Item 2. Properties
Item 2.
Properties.
On
April 30, 2021, the Company closed on the purchase and sale agreement to acquire a 71,361 square feet commercial office building located
in Lenexa, Kansas which is intended to serve as the Company’s future office and warehouse needs for executive offices and for management
and warehouse operations for the video solutions operating segment. The building contains approximately 30,000 square feet of office
space and the remainder warehouse space. The total purchase price was approximately $5.3 million. The Company funded the purchase price
with cash on hand, without the addition of external debt or other financing.
On
October 26, 2023, the Company entered into a Loan and Security Agreement (the “Kompass Loan Agreement”) by and between the
Company, Digital Ally Healthcare, and Kompass Kapital Funding, LLC, a Kansas limited liability company (“Kompass”). In connection
with the Kompass Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing by and between the Company, as grantor, and Kompass, as grantee, and mortgaged its real property having an address
of 14001 Marshall Drive, Lenexa, KS 66215.
During
the year ended December 31, 2024, the Company sold its building for $5,900,000 less closing costs of $36,634. The carrying amount of
the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $401,743 in the Consolidated
Statement of Operations during the year ended December 31, 2024. As part of the sale agreement the Company leased the space back for
a period of 6 months ending February 12, 2025. The Company is searching for suitable facilities for its long-term needs.
On
October 16, 2024, the Company entered into an operating lease with a third party for office space used by the Video Solutions Segment and
temporarily by the Entertainment 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 months.
11
On
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 provided
for monthly payments ranging from $7,211 to $7,364 and was originally scheduled to terminate in December 2022. Following the expiration
of the original lease term, the Company continued to occupy the space on a month-to-month basis. The lease was formally terminated in
September 2025. TicketSmarter now occupies office space provided by the entertainment segment, and no separate lease obligation related
to this location remained outstanding as of December 31, 2025. During the period of occupancy, the Company was responsible for property
taxes, utilities, insurance, and its proportionate share of common area maintenance costs.
On
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-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
52 months.