial statements.

ENTERTAINMENT, INC.

Digital Ally, Inc.)

STATEMENTS OF EQUITY(DEFICIT)

7 unchanged sentences

Restricted common stock forfeitures

Conversion of convertible note into common stock

Issuance due to rounding from reverse stock split

Fair value of pre-funded warrants issued along with sale of common stock

Transition of warrant derivative liability to equity upon exercise of pre-funded warrants

Sale of common stock and pre-funded warrants,

net of offering costs

Issuance of common stock upon exercise of February 2025 Series B common stock purchase warrants

Transition of warrant derivative liability to equity upon exercise of Series B warrants issued along with February 2025 sale of common

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

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

Detachable warrants issued in connection with Senior Notes in September and December 2025

Issuance of commitment shares in conjunction with the Committed Equity Financing Agreement

Round up of fractional shares resulting from the reverse stock splits

Fair value of warrants issued along with sale

of common stock

( 2,075,300 )

Issuance of commitment shares in connection

with bridge financing

Issuance of common stock upon exercise of pre-funded

Allocation of fair value of Series B warrants

approved by shareholders

Transition of warrant derivative liability

to equity upon exercise of Series B warrants

Issuance of common stock upon exercise of Series

B common stock purchase warrants

( 1,871,578 )

( 19,844,147 )

( 21,715,725 )

Balance, December 31, 2024

3 unchanged sentences

$ ( 9,013,430 )

Stock-based compensation

Restricted common stock grant

Restricted common stock forfeitures

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

Fair value of warrants issued along with sale of common stock

$ 129,697,783

$ ( 1,198,286 )

Issuance of commitment shares in connection with bridge financing

Issuance of common stock upon exercise of pre-funded warrants

Allocation of fair value of Series B warrants approved by shareholders

Transition of warrant derivative liability to equity upon exercise of Series

Issuance of common stock upon exercise of common stock purchase warrants

$ ( 137,512,928 )

$ ( 9,013,430 )

Stock-based compensation

Fair value of pre-funded warrants issued along

with sale of common stock

Transition of warrant derivative liability

to equity upon exercise of pre-funded warrants

Sale of common stock and pre-funded warrants,

net of offering costs

Issuance of common stock upon exercise of June

2024 Series B common stock purchase warrants

Issuance of common stock upon exercise of Series B common stock purchase warrants

Transition of warrant derivative liability

to equity upon exercise of Series B warrants

Fair value of Series A warrants issued along

with sale of common stock

( 1,340,214 )

Balance, December 31, 2024

( 1,340,214 )

Fair value of Series B warrants issued along

with sale of common stock

( 5,406,408 )

Issuance of common stock upon exercise of February

2025 Series B common stock purchase warrants

Transition of warrant derivative liability

to equity upon exercise of Series B warrants issued along with February 2025 sale of common stock

Transition of warrant derivative liability

to equity of Series A warrants issued along with February 2025 sale of common stock

Deemed capital contribution related to modification

of notes payable - related party

Issuance of commitment shares in conjunction

with the Committed Equity Financing Agreement

Round up of fractional shares resulting from

the reverse stock splits

( 6,671,508 )

( 7,359,024 )

Balance, December 31, 2025

$ 148,439,504

1 unchanged sentence

$ ( 144,184,436 )

Notes to Consolidated Financial Statements.

$ 148,439,504

$ ( 1,885,802 )

$ ( 144,184,436 )

The accompanying notes are an integral part of these financial statements.

ENTERTAINMENT, INC.

Digital Ally, Inc.)

STATEMENTS OF CASH FLOWS

ENDED DECEMBER 31, 2024 AND 2023

Cash Flows from Operating Activities:

1 unchanged sentence

$ ( 21,715,725 )

Adjustments to reconcile net loss to net cash flows used in operating activities:

net (loss) from discontinued operations, net of tax

( 1,403,094 )

( 3,817,620 )

Net loss from continuing

( 5,955,930 )

( 17,898,105 )

Adjustments to reconcile

net loss to net cash flows used in operating activities:

Depreciation and amortization

Gain on sale of property, plant and equipment

Loss on disposal of intangible assets

Goodwill and intangible asset impairment charge

Gain on sale of property,

plant and equipment

Loss on disposal of intangible

Goodwill and intangible

asset impairment charge

Stock based compensation

Non-cash interest expense

Amortization of debt issuance costs

Gain on extinguishment of liabilities

Convertible debt discount amortization

Loss on extinguishment of convertible debt

Loss on extinguishment of debt

Gain on extinguishment

of liabilities

( 2,234,658 )

Loss on extinguishment

of convertible debt

Loss on litigation

Provision for doubtful accounts receivable

Provision for doubtful lease receivable

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

Change in fair value of warrant derivative liability

Provision for doubtful

accounts receivable

Provision for doubtful

lease receivable

Derivative liability at issuance

Change in fair value of

warrant derivative liability

( 3,331,616 )

Provision for inventory obsolescence

Provision for inventory

( 2,372,806 )

Change in operating assets and liabilities:

Provision for loss on litigation settlement receivable

Change in operating assets

and liabilities:

(Increase) decrease in:

Accounts receivable – trade

Accounts receivable – other (including related party)

Accounts receivable –

( 1,268,318 )

Prepaid expenses

Operating lease right of use assets

Accounts receivable –

other (including related party)

( 1,057,211 )

Prepaid expenses

Operating lease right of

Increase (decrease) in:

Accounts payable

( 4,403,298 )

Accrued expenses

Accrued interest - related party

( 3,974,349 )

Accrued interest - related

Income taxes payable

1 unchanged sentence

Operating lease obligations

Contract liabilities

Net cash used in operating activities

( 2,014,550 )

Net cash used

in operating activities – continuing operation

( 8,411,005 )

( 5,417,467 )

cash provided by operating activities – discontinued operation

Cash Flows from Investing Activities:

Purchases of property, plant and equipment

Proceeds from sale of property, plant and equipment

Purchases of intangible assets

Proceeds from sale of intangible assets

Cash paid for acquisition of Country Stampede

Proceeds from sale of land and building

Net cash provided by (used in) investing activities

Purchases of property,

plant and equipment

Proceeds from sale of property,

plant and equipment

Purchases of intangible

Proceeds from sale of intangible

Cash paid for acquisition

of Country Stampede

from sale of land and building

Net cash provided by

(used) in investing activities – continuing operation

cash provided by (used) in investing activities – discontinued operation

Cash Flows from Financing Activities:

Net proceeds of equity offering with detachable warrants

Net proceeds of senior promissory notes with commitment shares

Net proceeds of convertible debt with detachable warrants

Net proceeds of related party note payable

Net proceeds of revolving loan agreement – Video Solutions Segment

Proceeds – Commercial Extension of Credit – Entertainment Segment

Payments on Commercial Extension of Credit – Entertainment Segment

Net proceeds of February

2025 public equity offering with detachable warrants

Net proceeds of senior

promissory notes with commitment shares

Net proceeds from September

2025 issuance of senior secured convertible notes with detachable warrants

Net proceeds of unsecured

promissory note – entertainment segment

Net proceeds of related

party note payable

Payments of related party

Proceeds – Commercial

Extension of Credit – Entertainment Segment

Payments on Commercial

Extension of Credit – Entertainment Segment

Proceeds – Merchant

Advances – Video Solutions Segment

Payments on Merchant Advances

– Video Solutions Segment

( 1,922,750 )

Proceeds – Merchant Advances – Video Solutions Segment

Payments on Merchant Advances – Video Solutions Segment

( 1,551,250 )

Payments on convertible debt

Payments on Senior Secured

Promissory Notes – Video Solutions Segment

( 3,675,000 )

Proceeds – Merchant Advances – Entertainment Segment

Payments on Merchant Advances – Entertainment Segment

Proceeds – Merchant

Advances – Entertainment Segment

Payments on Merchant Advances

– Entertainment Segment

( 2,714,456 )

Principal payment on EIDL loan

Principal payment on contingent consideration promissory notes

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

Principal payment on EIDL

Issuance of common stock

under equity line of credit agreement

from issuance of common shares upon exercise of Series B warrants

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

( 2,754,050 )

Cash, cash equivalents and restricted cash, beginning of year

Cash, cash equivalents, and restricted cash, end of year

– continuing operation

Net cash used

in financing activities – discontinued operation

Net increase (decrease) in cash, cash

equivalents and restricted cash

Cash and cash equivalents,

beginning of year

Cash and cash equivalents,

Supplemental disclosures of cash flow information:

Cash payments for interest

Cash payments for income taxes

Supplemental disclosures of non-cash investing and financing activities:

Restricted common stock grant

Restricted common stock forfeitures

Commercial extension of credit repaid through accrued revenue – Entertainment segment

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

Assets acquired in business acquisitions

Goodwill acquired in business acquisitions

Liabilities assumed in business acquisitions

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

Fair value of warrants issued with sale of shares

Transition of warrant derivative liability to equity upon exercise of warrants

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

Issuance of common stock upon exercise of pre-funded warrants

Payments to vendors directly from proceeds of sale of common stock

Issuance of commitment shares in connection with bridge financing

Conversion of convertible notes payable into common stock

Debt discount on convertible note

payments for interest

payments for income taxes

Supplemental disclosures of non-cash investing

and financing activities:

common stock grant

common stock forfeitures

extension of credit repaid through accrued revenue – Entertainment segment

and lease liability recorded on extension (termination) of lease

acquired in business acquisitions

assumed in business acquisitions

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

capital contribution related to modification of notes payable - related party

Fair value of warrants

issued with sale of shares

of warrant derivative liability to equity upon exercise of warrants

Issuance of commitment

shares in connection with ELOC purchase agreement

of common stock upon exercise of pre-funded warrants

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

to vendors directly from proceeds of sale of common stock

of commitment shares in connection with bridge financing

ENTERTAINMENT, INC.

Digital Ally, Inc.)

TO CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

and had no operations until 2004.

30, 2004, Vegas Petra, Inc.

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

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

business of the Registrant, Digital Ally, Inc.

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

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

(“TicketSmarter”), Worldwide

Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc.

(“Kustom 440”), Kustom Entertainment, Inc.,

and its majority-owned subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,” and the

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

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

Segment and 3) the Ticketing Segment.

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

products, disinfectant and related safety products for use in law enforcement, security and commercial applications.

This segment includes

both service and product revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video

and health safety solutions.

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

organizations throughout the country, as a monthly service fee.

The Ticketing Segment acts as an intermediary between ticket buyers and

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

various platforms.

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

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

Such required

segment information is included in Note 22.

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

of the State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of its common stock.

The Reverse Stock Split was effective as of time of filing.

No fractional shares were issued in connection with the Reverse Stock Split.

Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest

whole number.

In connection with the Reverse Stock Split, the board of directors of the Company approved appropriate and proportional

adjustments to all outstanding securities or other rights convertible or exercisable into shares of the Company’s common stock,

including, without limitation, all preferred stock, warrants, options, and other equity compensation rights.

All historical share and

per-share amounts reflected throughout the Company’s consolidated financial statements and other financial information in this

Report have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented.

The par value

per share of the Company’s common stock was not affected by the Reverse Stock Split.

Business Combination

June 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp.,

a Delaware corporation (Nasdaq:

CLOE) (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary

of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as

the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Clover Leaf in accordance

with the terms and conditions of the Merger Agreement, and Kustom Entertainment, Inc., a Nevada corporation, a wholly owned subsidiary

of the Company, with a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary

ticketing technologies (“Kustom”).

Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein

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

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

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

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

symbol that reflects the name “Kustom Entertainment”.

November 8, 2024, Clover Leaf and Kustom mutually agreed to terminate their previously announced Merger Agreement and Plan of Merger

effective as of November 7, 2024 by entering into a mutual termination and release agreement among the parties.

The parties released

each other of all obligations related to the Merger Agreement.

Entertainment, Inc.

(formerly Digital Ally, Inc.) was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc.

had no operations until 2004.

On November 30, 2004, Vegas Petra, Inc.

entered into a Plan of Merger with Digital Ally, Inc., at which

time the merged entity was renamed Digital Ally, Inc.

January 8, 2026, the Company changed its legal name from Digital Ally, Inc.

to Kustom Entertainment, Inc.

pursuant to a Certificate of

Amendment to its Articles of Incorporation filed with the Secretary of State of the State of Nevada.

The name change became effective

on January 8, 2026, and the Company began trading on the Nasdaq Capital Market under its new name at the start of trading on January

In connection with the name change, the Company also changed its Nasdaq trading symbol from “DGLY” to “KUST.”

The name change and symbol change did not affect the Company’s assets, liabilities, operations, or capital structure, and stockholders

were not required to take any action with respect to their stock certificates.

The Board of Directors also approved a conforming amendment

to the Company’s Amended and Restated Bylaws solely to reflect the new corporate name.

Unless the context otherwise requires, references

in these consolidated financial statements to the “Company,” “Digital Ally,” “Digital,” “Kustom”

or similar terms refer to Kustom Entertainment, Inc.

and its consolidated subsidiaries.

The Company formed Digital Ally International, Inc.

in August 2009 to facilitate

the export sales of its digital video imaging and storage products.

The Company formed TicketSmarter, Inc.

on September 1, 2021, upon

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

The Company formed Kustom

Entertainment, Inc.

and Kustom 440, Inc.

in 2022 to create and produce live entertainment experiences directly for consumers.

business of the Registrant, Kustom Entertainment, Inc.

(formerly Digital Ally, Inc.), together with its wholly owned subsidiaries

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

Inc., collectively referred to as the “Company,” is divided into two reportable operating segments:

(1) Video Solutions

and (2) Entertainment.

The Company previously operated a third reportable segment, the Revenue Cycle Management segment, which

reflected the operations of Nobility Healthcare, LLC.

Following the sale of Nobility Healthcare on January 8, 2026, the results of

this segment have been classified as discontinued operations for all periods presented and are no longer reported as a separate

The Video Solutions Segment is the Company’s legacy business that produces digital video imaging, storage products,

and related security and commercial applications.

This segment includes both service and product revenues through subscription

models offering cloud-based services and warranty solutions, as well as hardware sales for video and safety solutions.

Entertainment Segment generates revenue through the production of live events and concerts, including the Company’s annual

Country Stampede music festival.

This segment also acts as an intermediary between ticket buyers and sellers through the

Company’s secondary ticketing platform, TicketSmarter.com, and includes the acquisition of tickets from primary sellers for

resale through various platforms.

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

statements and requires selected information about those segments to be presented.

Such required segment information is included in Note

The Company retroactively adjusts all historical share and per-share amounts

reflected throughout the consolidated financial statements and other financial information to reflect reverse stock splits as if they

had occurred as of the earliest period presented.

The par value per share of the Company’s Common Stock is not affected by reverse stock

See Note 18 for details regarding each reverse stock split effectuated during and subsequent to the periods presented.

Discontinued Operations

and Held for Sale

Company classified Nobility Healthcare, LLC (“Nobility”) as a discontinued operation and held for sale as of December 31,

2025, in accordance with ASC 205-20.

The results of Nobility are reported net of tax as discontinued operations, with prior periods retrospectively

reclassified.

A goodwill impairment loss of $1,527,634 was recognized upon classification.

The sale of Nobility was completed on January

Unless otherwise indicated, all Notes to the Consolidated Financial Statements exclude Nobility’s assets, liabilities,

results of operations, and cash flows.

DISCONTINUED OPERATIONS for further details.

Going Concern Matters and Management’s Plans

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

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

The Company incurred substantial operating losses in the year ended

December 31, 2025, primarily due to reduced gross margins caused by a combination of competitors’ introduction of newer products with

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

the video solutions segment, historically.

The Company incurred an operating loss of $ 10,882,421 for the year ended December 31, 2025,

and had an accumulated deficit of $ 144,184,436 as of December 31, 2025.

These matters raise substantial doubt about the Company’s ability

to continue as a going concern.

fiscal year 2025, the Company accessed the public and private capital markets to raise funding through the issuance of debt and equity,

raising $ 15,740,800 through private placement transactions and an underwritten public offering.

In February 2025, the Company completed

an underwritten public offering, including the underwriter’s exercise of its overallotment option, for aggregate net proceeds of $ 14,308,300 ,

and issued an unsecured promissory note generating additional net cash proceeds of $ 600,000 .

In September and December 2025, the Company

issued senior secured convertible notes with detachable warrants in two closings, resulting in aggregate net cash proceeds of $ 832,500 .

These financing activities provided additional liquidity to execute the Company’s business plans and were used to repay debt obligations,

settle accounts payable, and fund operations.

Management expects to continue accessing the capital markets until the Company achieves

consistent positive cash flow from operations;

however, there can be no assurance as to the timing or availability of such financing.

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

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

There can be no assurance that

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

it on terms acceptable or favorable to the Company.

fiscal year 2025, the Company implemented a cost-reduction program and enhanced its short- and long-term liquidity through (i) the February

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

(the “ELOC”).

Within the entertainment segment, the Company exited several large partnerships and sponsorships that did not

meet expected returns;

management does not expect discontinuing these arrangements to materially hinder total revenues in 2026 or thereafter.

In the video segment, the Company reduced headcount and relocated to smaller, lower-cost facilities following the sale of its warehouse/office

Company has successfully recorded $ 8,518,323 in deferred revenue as of December 31, 2025, which results in recurring revenue during the

period of 2026 to 2030.

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

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

offer no assurances in this regard.

a result of the Company’s implementation of cost-cutting measures and liquidity generated by its recent public and private financing

activities, the Company significantly improved its financial position during fiscal year 2025.

As of December 31, 2025, the Company had

a working capital deficit of $ 1,496,587 and total stockholders’ equity of $ 2,369,956 .

Notwithstanding these improvements, the Company

recorded a net loss attributable to common stockholders of $ 6,671,508 for the year ended December 31, 2025.

accompanying consolidated financial statements have been prepared on a going concern basis.

As described above, the Company has incurred

operating losses and negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a

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

In response, management has implemented

and continues to implement plans intended to mitigate these conditions, including (i) the February 2025 public equity offering generating

net proceeds of $14,308,300, (ii) the issuance of senior secured convertible notes generating aggregate net proceeds of $832,500, (iii)

entry into a committed equity financing facility providing access to up to $25,000,000 over a 36-month term, (iv) the issuance of an

unsecured promissory note generating net proceeds of $600,000, (v) ongoing cost-reduction initiatives including headcount reductions

and facility consolidations, and (vi) the divestiture of the Revenue Cycle Management segment.

Notwithstanding these measures, substantial

doubt about the Company’s ability to continue as a going concern has not been alleviated as of the date of issuance of these consolidated

financial statements.

The accompanying consolidated financial statements do not include any adjustments related to the recoverability

and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue

as a going concern.

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

of Consolidation :

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

Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu

Jets, Inc., Kustom 440, Inc., and its majority-owned subsidiary Nobility Healthcare, LLC.

All intercompany balances and transactions

have been eliminated during consolidation.

Company formed Digital Ally International, Inc.

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

The Company formed

Shield Products, LLC in May 2020 to facilitate the sales of its Shield™ line of disinfectant/cleanser products and ThermoVu™

line of temperature monitoring equipment.

The Company formed Nobility Healthcare, LLC (“Nobility Healthcare”) in June 2021

to facilitate the operations of its revenue cycle management solutions and back-office services for healthcare organizations.

formed TicketSmarter, Inc.

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

The Company formed Worldwide Reinsurance Ltd., which is a captive insurance company domiciled in Bermuda.

It will provide primarily liability

insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s insurance

The Company formed Kustom 440, Inc.

in 2022 to create unique entertainment experiences directly for consumers.

The accompanying consolidated financial statements are presented in conformity

with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and pursuant to the rules and regulations

Securities and Exchange Commission (the “SEC”).

The consolidated financial statements include the accounts of the

Company and its wholly-owned subsidiaries, including Digital Ally International, Inc., Digital Ally Healthcare, LLC, TicketSmarter, Inc.,

and Kustom 440, Inc.

All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates :

The preparation of the consolidated

financial statements in conformity with accounting principles generally accepted in the United States of America requires management to

make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

Actual results could

differ from those estimates.

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

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

of revenue, inventory valuation reserve, allowances for doubtful accounts and other receivables, incremental borrowing rate on leases,

the valuation allowance for deferred tax assets and other legal claims and contingencies.

The results of any changes in accounting estimates

are reflected in the financial statements in the period in which the changes become evident.

Estimates and assumptions are reviewed periodically,

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

Value of Financial Instruments :

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revenue when a performance obligation is satisfied.

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

Company generates revenue from both product and service offerings across its two reportable segments.

The Company reports all revenues

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

generated by all segments are reported net of sales taxes.

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

the customer.

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

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

As part of its consideration for

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

contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance

In determining the transaction price, the Company evaluates whether the price is subject to refunds or adjustment to

determine the net consideration to which it expects to be entitled.

As the Company’s standard payment terms are generally less

than one year for product sales (although some subscriptions for services may reach out 3-5 years), it has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant

financing component.

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

The product price, as specified on the purchase order, is considered the standalone selling price as it is an observable

input which depicts the price as if sold to a similar customer in similar circumstances.

Revenue is recognized when control of the

product is transferred to the customer (i.e.

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

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

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

Customers do not have a right

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

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

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

on a gross basis, except for certain service revenues within the Entertainment segment, and all revenues are reported net of sales taxes.

Solutions Segment

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

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

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

As part of its consideration for the contract,

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

For each contract, the Company

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

In determining the

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

which it expects to be entitled.

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

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

whether a contract has a significant financing component.

The Company allocates the transaction price to each distinct product based

on its relative standalone selling price.

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

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

Revenue is recognized

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

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

typically occurs at shipment.

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

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

Customers do not have

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

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

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

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

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criteria have been met.

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

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

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

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

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

Cycle Management

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

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

These service fees are reported as monthly revenue upon completion

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

Entertainment

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a principal or agent in the transaction.

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

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

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

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

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

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Payment is due at the time of sale.

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

as current liabilities and non-current liabilities in the Consolidated Balance Sheets.

Such amounts consist of extended warranty contracts,

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

During the year ended December 31, 2024, the Company recognized revenue of $ 4.4 million related to its contract liabilities.

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

as current liabilities and non-current liabilities in the Consolidated Balance Sheets.

Such amounts consist of extended warranty contracts,

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

Total contract liabilities consist of the following:

SCHEDULE OF CONTRACT LIABILITIES

December 31, 2024

December 31, 2023

Additions/Reclass

Recognized Revenue

December 31, 2024

Contract liabilities, current

Contract liabilities, non-current

December 31, 2023

December 31, 2022

Additions/Reclass

Recognized Revenue

December 31, 2023

Contract liabilities, current

Contract liabilities, non-current

returns and allowances aggregated $ 86,370 and $ 117,713 for the years ended December 31, 2024 and 2023, respectively.

Obligations for

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

The accrual is determined based upon

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

of Estimates :

preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States

of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during

the reporting period.

Actual results could differ from those estimates.

Management utilizes various other estimates, including but not

limited to, determining the estimated lives of long-lived assets, determining the potential impairment of long-lived assets, the fair

value of warrants, options, the recognition of revenue, inventory valuation reserve, allowances for doubtful accounts and other receivables,

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

of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident.

and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

revenue includes payments received in advance of the Company’s performance obligations and is presented as current and non-current liabilities

in the consolidated balance sheets.

Revenue is recognized as the related performance obligations are satisfied over time.

Deferred Revenue, for additional information regarding the composition, activity, and expected future recognition of deferred revenue

From time to time, the Company

is notified that they may be a party to a lawsuit or that a claim is being made against them.

It is their policy not to disclose the specifics

of any claim or threatened lawsuit until the summons and complaint are served on them.

After carefully assessing the claim, and assuming

they determine that they are not at fault or they disagree with the damage or relief demanded, they vigorously defend any lawsuit filed

against them.

The Company records a liability when losses are deemed probable and reasonably estimable.

When losses are deemed reasonably

possible but not probable, they 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, they 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.

The Company reevaluates and updates accruals

as matters progress over time.

and cash equivalents :

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

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

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

The Company minimizes this risk by placing its cash deposits

with major financial institutions.

At December 31, 2024 and December 31, 2023, the uninsured balance amounted to $ 0 and $ 29,700 , respectively.

cash of $- 0 - and $ 97,600 was included in other assets as of December 31, 2024 and 2023, respectively.

Restricted cash consists of bank

deposits that collateralize a debt obligation.

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

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

restricted cash in the consolidated statements of cash flows:

SCHEDULE OF RECONCILIATION OF CASH AND CASH EQUIVALENTS

December 31, 2024

December 31, 2023

Cash and cash equivalents

Long-term restricted cash included in other assets

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

receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding

amounts on a weekly basis.

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

At times, account

balances may exceed the federally insured limit of $ 250,000

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

At December 31, 2025 and

December 31, 2024, the balance in excess of the federally insured limit amounted to $304,653 and $- 0 -, respectively.

Accounts receivables are carried

at original invoice amount less an allowance for doubtful accounts, which is estimated in accordance with ASC 326, Financial Instruments

— Credit Losses.

The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables

and considering a customer’s financial condition, credit history, and current economic conditions.

receivables are written off when deemed uncollectible.

Recoveries of trade receivables previously written off are recorded when received.

A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days

beyond terms.

and considering a customer’s financial condition, credit history, current economic conditions, and reasonable and supportable forecasts

of future conditions that may affect the collectability of the reported amount.

Trade receivables are written off when deemed uncollectible,

and recoveries of trade receivables previously written off are recorded when received.

A trade receivable is considered past due if any portion of the receivable balance is outstanding for more

than thirty (30) days beyond terms.

No interest is charged on overdue trade receivables.

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

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

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

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

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

impairment testing is performed at the reporting unit level.

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

Traditionally,

goodwill impairment testing is a two-step process.

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

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

is no impairment.

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

measure the amount of impairment, if any.

Step two involves calculating an implied fair value of goodwill.

The Company has adopted ASU

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

As a result, the

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

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

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

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

This analysis requires significant judgments,

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

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

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

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

estimates in the income and market approach include:

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

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

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

Company has adopted ASU 2017-04, which simplifies goodwill impairment measurement by eliminating the second step from the goodwill impairment

As a result, the Company compares the fair value of a reporting unit with its respective carrying value and recognizes an impairment

charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

The Company determines the fair value of its reporting units using a weighting

of the income and market valuation approaches.

The income approach applies a fair value methodology to each reporting unit based on discounted

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 the business, estimation of the useful life over

which cash flows will occur, and determination of the weighted average cost of capital, which is risk-adjusted to reflect the specific

risk profile of the reporting unit being tested.

Under the market approach, The Company estimates the fair value based on multiples of

comparable public companies and precedent transactions.

Significant estimates in the income and market approach include:

future levels

of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free debt-free net working capital as a percentage of

revenue, capital expenditures as a percentage of revenue, discount rate, selection of guideline public companies, and revenue market multiples.

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

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

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

operating results;

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

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

significant negative industry or economic trends.

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

the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows

expected to result from the use of the asset and its eventual disposition.

If the sum of the expected future undiscounted cash flows

and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss.

An impairment

loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair

value if available, or discounted cash flows, if fair value is not available.

The Company assessed potential impairments of its

long-lived assets as of an interim date of September 30, 2024 and concluded that there was an impairment which was recorded during the year ended December 31, 2024.

Subsequent to completing

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

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

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

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

in our stock price.

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

Refer to Note 8.

Goodwill and Other

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

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

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

and significant negative

industry or economic trends.

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

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

of the asset and its eventual disposition.

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

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

An impairment loss is reflected as the amount by which

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

if fair value is not available.

the third fiscal quarter of 2024, management identified triggering events, 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 the Company’s

As a result, the Company performed an interim impairment test as of September 30, 2024.

Based on that interim test, the

Company recorded total impairment charges of $ 4,830,000 consisting of $ 307,000 of TicketSmarter goodwill impairment, $ 201,000 of TicketSmarter

trademark impairment, and $ 4,322,000 of revenue cycle management segment goodwill impairment.

The Company also assessed potential impairments

of its long-lived assets as of December 31, 2024 and concluded that no additional impairment was required beyond the amounts recorded

at September 30, 2024.

Company performed its 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.

Based on the results of the annual test, the Company 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, the Company recorded total impairment charges of $ 2,533,667 for the year ended December 31,

2025, consisting of:

$ 1,428,000 of goodwill impairment;

$ 746,667 representing the full write-off of the Sponsorship Agreement Network

intangible asset, which failed the ASC 360 recoverability test;

$ 189,000 of TicketSmarter trademark impairment;

and $ 170,000 of Country

Stampede trademark impairment.

These charges are included in the goodwill and intangible asset impairment line in the consolidated statements

of operations for the year ended December 31, 2025.

Refer to Note 8, Goodwill and Other Intangible Assets, for additional details on

the valuation methodologies and inputs used in the fair value measurements.

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

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value of assets and liabilities acquired in business combinations :

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

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

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

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

of inputs and assumptions that a market participant would use.

The Company allocates any excess purchase price that exceeds

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

The use of alternative valuation assumptions,

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

and amortization 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.

The Company accounts for business combinations using the acquisition method

of accounting, under which the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair

values at the acquisition date, with any excess recorded as goodwill.

Transaction costs associated with acquisitions are expensed as incurred

and included in selling, general and administrative expenses in the consolidated statements of operations.

Inventories :

16 unchanged sentences

Changes in support plans or technology could have a significant impact on obsolescence.

support our world-wide service operations for the video solutions segment, we maintain service spare parts inventory, which consists

of both consumable and repairable spare parts.

Consumable service spare parts are used within our service business to replace worn or

damaged parts in a system during a service call and are generally classified in current inventory as our stock of this inventory turns

relatively quickly.

However, if there has been no recent usage for a consumable service spare part, but the part is still necessary to

support systems under service contracts, the part is non-current and included within non-current inventories within our consolidated

balance sheet.

Consumables are charged to cost of goods sold when issued during the service call.

these service parts age over the related product group’s post-production service life, we reduce the net carrying value of our

repairable spare part inventory on the consolidated balance sheet to account for the excess that builds over the service life.

The post-production

service life of our systems is generally seven to twelve years and, at the end of twelve years, the carrying value for these parts in

our consolidated balance sheet is reduced to zero.

We also perform periodic monitoring of our installed base for premature end of service

life events and expense, through cost of sales, the remaining net carrying value of any related spare parts inventory in the period incurred.

To support its world-wide service operations for the video solutions segment,

the Company maintains service spare parts inventory, which consists of both consumable and repairable spare parts.

Consumable service

spare parts are used within its service business to replace worn or damaged parts in a system during a service call and are generally

classified in current inventory as its stock of this inventory turns relatively quickly.

However, if there has been no recent usage for

a consumable service spare part, but the part is still necessary to support systems under service contracts, the part is non-current and

included within non-current inventories within its consolidated balance sheet.

Consumables are charged to cost of goods sold when issued

during the service call.

As these service parts age over the related product group’s post-production

service life, the Company reduces the net carrying value of its repairable spare part inventory on the consolidated balance sheet to account

for the excess that builds over the service life.

The post-production service life of its systems is generally seven to twelve years and,

at the end of twelve years, the carrying value for these parts in its consolidated balance sheet is reduced to zero.

The Company also

performs periodic monitoring of its installed base for premature end of service life events and expenses, through cost of sales, the remaining

net carrying value of any related spare parts inventory in the period incurred.

Prepaid inventory represents advance payments made to suppliers for inventory not yet received.

The Company periodically

evaluates the recoverability of prepaid inventory balances and records an allowance when amounts are not expected to be fully realized.

plant and equipment :

37 unchanged sentences

Such costs are included in selling, general and administrative expenses in the Consolidated Statements of Operations.

expense video solutions segment and entertainment segments includes costs related to trade shows and conventions, promotional material

and supplies, and media costs.

expense for the video solutions segment and entertainment segments includes costs related to trade shows and conventions, promotional

material and supplies, and media costs.

Advertising costs are expensed in the period in which they are incurred.

The Company incurred total advertising

expenses of approximately $ 1,121,116 and $ 5,773,965 for the years ended December 31, 2024 and 2023, respectively.

Such costs are included

in selling, advertising and promotional expenses in the Consolidated Statements of Operations.

The Company incurred

total advertising expenses of $ 309,630 and $ 1,121,116 for the years ended December 31, 2025 and 2024, respectively.

costs are included in selling, advertising and promotional expenses in the Consolidated Statements of Operations.

taxes are provided for by the liability method in which deferred tax assets are recognized for deductible temporary differences and operating

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Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

Company applies the provisions of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”)

740 - Income Taxes that provides a framework for accounting for uncertainty in income taxes and provided a comprehensive model to

17 unchanged sentences

Company is subject to taxation in the United States and various states.

The Company’s 2022 federal tax return was recently examined by the Internal Revenue Service resulting in no proposed adjustments.

The Company’s 2022 federal tax return was recently examined

by the Internal Revenue Service resulting in no proposed adjustments.

Therefore, the Company’s federal and state income tax returns

are closed for examination purposes by relevant statute and by examination for 2022 and all prior tax years for federal tax purposes

and 2023 and all prior years for state tax purposes.

and Development Expenses :

6 unchanged sentences

were not significant, and software development costs were expensed as incurred during 2025 and 2024.

Derivative Liabilities :

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

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

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

asset or liability.

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

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

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

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

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

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

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

our statement of operations.

Derivative Liabilities and Bifurcated Embedded Derivatives :

accordance with ASC 815-40, Derivatives and Hedging:

Contracts in an Entity’s Own Equity , entities must consider

whether to classify contracts that may be settled in its own stock, such as warrants to purchase shares of Common Stock, as equity

of the entity or as an asset or liability.

If an event that is not within the entity’s control could require net cash

settlement, then the contract should be classified as an asset or a liability rather than as equity.

The Company has determined that

because the terms of the various warrants issued and remaining outstanding include a provision that entitles all the warrant holders

to receive cash for their warrants in the event of a qualifying cash tender offer, while only certain of the holders of the

underlying shares of common stock would be entitled to cash, its warrants should be classified as a liability measured at fair

value, with changes in fair value each period reported in earnings.

In addition, the Company evaluates

the terms of its debt instruments for embedded features that require bifurcation under ASC 815-15, Derivatives and Hedging:

Derivatives .

When a convertible note contains a conversion feature or other embedded derivative that is not clearly and closely related

to the host debt instrument, and meets the definition of a derivative, the Company bifurcates the embedded feature from the host instrument

and records it as a separate derivative liability measured at fair value.

The host debt instrument is recorded at its residual carrying

value after the bifurcation.

The bifurcated embedded derivative and any detachable warrants issued in connection with the same debt instrument

are initially recorded at their respective fair values, with any excess of the aggregate fair value over the proceeds allocated to the

host note recognized immediately in earnings as a day-one loss.

Subsequent changes in fair value of both the warrant derivative liabilities

and bifurcated embedded derivatives are reported in earnings each period.

Volatility in the price of the Company’s common stock may result in

significant changes in the value of these derivatives and resulting gains and losses on its consolidated statements of operations.

Compensation :

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estimate compensation expense are determined as follows:

Expected term is determined

using the contractual term and vesting period of the award;

Expected volatility of

award grants made in the Company’s plan is measured using the weighted average of historical daily changes in the market price

of the Company’s common stock over the period equal to the expected term of the award;

Expected dividend rate

is determined based on expected dividends to be declared;

Risk-free interest rate

is equivalent to the implied yield on zero-coupon U.S.

Treasury bonds with a maturity equal to the expected term of the awards;

Forfeitures are accounted

for as they occur.

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

volatility of award grants made in the Company’s plan is measured using the weighted average of historical daily changes in

the market price of the Company’s common stock over the period equal to the expected term of the award;

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

interest rate is equivalent to the implied yield on zero-coupon U.S.

Treasury bonds with a maturity equal to the expected term of

are accounted for as they occur.

benefit plans :

The Company sponsors a 401(k) retirement savings plan for the benefit of its employees.

plan, as amended, requires it to provide 100% matching contributions for employees, who elect to contribute up to 3% of their compensation

to the plan and 50 %

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

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

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

Operating segments are identified

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

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

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

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

Corporate expenses capture the Company’s corporate

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

Therefore, its operations are eliminated in consolidation

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

The Company adopted

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

See Note 22, Operating Segments, for more information.

statements and requires selected information about those segments to be presented in the consolidated financial statements.

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

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

how to allocate resources and assess performance.

The Company’s two operating segments are Video Solutions and Entertainment, each

of which has dedicated personnel responsible for those businesses and each of which reports directly to the CODM.

Corporate expenses

represent the Company’s corporate administrative activities and are included in segment information but are not considered a separate

reportable segment for financial reporting purposes.

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

financial statements.

See Note 22, Operating Segments, for additional information.

Consideration

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Non-controlling

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

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

Since the Company

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

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

Consolidated Statements of Operations.

interests in the Company’s consolidated financial statements represent the ownership interests in subsidiaries not attributable,

directly or indirectly, to the Company.

During the periods presented, the Company held a 51% equity interest in Nobility Healthcare,

LLC (“Nobility”), with the remaining 49% held by third-party venture partners.

Because Nobility represents the Company’s

entire discontinued operation, the non-controlling interest related to Nobility is fully included within discontinued operations and

is not included in income or loss from continuing operations.

The non-controlling owners’ share of Nobility’s results of

operations is presented within net income (loss) from discontinued operations in the consolidated statements of operations.

to its classification as held for sale and discontinued operations, the Company consolidated Nobility based on its controlling financial

Upon classification as a discontinued operation, Nobility’s assets, liabilities, results of operations, and the related

non-controlling interest are presented separately from the Company’s continuing operations.

Preferred Stock

stock may be classified as a liability, temporary equity (i.e., mezzanine equity) or permanent equity.

To determine the appropriate classification,

an evaluation of the cash redemption features is required.

Where there exists an absolute right of redemption presently or in the future,

the preferred stock would be classified as a liability.

If redemption is contingently redeemable upon the occurrence of an event that

is outside of the issuer’s control, it should be classified as mezzanine equity.

The probability that the redemption event will

occur does not impact the classification.

If no redemption features exist, or if a contingent redemption feature is within the Company’s control, the

preferred stock would be considered equity.

receivables are carried at the original invoice amount less the total payments received pertaining to each individual customer’s

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These agreements range from three to five years and are removed from lease receivable upon termination of the agreement.

The Company determines if an allowance for doubtful accounts by regularly evaluating individual customer lease receivables and considering

The Company determines an allowance for doubtful accounts by regularly evaluating individual customer lease receivables and considering

a customer’s financial condition, credit history, and current economic conditions.

The allowance for uncollectible accounts totaled $ 25,000 and $ 5,000 as of December 31, 2024 and 2023, respectively.

The allowance for doubtful accounts was $ 75,000 and $ 25,000 as of December

31, 2025 and 2024, respectively.

Operations and Held for Sale

ASC 205-20, Discontinued Operations , the results of a disposed business are reported as discontinued operations when the held-for-sale

and strategic shift criteria are met.

When a business is classified as a discontinued operation, (i) its results of operations are presented

in a single line, net of tax, in the consolidated statements of operations, (ii) its assets and liabilities are classified as held for

sale in the consolidated balance sheets in the period of classification, and (iii) prior-period financial statements are retrospectively

reclassified to conform to the current-period presentation.

DISCONTINUED OPERATIONS for further details regarding the Company’s discontinued operations.

Accounting Standards

Adopted Accounting Standard Updates.

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

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

segment items.

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

This ASU is effective for annual periods

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

This ASU is required to

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

The Company adopted ASU 2023-07 in

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

Note 22, Operating Segments, for more information.

2023-07, Improvements to Reportable Segment Disclosures , which requires companies to disclose significant segment expenses provided

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

Additionally, all existing annual

disclosures must be provided on an interim basis.

This ASU is effective for annual periods beginning after December 15, 2023 and interim

periods within fiscal years beginning after December 15, 2024.

This ASU is required to be applied retrospectively to all prior periods

presented in the consolidated financial statements.

The Company adopted ASU 2023-07 in 2024 and applied the amendment retrospectively

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

See Note 22, Operating Segments, for more information.

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

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

statutory federal

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

Additionally, this ASU requires companies to disclose the total

amount of income taxes paid during the period.

This ASU became effective for the Company’s consolidated financial statements as

of and for the year ended December 31, 2025.

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

to all prior periods presented in the consolidated financial statements.

The Company applied this guidance on a prospective basis only

with no significant impact to the consolidated financial statements as of and for the year ended December 31, 2025.

Issued Accounting Pronouncements.

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

to the rate reconciliation and income taxes paid.

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

operations to the U.S.

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

Additionally, this ASU

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

This ASU is effective for annual periods beginning

after December 15, 2024, with early adoption permitted.

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

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

The Company is currently evaluating

the impact to the Company’s consolidated financial statements.

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

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

does not anticipate this guidance having a material impact to the consolidated financial stat

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

March 2024, the SEC adopted rules to develop standardized climate-related disclosures by publicly traded companies including the emission

of greenhouse gases.

The rules are currently effective for the Company in the fiscal year beginning in 2027.

However, as a result of

pending legal challenges, the actual timing of effectiveness of the rules and applicable phase-in periods, as well as whether portions

of the rules remain in effect after the legal challenges, are uncertain.

The Company is currently evaluating the guidance and its impact

on the financial statements.

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

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

Concern Matters and Management’s Plans

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

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

The Company incurred substantial operating losses in the years

ended December 31, 2024 and December 31, 2023 primarily due to reduced gross margins caused by a combination of competitors’ introduction

of newer products with more advanced features together with significant price cutting of their products and the recent acquisitions with

much smaller margins than the video solutions segment, historically.

The Company incurred operating losses of approximately $ 15.2 million

for the year ended December 31, 2024 and $ 22.2 million during the year ended December 31, 2023 and it had an accumulated deficit of $ 137.5

million as of December 31, 2024.

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

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

In that regard, the Company raised approximately $ 4.9 million in the year ended December 31, 2024 through a private placement transaction

and an underwritten public offering.

During February 2025, the Company raised net proceeds of approximately $ 13.48 million through an

underwritten public offering.

These equity raises were utilized to fund its operations and acquisitions.

Management expects this pattern

to continue until it achieves positive cash flow from operations, although it can offer no assurance in this regard.

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

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

There can be no assurance that

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

obtain it on terms acceptable or favorable to the Company.

Company has increased its contract liabilities to nearly $ 10.5 million as of December 31, 2024, which results in recurring revenue during

the period of 2025 to 2027.

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

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

offer no assurances in this regard.

Company has significantly cut costs in its entertainment segment through the removal of several large partnerships and sponsorships.

These did not yield the results management expected;

thus, it is not expected that these costs will significantly hinder total revenues

in 2025 and beyond.

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

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

addition to the initiatives described above, the Board of Directors is conducting a review of a full range of strategic alternatives

to best position the Company for the future including, but not limited to, the sale of all or certain assets, properties or groups of

properties or individual businesses or merger or combination with another company.

The result of this review may also include the continued

implementation of the Company’s business plan.

There can be no assurance that any additional transactions or financing will result

from this process.

on the uncertainties described above, the Company believes its business plan does not alleviate the existence of substantial doubt about

its ability to continue as a going concern within one year from the date of the issuance of these consolidated financial statements.

The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of

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

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

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are typically made on credit and the Company generally does not require collateral while sales to international customers require payment

before shipment or backing by an irrevocable letter or credit.

before shipment or backing by an irrevocable letter of credit.

The Company performs ongoing credit evaluations of its customers’

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31, 2025 and $ 208,458 as of December 31, 2024.

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

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

The Company minimizes this risk by placing its cash deposits

with major financial institutions.

At December 31, 2024 and 2023, the uninsured balance amounted to $- 0 - and $ 29,700 , respectively.

Company uses primarily a network of unaffiliated distributors for international sales and an employee-based direct sales force for domestic

No international distributor individually exceeded 10 % of total revenues.

No one individual customer receivable balance exceeded

10 % of total accounts receivable as of December 31, 2024 and 2023.

The Company evaluated concentration of credit risk across all receivable balances, including trade accounts receivable

and subscription receivables, as of December 31, 2025 and 2024.

No individual customer balance exceeded 10% of total trade accounts receivable

or total subscription receivables as of either date.

No individual customer, event, venue, or counterparty within the Entertainment segment

exceeded 10 % of total revenues from continuing operations for the years ended December 31, 2025 and 2024.

No international distributor

individually exceeded

10 % of total revenues from continuing operations for the years ended December 31, 2025 and 2024.

Company’s video solutions segment purchases finished circuit boards and other proprietary component parts from suppliers located

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order basis and does not have long-term contracts with its suppliers.

ACCOUNTS RECEIVABLE – ALLOWANCE FOR DOUBTFUL ACCOUNTS

allowance for doubtful accounts receivable was comprised of the following for the years ended December 31, 2024 and 2023:

SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

ACCOUNTS RECEIVABLE AND SUBSCRIPTION RECEIVABLES

December 31, 2025

December 31, 2024

Accounts receivable – trade, gross

allowance for doubtful accounts

Accounts receivable – trade, net

Subscription receivables, gross – current

allowance for doubtful accounts

Subscription receivables, net – current

Subscription receivables – long term

Total subscription receivables, net

allowance for doubtful accounts receivable was comprised of the following for the years ended December 31, 2025 and 2024:

SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

Beginning balance

Provision for bad debts

Charge-offs to allowance, net of recoveries

Charge-offs to allowance,

net of recoveries

Ending balance

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December 31, 2025

December 31, 2023

Notes receivable

Lease receivable, net

Litigation receivables

Allowance for loss on litigation receivables

Total other receivables

As of December 31, 2025, the Company recorded litigation receivables of $ 578,890 related to amounts owed pursuant

to the pending default judgment against Pharmaxx Medical, Inc.

The Company established an allowance of $ 289,445 against these receivables

based on management’s assessment that full collection is uncertain given the status of the proceedings and the defendant’s financial condition

and ability to satisfy the judgment.

The Company has engaged legal counsel and is actively pursuing recovery of these amounts.

15, Commitments and Contingencies, for additional information regarding the Company’s legal proceedings against Pharmaxx Medical, Inc.

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

SCHEDULE OF INVENTORIES

December 31, 2024

December 31, 2023

Raw material and component parts– video solutions segment

Raw material and component parts–

video solutions segment

Work-in-process– video solutions segment

Finished goods – video solutions segment

Finished goods – entertainment segment

Reserve for excess and obsolete inventory– video solutions segment

Finished goods –

entertainment segment

Reserve for excess and

obsolete inventory– video solutions segment

( 1,849,124 )

( 2,037,252 )

Reserve for excess and obsolete inventory – entertainment segment

for excess and obsolete inventory – entertainment segment

Total inventories

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SCHEDULE OF PREPAID EXPENSE

December 31, 2024

December 31, 2023

Prepaid inventory

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SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

December 31, 2024

December 31, 2023

Office furniture, fixtures, equipment, and aircraft

Office furniture, fixtures, equipment,

Warehouse and production equipment

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Building improvements

accumulated depreciation and amortization

( 1,503,857 )

Net property, plant and equipment

accumulated depreciation

and amortization

Net property, plant

and equipment

and amortization of property, plant and equipment aggregated $ 194,385 and $ 537,627 for the years ended December 31, 2025 and 2024, respectively.

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or charged to income.

the year ended December 31, 2024 the Company sold its aircraft for $ 1,100,000

less closing costs of $ 1,500 .

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

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

in the Consolidated Statement of Operations.

In addition, during the year ended December 31, 2024 the Company sold its building for $ 5,900,000

less closing costs of $ 36,634 .

the year ended December 31, 2024 the Company sold its aircraft for $ 1,100,000 less closing costs of $ 1,500 .

The carrying amount of the

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

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

of Operations.

In addition, during the year ended December 31, 2024 the Company sold its building for $ 5,900,000 less closing costs of

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.

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.

GOODWILL AND OTHER INTANGIBLE ASSETS

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

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

SCHEDULE OF INTANGIBLE ASSETS

December 31, 2024

December 31, 2023

Accumulated Impairment

Amortized intangible assets:

Licenses (video solutions segment)

Patents and trademarks (video solutions segment)

Sponsorship agreement network (entertainment segment)

Patents and trademarks (video solutions

Sponsorship agreement network (entertainment

SEO content (entertainment segment)

Personal seat licenses (entertainment segment)

Website enhancements (entertainment segment)

Client agreements (revenue cycle management segments)

Website enhancements (entertainment

Indefinite life intangible assets:

Goodwill (Entertainment segment)

Goodwill (Revenue cycle management segment)

Trade name and trademarks (entertainment segment)

Patents and trademarks pending (video solutions segment)

Patents and trademarks

pending (video solutions segment)

Amortized intangible assets:

Patents and trademarks (video solutions

Sponsorship agreement network (entertainment

SEO content (entertainment segment)

Personal seat licenses (entertainment segment)

Website enhancements (entertainment

Indefinite life intangible assets:

Goodwill (Entertainment segment)

Trade name and trademarks (entertainment segment)

Patents and trademarks

pending (video solutions segment)

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

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patent or trademark is denied, then the amount deferred will be immediately charged to expense.

intangible assets consist of sponsorship agreement network, SEO content, personal seat licenses, website enhancements and client agreements.

These assets are recorded at cost and amortized on a straight-line basis over their estimated useful lives.

SCHEDULE OF INTANGIBLE ASSETS USEFUL LIFE

Asset Useful Life

Patents and trademarks (video solutions

Sponsorship agreement network (entertainment

SEO content (entertainment segment)

Personal seat licenses (entertainment segment)

Website enhancements (entertainment segment)

for the years ended December 31, 2025 and 2024 was $ 1,350,382 and $ 1,377,809 , respectively.

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SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS

Year ending December 31:

2031 and thereafter

Annual impairment test

We performed an annual impairment

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

The fair value of each reporting

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

The income approach applied a fair value methodology

to each reporting unit based on discounted cash flows.

This analysis requires significant judgments, including estimation of future cash

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

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

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

The weighted average cost of capital used

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

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

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

reporting units.

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

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

The combined fair values for all

reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering

a reasonable control premium.

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

carrying value at a 25 % premium or greater.

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

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

not to be impaired, as well,

impairment test

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

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

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

Therefore, we performed an interim

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

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

The income approach

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

This analysis requires significant judgments,

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

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

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

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

We also applied a market approach,

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

to apply to the operating results of the reporting units.

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

taxes, depreciation, and amortization.

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

for all of the reporting units.

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

date of valuation, while considering a reasonable control premium.

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

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

Based on our most recent impairment test, the video

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

entertainment segments were determined to be impaired.

held goodwill of $ 5,480,966 as of September 30, 2024 and December 31, 2023, related to businesses within our revenue cycle management

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 September 30, 2024 interim impairment test, we concluded that the carrying amount

of the revenue cycle management and the entertainment reporting units exceeded its estimated fair values.

Thus, we recorded a non-cash

goodwill impairment charge of $ 4,322,000 , related to the goodwill carrying balance for the revenue cycle management segment, and a non-cash

goodwill impairment charge of $ 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

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.

The company performed its annual goodwill and intangible asset impairment test as of December 31, 2025 on a full

quantitative basis, given its 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.

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

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 its 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 its December 31, 2025 annual impairment test ranged

The company also applied a market approach, which develops a value correlation based on the market capitalization of similar

publicly traded companies, referred to as a multiple, to apply to the operating results of the reporting units.

The primary market

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

The income and market approaches

were equally weighted for all reporting units.

combined fair values for all reporting units were then reconciled to the company’s aggregate market value of its shares of

Common Stock on the date of valuation, while considering a reasonable control premium.

The Company considers a reporting

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

premium or greater.

Based on the company’s 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 $ 595,000 .

The Video Solutions Segment carries no goodwill.

Entertainment Segment was determined to be impaired.

The company held total goodwill of approximately $ 5,805,507

related to businesses within its Entertainment Segment prior to 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 its December 31, 2025 annual impairment test, the company 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 its consolidated statements of operations for the year ended

December 31, 2025.

The remaining goodwill balance for the Entertainment Segment was approximately $ 4,377,507

as of December 31, 2025.

The 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

Indefinite-lived

intangible assets

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.

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

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

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

Operations for the year ended December 31, 2024.

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

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

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

Company held indefinite-lived trade names and trademarks with an aggregate carrying value of $ 340,000

as of December 31, 2025, consisting of the TicketSmarter trade name $ 210,000

and the Country Stampede trade name $ 130,000 ,

each related to businesses within its Entertainment Segment.

a result of its December 31, 2025 annual impairment test, the company 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 its consolidated statements of operations for the year ended December 31, 2025.

The company recorded a $ 189,000 impairment charge related

to the TicketSmarter trade name, reducing its carrying value from $ 399,000 to $ 210,000 , and a $ 170,000 impairment charge related to the

Country Stampede trade name, reducing its carrying value from $ 300,000 to $ 130,000 .

The charges were primarily driven by the Entertainment

Segment’s continued operating losses, declining revenue performance within the related businesses, and the overall challenging

economic environment.

addition, The Company recorded a non-cash impairment charge of $ 746,667

related to the sponsorship agreement network intangible asset within the Entertainment Segment, reducing its net carrying value to

as of December 31, 2025.

The total goodwill and intangible asset impairment charge recorded for the year ended December 31, 2025 was

$ 2,533,667 .

assets were the following at December 31, 2025 and 2024:

SCHEDULE OF OTHER ASSETS

Lease receivable

Restricted Cash

Total other assets

Prepaid commissions

DEBT OBLIGATIONS

2 unchanged sentences

Economic injury disaster loan (EIDL)

Contingent consideration promissory note –

Nobility Healthcare Division Acquisition

Contingent consideration promissory note –

Nobility Healthcare Division Acquisition

Revolving Loan Agreement

Unsecured Promissory note – Entertainment

2025 Secured Notes

Commercial Extension of Credit- Entertainment

Merchant Advances – Video Solutions Segment

Senior Secured Promissory Notes

Merchant Cash Advances – Video Solutions

Senior Secured Promissory Notes-Issued November

Total gross principal

Unamortized debt issuance

5 unchanged sentences

SCHEDULE OF MATURITY OF DEBT OBLIGATIONS

Gross Principal

Unamortized Discount

Carrying Value

2030 and thereafter

11 unchanged sentences

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

Company made principal payments of $ 3,286 and

$ 2,219 during the years ended December 31, 2024 and 2023, respectively, and recorded interest expense of $ 5,486 and

$ 5,606 for the years ended December 31, 2024 and 2023, respectively.

Consideration Promissory Notes

June 30, 2021, Nobility Healthcare, a subsidiary of the Company, issued a contingent consideration promissory note (the “June Contingent

Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “June Seller”)

of $ 350,000 .

The June Contingent Note has a three-year 3

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh

business day of each quarter.

The principal amount of the June Contingent Note is subject to an earn-out adjustment, being the difference

between $ 975,000

(the “June Projected Revenue”) and the cash basis

revenue (the “June Measurement Period Revenue”) collected by the June Seller in its normal course of business from the clients

existing on June 30, 2021, during the period from October 1, 2021 through September 30, 2022 (the “June Measurement Period”)

measured on a quarterly basis and annualized as of the relevant period.

If the June Measurement Period Revenue is less than the June

Projected Revenue, such amount will be subtracted from the principal balance of this June Contingent Note on a dollar-for-dollar basis.

If the June Measurement Period Revenue is more than the June Projected Revenue, such amount will be added to the principal balance of

this June Contingent Note on a dollar-for-dollar basis.

In no event will the principal balance of this June Contingent Note become a

negative number.

The maximum downward earn-out adjustment to the principal balance will be a reduction to zero.

There are no limits to

the increases to the principal balance of the June Contingent Note as a result of the earn-out adjustments.

The June Contingent Note is considered to be additional purchase price;

therefore, the estimated fair value of the

contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid

for the acquisition with subsequent changes in fair value recorded as a gain or loss in the Consolidated Statements of Operations.

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

Total principal

payments, since inception, on this contingent consideration promissory note totaled $ 290,073 .

The estimated fair value of the June Contingent

Note at December 31, 2024 is $- 0 -, representing a reduction in its estimated fair value of $ 58,819 as compared to its estimated fair value

as of December 31, 2023.

This reduction only relates to the principal payments made for the year ended December 31, 2024.

Therefore, the

Company recorded no gain or loss in the Consolidated Statements of Operations for the year ended December 31, 2024.

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

in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “August Sellers”) of

The August Contingent Payment Note has a three-year 3

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh

business day of each quarter.

The principal amount of the August Contingent Payment Note is subject to an earn-out adjustment, being

the difference between the $ 3,000,000

(the “August Projected Revenue”) and the cash basis revenue (the “August Measurement Period Revenue”)

collected by the August Sellers in its normal course of business from the clients existing on September 1, 2021, during the period from

December 1, 2021 through November 30, 2022 (the “August Measurement Period”) measured on a quarterly basis and annualized

as of the relevant period.

If the August Measurement Period Revenue is less than the August Projected Revenue, such amount will be subtracted

from the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis.

If the August Measurement Period Revenue

is more than the August Projected Revenue, such amount will be added to the principal balance of this August Contingent Payment Note

on a dollar-for-dollar basis.

In no event will the principal balance of this August Contingent Payment Note become a negative number.

The maximum downward earn-out adjustment to the principal balance will be to zero.

There are no limits to the increases to the principal

balance of the August Contingent Payment Note as a result of the earn-out adjustments.

The August Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value

of the contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration

paid for the acquisition.

Management has recorded the contingent consideration promissory note at its estimated fair value of $ 650,000

at the acquisition date.

Principal payments, since its inception, on this contingent consideration promissory note totalled $ 681,907 .

The estimated fair value of the August Contingent Note at December 31, 2024 is $- 0 -, representing a decrease in its estimated fair value

of $ 129,651 as compared to is estimated fair value as of December 31, 2023.

This reduction only relates to the principal payments made

for the year ended December 31, 2024.

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

the year ended December 31, 2024.

On January 1, 2022, Nobility Healthcare

issued another contingent consideration promissory note (the “January Contingent Payment Note”) in connection with a stock

purchase agreement between Nobility Healthcare and a private company (the “January Sellers”) of $ 750,000 .

The January Contingent

Payment Note has a two-and-a-half-year term and bears interest at a rate of 3.00 % per annum.

Quarterly principal and interest

payments are deferred for seven months and is due in equal quarterly installments on the tenth business day of each quarter.

The principal

amount of the January Contingent Payment Note is subject to an earn-out adjustment, being the difference between $ 3,500,000 (the

“January Projected Revenue”) and the cash basis revenue (the “January Measurement Period Revenue”) collected

by the January Sellers in its normal course of business from the clients existing on January 1, 2022, during the period from April 1,

2022 through March 31, 2023 (the “January Measurement Period”) measured on a quarterly basis and annualized as of the relevant

If the January Measurement Period Revenue is less than the January Projected Revenue, such amount will be subtracted from the

principal balance of this January Contingent Payment Note on a dollar-for-dollar basis.

If the January Measurement Period Revenue is

more than the January Projected Revenue, such amount will be added to the principal balance of this January Contingent Payment Note on

a dollar-for-dollar basis.

In no event will the principal balance of this January Contingent Payment Note become a negative number.

maximum downward earn-out adjustment to the principal balance will be a reduction to zero.

There are no limits to the increases to the

principal balance of the January Contingent Payment Note as a result of the earn-out adjustments.

On January 1,

2022, Nobility Healthcare issued another contingent consideration promissory note (the “January Contingent Payment Note”)

in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “January Sellers”) of

Principal payments, since its inception, on this contingent consideration promissory note totalled $ 153,769 .

The estimated

fair value of the January Contingent Note at December 31, 2023 is $- 0 -, representing a decrease in its estimated fair value of $ 208,083 as

compared to its estimated fair value as of December 31, 2022, of which $ 32,936 represents payments made during the year ended December

Therefore, the Company recorded a gain of $ 175,146 in the Consolidated Statements of Operations for the year ended December

On February 1, 2022,

Nobility Healthcare issued another contingent consideration promissory note (the “February Contingent Payment Note”) in connection

with an asset purchase agreement between Nobility Healthcare and a private company (the “February Sellers”) of $ 105,000 .

The February Contingent Payment Note has a three-year 3

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for seven months and are due in equal quarterly installments on the

tenth business day of each quarter.

The principal amount of the February Contingent Payment Note is subject to an earn-out adjustment,

being the difference between $ 440,000

(the “February Projected Revenue”) and the cash basis revenue (the “February Measurement Period Revenue”) collected

by the February Sellers in its normal course of business from the clients existing on February 1, 2022, during the period from May 1,

2022 through April 30, 2023 (the “February Measurement Period”) measured on a quarterly basis and annualized as of the relevant

If the February Measurement Period Revenue is less than the February Projected Revenue, such amount will be subtracted from the

principal balance of this February Contingent Payment Note on a dollar-for-dollar basis.

If the February Measurement Period Revenue is

more than the February Projected Revenue, such amount will be added to the principal balance of this February Contingent Payment Note

on a dollar-for-dollar basis.

In no event will the principal balance of this February Contingent Payment Note become a negative number.

The maximum downward earn-out adjustment to the principal balance will be a reduction to zero.

There are no limits to the increases to

the principal balance of the February Contingent Payment Note as a result of the earn-out adjustments.

The February Contingent

Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability is recorded

as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition.

has recorded the contingent consideration promissory note at its estimated fair value of $ 105,000 at the acquisition date.

The estimated

fair value of the February Contingent Note at December 31, 2023 is $- 0 -, representing a decrease in its estimated fair value of $ 4,347

as compared to its estimated fair value as of December 31, 2022, of which $ 1,584 represents payments made during the year ended December

Therefore, the Company recorded a gain of $ 2,763 in the Consolidated Statements of Operations for the year ended December 31,

Commercial Extension of Credit

February 23, 2023, the Company’s Entertainment segment entered into an extension of credit in the form of a loan to use in marketing

and operating its business in accordance with the Private Label Agreement previously entered into with the Lender.

The Lender agreed

to extend, subject to the conditions hereof, and Borrower agreed to take, a Loan for Principal Sum of $ 1,000,000 .

Lender retains 25 % of each remittance owed to Borrower under the terms of the Private Label Agreement.

Such remittances includes regular

weekly remittances and any additional incentive payments to which the Borrower may be entitled.

The 25% withholding of the Borrower’s

applicable remittance is deemed a “Payment” under the terms of this Note, and Payments shall continue until the earlier of

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

the year ended December 31, 2023, the Entertainment segment drew an additional $ 455,643 on

this agreement, with the principal balance never exceeding $ 1,000,000 .

During the year ended December 31, 2023, the Company’s Entertainment segment had repaid $ 1,367,715 towards

the principal on the loan through remittances and had an outstanding balance of $ 87,928 .

During the year ended December 31, 2024, the Company’s Entertainment segment repaid the outstanding principal of $ 87,928 and

did not renew this agreement.

During the year ended December 31, 2024, the Company’s Entertainment segment fully amortized $ 35,000 fees.

Promissory Note

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

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

Payments of principal and interest were originally due

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

The remaining

outstanding balance totaled $ 525,000 as of December 31, 2025.

Commercial Extension of Credit

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

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

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

to the conditions hereof, and Borrower agreed to take, an advance for a sum of $ 75,000 with monthly advances of $ 100,000 .

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

The total advances received

for the year ended December 31, 2024 were $ 1,275,000 and payments made totaled $ 1,175,000 .

The outstanding balance as of December 31, 2024

was $ 100,000 .

On August 7, 2024 and as amended on September 25, 2024, the Company’s

Entertainment segment entered into an extension of credit (the “Agreement”) with Vegas Tickets in the form of a prepayment

for the rights to acquire certain Major League Baseball and National Football League playoff and season tickets.

Vegas Tickets agreed

to advance, subject to the conditions of the Agreement, and the Company’s Entertainment segment agreed to take, an advance for a

sum of $ 200,000 .

Under the Agreement, the Company’s Entertainment segment has the right to reacquire the tickets for a cash amount

of $ 220,000 by November 1, 2024.

The repurchase date was extended to December 1, 2024 by an amendment dated October 31, 2024.

The repurchase

was completed and the remaining balance is $- 0 - as of December 31, 2024.

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

by a Securities Purchase Agreement, dated as of April 5, 2023 (the “Purchase Agreement”), between the Company and certain

investors (the “Purchasers”).

the First Closing, the Company issued and sold to the Purchasers Senior Secured Convertible Notes in the aggregate original principal

amount of $ 3,000,000 (the “Notes”) and warrants (the “Warrants”).

The Purchase Agreement provided for a ten percent

( 10 %) original interest discount resulting in gross proceeds to the Company of $ 2,700,000 .

No interest accrues under the Notes.

are exercisable for an aggregate 1,125,000 shares comprised of 375,000 warrants at an exercise price of $ 5.50 per share of the Company’s

common stock, par value $ 0.001 (the “Common Stock”), 375,000 warrants at an exercise price of $ 6.50 per share of Common Stock,

and 375,000 warrants at an exercise price of $ 7.50 per share of Common Stock.

to certain conditions, within 18 months from the effectiveness date and while the Notes remain outstanding, the Purchasers have the right

to require the Company to consummate a second closing of up to an additional $ 3,000,000 of Notes (the “Second Notes”) and

Warrants on the same terms and conditions as the First Closing, except that the Second Notes may be subordinate to a mortgage on the

Company’s headquarters building (the “Bank Mortgage”).

Notes are convertible into shares of Common Stock at the election of the Purchasers at any time at a fixed conversion price of $ 5.00

(the “Conversion Price”) per share of Common Stock.

The Conversion Price is subject to customary adjustments for stock dividends,

stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or

securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject

to certain exceptions).

Subject to certain conditions, including certain equity conditions, the Company may redeem some or all of the

then outstanding principal amount of the Note for cash in an amount equal to 110 % of the outstanding principal amount of the Notes (the

“Optional Redemption Amount”).

In addition, the Purchasers may, at their option, demand repayment at the Optional Redemption

Amount upon five (5) business days’ written notice following (i) the closing by the Company of the Bank Mortgage, or (ii) a sale

by the Company of Common Stock or Common Stock equivalents.

Notes rank senior to all outstanding and future indebtedness of the Company and its subsidiaries, and are secured by substantially all

of the Company’s assets, as evidenced by (i) a security agreement entered into at the Closing, (ii) a trademark security agreement

entered into at the Closing, (iii) a patent security agreement entered into at the Closing, (iv) a guaranty executed by all direct and

indirect subsidiaries of the Company pursuant to which each of them has agreed to guaranty the obligations of the Company under the Notes,

and (v) a mortgage on the Company’s headquarters building in favor of the Purchasers.

at the Closing, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers.

Pursuant to the terms of the Registration Rights Agreement, the Company has agreed to prepare and file with the SEC within the 10th business

day following the First Closing (the “Filing Date”) a registration statement covering the resale of the shares of Common

Stock issuable upon conversion of the Notes and exercise of the Warrants, and to use its best efforts to cause such Registration Statement

to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible, but

in any event no later than 45 days following the Filing Date (the “Effectiveness Date”).

If the Registration Statement is

not filed by the Filing Date or is not declared effective by the Effectiveness Date, or under certain other circumstances described in

the Registration Rights Agreement, then the Company shall be obligated to pay, as partial liquidated damages, to each Purchaser an amount

in cash equal to 2 % of the original principal amount of the Notes each month until the applicable event giving rise to such payments

If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will

pay interest thereon at a rate of 10 % per annum.

Company recognized the full warrant derivative value, with the remaining amount being allocated to the debt obligation.

As the warrant

derivative value exceeded the net proceeds from the issuance, the excess amount is recognized as a loss on the date of the issue date.

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

The following is

the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted in

connection with the Notes:

SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED

April 5, 2023

(issuance date)

Volatility – range

Risk-free rate

Remaining contractual term

Exercise price

Common stock issuable under the warrants

June 2, 2023, the Purchasers elected to convert $ 125,000 principal, at the fixed price of $ 5.00 per share of common stock, 25,000 shares

valued at $ 119,750 .

The loss on conversion of convertible note into common shares, of $ 93,386 , was recorded during the period.

October 26, 2023, the Company entered into a Revolving Loan Agreement of which a portion of the net proceeds were used to repay the

principal amount of the Convertible debt.

The Company made an aggregate payment of $ 3,162,500

from the proceeds, inclusive of fees to retire the convertible notes.

In 2023, the Company amortized $ 2,169,545

in debt issuance costs associated with the convertible notes and expensed the remaining balance of $ 731,819

upon extinguishment of the notes.

As a result, a loss on extinguishment of convertible debt totaling $ 1,112,705

was recorded in our Consolidated Statements of Operations for the year ended December 31, 2023.

The warrants associated with

the convertible debt remain outstanding.

Loan Agreement

October 26, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) by and between the Company,

Digital Ally Healthcare, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Digital Ally Healthcare”

and, together with the Company, the “Borrower”), and Kompass Kapital Funding, LLC, a Kansas limited liability company (“Kompass”).

In connection with the Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security

Agreement and Fixture Filing (the “Mortgage”) by and between the Company, as grantor, and Kompass, as grantee, and issued

a Revolving Note (the “Revolving Note”) to Kompass.

The gross proceeds to the Company were $ 4,880,000 before repaying those

certain Senior Secured Convertible Notes issued on April 5, 2023 in the aggregate amount of $ 3,162,500 and paying customary fees and

to the Loan Agreement, Kompass agreed to make revolving loans (the “Revolving Loans”) available to the Borrower as the Borrower

may from time to time request until, but not including, October 26, 2025, and in such amounts as the Borrower may from time to time request,

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

$ 4,880,000 or an amount equal to eighty percent of the value of the mortgaged property, which consists of the real property owned by

the Company having an address of 14001 Marshall Drive, Lenexa, KS 66215 (the “Mortgaged Property”).

Under the Loan Agreement,

the Revolving Loans made by Kompass may be repaid and, subject to customary terms and conditions, borrowed again up to, but not including

October 26, 2025, unless the Revolving Loans are otherwise accelerated, terminated or extended as provided in the Loan Agreement.

Revolving Loans shall be used by the Borrower for the purpose of working capital and to retire existing debt.

Under the Loan Agreement,

the Borrower is required to provide written notice to Kompass prior to creating, assuming or incurring any debt or becoming liable, whether

as endorser, guarantor, surety or otherwise, for any debt or obligation of any other party.

While obligations remain outstanding under

the Loan Agreement, the Borrower is required to maintain a minimum balance of $ 97,600 in a reserve account (the “Capital Reserve

Under the Loan Agreement, the Borrower is prohibited from creating, assuming, incurring or suffering or permitting to

exist any lien of any kind or character upon the collateral, which consists of the Mortgaged Property and the Company’s interest

in the Capital Reserve Account.

The Loan Agreement contains customary covenants, representations and warranties by the Borrower.

to the Loan Agreement, the Company issued the Revolving Note to Kompass whereby the Company and Digital Ally Healthcare jointly and severally

promise to pay to the order of Kompass the lesser of (i) $4,880,000.00, or (ii) the aggregate principal amount of all Revolving Loans

outstanding under and pursuant to the Loan Agreement at the maturity or maturities and in the amount or amounts stated on the records

of Kompass, together with interest (computed on the actual number of days elapsed on the basis of a 360 day year) at a floating per annum

rate equal to the greater of (i) the Prime Rate plus four percent or (ii) eight percent, on the aggregate principal amount of all Revolving

Loans outstanding from time to time as provided in the Loan Agreement.

Company entered into the Mortgage to secure its obligations under the Loan Agreement.

The property mortgaged under the Mortgage consists

of the Mortgaged Property.

The Mortgage contains customary covenants, representations and warranties by the Company.

August 12, 2024, the Company sold the Mortgaged Property and paid off the $ 4,880,000 outstanding

principal balance together with all accrued and unpaid interest.

In addition, upon origination of the Revolving Loan, the Company

recorded debt issuance costs of $ 188,255 which

was fully amortized as of the date the Mortgage was paid in full.

The remaining unamortized discount was $- 0 -

and $ 171,258 as

December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024 and 2023, the Company amortized $ 171,258

and $ 16,997 of debt discount under interest expense, respectively.

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

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

The Lender, Ticket Evolution, Inc., agreed to

extend, subject to the conditions hereof, and Borrower agreed to take, an advance for a sum of $ 75,000 with

monthly advances of $ 100,000 .

The advances made

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

The total advances received for the

year ended December 31, 2024 were $ 1,275,000 and payments made totaled $ 1,175,000 .

The outstanding balance as of December 31, 2024 was

On August 7, 2024 and as amended

on September 25, 2024, the Company’s Entertainment segment entered into an extension of credit (the “Agreement”) with

Vegas Tickets in the form of a prepayment for the rights to acquire certain Major League Baseball and National Football League playoff

and season tickets.

Vegas Tickets agreed to advance, subject to the conditions of the Agreement, and the Company’s Entertainment

segment agreed to take, an advance for a sum of $200,000.

Under the Agreement, the Company’s Entertainment segment has the right

to reacquire the tickets for a cash amount of $220,000 by November 1, 2024.

The repurchase date was extended to December 1, 2024 by an

amendment dated October 31, 2024.

The repurchase was completed and the remaining balance is $-0- as of December 31, 2024.

Cash Advances – Video Solutions Segment

6 unchanged sentences

The loan bears interest at 2.9 % per week.

the year ended December 31, 2024, the Company made repayments totaling $ 1,551,250

and received additional proceeds of $ 1,144,000

and recorded additional discount of $ 980,000 .

The Company refinanced this loan in April 2024 resulting in the additional proceeds received during the year ended December 31,

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

ended December 31, 2024 of $ 68,827 .

of December 31, 2024 the outstanding principal balance was $ 1,922,750 which

is expected to be repaid in early 2025.

The remaining unamortized discount was $- 0 -

and $ 369,171 as

of December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024 and 2023, the Company amortized

$ 1,180,343 and $ 142,829 , of debt discount under interest expense, respectively.

During 2024 and 2023, the Company made repayments

totaling $ 1,551,250 and $ 162,000 , respectively.

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

recorded additional discount of $ 980,000 .

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

during the year ended December 31, 2024.

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

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

Company paid the outstanding balance of $ 1,922,750

in full during the year ended December 31, 2025 and the merchant advance arrangement was subsequently terminated.

There were no amounts outstanding or available

under this arrangement as of December

Cash Advances – Entertainment Segment

1 unchanged sentence

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

The advance is, for the most part,

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

The Company will repay an aggregate

of $ 1,425,000 to the lender.

The advance is, for the most

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

The Company will repay an

aggregate of $ 1,425,000 to the lender.

The loan bears interest at a 40.4523 % annual effective rate based on latest debt modification.

4 unchanged sentences

The two amendments to the underlying loan agreement, resulting in additional proceeds totaling

The modifications were both deemed to be extinguishments of debt resulting in a $ 310,505

loss on the extinguishment of debt during the year ended December

The modifications were both deemed to be extinguishments of debt resulting in a $ 310,505 loss on the extinguishment of

debt during the year ended December 31, 2024.

July 13, 2024, the Company entered into a Letter Agreement with the note holder, which modified the note payable by increasing the principal

amount of the note payable from $ 1,425,000 to $ 1,725,000 ;

provided, however, that if the Borrowers repay the Note in full on or before

August 15, 2024, then the principal amount of the Note shall be reduced automatically by $ 100,000 .

provided, however, that if the Borrowers repay the Note in full on or

before August 15, 2024, then the principal amount of the Note shall be reduced automatically by $ 100,000 .

Pursuant to the Letter Agreement,

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payment to the note holder in the amount of $ 150,000 on or before July 26, 2024.

The Company also agreed to sell or enter into a firm

commitment to sell the office building owned by the Company and pay to the Purchaser:

(i) $ 325,000 , if the Company sells or enters into

a firm commitment to sell the building on or before August 7, 2024;

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

to sell the building after August 7, 2024.

Pursuant to the modified/amended note, the Company’s failure to sell or enter into a

firm commitment to sell the building prior to September 1, 2024 shall constitute an event of default, as defined in the note purchase

The Company also agreed to pay to the note holder $ 100,000 per month until the modified/amended note is repaid in full, with

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

The Company also agreed to sell or enter into a

firm commitment to sell the office building owned by the Company and pay to the Purchaser:

(i) $ 325,000 , if the Company sells or enters

into a firm commitment to sell the building on or before August 7, 2024;

or (ii) $ 400,000 , if the Company sells or enters into a firm

commitment to sell the building after August 7, 2024.

Pursuant to the modified/amended note, the Company’s failure to sell or enter

into a firm commitment to sell the building prior to September 1, 2024 shall constitute an event of default, as defined in the note purchase

The Company also agreed to pay to the note holder $ 100,000 per month until the modified/amended note is repaid in full,

with the first such payment occurring on August 12, 2024, and each subsequent payment occurring on the 12th calendar day of each month

September 25, 2024, the Company and the note holder agreed to an amended and restated senior secured promissory note with a new principal

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Company was unable to make certain required payments under the terms of the amended note.

October 22, 2024, the Company received a Default and Reservation Letter (the “Default Notice”) from counsel for the administrative

agent for the amended note, (i) notifying the Company that it was in default under the amended note for, among other reasons, failing

to make a $ 100,000 payment that was due on October 10, 2024, (ii) accelerating all principal and interest payments due under the amended

note, and (iii) demanding the Borrowers enter into a lockbox control agreement within ten (10) business days of the date of the Default

As of the date of the Default Notice, the outstanding obligation of the Company under the amended note was approximately $ 1,600,000 .

On October 22, 2024, the Company received

a Default and Reservation Letter (the “Default Notice”) from counsel for the administrative agent for the amended note, (i)

notifying the Company that it was in default under the amended note for, among other reasons, failing to make a $ 100,000 payment

that was due on October 10, 2024, (ii) accelerating all principal and interest payments due under the amended note, and (iii) demanding

the Borrowers enter into a lockbox control agreement within ten (10) business days of the date of the Default Notice.

As of the date

of the Default Notice, the outstanding obligation of the Company under the amended note was approximately $ 1,600,000 .

October 24, 2024, the Company received a Notice of UCC Article 9 Public Sale (the “Sale Notice”) from counsel to the administrative

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obligations under the Note and Security Agreement on November 5, 2024.

further described below (see Securities Purchase Agreement and Senior Secured Promissory Notes ), the Company raised sufficient

funds through a private placement which closed on November 7, 2024, to repay the amended note in full.

The Company’s full repayment

of the outstanding obligations under such amended note effectively cured all defaults under the Agreement and terminated the public sale

process of the collateral securing the Borrowers’ obligations thereunder.

During the year

ended December 31, 2024 and 2023, the Company amortized $ 384,302

of debt discount under interest expense, respectively.

The Company recorded total losses of $ 684,512 from the extinguishments of such debt during the year ended December 31, 2024.

Purchase Agreement and Senior Secured Promissory Notes

further described below (see Securities Purchase Agreement and Senior Secured Promissory Notes ), the Company raised

sufficient funds through a private placement which closed on November 7, 2024, to repay the amended note in full.

The Company’s

full repayment of the outstanding obligations under such amended note effectively cured all defaults under the Agreement and terminated

the public sale process of the collateral securing the Borrowers’ obligations thereunder.

the year ended December 31, 2024, the Company amortized $ 384,302 of

debt discount under interest expense.

The Company recorded total losses of $ 684,512

from the extinguishments of such debt during the year ended December 31, 2024.

Securities Purchase Agreement and Senior Secured Promissory Notes

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

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

(i) senior secured promissory notes in aggregate principal amount of $ 3,600,000 (the “Notes”), and (ii) 808,377 shares (the

“Commitment Shares”) of the Company’s common stock, for aggregate gross proceeds of approximately $ 3.0 million, before

deducting placement agent fees and other offering expenses payable by the Company.

This private placement closed on November 7, 2024

(the “Closing Date”).

(i) senior secured promissory notes in aggregate principal amount of $ 3,600,000 (the “Notes”), and (ii) 135 shares (the “Commitment

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

agent fees and other offering expenses payable by the Company.

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

to the SPA, the Company was required to use approximately $ 2,015,623 of the net proceeds from the private placement to pay, in full,

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See Merchant Cash Advances – Entertainment Segment.

Company’s full repayment of the outstanding obligations under such promissory note effectively cured all defaults under the promissory

note and terminated the public sale process of the collateral securing the Borrowers’ obligations thereunder.

The Company’s

recorded a loss of $ 374,007 from the extinguishment of such debt during the year ended December 31, 2024.

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

The Company’s full repayment of

the outstanding obligations under such promissory note effectively cured all defaults under the promissory note and terminated the public

sale process of the collateral securing the Borrowers’ obligations thereunder.

The Company’s recorded a loss of $ 374,007 from

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

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

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

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

The Company is also required

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

The Company was also required

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

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

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

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

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

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

(i) the Company’s board of directors approved an

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

stockholders entitled to vote at such special meeting and (ii) the Company filed with the SEC a preliminary proxy statement on

Schedule 14A announcing a meeting of stockholders for the purpose of approving the Series A and Series B warrants issued by the

Company on June 25, 2024.

See Note 17, Common Stock Purchase Warrants.

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

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Commitment shares

is analysis of the senior secured promissory notes balance:

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

offering (See Note 12).

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

SCHEDULE OF SENIOR SECURED PROMISSORY NOTES BALANCE

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Balance, as of December 31, 2024

Amortization of discount

( 3,600,000 )

Balance, as of December 31, 2025

Senior Secured Convertible Note and Committed Equity Financing

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

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

principal amount of $ 802,500 ,

which reflects a 7 %

original issue discount applied to gross proceeds of $ 750,000 ,

and detachable common stock purchase warrants to purchase 158,856

shares of the Company’s common stock at an exercise price

See Note 17, Common Stock Purchase Warrants.

The 2025 Secured Notes bear interest at 8 %

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

discount to the five-day volume-weighted average price (VWAP) preceding conversion, subject to customary anti-dilution and

price-based adjustment provisions.

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

of the outstanding principal amount.

second closing of Senior Secured Convertible Notes with an original principal balance of $ 267,500

occurred on December 16, 2025, with 49,043

detachable common stock purchase warrants to purchase shares of the Company’s common stock at an exercise price of $ 6.372

See Note 17, Common Stock Purchase Warrants .

The second closing of the 2025 Secured Notes were issued at a 7 %

original issue discount, providing gross proceeds of $ 250,000 ,

and bear interest at 8 %

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

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

The Notes are secured by substantially all of the

Company’s assets and guaranteed by certain subsidiaries.

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

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

The conversion

price of the 2025 Secured Notes is variable, equal to a 10% discount to the five-day VWAP preceding conversion, and accordingly does

not meet the fixed-for-fixed requirement under ASC 815-40, Derivatives and Hedging:

Contracts in an Entity’s Own

As a result, the conversion feature was bifurcated from the host debt instrument and recognized as a derivative

liability at fair value under ASC 815-15 , Derivatives and Hedging:

Embedded Derivatives .

The detachable warrants were

similarly classified as derivative liabilities at fair value under ASC 815-40, as their terms include provisions that could require

net cash settlement upon a qualifying tender offer.

Upon issuance, the aggregate fair value of these derivative liabilities was

Both derivative liabilities are remeasured at fair value each reporting period, with changes recognized in earnings.

See Note 11, Fair Value Measurement , for the Level 3 derivative liability activity related to the bifurcated

conversion feature and detachable warrants during the year ended December 31, 2025.

At the September 2025 closing, the fair value of the bifurcated conversion feature exceeded the net proceeds of $ 610,000 ;

accordingly, no proceeds were allocated to the host debt instrument or the detachable warrants, and the excess of $ 128,246 was recognized

immediately as a day-one charge within the change in fair value of derivative liabilities in the consolidated statements of operations.

The full face value of $ 802,500 was recorded as a debt discount at the September 2025 closing.

At the December 2025 closing, a debt discount

of $ 244,425 was recorded.

The debt discounts are amortized to interest expense over the term of the 2025 Secured Notes using the effective-interest

aggregate original principal amount of the 2025 Secured Notes of $ 1,070,000 represents

the combined face value of both closings.

The combined net proceeds were $ 832,500

, consisting of $ 610,000

from the September 2025 closing, net of $ 140,000

in transaction costs, and $ 222,500

from the December 2025 closing, net of $ 27,500

in transaction costs.

is an analysis of the 2025 Senior Notes balance:

SCHEDULE OF SENIOR NOTES BALANCE

Balance, as of December 31, 2024

2025 Senior Notes, at par

Discount recognized at

issuance date

( 1,046,925 )

Amortization of discount

Balance, as of December 31, 2025

FAIR VALUE MEASUREMENT

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

basis as of December 31, 2024 and 2023.

basis as of December 31, 2025 and December 31, 2024:

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

Warrant derivative liabilities

Contingent consideration

promissory notes and contingent consideration earn-out agreement

Warrant derivative liabilities

Contingent consideration

promissory notes and contingent consideration earn-out agreement

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

Warrant derivative

following table represents the change in Level 3 tier value measurements for warrant derivative liabilities:

SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS

Consideration

Promissory Notes and Earn-Out Agreement

Balance, December 31, 2024

Issuance of pre-funded warrant derivative liabilities

in February 2025 public equity offering

Issuance/Activation of Series A Warrants issued

in connection with the February 2025 public equity offering

Issuance/Activation of Series B Warrants issued

in connection with the February 2025 public equity offering

Issuance of derivative liabilities in connection with the 2025 Senior Secured Convertible Notes

Transition of warrant derivative liability

to equity due to exercise of pre-funded warrant derivative liabilities in February 2025 public equity offering

Transition of warrant derivative liability

to equity due to exercise of Series B common stock purchase warrants issued in June 2024 Private Placement

( 1,989,806 )

Transition of warrant derivative liability

to equity due to exercise of Series B common stock purchase warrants issued in February 2025 Public Equity Offering

( 5,406,320 )

Transition of warrant derivative liability

to equity due to elimination of net cash settlement provisions relative to the Series A common stock purchase warrants issued in

February 2025 Public Equity Offering

Change in fair value of bifurcated embedded derivative liabilities

Change in fair value of

warrant derivative liabilities

( 3,331,616 )

Balance, December 31, 2025

Balance, December 31, 2023

Issuance of Series A and pre-funded warrant

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June 2024 Private Placement

Issuance of Series B warrant derivative

liabilities in June 2024 Private Placement upon Stockholder Approval

Issuance of Series B warrant derivative liabilities

in June 2024 Private Placement upon Stockholder Approval

Transition of warrant derivative liability

to equity due to exercise of common stock purchase warrants

Change in fair value of warrant derivative

Principal payments on

contingent consideration promissory notes – Revenue Cycle Management Acquisitions

Balance, December 31, 2024

Consideration

Promissory Notes and Earn-Out Agreement

Warrant Derivative

Balance, December 31, 2022

Issuance of warrant derivative liabilities

Change in fair value of warrant derivative liabilities

( 1,846,642 )

Principal payments on contingent consideration promissory notes – Revenue Cycle Management Acquisitions

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

Change in fair value of

warrant derivative liabilities

Balance, December 31, 2024

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Accrued warranty expense

Accrued litigation costs

Accrued sales commissions

Accrued payroll and related fringes

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Accrued interest - related party

Accrued interest

Accrued board of directors’ fees

Customer deposits

General accrued expense

Total accrued expenses

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Beginning balance

Provision for warranty expense

Charges applied to warranty

Provision for warranty

applied to warranty reserve

Ending balance

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Income tax provision

Allocated to:

Continuing operations

reconciliation of the income tax (provision) benefit at the statutory rate of 21% for the years ended December 31, 2025, and 2024 to

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State taxes, net of Federal benefit

Stock based compensation

Change in valuation reserve on deferred tax

Contingent consideration for acquisition

Extinguishment of convertible debt

Non allowable expenses and excludable income

Expiring net operating loss and tax credit

carryforwards

Income tax (provision)

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Deferred tax assets:

Stock-based compensation

Start-up costs

Inventory reserves

Warrant derivative liabilities

Investment in subsidiaries

Research & development expenses

Allowance for doubtful accounts receivable

Property, plant and equipment depreciation

Intangible assets

Research & development

Allowance for doubtful

accounts receivable

Property, plant and equipment

Deferred revenue

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Net operating loss carryforward

Research and development tax credit carryforward

Research and development

tax credit carryforward

State jobs credit carryforward

Charitable contributions carryforward

Uniform capitalization

of inventory costs

Charitable contributions

capitalization of inventory costs

Total deferred tax assets

Valuation reserve

( 47,955,000 )

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Deferred tax liabilities:

Investment in subsidiaries

Property, plant and equipment

Warrant derivative liabilities

Intangible assets

Domestic international

sales company

international sales company

Total deferred tax liabilities

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Therefore, it determined

to increase our valuation allowance by $ 4,680,000 but continue to fully reserve its deferred tax assets at December 31, 2024.

expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates

its ability to realize these assets.

To the extent the Company determines that the realization of some or all of these benefits is more

likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed.

Such a reversal

would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’

of December 31, 2024, the Company had the following Federal net operating loss carry-forwards available to offset future taxable income:

OF FEDERAL NET OPERATING LOSS CARRY FORWARDS

to fully reserve its deferred tax assets at December 31, 2025.

The Company expects to continue to maintain a full valuation allowance

until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets.

To the extent

the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable

income, a portion or all of the valuation allowance will be reversed.

Such a reversal would be recorded as an income tax benefit and,

for some portion related to deductions for stock option exercises, an increase in shareholders’ equity.

of December 31, 2025, the Company had the following estimated Federal net operating loss carry-forwards available to offset future taxable

SCHEDULE OF FEDERAL NET OPERATING LOSS CARRY FORWARDS

Tax years generated:

2017 and before

2018 and after

Federal net operating loss carry-forwards available

net operating loss carry-forwards available

$ 168,405,000

tax net operating loss carry-forwards expire between 2025 and 2043 relative to Federal net operating loss carry-forwards generated

in tax years 2017 and prior.

Federal net operating loss carry-forwards generated in tax years 2018 and after cannot be carried back

to prior years and have an indefinite life since the enactment of the Tax Cuts and Jobs Act of 2017.

The Tax Cuts and Jobs Act of

2017 further provides for an annual limitation on usage equivalent to 80% of taxable income.

In addition, the Company had research

and development tax credit carry-forwards totaling $ 1,742,000 available

as of December 31, 2024, which expire

between 2025 and 2040 .

Internal Revenue Code contains provisions under Section 382 which limit a company’s ability to utilize net operating loss carry-forwards

in the event that it has experienced a more than 50% change in ownership over a three-year period.

Current estimates prepared by the

Company indicate that there may have been ownership changes in the past that could limit our ability to utilize a portion of our net

operating loss carryforwards and our research and development tax credit carry-forwards.

discussed in Note 1, “Summary of Significant Accounting Policies,” tax positions are evaluated in a two-step process.

Company first determines whether it is more likely than not that a tax position will be sustained upon examination.

If a tax position

meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial

The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate

Management has identified no tax positions taken that would meet or exceed these thresholds and therefore there are no gross

interest, penalties and unrecognized tax expense/benefits that are not expected to ultimately result in payment or receipt of cash in

the consolidated financial statements.

effective tax rate for the years ended December 31, 2024, and 2023 varied from the expected statutory rate due to the Company continuing

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

The Company determined that it was appropriate to continue the full

valuation allowance on net deferred tax assets as of December 31, 2024, primarily because of the current year operating losses.

tax net operating loss carry-forwards expire between 2026 and 2037 relative to Federal net operating loss carry-forwards generated in

tax years 2017 and prior.

Federal net operating loss carry-forwards generated in tax years 2018 and after cannot be carried back to prior

years and have an indefinite life since the enactment of the Tax Cuts and Jobs Act of 2017.

The Tax Cuts and Jobs Act of 2017 further

provides for an annual limitation on usage equivalent to 80% of taxable income.

In addition, the Company had research and development

tax credit carry-forwards totaling $ 1,685,000 available as of December 31, 2025, which expire between 2026 and 2037 .

July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the U.S.

The OBBBA includes numerous provisions

that affect corporate taxation, including changes to bonus depreciation, the expensing of domestic research costs, and modifications

to certain U.S.

international tax rules.

The Company has analyzed the impacts of the OBBBA and reflected them in the current period.

These impacts do not have a material effect on the tax rate for the year ended December 31, 2025.

The majority of the tax law changes

will take effect in future years.

Company’s 2022 federal tax return was recently examined by the Internal Revenue Service resulting in no proposed adjustments.

OPERATING LEASE

The Company entered into an operating

lease with a third party in October 2019 for copiers used for office and warehouse purposes.

The terms of the lease include 48 monthly

payments of $ 1,598 with a maturity date of October 2023.

The Company has the option to purchase such equipment at maturity for its estimated

fair market value at that point in time.

The lease for the Company’s copier operating lease expired and was renewed in October

Company entered into an operating lease with a third party in October 2023 for copiers used for office and warehouse purposes.

of the lease include 48 monthly payments of $ 1,786 with a maturity date of October 2027.

The Company has the option to purchase such

equipment at maturity for its estimated fair market value at that point in time.

The remaining lease term for the Company’s copier

operating lease as of December 31, 2024 was thirty-four 34 months.

Company entered into an operating lease with a third party on November 27, 2024 for a copier used for office purposes.

the lease include 36

monthly payments of $ 90

with a maturity date of November 27, 2027 .

The Company has the option to purchase such equipment at maturity for its estimated fair

market value at that point in time.

The remaining lease term for the Company’s copier operating lease as of December 31, 2024

was thirty-five

The Company entered into an operating

lease with a third party on October 16, 2024 for office space used by the entertainment segment and temporarily by the video solutions

The terms of the lease include 36 monthly payments of $ 7,251.92 with a maturity date of October 31, 2027 .

The remaining lease

term for the Company’s office space lease as of December 31, 2024 was thirty-four 34 months.

May 13, 2020, the Company entered into an operating lease for new warehouse and office space, which served as its new principal executive

office and primary business location prior to the April 30 purchase and sale agreement.

The original lease agreement was amended on August

28, 2020 to correct the footage under lease and monthly payment amounts resulting from such correction.

The lease terms, as amended include

no base rent for the first nine months and monthly payments ranging from $ 12,398 to $ 14,741 thereafter, with a termination date of December

The Company is responsible for property taxes, utilities, insurance and its proportionate share of common area costs related to

its new location.

The Company took possession of the leased facilities on June 15, 2020.

On September 16, 2024, the Company and the landlord

agreed to terminate the lease and the Company relinquished possession and control of the premises.

The Company reversed the related right

of use asset by $ 349,710 and its $ 37,500 rent deposit.

In addition, the Company reversed its right of use lease liability by $ 396,595 ,

resulting in a net gain from the lease extinguishment totaling $ 9,385 for the year ended December 31, 2024 .

June 30, 2021, the Company completed the acquisition of its first medical billing company, through Nobility Healthcare.

Upon completion

of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space.

The lease terms

include monthly payments ranging from $ 2,648 to $ 2,774 thereafter, with a termination date in July 2024 .

The Company was responsible

for property taxes, utilities, insurance and its proportionate share of common area costs related to this location.

The lease term expired

in July 2024 and was not renewed by the Company.

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

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

lease was renewed in April 2023 with favorable terms and payments ranging from $ 7,436 to $ 8,877 thereafter, with a termination date in

The Company is responsible for property taxes, utilities, insurance and its proportionate share of common area costs related

to this location.

The remaining term for the Company’s office operating lease was sixty-three 63 months as of December 31, 2024.

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

Upon completion

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

The lease terms include

monthly payments ranging from $ 7,211 to $ 7,364 thereafter, with a termination date of December 2022 .

The Company is responsible for property

taxes, utilities, insurance and its proportionate share of common area costs related to this location.

The Company took possession of

the leased facilities on September 1, 2021.

The Company currently rents this space on a month-to-month basis with intentions to relocate

upon the identification of suitable space.

January 1, 2022, the Company completed the acquisition of a private medical billing company, through its revenue cycle management segment.

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

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

The Company is responsible

for property taxes, utilities, insurance and its proportionate share of common area costs related to this location.

The Company took

possession of the leased facilities on January 1, 2022.

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

asset and lease liability by $ 73,894 .

expense related to the Company’s office space and copier operating leases was recorded on a straight-line basis over the

Total lease expense under the five operating leases was approximately $ 627,212

May 8, 2025, the Company entered into an operating lease with a third party for a warehouse and office used by the Entertainment segment.

The lease has a five 5 -year term expiring in May 2030 and provides for base monthly rent of $ 16,035 , subject to annual increases of 2.5%,

with May 2025 rent prorated.

The Company prepaid one year of rent, real estate taxes, and insurance totaling $ 247,105 , which is applied

to the first and final six months of the lease term, and also provided a $ 20,000 security deposit.

The lease is structured as a triple-net

lease, under which the Company is responsible for all real estate taxes, insurance, utilities, and other operating costs associated with

the premises;

real estate taxes for the period from lease commencement through December 31, 2025 were approximately $ 3,748 per month

and insurance costs were approximately $ 432 per month, both subject to annual adjustment.

The lease includes renewal options and an option

to purchase the property after the 33rd month of the lease term.

As of December 31, 2025, the remaining lease term was approximately

October 2023, the Company entered into an operating lease with a third party for copiers used for office and warehouse purposes.

lease originally provided for 48 monthly payments of $ 1,786 with a scheduled maturity in October 2027 and included an option to purchase

the equipment at fair market value at maturity.

The lease was terminated effective December 15, 2025, and accordingly, there was no remaining

lease term outstanding as of December 31, 2025.

November 27, 2024, the Company entered into an operating lease with a third party for a copier used for office purposes.

The lease provides

for 36 monthly payments of $ 90 and matures on November 27, 2027 .

The Company has the option to purchase the equipment at its estimated

fair market value at maturity.

As of December 31, 2025, the remaining lease term was approximately twenty-three 23 months.

October 16, 2024, the Company entered into an operating lease with a third party for office space used by the Entertainment segment and

temporarily by the Video Solutions segment.

The lease provides for 36 monthly payments of $ 7,251.92 and matures on October 31, 2027 .

As of December 31, 2025, the remaining lease term was approximately twenty-two 22 months.

May 13, 2020, the Company entered into an operating lease for warehouse and office space that served as its principal executive office

and primary business location.

On September 16, 2024, the Company and the landlord agreed to terminate the lease, and the Company recognized

a net gain on lease extinguishment of $ 9,385

for the year ended December 31, 2024.

connection with the September 2021 acquisition of Goody Tickets, LLC and TicketSmarter, LLC, the Company assumed responsibility for TicketSmarter’s

office space lease.

The lease was formally terminated in September 2025, and no separate lease obligation related to this location remained

outstanding as of December 31, 2025.

expense related to the Company’s office space and copier operating leases was recorded on a straight-line basis over the lease

Total lease expense of $ 274,272

for the year ended December 31, 2025 includes expense under all operating leases active during the period, including partial-year expense under the copier

lease that was terminated effective December 15, 2025.

weighted-average remaining lease-term related to the Company’s lease liabilities as of December 31, 2025 and December 31, 2024

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SCHEDULE OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

lease right of use assets

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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COMMITMENTS AND CONTINGENCIES

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

It is our policy to not disclose

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

After carefully assessing

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

any lawsuit filed against us.

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

When losses are deemed

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

possible losses for the claim, if material for disclosure.

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

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

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

We reevaluate and update accruals as matters

progress over time.

From time to time, the Company is notified that the Company may be a party

to a lawsuit or that a claim is being made against them.

It is its policy not to disclose the specifics of any claim or threatened lawsuit

until the summons and complaint are actually served on the Company.

After carefully assessing the claim, and assuming the Company determines

that they are not at fault or disagrees with the damage or relief demanded, they vigorously defend any lawsuit filed against them.

Company records a liability when losses are deemed probable and reasonably estimable.

When losses are deemed reasonably possible but not

probable, they 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, they take into consideration factors such as its

historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of its prevailing,

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

The Company reevaluates and update accruals as matters progress

Culp McAuley,

May 31, 2022, the Company filed a lawsuit against Culp McAuley, Inc.

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January 5, 2024, the Company filed a motion for summary judgment against defendants Campbell McAuley and Mark Depew.

On the same date,

the Company also filed separate motions for default judgment against Culp McAuley and Brandon Culp, respectively.

On January 5, 2024,

date, the Company also filed separate motions for default judgment against Culp McAuley and Brandon Culp, respectively.

5, 2024, defendant Mark Depew filed a motion for summary judgment against the Company.

On May 17, 2024, the Court issued Orders which, respectively,

(i) granted defendant Mark Depew’s motion for summary judgment against the Company;

(ii) denied the Company’s motion for

summary judgment against Depew;

(iii) granted the Company’s motion for summary judgment against defendant Campbell McAuley;

(iv) granted the Company’s motions for default judgment against defendants Culp McAuley and Brandon Culp.

Finding that defendants

Brandon Culp and Campbell McAuley were each the alter ego of Culp McAuley, on June 4, 2024, the Court entered judgment in favor of the

Company in the amount of $ 3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”).

The Company is currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover.

June 14, 2024, the Company filed a Notice of Appeal to the United States Court of Appeals for the Tenth Circuit from the Court’s

May 17, 2024 Order that granted summary judgment in favor of Mark Depew.

On December 10, 2024, the Company and Depew filed a Stipulation

of Dismissal in the Tenth Circuit that ended the appeal after the Company and Depew reached a settlement.

March 2024, the Company filed a complaint against Larry Roberts (“defendant”) in the Superior Court of the State of California,

County of Orange.

The lawsuit arises from the defendant’s multiple breaches of his obligations to the Company.

The Company seeks

monetary damages based on certain conduct by the defendant.

On May 28, 2024, the defendant filed a motion to strike portions of the complaint

and a motion for demurrer.

On May 17, 2024, the Court issued Orders

which, respectively, (i) granted defendant Mark Depew’s motion for summary judgment against the Company;

(ii) denied the

Company’s motion for summary judgment against Depew;

(iii) granted the Company’s motion for summary judgment against

defendant Campbell McAuley;

and (iv) granted the Company’s motions for default judgment against defendants Culp McAuley and

Brandon Culp.

Finding that defendants Brandon Culp and Campbell McAuley were each the alter ego of Culp McAuley, on June 4, 2024,

the Court entered judgment in favor of the Company in the amount of $ 3,999,984

against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”).

The Company is

currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover.

The Company continues to explore for sources of assets as a possible source of collection from the judgment debtors.

On June 14, 2024, the Company filed a Notice of Appeal to the United States Court of Appeals for the Tenth Circuit

from the Court’s May 17, 2024 Order that granted summary judgment in favor of Mark Depew.

On December 10, 2024, the Company and

Depew filed a Stipulation of Dismissal in the Tenth Circuit that ended the appeal after the Company and Depew reached a settlement.

As of December 31, 2025, the Company

holds an unsatisfied judgment of $ 3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally.

continues to explore available sources of assets from the judgment debtors;

however, collection of the judgment remains uncertain and

no assurance can be given that any amounts will be recovered.

The Company recorded a loss of $ 1,959,396 on this matter during the year

ended December 31, 2024, which, together with losses recorded in prior years, reduced the Company’s cumulative net exposure to zero as

of December 31, 2024.

No additional losses were recorded on this matter during the year ended December 31, 2025, and the Company’s net

exposure remained zero as of December 31, 2025.

The Company’s estimate with respect to the aggregate reasonably possible loss is

based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties.

As a result, actual results may vary significantly from the current estimate.

Larry Roberts

In March 2024, the Company filed a complaint against Larry Roberts in the

Superior Court of the State of California, County of Orange, Case No.

30-2024-01385012-CU-FR-CJC.

The lawsuit arises from the defendant’s

alleged theft and misapplication of funds that were intended for the purchase of goods on behalf of the Company.

The Company seeks monetary

damages based on certain conduct by the defendant.

On May 28, 2024, the defendant filed a motion to strike portions of the complaint and

a motion for demurrer.

On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer.

The Court further denied the defendant’s motion to strike in its entirety.

further denied the defendant’s motion to strike in its entirety.

Discovery is ongoing.

A jury trial has been scheduled for October 19,

of December 31, 2024, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case (when taking into

account, among other things, the uncertainty of recovering the judgment amount owed to the Company by Culp McAuley, Brandon Culp and

Campbell McAuley, jointly and severally), our estimate of the aggregate reasonably possible loss could be the entire balance of the judgment.

The Company has recorded an additional loss of $ 1,959,396

on this matter as of December 31, 2024 which

together with the previously recorded losses in prior years, reduces the Company’s net exposure to zero at December 31, 2024.

Our estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is subject to significant

judgment and a variety of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time,

particularly if and as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding.

Also, the matters

underlying the reasonably possible loss will change from time to time.

As a result, actual results may vary significantly from the current

the ultimate resolution is unknown, based on the information currently available, we do not expect that the pending lawsuit or the enforcement

of the judgment will have a material adverse effect on our operations, financial condition or cash flows.

However, the outcome of any

litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from

the resolution of the pending lawsuit or enforcement of the judgment will be covered by our insurance or will not be in excess of amounts

recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition

or cash flows.

The Company sponsors a 401(k) retirement savings plan for the benefit of its employees.

The plan, as amended, requires

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

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

The Company made matching contributions

totaling $ 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.

The Company is not able to provide an estimate of the likelihood of success at this time.

The matter remains open.

Pharmaxx Medical,

Company filed a complaint against Pharmaxx Medical, Inc.

in the Superior Court of the State of California, County of Riverside,

CVSW2300198, alleging breach of contract arising from the failure to deliver pharmaceutical gloves.

After the court struck the

defendant’s answer, the Company submitted the default package to obtain a default judgment against the defendant.

The default package

remains pending with the court.

As of December 31, 2025, the Company recorded a litigation receivable of $ 578,890 related to this matter, against

which an allowance of $ 289,445 has been established.

Other Receivable

First Insurance

Funding Corp.

— Johnson County Collection Case

The Company is a defendant in a collection case filed in the District Court of Johnson County, Kansas limited actions

This is a collection lawsuit claiming the Company owed money for insurance premium funding on a cancelled policy totaling

Digital disputed it owes the money as they cancelled the insurance policy through their insurance broker.

An answer was filed

denying the claim.

The matter remains open.

Gregory Johnson

— Kansas Department of Labor

Gregory Johnson filed a claim with the State of Kansas, Wage and Hour Division, Claim No.

240591, seeking $30,000

for alleged severance pay.

Johnson was laid off in a reduction in force and did not have a severance agreement.

An answer denying

the claim has been filed.

A hearing was held on October 27, 2025 before an Administrative Law Judge, with the matter being dismissed in

the Company’s favor.

— Former Consultant

A former consultant

has filed a claim against Kustom 440, Inc., a wholly owned subsidiary of the Company, seeking to compel payment under an alleged consulting

The Company is currently engaged in settlement negotiations.

The matter remains open.

Artist Performance

In January 2026,

Kustom 440, Inc., a wholly owned subsidiary of the Company, entered into a performance agreement with a headlining artist for the 2026

Country Stampede music festival scheduled for June 27, 2026.

The agreement provides for a flat performance guarantee of $750,000, payable

in installments consisting of a deposit of $187,500 paid upon execution, a second deposit of $187,500 due no later than May 27, 2026,

and a remaining balance of $375,000 payable following the performance.

The agreement does not provide for cancellation except in the

event of force majeure or material breach by either party.

As of December 31, 2025, no amounts had been paid or accrued under this agreement.

STOCK-BASED COMPENSATION

1 unchanged sentence

and $ 128,519 for the years ended December 31, 2025 and 2024, respectively.

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

(i) the 2005 Stock Option and Restricted

Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the

2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the

“2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option

and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”),

(viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock

Plan (the “2020 Plan”), and (x) the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”).

The 2005 Plan,

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

of December 31, 2025, the Company has adopted various stock option and restricted stock plans which are referred to as the “Plans.”

The Company registers all shares of common stock that are issuable under its Plans with the SEC.

A total of 125,021 shares remain available

for awards under the various Plans as of December 31, 2025.

option grants.

The Company believes that such awards better align the interests of our employees with those of its stockholders.

Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards

generally vesting based on the completion of continuous service and having ten-year contractual terms.

These option awards typically

provide for accelerated vesting if there is a change in control (as defined in the Plans).

The Company has registered all shares of common

stock that are issuable under its Plans with the SEC.

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

as of December 31, 2024.

The Company believes that award of stock options better align the interests of our employees with those of its

stockholders.

Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with

such option awards which generally vest based on the completion of continuous service and have ten-year contractual terms.

awards typically provide for accelerated vesting if there is a change in control (as defined in the Plans).

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

in the various Plans during the years ended December 31, 2024 and 2023 is reflected in the following table:

Activity involving the

award of stock options during the years ended December 31, 2025 and 2024 is reflected in the following table:

SCHEDULE OF STOCK OPTIONS OUTSTANDING

13 unchanged sentences

during the years ended December 31, 2025 and 2024.

December 31, 2024 and 2023, the aggregate intrinsic value of options outstanding was approximately $- 0 - and $- 0 -, respectively, and the

aggregate intrinsic value of options exercisable was approximately $- 0 - and $- 0 -, respectively.

compensation expense was recognized for stock options during the years ended December 31, 2025 and 2024, as all outstanding options were

fully vested in prior periods.

As of December 31, 2025 and 2024, no outstanding or exercisable options had intrinsic value, as all exercise

prices exceeded the market price of the Company’s common stock on those dates.

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

3 unchanged sentences

contractual life

$ 0.01 to $ 249,999

$ 250,000 to $ 349,999

$ 350,000 to $ 364,000

stock grants.

17 unchanged sentences

As of December 31, 2025, there was $ 18,912 of total unrecognized compensation costs related to all remaining non-vested restricted stock

grants, which will be amortized over the next thirty-seven months in accordance with their respective vesting scale.

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

nonvested balance of restricted stock vests as follows:

1 unchanged sentence

COMMON STOCK PURCHASE WARRANTS

following table summarizes information about shares issuable under warrants outstanding during the years ended December 31, 2025 and

SCHEDULE OF WARRANT ACTIVITY

exercise price

Balance, January 1, 2025

Issuance February 2025

– Prefunded Warrants

Issuance/activation of

February 2025 – Series A Warrants

Issuance of September 2025 – Detachable

Issuance of December 2025 – Detachable

Issuance/activation of

February 2025 – Series B Warrants

Exercise February 2025 – Prefunded

Exercised June 2024 - Series

Exercised February 2025

– Series B Warrants

Terminated/Cancelled

Balance, December 31, 2025

exercise price

Balance, January 1, 2024

Issuance – Series

A and prefunded warrants

Issuance – Series

A warrant reset provisions

Terminated/Cancelled

Balance, December 31, 2024

total intrinsic value of all outstanding warrants aggregated $ 25 and $ 2,128,320 as of December 31, 2025 and December 31, 2024, respectively

and the weighted average remaining term was 55.4 and 52.3 months as of December 31, 2025 and 2024, respectively.

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

warrants to purchase shares of Common Stock as of December 31, 2025:

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

and exercisable warrants

contractual life

and December 2025 Detachable Purchase Warrants

September 15, 2025, the Company entered into a Securities Purchase Agreement with an institutional investor pursuant to which the

Company issued Senior Secured Convertible Notes (the “September 2025 Notes”) (See Note 10) with an aggregate original

principal amount of $ 802,500

and detachable common stock purchase warrants to purchase 158,856

shares of the Company’s common stock at an exercise price of $ 6.372

The detachable warrants issued in connection with the September 2025 Notes have a term of five years from the date of

December 16, 2025, the Company completed the second closing under the Securities Purchase Agreement and issued additional Senior Secured

Convertible Notes with an aggregate original principal amount of $ 267,500 together with detachable common stock purchase warrants to

purchase 49,043 shares of the Company’s common stock at an exercise price of $ 6.372 per share.

The detachable warrants issued in

the December 2025 closing also have a five-year term from the date of issuance.

as of December 31, 2025, the Company had a total of 207,899

detachable warrants outstanding related to the September and December 2025 financings, each exercisable at $ 6.372

See Note 10, Debt Obligations , and Note 11, Fair Value Measurement , for additional details regarding

these warrants during the year ended December 31, 2025.

2025 Purchase Warrants

June 25, 2024, the Company issued Series A and prefunded warrants to purchase a total of 1,768,227 shares of Common Stock along with

the sale of common stock.

The Company also issued Series B Warrants that will be issuable and exercisable at any time or times on or

after the date Stockholder Approval is obtained in addition to the Series A warrants that are not included in outstanding warrants until

such time as Stockholder Approval is obtained.

Both the Series A and Series B warrants have reset provisions that are activated upon

the date Stockholder Approval is obtained.

The warrant terms provide for net cash settlement outside the control of the Company under

certain circumstances.

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

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

as the change in fair value of warrant derivative liabilities.

Furthermore, the Company re-values the fair value of warrant derivative

liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value

of warrant derivative liabilities through the consolidated statement of operations.

the year ended December 31, 2024, prefunded warrants to purchase 573,008

shares of common stock were fully exercised.

Series B warrants issued in this transaction became issuable and exercisable on the date Stockholder Approval is obtained.

approval was obtained on December 17, 2024 which activated the Series B warrants.

Both the Series A and Series B warrants also contain

price and warrant reset provisions that were activated upon the date of Stockholder Approval.

The reset provisions increased the number

of common shares issuable under the Series A warrant from 1,195,219

shares and the exercise price per Series A warrant was reduced

per share effective December 17, 2024.

In addition, the Series

B warrants became effective and exercisable upon Stockholder Approval on December 17, 2024 which resulted in 4,766,777

common shares issuable under the Series B warrants with an

exercise price of $ 0.001

per share effective December 17, 2024.

The Company recognized

the full Series B warrant derivative liability value of $ 2,865,727

as of the date of Stockholder Approval when it became effective and exercisable

of which $ 454,150 was recorded in equity and $ 2,411,577 was charged as a loss in the statement of operations for the year ended December

The following are the assumptions used in calculating the estimated fair value of the detachable Series B warrants to

purchase common stock which became effective and exercisable upon Stockholder Approval on December 17, 2024 and on December 31, 2024:

February 13, 2025, the Company issued 16,358 pre-funded units, each consisting of one-prefunded warrant (to purchase a total of 16,358

shares of Common Stock, inclusive of the underwriter’s overallotment exercise), one Series A warrant and one Series B warrant along

with the sale of 1,309 units, each consisting of one share of Common Stock, one Series A warrant and one Series B warrant, for an aggregate issuance of 16,667 Series A warrants and 16,667 Series B warrants prior to the application of

reset provisions.

Series A and Series B warrants were exercisable only upon receipt of stockholder approval to approve each of (i) certain terms in

the Series A warrants and Series B warrants and the issuance of the shares of Common Stock issuable upon the exercise of such

warrants, as may be required by the applicable rules and regulations of The Nasdaq Stock Market LLC and (ii) if necessary, a

proposal to amend the Company’s Articles of Incorporation, as amended, to increase the authorized share capital of the Company

to an amount sufficient to cover the shares of Common Stock issuable upon the exercise of the Series A warrants and Series B

The Series A Warrants were exercisable commencing upon the date of public notice of the Stockholder Approval (the

“Warrant Stockholder Approval Date”) until five years after the Warrant Stockholder Approval Date, and the Series B

Warrants were exercisable commencing upon the Warrant Stockholder Approval Date until two and one-half years after the Warrant

Stockholder Approval Date.

Both the Series A and Series B warrants contain reset provisions that are activated upon the date

Stockholder Approval is obtained.

The Company’s Shareholders approved the issuance of the Series A and B warrants at a Special

Meeting of Shareholders on May 6, 2025 which serves as the Warrant Stockholder Approval Date.

The Series A and B warrant terms

provide for net cash settlement outside the control of the Company under certain circumstances.

As such, the Company is required to

treat the Series A and B warrants as derivative liabilities until such time as the circumstances which allow for settlement outside

the control of the Company are terminated or no longer applicable.

Warrant derivative liabilities treatment of the Series A and B

warrants to be valued at their estimated fair value at their issuance/activation date and at each reporting date with any subsequent

changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities.

Furthermore, the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the

resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the

consolidated statement of operations.

pre-funded warrants were all exercised within days of their issuance.

The aggregate fair value of the pre-funded warrants was

estimated at $ 1,803

in total, or approximately $ 0.11 per warrant, reflecting the minimal time value associated with the warrants given their $ 0.001 exercise price and extremely short contractual term of approximately 11 days.

This fair value at the time of exercise remained the same as their fair value as of the date of issuance.

The following are the

assumptions used in calculating the estimated fair value of the pre-funded warrants to purchase Common Stock which were effective

and exercisable upon issuance on February 13, 2025:

SCHEDULE OF WARRANT MODIFICATION

B issuance date - December 17, 2024

B - December 31, 2024

funded warrants issuance date – February 13, 2025

Volatility – range

3 unchanged sentences

Common stock issuable under the warrants

the year ended December 31, 2024, Series B warrants to purchase 973,000

shares of common stock were fully exercised.

In conjunction

with the exercise of the Series B warrants, the Company transitioned the related warrant derivative liability totaling $ 584,955

As of December 31, 2025, in conjunction with the exercise of the pre-funded warrants, the Company transitioned

the related warrant derivative liability totaling $ 1,803

to equity as of their exercise date.

The warrant derivative

liability related to the Series B warrants was $ 1,989,806 as of December 31, 2024.

The change in fair value of the Series B warrant derivative

liability from their issuance date through December 31, 2024 totaled $ 290,965 which was included as a loss in the statement of operations

for the year ended December 31, 2024.

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

the derivative liability relative to the prefunded warrants and Series A warrants as of their date of issuance and as of December

date assumptions

The warrant derivative liability related to the pre-funded warrants was $- 0 -

as of December 31, 2025.

The Series A warrants were issued and activated on the Warrant Stockholder

Approval Date of May 6, 2025.

A total of 115,946 Series A warrants were issued, reflecting the application of reset provisions upon stockholder

The aggregate fair value of the Series A warrants was estimated at $ 1,340,214 , or approximately $ 11.56 per warrant, at the time of their issuance and activation.

Upon issuance, the $ 1,340,214

fair value was recorded as a warrant derivative liability with a corresponding charge to additional paid-in capital, as the Series A warrants

were classified as derivative liabilities due to the net cash settlement provisions described above.

The following are the assumptions

used in calculating the estimated fair value of the Series A warrants to purchase Common Stock which were effective and exercisable upon

the Warrant Stockholder Approval Date of May 6, 2025:

A warrants issuance/activation date – May 6, 2025

Volatility – range

3 unchanged sentences

Common stock issuable under the warrants

The Company recognized the fair value

of the Series A warrants of $ 1,998,074 as a warrant derivative liability as of the date of issuance.

During the year ended December 31,

2024, there were no Series A warrants exercised.

The fair value of the warrant derivative liability related to the Series A warrants

was $ 2,408,598 as of December 31, 2024.

The change in fair value of the Series A warrant derivative liability from their issuance date

through December 31, 2024 totaled $ 410,524 which was included as a loss in the statement of operations for the year ended December 31,

Purchase Warrants

April 5, 2023, the Company issued warrants to purchase a total of 1,125,000 shares of Common Stock.

The warrant terms provide for net

cash settlement outside the control of the Company under certain circumstances.

As such, the Company is required to treat these warrants

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

changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities.

the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant

derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.

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

warrant derivative liabilities as of their date of issuance and as of December 31, 2024:

date assumptions

31, 2024 assumptions

2025, the circumstances under which the Series A warrant terms allow for settlement outside the control of the Company were

terminated and no longer applicable.

As of that date, 115,932

Series A warrants remained outstanding.

The Company determined the fair value of the warrant derivative liability as of June 27,

2025 to be $ 530,101 ,

or approximately $ 4.57

per warrant, and transitioned that value to equity as the Series A warrants were no longer treated as warrant derivative

The decline in fair value from $ 1,340,214

at issuance on May 6, 2025 to $ 530,101

at the transition date on June 27, 2025 reflects the decrease in the Company’s common stock price and changes in volatility

assumptions over the intervening period, with the $ 810,113

change in fair value recognized as a gain in the consolidated statement of operations during the year ended December 31, 2025.

11 , Fair Value Measurement , for the Level 3 warrant derivative liability activity, including the issuance, fair value

changes, and transition to equity of the Series A warrants during the year ended December 31, 2025.

The following are the

assumptions used in calculating the estimated fair value of the Series A warrants as of the transition date of June 27, 2025:

A warrants transition date – June 27, 2025

Volatility – range

3 unchanged sentences

Common stock issuable under the warrants

following table summarizes information about shares issuable under warrants outstanding during the years ended December 31, 2024 and

SCHEDULE OF WARRANT ACTIVITY

Series B warrants were issued and activated on the Warrant Stockholder Approval Date of May 6, 2025.

Based on the application of reset

provisions upon stockholder approval, a total of 556,452

Series B warrants were issued at a zero exercise price.

The aggregate fair value

of the Series B warrants was estimated at $ 5,406,408 ,

or approximately $ 9.72 per warrant, at the time of their issuance and activation.

Upon issuance, the $ 5,406,408 fair value was recorded

as a warrant derivative liability with a corresponding charge to additional paid-in capital.

The Series B Warrants contain a zero-exercise

price option at the holder’s election.

Under the zero-exercise price option, a holder of the Series B Warrant has the right to receive

an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon

a cash exercise of the Series B Warrant and (y) three (3.0).

As a result of this feature, the Company did not receive nor did it expect

to receive any cash proceeds from the exercise of the Series B Warrants because it is highly unlikely that a Series B Warrant holder

would elect to pay an exercise price in cash to receive one share of common stock when they could elect the alternate cashless exercise

option and pay no exercise price to receive more shares of common stock than they would receive if they did pay an exercise price.

following are the assumptions used in calculating the estimated fair value of the Series B warrants as of the Warrant Stockholder Approval

Date of May 6, 2025:

B warrants issuance/activation date – May 6, 2025

Volatility – range

Risk-free rate

Remaining contractual term

Exercise price

Balance, January 1, 2024

Issuance – Series A and Prefunded Warrants

Issuance - Series B warrants

Series A warrant reset provisions

( 1,546,008 )

Terminated/Cancelled

Balance, December 31, 2024

Common stock issuable under the warrants

total Series B warrants issued on May 6, 2025, a total of 556,439

warrants were immediately exercised by their holders at a combined fair value of $ 5,406,320 ,

or approximately $ 9.72 per warrant, and transitioned to equity during the year ended December 31, 2025.

As of December 31, 2025, 13

Series B warrants remained outstanding and were remeasured at a fair value of $ 25

in the aggregate, or approximately $ 1.92 per warrant, based on the Company’s closing stock price on December 31, 2025 applied to the

shares receivable under the cashless exercise multiplier of 3.0.

See Note 11, Fair Value Measurement , for the Level 3 warrant derivative liability activity, including the

issuance, fair value changes, and transition to equity of the Series B warrants during the year ended December 31, 2025.

Purchase Warrants

June 25, 2024, the Company issued Series A and prefunded warrants to purchase a total of 295 shares of Common Stock along with the sale

of common stock.

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

date Stockholder Approval is obtained in addition to the Series A warrants that are not included in outstanding warrants until such time

as Stockholder Approval is obtained.

Both the Series A and Series B warrants have reset provisions that are activated upon the date Stockholder

Approval is obtained.

The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances.

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

their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the

change in fair value of warrant derivative liabilities.

Furthermore, the Company re-values the fair value of warrant derivative liability

as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant

derivative liabilities through the consolidated statement of operations.

the year ended December 31, 2024, prefunded warrants to purchase 96 shares of common stock were fully exercised.

Series B warrants issued in this transaction became issuable and exercisable on the date Stockholder Approval is obtained.

approval was obtained on December 17, 2024 which activated the Series B warrants.

Both the Series A and Series B warrants also contain

price and warrant reset provisions that were activated upon the date of Stockholder Approval.

The reset provisions increased the number

of common shares issuable under the Series A warrant from 199 to 997 shares and the exercise price per Series A warrant was reduced from

$ 3,012.00 to $ 1,004.00 per share effective December 17, 2024.

In addition, the Series B warrants became effective and exercisable upon

Stockholder Approval on December 17, 2024 which resulted in 795 common shares issuable under the Series B warrants with an exercise price

of zero per share effective December 17, 2024.

The Company recognized the full Series B warrant derivative liability value of $ 2,865,727

as of the date of Stockholder Approval when it became effective and exercisable of which $ 454,150 was recorded in equity and $ 2,411,577

was charged as a loss in the statement of operations for the year ended December 31, 2024.

The following are the assumptions used in

calculating the estimated fair value of the detachable Series B warrants to purchase common stock which became effective and exercisable

upon Stockholder Approval on December 17, 2024 and on December 31, 2024:

B issuance date - December 17, 2024

B - December 31, 2024

Volatility – range

Risk-free rate

Remaining contractual

Exercise price

Balance, January 1, 2023

Terminated/Cancelled

Balance, December 31, 2023

total intrinsic value of all outstanding warrants aggregated $ 2,128,320 and $- 0 - as of December 31, 2024 and 2023, respectively and the

weighted average remaining term was 52.3 and 51.2 months as of December 31, 2024 and 2023, respectively.

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

warrants to purchase shares of common stock as of December 31, 2024:

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

and exercisable warrants

contractual life

Common stock issuable under the warrants

the year ended December 31, 2024, Series B warrants to purchase 162 shares of common stock were fully exercised.

In conjunction with

the exercise of the Series B warrants, the Company transitioned the related warrant derivative liability totaling $ 584,955 to equity

as of their exercise date.

The warrant derivative liability related to the Series B warrants was $ 1,989,806 as of December 31, 2024.

The change in fair value of the Series B warrant derivative liability from their issuance date through December 31, 2024 totaled $ 290,965

which was included as a loss in the statement of operations for the year ended December 31, 2024.

See Note 11, Fair Value Measurement , for the Level 3 warrant derivative

liability activity, including the issuance, fair value changes, and transition to equity of the Series B warrants during the year ended

December 31, 2024.

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

derivative liability relative to the prefunded warrants and Series A warrants as of their date of issuance and as of December 31, 2024:

date assumptions

Volatility – range

Risk-free rate

Remaining contractual

Exercise price

Common stock issuable under the warrants

Company recognized the fair value of the Series A warrants of $ 1,998,074 as a warrant derivative liability as of the date of issuance.

During the year ended December 31, 2024, there were no Series A warrants exercised.

The fair value of the warrant derivative liability

related to the Series A warrants was $ 2,408,598 as of December 31, 2024.

The change in fair value of the Series A warrant derivative

liability from their issuance date through December 31, 2024 totaled $ 410,524 which was included as a loss in the statement of operations

for the year ended December 31, 2024.

See Note 11, Fair Value Measurement , for the Level 3 warrant derivative

liability activity, including the issuance and fair value changes of the Series A warrants during the year ended December 31, 2024.

Purchase Warrants

April 5, 2023, the Company issued warrants to purchase 184

shares of Common Stock, which are classified as derivative

liabilities due to net cash settlement provisions outside the control of the Company and are marked to market at each reporting date.

As of December 31, 2025, all 184 warrants remain outstanding with exercise prices ranging from $ 33,000.00 to $ 45,000.00 per share and

a remaining contractual term of approximately 2.5 years, and are valued at an aggregate fair value of $ 169 , reflecting the significant

decline in the Company’s stock price relative to the exercise prices of these warrants.

See Note 11, Fair Value Measurement , for the Level 3 warrant derivative

liability activity related to these warrants during the year ended December 31, 2025.

18 - STOCKHOLDERS’ EQUITY

Issuance of Restricted Common Stock

January 10, 2023, the board of directors approved the grant of 22,500 shares of common stock to officers of the Company.

will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided

that each grantee remains an officer or employee on such dates.

Additionally, the board of directors approved the grant of 12,500 restricted

common shares to certain new employees of the Company.

Such shares will generally vest over a period of one 1 to two years on their respective

anniversary dates in January through January 2025, provided that each grantee remains an employee of the company on such dates.

Senior Secured Convertible Notes

In September and

December 2025, the Company issued Senior Secured Convertible Notes with detachable warrants in two closings.

For a full description of

the terms, proceeds allocation, and warrant valuation, see Note 10, Debt Obligations, and Note 17, Common Stock Purchase Warrants.

Equity Financing (ELOC)

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

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

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

Under the agreement, and subject to certain conditions and

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

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

There have been no draws under the ELOC facility as of December 31,

connection with the ELOC Purchase Agreement, the Company agreed to pay a total commitment fee of 3 % of the $ 25 million facility or a

total of $ 750,000 .

In that regard, the Company issued a total of 114,010 common shares valued at $ 227,792 during 2025.

The remaining

commitment fee of $ 522,208 will be paid through the issuance of additional common shares or through deductions from future cash proceeds

from ELOC draws under the facility.

2025 Public Equity Offering

February 13, 2025, the Company completed an underwritten public offering pursuant to an underwriting agreement with Aegis Capital

The offering consisted of 1,309 units at a public offering price of $ 900.00 per unit and 16,358 pre-funded

units at a public offering price of $ 894.00 per

pre-funded unit.

Each unit consisted of one share of Common Stock, one Series A warrant, and one Series B warrant.

Each pre-funded

unit consisted of one pre-funded warrant, one Series A warrant, and one Series B warrant.

offering closed on February 14, 2025, with aggregate net proceeds of $ 13,480,000 .

The underwriter subsequently exercised its overallotment option, resulting in total aggregate net proceeds of $ 14,308,300

deducting underwriter fees and other offering expenses.

For a description of the Series A and Series B warrant terms and valuation, see Note 17, Common Stock Purchase

Issuance of Restricted Common Stock

January 2024, the board of directors approved the grant of 9 shares of common stock to officers of the Company.

Such shares will

generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that

each grantee remains an officer or employee on such dates.

Additionally, the board of directors approved the grant of 25,197 restricted

common shares to certain new employees of the Company.

Such shares will generally vest over a period of one 1 to two years on their respective

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

Such shares will generally

vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee

remains an officer or employee on such dates.

Additionally, the board of directors approved the grant of 5 restricted common shares to

certain new employees of the Company.

Such shares will generally vest over a period of one 1 to two years on their respective anniversary

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

Private Placement Transaction

3 unchanged sentences

the Company in connection with the Private Placement.

part of the Private Placement, the Company issued an aggregate of 1,195,219

units and pre-funded units (collectively, the “June Units”) at a purchase price of $ 2.51

per unit (less $ 0.0001

per pre-funded unit).

Each June Unit consists of (i) one share of common stock, par value $ 0.001

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

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

Warrant”) and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset

Date and in accordance with the terms therein (the “Series B Warrant”, and together with the Series A Warrant, the

part of the Private Placement, the Company issued an aggregate of 199 units and pre-funded units (collectively, the “June Units”)

at a purchase price of $ 15,060.00 per unit (less $ 0.0001 per pre-funded unit).

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

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

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

Warrant”) and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset Date

and in accordance with the terms therein (the “Series B Warrant”, and together with the Series A Warrant, the “Warrants”).

Purchase Agreement and Senior Secured Promissory Notes

1 unchanged sentence

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

notes in aggregate principal amount of $ 3,600,000 , and (ii) 808,377 shares (the “Commitment Shares”) of the Company’s

common stock, for aggregate gross proceeds of approximately $ 3.0 million, before deducting placement agent fees and other offering expenses

notes in aggregate principal amount of $ 3,600,000 , and (ii) 135 shares (the “Commitment Shares”) of the Company’s common

stock, for aggregate gross proceeds of approximately $ 3.0 million, before deducting placement agent fees and other offering expenses

payable by the Company.

3 unchanged sentences

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

SCHEDULE OF NET PROCEEDS FROM THE PRIVATE PLACEMENT

Allocated to the following:

Senior secured promissory notes

Senior secured

promissory notes

Commitment shares

Deemed Capital Contribution — Modification of Related Party

Notes Payable

During the year

ended December 31, 2025, the Company recorded an aggregate deemed capital contribution of $ 2,983,298

to additional paid-in capital in connection with three modifications of related party promissory notes.

The March 2025 modification

of the TicketSmarter related party promissory note eliminated accrued interest of $ 582,203

and resulted in a deemed capital contribution of $ 1,249,372 ,

and the June 2025 modification of the TicketSmarter related party promissory note reduced the outstanding principal balance and

eliminated accrued interest of $ 43,515 ,

resulting in an additional deemed capital contribution of $ 622,622 .

In addition, on June 4, 2025, the Company modified the Goodman Trust related party promissory note, which extended the repayment terms and subordinated all payments to the line of credit, deferring

payments to 2037.

As a result of the modification, the correct fair value of the debt at the modification date was determined to be $ 372,548 ,

resulting in a discount of $ 1,627,452 and an additional deemed capital contribution of $ 1,111,304 .

Because the holders of these notes

are related parties, the forgiveness of accrued interest,

principal reductions, and discount adjustments arising from the modifications were treated as capital contributions rather than recognized as income.

These transactions are reflected as

increases to additional paid-in capital in the consolidated statements of stockholders’ equity for the year ended December 31,

See Note 19, Related Party Transactions, for additional details regarding the terms of each modification.

of Restricted Stock

the years ended December 31, 2025 and 2024, the Company cancelled - 0 - and 9 shares due to termination of employees, respectively.

of Prefunded Warrants

the year ended December 31, 2024, prefunded warrants to purchase 573,008

shares of common stock were fully exercised at an exercise

price of $ 0.0001 per share .

the year ended December 31, 2024, Series B warrants to purchase 973,000

shares of common stock were fully exercised for $ 973 .

In conjunction with the exercise of the Series B warrants, the Company transitioned

the related warrant derivative liability totaling $ 584,955

to equity as of their exercise date.

Conversion of Convertible Note

the year ended December 31, 2023, pursuant to the Convertible Note, the Purchasers elected to convert $ 125,000 principal, at the fixed

price of $ 5.00 per share of common stock, 25,000 shares valued at $ 119,750 .

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

State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of our common stock.

Reverse Stock Split was effective as of time of filing.

No fractional shares were issued in connection with the Reverse Stock Split.

Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest

whole number.

In connection with the Reverse Stock Split, our board approved appropriate and proportional adjustments to all outstanding

securities or other rights convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock,

warrants, options, and other equity compensation rights.

All historical share and per-share amounts reflected throughout our consolidated

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

occurred as of the earliest period presented.

The par value per share of our common stock was not affected by the Reverse Stock Split.

Noncontrolling

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

As a result, the noncontrolling shareholders

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

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

reported net loss (income) attributable to noncontrolling interests of consolidated subsidiary of $ 1,871,578 and $( 224,598 ) for the years

ended December 31, 2024 and 2023, respectively.

RELATED PARTY TRANSACTIONS

with Managing Member of Nobility Healthcare

Company accrued reimbursable expenses payable to Nobility, LLC totaling $ 245,716 and $ 619,301 as of December 31, 2024 and 2023, respectively.

Total management fees accrued and payable in accordance with the operating agreement totaled $ 38,625 and $ 49,014 as of December 31, 2024

and 2023, respectively.

The company recorded management fee expense of $ 67,905 and $ 169,075 for the years ended December 31, 2024 and

2023, respectively.

with Related Party of TicketSmarter

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

loan in the amount of $ 2,325,000

to TicketSmarter to support TicketSmarter’s operations.

On October 2, 2023 an additional $ 375,000

was advanced to Ticketsmarter.

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

The TicketSmarter Related Party Note bears interest of 13.25 %

per annum with repayment beginning January 2, 2024.

As of December 31, 2024 and 2023, the entire TicketSmarter Related Party note

balance totaled $ 2,700,000 ,

and is classified as current, with an accrued interest balance of $ 488,711 and $ 95,031 , respectively.

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

discount received to resolve such outstanding payables is recognized as a gain on extinguishment of liabilities on the statement of

Additionally, these negotiations relieved TicketSmarter of numerous future obligations following fiscal year

On August 19,

2024, the parties agreed to amend the note whereby the repayment dates were extended to begin on January 2, 2025 and continue at

for 50 consecutive weeks plus interest.

The parties did not change any other provisions or terms of the note.

The amendment was

determined to be a modification of the note rather than an extinguishment and reissuance of a new note.

No payments have been made to date in 2025.

Related Party Note

August 22, 2024, Digital Ally’s Chief Executive Officer, made a loan in the amount of $ 100,000 to the Company to support its operations.

In addition, on October 24, 2024, Digital Ally’s Chief Executive Officer, made an additional loan in the amount of $ 40,000 to the

Company to support its operations.

These transactions were recorded as related party notes payable (the “Company Related Party

The Company Related Party Notes bear interest at prime rate ( 8.00 % as of December 31, 2024) per annum with repayment due

As of December 31, 2024, the entire Company Related Party note of $ 140,000 , is classified as current, with an accrued interest

balance of $ 3,465 .

NET LOSS PER SHARE

calculation of the weighted average number of shares outstanding and loss per share outstanding for the years ended December 31, 2024

and 2023 are as follows:

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

ended December 31,

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

$ ( 19,844,147 )

$ ( 25,688,547 )

Denominator for basic loss per share – weighted average shares

Dilutive effect of shares

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

Denominator for diluted loss per share

– adjusted weighted average shares outstanding

Net loss per share:

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

For the years ended

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

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

COUNTRY STAMPEDE ACQUISITION

March 1, 2024, Kustom 440, entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment,

LLC, a Kansas limited liability company (“JC Entertainment”).

Pursuant to the Acquisition Agreement, Kustom 440 acquired

certain assets associated with a music entertainment event (“Country Stampede”), including all intellectual property arising

out of and relating to Country Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment

is a party to host and operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede

Intellectual Property, the “Purchased Assets”).

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

the sum of $ 400,000 paid at the time of closing (“Closing”), and the remainder to be paid on or before thirty days from the

time of Closing.

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

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

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

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

like relating to such refund request.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

S-X dated May 21, 2020 and has concluded that this acquisition was not significant.

Accordingly, the presentation of the assets acquired,

historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are

not required to be presented.

Under the acquisition method, the purchase price of the Country Stampede Acquisition has been allocated

to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time

of the Country Stampede Acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially

affect the timing or amounts recognized in our financial statements.

The Country Stampede Acquisition was structured as an asset purchase;

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

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

over 15 years for income tax filing purposes.

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

income tax purposes.

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

acquisition date.

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

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

The Company retained the services of an

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

The Company has finalized the estimated fair value of assets acquired, and liabilities assumed

in the Country Stampede Acquisition which are as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Assets acquired (provisional):

Tangible assets acquired

Identifiable intangible assets acquired (Trademarks

and trade names)

Liabilities assumed

Net assets acquired

and liabilities assumed

Consideration:

Cash paid at Country Stampede Acquisition date

Cash paid subsequent to

Total Country Stampede

Acquisition purchase price

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there

could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained

about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these

assets or liabilities as of that date.

OPERATING SEGMENTS

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

financial statements.

Segment financial information is prepared in accordance with GAAP and our significant accounting policies described

Resources are allocated and performance is assessed using segment operating income by our Chief Executive Officer, whom we

have determined to be our Chief Operating Decision Maker (“CODM”).

Our CODM utilizes segment operating income when making

decisions about allocating capital and personnel to the segments, predominantly in the annual budget and quarterly forecasting processes.

In addition, our CODM uses operating income, including comparison of actual results to budget and forecast, in assessing the performance

of each segment and in evaluating product pricing, distribution strategies and marketing investments.

Our CODM reviews balance sheet

information at a consolidated level.

We compute segment operating income based on net sales revenue, less cost of goods sold, SG&A,

asset impairment charges and restructuring charges.

The SG&A used to compute each segment’s operating income is directly associated

with the segment.

We do not allocate non-operating income and expense, including interest or income taxes, to operating segments.

operate in three strategic business segments.

The Video Solutions Segment encompasses our law, commercial, and shield divisions.

This segment includes both service and product revenues through our subscription models offering cloud and warranty solutions, and

hardware sales for video and health safety solutions.

The Revenue Cycle Management Segment provides working capital and back-office

services to a variety of healthcare organizations throughout the country, as a monthly service fee.

The Entertainment Segment acts

as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire

tickets from primary sellers to then sell through various platforms.

Company’s corporate administration activities are reported in the corporate line item.

These activities primarily include expense

related to certain corporate officers and support staff, certain accounting staff, expense related to the Company’s Board of Directors,

stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities,

and a portion of the Company’s legal, auditing and professional fee expenses.

Corporate identifiable assets primarily consist of

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

financial information for the Company’s reportable business segments is provided for the years ended December 31, 2024, and 2023:

SCHEDULE OF SEGMENT REPORTING

Year ended December 31, 2024

Video Solutions

Entertainment

Revenue cycle Management

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Cost of Revenue - Product

Cost of Revenue – Service and

Research and development expense

Selling, advertising and

promotional expense

General and administrative

Goodwill and intangible asset

impairment charge

Total segment operating income (loss)

$ ( 1,199,855 )

$ ( 4,804,853 )

$ ( 3,818,614 )

$ ( 5,378,218 )

$ ( 15,201,540 )

Interest expense

( 3,815,323 )

Loss on litigation

( 1,959,396 )

Change in fair value of derivative liabilities

( 1,240,407 )

Gain on the extinguishment of liabilities

Loss on extinguishment of debt

Gain on sale of property, plant and equipment

Other non-operating income (loss)

Total non-operating income (loss)

( 6,514,185 )

Loss before income tax benefit (provision)

$ ( 21,715,725 )

Depreciation and amortization expense

Total identifiable assets, net of

Year ended December 31, 2023

Video Solutions

Entertainment

Revenue cycle Management

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Cost of Revenue - Product

Cost of Revenue – Service and

Research and development

Selling, advertising and

promotional expense

General and administrative

Goodwill and intangible asset

impairment charge

Total segment operating

income (loss)

$ ( 7,135,584 )

$ ( 3,646,770 )

$ ( 11,750,742 )

$ ( 22,240,553 )

Interest expense

( 3,134,253 )

Change in fair value of derivative liabilities

Gain on the extinguishment of liabilities

Loss on litigation

( 1,792,308 )

Loss on extinguishment of convertible debt

( 1,112,705 )

Other non-operating income (loss)

Total non-operating income (loss)

( 3,223,396 )

Loss before income tax benefit (provision)

$ ( 25,463,949 )

Depreciation and amortization

Total identifiable assets, net of

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.

segment net revenues reported above represent sales to external customers.

Segment gross profit represents net revenues less cost of

Segment operating income, which is used in management’s evaluation of segment performance, represents net revenues, less

cost of revenues, less all operating expenses.

Identifiable assets are those assets used by each segment in its operations.

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

SUBSEQUENT EVENTS

Offering of Securities

February 13, 2025, the Company entered into an underwriting agreement with Aegis Capital Corp.

for the sale and issuance of (i) 7,850,000

units (the “Units”) at a public offering price per Unit of $ 0.15 with each Unit consisting of one share of common stock, par value

$ 0.001 per share, one Series A warrant to purchase one share of common stock at an exercise price of $ 0.1875 per share and one Series

B warrant to purchase one share of common stock at an exercise price of $ 0.30 and (ii) 92,150,000 pre-funded units at a public offering

price of $ 0.149 per pre-funded unit, with each pre-funded unit consisting of one pre-funded warrant exercisable for one share of Common

Stock at an exercise price of $ 0.001 per share, one Series A Warrant and one Series B Warrant.

The Pre-Funded Warrants will be immediately

exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full.

Series A and Series B warrants will be exercisable only upon receipt of stockholder approval of (i) certain terms in the Series A and

B warrants and the issuance of the shares of common stock issuable upon the exercise of such Series A and Series B warrants, as may be

required by the applicable rules and regulations of The Nasdaq Stock Market LLC and (ii) if necessary, a proposal to amend the Company’s

Articles of Incorporation, to increase the authorized share capital of the Company to an amount sufficient to cover the shares of common

stock issuable upon the exercise of the Series A and Series B warrants.

The Series A warrants will be exercisable commencing upon the

date of Stockholder Approval until five years after such approval date, and the Series B Warrants will be exercisable commencing upon

the date of Stockholder Approval until two and one-half years after such date.

offering closed on February 14, 2025.

The net proceeds to the Company from the offering were approximately $ 13.48 million, after deducting

underwriter’s fees and the payment of other offering expenses associated with the offering payable by the Company.

intends to use the net proceeds from the offering for working capital and other general corporate purposes, to pay amounts owed under

a short-term merchant advance and to pay in full the aggregate face value of senior secured promissory notes that were previously issued

as part of a private placement that the Company entered into with certain institutional investors on November 6, 2024.

Company granted the underwriter an option to purchase additional shares of common stock and/or Series A and Series B warrants of (i)

of the number of shares of Common Stock sold in the offering, (ii) up to 15.0 %

of the number of Series A warrants sold in the offering and (iii) up to 15.0 %

of the number of Series B warrants sold in the offering.

The Underwriter may exercise this option in whole or in part at any time

within forty-five calendar days after the date of the final prospectus relating to the offering.

The Underwriter may exercise the

over-allotment option with respect to shares of common stock only, Series A and Series B warrants only, or any combination thereof.

The purchase price to be paid per additional share of Common Stock will be equal to the public offering price of one Unit (less

allocated to each Series A and Series B warrant), as applicable, less the underwriting discount, and the purchase price to be paid

per over-allotment Series A and Series B warrant will be $ 0.00001 .

On February 14, 2025, the Underwriter exercised its over-allotment option with respect to 6,000,000

pre-funded warrants/common shares, 15,000,000

Series A warrants and 15,000,000

Series B warrants.

Settlement occurred on April 17, 2025.

Capital Corp.

served as the sole book-running manager in the offering, pursuant to the terms of the Underwriting Agreement, and received

seven percent ( 7 %)

of the aggregate purchase price paid by investors in the offering, a one percent ( 1 %)

non-accountable expense and reimbursement of the legal fees of its counsel.

units and pre-funded units were offered by the Company pursuant to an effective registration statement on Form S-1, as amended, which

was declared effective by the SEC on February 12, 2025.

The final prospectus relating to the offering was filed with the SEC on February

to December 31, 2024, the holders of Series B warrants remaining outstanding pursuant to the June 2024 private placement were exercised

to acquire a total of 3,793,777 shares at an exercise price of $ .001 per share.

The Series B warrants issued pursuant to the June 2024

private placement are now fully exercised.

Company issued 98,150,000 pre-funded warrants at a public offering price of $ 0.149 per pre-funded warrant at an exercise price of $ 0.001

Subsequent to their issuance on February 13, 2025, all 98,150,000 pre-funded warrants were exercised in full.

Shareholder Meeting

Company has called a special meeting of stockholders to be held on April 1, 2025 for the following purpose:

approve an amendment to our articles of incorporation to increase the number of authorized shares of our capital stock that we may

issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified as common stock, par value

$ 0.001 per share;

approve a proposal to authorize the board of directors of the Company, in its sole and absolute discretion, and without further action

of the stockholders, to file an amendment to our articles of incorporation, to effect a reverse stock split of our issued and outstanding

Common Stock at a ratio to be determined by the Board, ranging from one-for-five (1:5) to one-for-one hundred (1:100) , with such

reverse stock split to be effected at such time and date, if at all, as determined by the Board in its sole discretion, but no later

than April 1, 2026;

authorize, for purposes of complying with Nasdaq listing rule 5635(d), the issuance of Series A Warrants to purchase shares of Common

Stock and Series B Warrants to purchase shares of Common Stock shares of Common Stock underlying the Warrants and certain provisions

of the Warrants, issued in connection with an offering and sale of securities of the Company that was consummated on February 14,

approve one or more adjournments of the Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the

Authorized Share Increase Proposal, the Reverse Stock Split Proposal or the Issuance Proposal if there are not sufficient votes at

the Special Meeting to approve and adopt the proposals

April 1, 2025, the Company convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow

the Company to solicit additional votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase

the number of authorized shares of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000

shares shall be classified as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting

to reconvene on April 13, 2025.

On April 13, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on April

On April 13, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on April 21,

On April 21, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on April

On April 29, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on May 5,

of Failure to Satisfy a Continued Listing Rule

Report on Form 10-Q - On November 25, 2024, the Company received a notice (the “Notice”) from the Nasdaq Stock Market

LLC, which indicated that, as a result of the Company’s delay in filing its Quarterly Report on Form 10-Q for the period ended

September 30, 2024, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires Nasdaq-listed companies to

timely file all required periodic financial reports with the U.S.

Securities and Exchange Commission.

December 30, 2024, the Company filed the Quarterly Report.

On January 2, 2025, Nasdaq delivered a written notification notifying the

Company that it had regained compliance with the Quarterly Report Requirement.

Bid Price Requirement - December 20, 2024, the Company received a written notification from The Nasdaq Stock Market LLC indicating

that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), as the

Company’s closing bid price for its common stock was below $1.00 per share for the prior thirty (30) consecutive business days.

The Company has been granted a 180-calendar day compliance period, or until June 18, 2025, to regain compliance with the Minimum Bid

Price Requirement.

If the Company is not in compliance by June 18, 2025, the Company may be afforded a second 180-calendar day compliance

If the Company does not regain compliance within such compliance period, including any granted extensions, its common stock may

be subject to delisting, which delisting may be appealed to a Nasdaq hearings panel.

Stockholders’ Equity Standard - On January 2, 2025, the Company received a notice (the “Notice”) from the staff

of the Listing Qualifications department (the “Staff”) of Nasdaq, which indicated that the Company was not in compliance

with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”), as the Company’s stockholders’

equity of ($ 2,448,310 ), as reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30,

2024, was below the required minimum of $ 2.5 million, and the Company did not meet either the alternative compliance standards relating

to market value of listed securities of at least $ 35 million or net income from continuing operations of at least $ 500,000 in the most

recently completed fiscal year or in two of the last three most recently completed fiscal years.

Nasdaq listing rules and as specified in the Notice, the Company has 45 calendar days from the date of the Notice to submit to the Staff

a plan to regain compliance with the Stockholders’ Equity Requirement.

If the Company’s plan to regain compliance is accepted,

Nasdaq may grant an extension of up to 180 calendar days from the date of the Notice for the Company to evidence compliance.

Company submitted its plan to Nasdaq to regain compliance with the Stockholders’ Equity Requirement on February 17, 2025.

can be no assurance that the Company’s plan will be accepted or that if it is, that the Company will be able to regain compliance

with the Stockholders’ Equity Requirement.

the Company does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq,

Nasdaq will provide notice that the common stock will be subject to delisting from the Nasdaq Capital Market.

At that time, the Company

may appeal any such delisting determination to a Nasdaq hearings panel.

Company continues to work diligently to regain compliance with the Minimum Bid Price Requirement and Stockholders’ Equity Requirement

as promptly as possible to regain compliance with such continued listing rules of the Nasdaq.

Bid Price Requirement - On March 6, 2025, the Company received notice (the “March 6 Letter”) from the Nasdaq Staff that

the Staff had determined that as of March 5, 2025, the Company’s securities had a closing bid price of $0.10 or less for ten consecutive

trading days triggering application of Listing Rule 5810(c)(3)(A)(iii) which states in part:

if during any compliance period specified

in Rule 5810(c)(3)(A), a company’s security has a closing bid price of $0.10 or less for ten consecutive trading days, the Listing

Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security (the “Low Priced

Stocks Rule”).

As a result, the Staff determined to delist the Company’s securities from Nasdaq, unless the Company timely

requests an appeal of the Staff’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth

in the Nasdaq Listing Rule 5800 Series.

The Company must request a hearing no later than 4:00 p.m.

Eastern Time on March 13, 2025.

timely requested a hearing before the Panel to appeal the March 6 Letter and to address all outstanding matters, including

compliance with the Minimum Bid Price Requirement, the Low Priced Stocks Rule and the Stockholders’ Equity Requirement, which

hearing date has not been set as of the date of this Form 10-K.

While the appeal process is pending, the suspension of trading of

the Company’s common stock, par value $ 0.001 per share (the “Common Stock”), will be stayed and the Common Stock

will continue to trade on the Nasdaq Capital Market until the hearing process concludes and the Panel issues a written decision.

Company held its hearing with the Panel as scheduled on April 17, 2025.

May 1, 2025, the Panel rendered its decision which granted the Company’s request for continued listing on the Nasdaq Exchange.

Such decision is subject to the following conditions:

On or before May 2, 2025, the Company

shall file Form 10-K for 2024 in compliance with Listing Rule 5250(c)(1).

On or before May 20, 2025, the Company must file a

public disclosure describing any transactions undertaken by the Company to increase its equity and providing an indication of its

equity following those transactions.

In addition, on or before May 20, 2025, the Company

must provide the Panel with an update on its fundraising plans, and updated income projections for the next 12 months, with all underlying

assumptions clearly stated.

On or before June 6, 2025,

the Company shall demonstrate compliance with the Bid Price Rule.

If, prior to September

2, 2025, the Company becomes non-compliant with any Listing Rule, the Company will be delisted.

are no assurances however, that the Company will be able to meet and maintain all such conditions required by the Panel.

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

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

Payments of principal and interest are

due on May 5, 2025 .

Extension of Credit - On January 31, 2025, the Company’s Entertainment Segment entered into a $300,000 purchase agreement

with TFL, LLC (“TFL”).

TFL agreed to purchase Major League Baseball tickets from the Company’s Entertainment Segment

for $177,227.93 as well as pay off the remaining balance due to those teams for the Company’s Entertainment Segment season tickets of $122,772.07.

Profits generated from 2025 All Star Game and 2025 Post season tickets will be split 50/50 between the Parties, paid upon completion of

the respective events.

payable - The Company continues to negotiate with its vendors to settle outstanding balances owed for lesser amounts.

In that regard,

the Company’s Video Solutions Segment and one of its significant vendor’s agreed to extinguish accounts payable totaling

for an immediate payment of $ 500,000 .

The payment was made on February 25, 2025 resulting in a gain on the extinguishment of liabilities of $ 1,750,000 .

The Company continues to negotiate with its vendors to settle outstanding balances owed for lesser amounts.

of Co-Marketing Agreement - On February 20, 2025, the Company’s Entertainment Segment entered into a settlement agreement with

TicketSocket, Inc.

to terminate their Co-Marketing Agreement (which had been in place since September 15, 2022.

Both parties acknowledged

and agreed that $ 650,000 was still outstanding and due to the Company’s Entertainment Segment under the provisions of the Co-Marketing

However, the parties agreed that $ 500,000 would be accepted by the Company’s Entertainment Segment as payment in full

if such amount was paid before Tuesday, February 25, 2025.

This $ 500,000 was received before February 25, 2025 so, as such, the amounts

receivable from TicketSocket, Inc.

was fully extinguished.

The Company’s Entertainment Segment had recorded a reserve for

loss on the termination of the Co-Marketing Agreement of $ 150,000 as of December 31, 2024.

***********************

the years ended December 31, 2025 and 2024, Series B warrants to purchase 632 shares of Common Stock that were issued in conjunction

with the June 2024 public equity offering of Common Stock, were fully exercised for total proceeds of $ 3,793 .

In conjunction with the

exercise of the Series B warrants, the Company transitioned the related warrant derivative liability totaling $ 1,989,806 to equity as

of their exercise date.

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

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

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

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

Pursuant to the Charter Amendment, the Reverse Stock Split became effective on May 6, 2025.

As a result of the Reverse Stock Split, every

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 9A. Controls and Procedures