What changed in this filing

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Item 1. Business

2025-05-02 compared with 2024-04-01 · 354 added, 299 removed, 245 unchanged (73% of the section changed)

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Digital Ally, Inc.

January 2, 2008, we commenced trading on the Nasdaq Capital Market under the symbol “DGLY.” We conduct our business from

14001 Marshall Drive, Lenexa, Kansas 66215.

On January 2, 2008, we commenced trading on the Nasdaq Capital Market under

the symbol “DGLY.” We conduct our business from 6366 College Blvd., Overland Park, Kansas 66211.

Our telephone number is (913)

Our website address is www.digitalallyinc.com.

contents of, or information accessible through, our website are not part of this Annual Report on Form 10-K.

We make our filings with

the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to

those reports, as well as beneficial ownership filings available free of charge on our website as soon as reasonably practicable after

we file such reports with, or furnish such reports to, the SEC.

Our filings with the SEC are available to the public through the SEC’s

website at www.sec.gov.

The contents of, or information accessible through, our website are not part

of this Annual Report on Form 10-K.

We make our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form

10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as beneficial ownership filings available free of charge

on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

Our filings with

the SEC are available to the public through the SEC’s website at www.sec.gov.

August 23, 2022 (the “Effective Time”), the Predecessor Registrant merged with and into its wholly owned subsidiary, DGLY

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each to serve in the same capacity and for the same term as such person served with the Predecessor Registrant immediately before the

the purposes of this Annual Report on Form 10-K, unless the context otherwise requires, (i) the term “our,” or “us”

refers to the Predecessor Registrant and its subsidiaries with respect to the period prior to the Effective Time and to the Registrant

and its subsidiaries with respect to the period on and after the Effective Time;

(ii) as of any period prior to the Effective Time, references

to the “directors” mean the directors of the Predecessor Registrant, and, as of any period at and after the Effective Time,

the directors of the Registrant, (iii) as of any period prior to the Effective Time, references to “stockholders” mean the

holders of Predecessor Common Stock, and, as of any period at and after the Effective Time, the holders of Registrant Common Stock, and

(iv) as of any period prior to the Effective Time, references to “Common Stock” means the Predecessor Common Stock, and,

as of any period at and after the Effective Time, Registrant Common Stock.

the purposes of this Annual Report on Form 10-K, unless the context otherwise requires,

(i) the term “our,” or “us” refers to the Predecessor Registrant and its subsidiaries with respect to the period

prior to the Effective Time and to the Registrant and its subsidiaries with respect to the period on and after the Effective Time;

as of any period prior to the Effective Time, references to the “directors” mean the directors of the Predecessor Registrant,

and, as of any period at and after the Effective Time, the directors of the Registrant, (iii) as of any period prior to the Effective

Time, references to “stockholders” mean the holders of Predecessor Common Stock, and, as of any period at and after the Effective

Time, the holders of Registrant Common Stock, and (iv) as of any period prior to the Effective Time, references to “Common Stock”

means the Predecessor Common Stock, and, as of any period at and after the Effective Time, Registrant Common Stock.

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 (“Kustom 440”), Inc., Kustom Entertainment, Inc.

(“Kustom”), and its majority-owned subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,”

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

(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.

440”), Kustom Entertainment, Inc., (“Kustom”) ,

and its majority-owned subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,” and the

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

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

Management Segment and 3) the Entertainment Segment.

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

storage products, disinfectant and related safety products for use in law enforcement, security and commercial applications.

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.

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

The following table sets forth the Company’s total revenue and the revenue derived from each reportable operating 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, charging a monthly service fee.

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.

In addition, our

Entertainment Segment now includes live event production, including the recently acquired Country Stampede music festival and others.

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.

The following

table sets forth the Company’s total revenue and the revenue derived from each reportable operating segment:

Years Ended December 31,

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Solutions Operating Segment

our video solutions operating segment we supply technology-based products utilizing our portable digital video and audio recording capabilities

for the law enforcement and security industries and for the commercial fleet and mass transit markets.

We have the ability to integrate

electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our customers’ requests.

Our products include:

the EVO-HD, DVM-800 and DVM-800 Lite, which are in-car digital video systems for law enforcement and commercial

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

our patented and revolutionary

VuLink product which integrates our body-worn cameras with our in-car systems by providing hands-free automatic activation for both law

enforcement and commercial markets;

the FLT-250, DVM-250, and DVM-250 Plus, which are our commercial line of digital video mirrors that

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

and FleetVu and VuLink, which are our cloud-based

evidence management systems.

We further diversified and broadened our product offerings in 2020, by introducing two new lines of branded

(1) the ThermoVu® which is a line of self-contained temperature monitoring stations that provides alerts and controls facility

access when an individual’s temperature exceeds a pre-set threshold and (2) our Shield™ disinfectants and cleansers which

are for use against viruses and bacteria.

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

the sale of Shield TM disinfectant and personal protective products.

This segment generates revenues through our subscription

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

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

over the term of the subscription, typically 3 or 5 years.

Cycle Management Operating Segment

entered the revenue cycle management business late in the second quarter of 2021 with the formation of our wholly owned subsidiary, Digital

Ally Healthcare, Inc.

and its majority-owned subsidiary Nobility Healthcare, LLC (“Nobility Healthcare”).

Nobility Healthcare

completed its first acquisition on June 30, 2021, when it acquired a private medical billing company, and has since completed three more

acquisitions of private medical billing companies, in which we assist in providing working capital and back-office services to healthcare

organizations throughout the country.

Our assistance consists of insurance and benefit verification, medical treatment documentation

and coding, and collections.

Through our expertise and experience in this field, we aim to maximize our customers’ service revenues

collected, leading to substantial improvements in their operating margins and cash flows.

revenue cycle management segment consists of our medical billing subsidiaries.

Revenues of this segment are recognized after we perform

the obligations of our revenue cycle management services.

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

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

Entertainment

Operating Segment

also provide live entertainment and events ticketing services through the formation of our wholly owned subsidiary, TicketSmarter, Inc.

(“TicketSmarter”) and its completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC, on September 1, 2021.

TicketSmarter

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

TicketSmarter offers tickets for over 125,000 live events through its platform, for a wide range of events, including concerts, sporting

events, theatres, and performing arts, throughout the country.

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

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

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

Entertainment direct expenses include

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

maintenance fees, along with other administrative costs.

June 1, 2023, the Company, entered into an Agreement and Plan of Merger (the “CLOE Merger Agreement”) with Clover Leaf Capital

Corp., a Delaware corporation (“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 (“Yntegra”),

in the capacity as the representative from and after the effective time for the stockholders of Clover Leaf in accordance with the terms

and conditions of the CLOE Merger Agreement (the “Sponsor” or the “Purchaser Representative”), and Kustom, with

a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies.

to the CLOE Merger Agreement, subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated

by the CLOE Merger Agreement (the “Closing”), Merger Sub will merge with and into Kustom (the “Merger” and, together

with the other transactions contemplated by the Merger Agreement, the “Business Combination”), with Kustom continuing as

the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf.

In the Merger, all of the issued and outstanding

capital stock of Kustom immediately prior to the effective time shall no longer be outstanding and shall automatically be cancelled and

shall cease to exist in exchange for the right for the Company to receive the Merger Consideration (as defined below).

Upon consummation

of the Business Combination, Clover Leaf will change its name to “Kustom Entertainment, Inc.”

aggregate merger consideration to be paid pursuant to the CLOE Merger Agreement to the Company as of immediately prior to the effective

time will be an amount equal to (the “Merger Consideration”) (i) $125 million, minus (ii) the estimated consolidated indebtedness

of Kustom as of the Closing (“Closing Indebtedness”).

The Merger Consideration to be paid to the Company will be paid solely

by the delivery of new shares of Clover Leaf Class A Common Stock, each valued at $11.14 per share (the “Merger Consideration Shares”).

The Closing Indebtedness (and the resulting Merger Consideration) is based solely on estimates determined shortly prior to the Closing

and is not subject to any post-Closing true-up or adjustment.

is comprised of TicketSmarter and Kustom 440, both currently wholly owned subsidiaries.

Both TicketSmarter and Kustom 440 will combine

their management teams and focus on concerts, entertainment and garnering additional ticketing partnerships in 2024 and beyond.

440 and TicketSmarter will use their existing sponsorships and sports property partnerships to develop alternative entertainment options

for consumers.

combined company will be known as Kustom Entertainment and will operate under the same management team as Kustom which is currently

led by Stanton E.

Ross, the current CEO of the Company.

The transaction contemplates an equity value of $125 million for Kustom.

combined company is expected to have an implied initial pro forma equity value of approximately $222.2 million, with the proposed

Business Combination expected to provide approximately $18.1 million in gross proceeds from the cash held in trust by Clover Leaf, assuming

no redemptions.

Additionally, the Company will distribute to its shareholders 20% of the Merger Consideration Shares obtained in Kustom

immediately following the closing of the Merger and intends to distribute the balance of such Merger Consideration Shares following a

six-month lock-up period.

transaction has been approved by the board of directors of the Company (the “Board” or “Board of Directors”)

and the board of directors of Clover Leaf and is subject to approval by the stockholders of Clover Leaf and other customary closing conditions.

The Company, as the sole holder of Kustom common stock, has approved the transaction.

to the plan to consummate the Business Combination, the Company no longer expects to pursue a separation of Kustom into its own independent

publicly traded company via spin-off, as announced on December 8, 2022.

October 2023, Kustom Entertainment and Clover Leaf announced the filing of a Registration Statement on Form S-4 by Clover Leaf with the

Securities and Exchange Commission (the “SEC”) on October 4, 2023, relating to the previously announced proposed Business

December 2023, Kustom Entertainment and Clover Leaf announced the filing of the Amendment No.

1 to the Registration Statement on Form

S-4 by Clover Leaf with the SEC on December 8, 2023, relating to the previously announced proposed Business Combination.

February 2024, Kustom Entertainment and Clover Leaf announced the filing of the Amendment No.

2 to the Registration Statement on Form

S-4 by Clover Leaf with the SEC on February 5, 2024, relating to the previously announced proposed Business Combination.

Video Solutions Operating Segment Products and Services

our video solutions operating segment we supply technology-based products utilizing our portable digital video and audio recording

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law enforcement and commercial markets;

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

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

automatic activation for both law enforcement and commercial markets;

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

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

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

EVO Web Portal, which is our cloud-based

evidence management system for Law enforcement and commercial market;

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

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pre-set threshold and (2) our Shield™ disinfectants and cleansers, which are for use against viruses and bacteria.

Revenue from our video solutions operating segment encompasses video recording

products and services for our law enforcement and commercial customers and the sale of Shield TM disinfectant and personal protective

This segment generates revenues through our subscription models offering cloud and warranty solutions, and hardware sales for

video and personal protective safety products and solutions.

Revenues for product sales are recognized upon delivery of the product, and

revenues from our cloud and warranty subscription plans are deferred over the term of the subscription, typically 3 or 5 years.

Cycle Management Operating Segment

We entered the revenue cycle management business late in the second quarter

of 2021 with the formation of our wholly owned subsidiary, Digital Ally Healthcare, Inc.

and its majority-owned subsidiary Nobility Healthcare,

LLC (“Nobility Healthcare”).

Nobility Healthcare completed its first acquisition on June 30, 2021, when it acquired a private

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

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

Our services consist of insurance and benefit

verification, medical treatment documentation and coding, and collections.

Through our expertise and experience in this field, we aim

to maximize our customers’ service revenues collected, leading to substantial improvements in their operating margins and cash flows.

revenue cycle management segment consists of our medical billing subsidiaries.

Revenues of this segment are recognized after we perform

the obligations of our revenue cycle management services.

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

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

Entertainment

Operating Segment

We also provide live entertainment and events ticketing services through

the formation of our wholly owned subsidiary, TicketSmarter and its completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC,

on September 1, 2021.

TicketSmarter provides ticket sales, partnerships, and mainly, ticket resale services through its online ticketing

marketplace for live events, TicketSmarter.com.

TicketSmarter offers tickets for over 125,000 live events through its platform, for a

wide range of events, including concerts, sporting events, theatres, and performing arts, throughout the country.

Our entertainment operating segment consists of entertainment services

provided through TicketSmarter and its online platform, TicketSmarter.com.

Revenues of this segment include ticketing service charges

generally determined as a percentage of the face value of the underlying ticket and ticket sales from our ticket inventory which are recognized

when the underlying tickets are sold.

This segment’s direct expenses include the cost of tickets purchased for resale by the Company

and held as inventory, credit card fees, ticketing platform expenses, website maintenance fees, and other administrative costs.

Digital Video Mirror System for Law Enforcement – EVO-HD, DVM-800 and DVM-800 Lite

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when paired with remote service capabilities.

An internal cell modem will allow for connectivity to the VuVault.net cloud, powered by

An internal cell modem will allow for connectivity to EVO Web Portal, powered by

Amazon Web Services (“AWS”) and real time metadata when in the field.

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auto-activation technology and can be paired with a FirstVu HD body-worn camera.

Company also offers the DVM-800 Lite, an entry level system is a self-contained video recorder, microphone and digital storage system

Company also offers the DVM-800 Lite, an entry level system with a self-contained video recorder, microphone and digital storage system

that is integrated into a rear-view mirror and is designed for law enforcement.

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Ally provides commercial fleets and commercial fleet managers with the digital video tools that they need to increase driver safety,

track assets in real-time and minimize the company’s liability risk while enabling fleet managers to operate the fleet at an optimal

track assets in real-time and minimize the company’s liability risk, all while enabling fleet managers to operate the fleet at an optimal

We market a product designed to address these commercial fleet markets with our EVO Fleet, DVM-250 Plus and FLT-250 event recorders

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specific application and inherent risks.

DVM-250 Plus is a part of the DVM family and is designed for commercial fleets featuring built-in digital audio and video recording technology

and other features to provide commercial fleet managers unmatched driver and asset management – all while aiming to deliver the

return on investment that matters most:

the safety and security of drivers and passengers.

The DVM-250 Plus is designed to capture events,

such as wrecks and erratic driving or other abnormal occurrences, for evidentiary or training purposes.

The commercial fleet markets

may find our units attractive from both a feature and a cost perspective compared to other providers.

Due to our marketing efforts, commercial

fleets are beginning to adopt this technology, and in particular, the ambulance and taxi-cab markets.

FLT-250 offers the same great features of the DVM-250 Plus in a new compact, non-mirrored form factor that allows for multiple mounting

options in any vehicle type for commercial fleets.

The non-mirror-based aspect of this product, allowed the FLT-250 to become more attractive

for our potential customers, as it is a much simpler plug and play option compared to mirror-based products.

the fourth quarter of 2022, Digital Ally released the EVO Fleet, offering a full-featured solution utilizing the latest in telematics

technology, including immediate driver-assist feedback by recognizing pedestrians, distracted or drowsy driving, and lane shifting.

believe that, due to the new technology, including the A.I.

interface, live tracking capabilities, up to four streams of video, and video

on command, this product will become a very prominent product in the market and for our current and potential customers.

Ally offers a suite of data management web-based tools to assist fleet managers in the organization, archival, and management of videos

and telematics information.

Within the suite, there are powerful mapping and reporting tools that are intended to optimize efficiency,

serve as training tools for teams on safety, and, ultimately, generate a significant return on investment for the organization.

The DVM-250 Plus is a part of the DVM family and is designed for commercial

fleets, featuring built-in digital audio and video recording technology and other features to provide commercial fleet managers unmatched

driver and asset management – all while aiming to deliver the return on investment that matters most:

the safety and security of

drivers and passengers.

The DVM-250 Plus is designed to capture events, such as wrecks and erratic driving or other abnormal occurrences,

for evidentiary or training purposes.

The commercial fleet markets may find our units attractive from both feature and cost perspective

compared to other providers.

Due to our marketing efforts, commercial fleets, in particular the ambulance and taxi-cab markets, are beginning

to adopt this technology.

The FLT-250 offers the same great

features of the DVM-250 Plus in a new compact, non-mirrored form factor that allows for multiple mounting options in any vehicle type

for commercial fleets.

The non-mirror-based aspect of this product allowed the FLT-250 to become more attractive for our potential customers,

as it is a much simpler plug and play option compared to mirror-based products.

In the fourth quarter of 2022,

Digital Ally released the EVO Fleet, offering a full-featured solution utilizing the latest in telematics technology, including immediate

driver-assist feedback by recognizing (i) pedestrians, (ii) distracted or drowsy driving, and (iii) lane shifting.

We believe that, due

to the new technology, including the Artificial Intelligence interface, live tracking capabilities, up to four streams of video, and video

on command, this product will become very prominent in the market and for our current and potential customers.

Digital Ally offers a suite of

data management web-based tools to assist fleet managers in the organization, archiving, and management of videos and telematics information.

Within the suite, there are powerful mapping and reporting tools that are intended to optimize efficiency, serve as training tools for

teams on safety, and, ultimately, generate a significant return on investment for the organization.

EVO-HD has become the platform for a new family of in-car video solution products for the commercial markets.

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The latest body worn camera launched by the Company is the FirstVu Pro, the Company’s flagship product in its

family of next generation of technology.

family of next generation technology.

The light weight, one-piece unit captures full HD video and audio, while offering industry leading

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Our FirstVU HD integrates with our in-car video systems through our patented VuLink system, allowing for automatic activation of both

the newly introduced body-worn cameras, Digital Ally also introduced two new QuickVu docking stations compatible with the FirstVu PRO

and FirstVu II body-worn cameras.

The QuickVu docking stations provide a comprehensive and elegant solution for storing and charging

body cameras while uploading video evidence to the cloud.

QuickVu also allows for rapid reviewing of footage right from the interactive

touchscreen display, and is available in eight or twenty-four individual docking bays.

For docking with the FirstVu HD body-worn cameras,

Digital Ally offers a 12-bay docking station and Mini-Docks.

The 12-bay docking station includes a 1TB local memory hard drive which

simultaneously upload 4 hours of video from 12 FirstVu HD cameras within a 15-minute shift change and push configuration updates.

Mini-Dock is a single unit, portable smart dock that uploads video evidence to VuVault from a FirstVu HD body camera.

With the newly introduced body-worn cameras, Digital Ally also introduced

two new QuickVu docking stations (QuickVu 8 and QuickVu 24), compatible with the FirstVu PRO and FirstVu II body-worn cameras.

docking stations provide a comprehensive and elegant solution for storing and charging body cameras while uploading video evidence to

QuickVu also allows for rapid reviewing of footage right from the interactive touchscreen display and is available in eight

or twenty-four individual docking bays.

For docking with the FirstVu HD body-worn cameras, Digital Ally offers a 12-bay docking station

and Mini-Docks.

The 12-bay docking station includes a 1TB local memory hard drive which can simultaneously upload 4 hours of video from

12 FirstVu HD cameras within a 15-minute shift change and push configuration updates.

The Mini-Dock is a single unit, portable smart dock

that uploads video evidence to VuVault from a FirstVu HD body camera.

Auto-activation

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Web and FleetVu Manager

Web is a web-based software, powered by and hosted on the AWS GovCloud platform, that enables police departments and security agencies

to manage digital video evidence quickly and easily.

EVO Web is capable of playing back, reviewing, downloading, archiving, unit configuration

and management, running customizable reports and maintaining a chain of custody logs.

AWS is the most secure cloud platform on the market

with features that go beyond simply storing and reviewing video evidence.

AWS GovCloud platform is trusted by the Department of Justice,

Defense Digital Services for the US Air Force, U.S.

EVO Web is a web-based software, powered by and hosted on the AWS GovCloud

platform, that enables police departments and security agencies to manage digital video evidence quickly and easily.

EVO Web is capable

of playing back, reviewing, downloading and archiving video, as well as unit configuration and management, running customizable reports

and maintaining a chain of custody logs.

AWS is the most secure cloud platform on the market with features that go beyond simply storing

and reviewing video evidence.

The AWS GovCloud platform is trusted by the Department of Justice, Defense Digital Services for the US Air

Department of Treasury, and U.S.

Department of Homeland Security.

Our products that

are compatible with EVO Web include:

FirstVu Pro, FirstVu II, FirstVu HD, QuickVu, EVO-HD, DVM-800 and DVM-800 Lite.

Our products that are compatible with EVO Web include:

Pro, FirstVu II, FirstVu HD, QuickVu, EVO-HD, DVM-800 and DVM-800 Lite.

Manager is a web-based software that provides commercial fleet managers with the tools to increase driver safety, track assets in real-time

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Heath Protection Products

Company’s Shield TM brand offers a variety of products to help keep you safe, including;

Shield Cleansers, ThermoVu,

Company’s Shield TM brand offers a variety of products to help keep you safe, including Shield Cleansers, ThermoVu,

Shied Disinfectant, and a variety of personal protection equipment including masks, gloves and sanitizer wipes.

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ThermoVu has optional features such as facial recognition to improve facility security

by restricting access based on temperature and/or facial recognition reasons.

by restricting access based on temperature and/or facial recognition.

ThermoVu provides an instant pass/fail audible tone with

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Company has been distributing other personal protective equipment and supplies, since the second quarter of 2021, such as masks and gloves

to supplement its Shield brand of products to health care workers as well as other consumers, consisting of vinyl and nitrile gloves,

level 3 and N95 NIOSH certified face masks, and disposable wipes.

to supplement its Shield TM brand of products to health care workers as well as other consumers, consisting of vinyl and nitrile

gloves, level 3 and N95 NIOSH certified face masks, and disposable wipes.

Revenue Cycle Management Operating Segment Products and Services

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of more than 35 collegiate conferences, over 300 universities, and hundreds of events and venues.

in late 2022, Kustom 440 is another piece of the entertainment segment of the Company, whose mission it is to attract, manage and promote

concerts, sports and private events.

Kustom 440 offers the production and promotion of live music events in third-party venues throughout

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

on-site operations, vendor sourcing, and day of production.

These events range in size from small corporate events to full stadium multi-day

entertainment operating segment primarily receives compensation for its services generally determined as a percentage of the face-value

of the tickets being purchased.

Our entertainment operating segment also provides customers with access to tickets which it has purchased

or received in return for its sponsorship or partnership from the venue, event or owner.

Established in late 2022, Kustom 440 is another piece of the entertainment

segment of the Company, whose mission it is to attract, manage and promote concerts, sports and private events.

Kustom 440 offers the

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

These services begin with the logistical matters

of events, including artist booking and research, ticketing, staging, on-site operations, vendor sourcing, and day of production.

events range in size from small corporate events to full stadium multi-day events.

Our entertainment operating segment primarily receives compensation for

its services, generally determined as a percentage of the face-value of the tickets being purchased.

Our entertainment operating segment

also provides customers with access to tickets which it has purchased or received in return for sponsorship or partnership from the venue,

event or owner.

and Industry Overview – Video Solutions Operating Segment

video solutions segment has historically had a primary market of domestic and international law enforcement agencies.

We have since expanded

our scope by pursuing the commercial fleet vehicle and mass transit markets.

Additionally, we have expanded into event security services

where we provide the hardware and software to supplement private security for NASCAR races, football and other sporting events, concerts

and other events where people gather.

We continue to further expand our focus on private security, homeland security, mass transit, healthcare,

general retail, educational, general consumer and other commercial markets.

In that regard, we have several installations involving private

security on cruise ships and similar markets.

We believe there are many potential private uses of our product offerings.

to have sales in the commercial fleet and ambulance service provider market, confirming that our EVO Fleet, DVM-250 Plus and FLT-250

products and FleetVu Manager can become a significant revenue producer for us.

Additionally, our body-worn cameras have applications

in law enforcement, along with private and event security, as well as commercial segments.

With the recent acquisitions we completed

in 2021 and 2022, we hope to utilize the connections we now have to live events, stadiums, and arenas, as well as new medical connections.

Our video solutions segment has historically had a primary market of domestic

and international law enforcement agencies.

We have since expanded our scope by pursuing the commercial fleet vehicle and mass transit

Additionally, we have expanded into event security services, where we provide the hardware and software to supplement private

security for NASCAR races, football and other sporting events, concerts and other events where people gather.

We continue to further expand

our focus on private security, homeland security, mass transit, healthcare, general retail, education, general consumer and other commercial

In that regard, we have several installations involving private security on cruise ships and similar markets.

We believe there

are many potential private uses of our product offerings.

We continue to have sales in the commercial fleet and ambulance service provider

market, confirming that our EVO Fleet, DVM-250 Plus and FLT-250 products and FleetVu Manager can become significant revenue producers

Additionally, our body-worn cameras have applications in law enforcement, along with private and event security, as well as commercial

With the acquisitions we completed in 2021 and 2022, we hope to utilize the connections we now have to live events, stadiums,

and arenas, as well as new medical connections.

and Industry Overview – Revenue Cycle Management Operating Segment

revenue cycle management segment consists of end-to-end revenue cycle management services that focuses on claim reimbursement billing,

verification, and related services to medical providers throughout the country.

We offer agreements with customers in which we provide

our services and bill the customers monthly for our services.

The healthcare industry in the United States represents a strong portion

of the United States’ economy, offering a robust market for these services.

Our current market includes many diverse specialties,

including radiology, oncology, orthopedics, pediatrics, internal medicine, and cardiology.

We continue to investigate ways to expand

our market reach, although can make no assurances in that regard.

Our revenue cycle management segment consists of end-to-end revenue cycle

management services that focus on claim reimbursement billing, verification, and providing related services to medical providers throughout

We offer agreements with customers in which we provide our services and bill the customers monthly for our services.

healthcare industry in the United States represents a strong portion of the United States’ economy, offering a robust market for

these services.

Our current market includes many diverse specialties, including radiology, oncology, orthopedics, pediatrics, internal

medicine, and cardiology.

We continue to investigate ways to expand our market reach, although can make no assurances in that regard.

and Industry Overview – Entertainment Operating Segment

entertainment segment refers to the sale of event tickets primarily through our online and mobile platforms.

We will buy inventory of

event tickets to then sell tickets through various platforms, including our own.

Our resale services refer to the sale of tickets by

a holder, who originally obtained the tickets directly from a venue or entity, through our platform in which we then collect services

fees on the transaction.

Our entertainment segment refers to the sale of event tickets primarily

through our online and mobile platforms.

We buy inventory of event tickets to then sell through various platforms, including our own.

Our resale services refer to the sale of tickets by a holder, who originally obtained the tickets directly from a venue or entity, through

our platform, after which we collect services fees on the transaction.

This is commonly referred to as secondary ticketing.

We work directly with consumers looking to buy or sell

event tickets for particular shows, concerts, games, and other events, allowing a simple and effective platform to move tickets.

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

These services begin with the logistical

matters of an event, including artist booking and research, ticketing, staging, on-site operations, vendor sourcing, and day of production.

We work directly

with consumers looking to buy or sell event tickets for particular shows, concerts, games, and other events, allowing a simple and effective

platform to move tickets.

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

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

vendor sourcing, and day of production.

- Video Solutions Operating Segment

video solutions segment, consisting of law enforcement and security surveillance markets, is extremely competitive.

Competitive factors

in these industries include ease of use, quality, portability, versatility, reliability, accuracy and cost.

Our video solutions segment, consisting of law enforcement and security

surveillance markets, is extremely competitive.

Competitive factors in these industries include ease of use, quality, portability, versatility,

reliability, accuracy and cost.

There are direct competitors with technology and products in the law enforcement and surveillance markets

for all of our products, including those that are in development.

Many of these competitors have significant advantages over us, including

greater financial, technical, marketing and manufacturing resources, more extensive distribution channels, larger customer bases and faster

response times to adapt to new or emerging technologies and changes in customer requirements.

Our primary competitors in the in-car video

systems market include L-3 Mobile-Vision, Inc., Coban Technologies, Inc., Enforcement Video, LLC d/b/a WatchGuard Video (“WatchGuard”),

Kustom Signals, Panasonic System Communications Company, International Police Technologies, Inc.

and a number of other competitors who

sell, or may in the future sell, in-car video systems to law enforcement agencies.

Our primary competitors in the body-worn camera market

include Axon Enterprises, Inc.

(“Axon”), Reveal Media, WatchGuard, and VieVU, Inc., which was acquired by Axon in 2018.

face similar and intense competitive factors for our event recorders in the commercial fleet and private security markets as we do in

the law enforcement and security surveillance markets.

There can be no assurance that we will be able to compete successfully in these

Further, there can be no assurance that new and existing companies will not enter the law enforcement and security surveillance

markets in the future.

The commercial fleet security and surveillance markets are also very competitive.

There are direct competitors

with technology and products in the law enforcement and surveillance markets for all of our products, including those that are in development.

Many of these competitors have significant advantages over us, including greater financial, technical, marketing and manufacturing resources,

more extensive distribution channels, larger customer bases and faster response times to adapt new or emerging technologies and changes

in customer requirements.

Our primary competitors in the in-car video systems market include L-3 Mobile-Vision, Inc., Coban Technologies,

Inc., Enforcement Video, LLC d/b/a WatchGuard Video (“WatchGuard”), Kustom Signals, Panasonic System Communications Company,

International Police Technologies, Inc.

and a number of other competitors who sell, or may in the future sell, in-car video systems to

law enforcement agencies.

Our primary competitors in the body-worn camera market include Axon Enterprises, Inc.

Reveal Media, WatchGuard, and VieVU, Inc., which was acquired by Axon in 2018.

We face similar and intense competitive factors for our

event recorders in the commercial fleet and private security markets as we do in the law enforcement and security surveillance markets.

There can be no assurance that we will be able to compete successfully in these markets.

Further, there can be no assurance that new

and existing companies will not enter the law enforcement and security surveillance markets in the future.

The commercial fleet security

and surveillance markets likewise are also very competitive.

There are direct competitors for our FLT-250 and DVM-250 Plus “event

recorders,” which may have greater financial, technical marketing, and manufacturing resources than we do.

Our primary competitors

in the commercial fleet sector include Lytx, Inc.

(previously DriveCam, Inc.) and SmartDrive Systems, among others.

for our FLT-250 and DVM-250 Plus “event recorders,” which may have greater financial, technical, marketing, and manufacturing

resources than we do.

Our primary competitors in the commercial fleet sector include Lytx, Inc.

(previously DriveCam, Inc.), Samsara and

SmartDrive Systems, among others.

– Revenue Cycle Management Operating Segment

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– Entertainment Operating Segment

entertainment segment faces robust competition from several sources throughout the industry.

As the online and mobile ticketing market

continues to increase, it has allowed for more technology-based companies to offer ticketing services and systems.

The online environment

consists of numerous other websites and platforms for all markets.

With the market continuing to grow, resale marketplaces and websites

can reach a vastly larger audience with more convenient access to tickets for a wide variety of events.

We continue to build our brand

and recognition, through numerous partnerships and sponsorships throughout the country, in attempt to become a preferred platform for

The event production portion of this segment faces strong competition ranging from small festival production companies to

large concert production companies and venues.

Our entertainment segment faces robust competition from several sources

throughout the industry.

As the online and mobile ticketing market continues to increase, it has allowed for more technology-based companies

to offer ticketing services and systems.

The online environment consists of numerous other websites and platforms for all markets.

the market continuing to grow, resale marketplaces and websites can reach a vastly larger audience with more convenient access to tickets

for a wide variety of events.

We continue to build our brand and recognition, through numerous partnerships and sponsorships throughout

the country, in an attempt to become a preferred platform for consumers.

The event production portion of this segment faces strong competition

ranging from small festival production companies to large concert production companies and venues.

Reinsurance Ltd.

December 2021, the Company formed a wholly-owned subsidiary, Worldwide Reinsurance Ltd.

(“Worldwide Re”), a Bermuda incorporated

captive insurance company that provided primarily liability insurance coverage to the Company for which insurance may not be currently

available or economically feasible in today’s insurance marketplace.

In December 2021, the Company formed a wholly-owned subsidiary, Worldwide

Reinsurance Ltd.

(“Worldwide Re”), a Bermuda incorporated captive insurance company that was created primarily to provide

liability insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s

insurance marketplace.

Re is subject to capital and other regulatory requirements imposed by the Bermuda Monetary Authority (“BMA”).

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coverage to Digital Ally and its affiliated businesses and seeks to expand beyond our affiliated companies to offer coverage for third

As of December 31, 2024, Worldwide Re has not begun its planned operations.

The Company has begun the termination of Worldwide Re and it is not likely that it will ever launch the operations of Worldwide Re.

Property – Video Solutions Operating Segment

31 unchanged sentences

depend heavily on any proprietary technology or patents.

Government Approval

Government approval is not required for us to license

our video solutions technology or sell such devices or products.

However, government support for semiconductors and certain of our target

markets including law enforcement and commercial vehicles, taxi-cab and private security operations may impact the size and growth rate

of video solutions devices and these potential target markets.

In recent years, there has been a trend in both the United States and abroad

to support the adoption of electric vehicles and renewable energy due to increased concern regarding the effects of climate change.

the Trump administration, government support for law enforcement and certain of our potential target markets may or may not continue or

may continue at lower levels than seen with the prior administration.

Government support for video solutions devices especially the application

of artificial intelligence within those video products and our potential target markets could have a material and positive impact on our

A lack of government support, on the other hand, may have a material and negative impact on our business if this lack of support

results in slower adoption of products in our target markets, until such time that the cost and performance improve for these products

enough that government support is unnecessary for mass adoption.

Regardless of the administration in the U.S., the market for video solutions

and our target markets is global and we believe there continues to be strong macro-trends regarding the adoption of video solutions and

associated products.

Environmental

While the Company believes that

it has the environmental permits necessary to conduct its business and that its operations conform to current environmental regulations,

increased public attention has been focused on the environmental impact of video manufacturing operations.

The Company, in

the conduct of its manufacturing operations, has handled and does handle materials that are considered hazardous, toxic or volatile under

federal, state and local laws and, therefore, is subject to regulations related to their use, storage, discharge and disposal.

assurance can be made that the risk of accidental release of such materials can be completely eliminated.

In the event of a

violation of environmental laws, the Company could be held liable for damages and the costs of remediation.

In addition, the Company,

along with the rest of the video solutions industry, is subject to variable interpretations and governmental priorities concerning environmental

laws and regulations.

The annual cost of complying with the regulations is minimal.

Environmental statutes have been interpreted to provide for joint and several

liability and strict liability regardless of actual fault.

There can be no assurance that the Company and its subsidiaries

will not be required to incur costs to comply with, or that the operations, business or financial condition of the Company will not be

materially adversely affected by current or future environmental laws or regulations.

of December 31, 2024, Digital Ally, and its subsidiaries, had approximately 31 full-time employees spread throughout the country, representing

1 unchanged sentence

These employees are spread amongst our operating segments as follows:

December 31, 2024

Employee headcount:

17 unchanged sentences

workforce include:

Programs and Employee Benefits:

the main objective of Digital Ally’s compensation program is to provide a compensation package

that will attract, retain, motivate and reward superior employees who must operate in a highly competitive and technologically challenging

Compensation Programs and

Employee Benefits:

the main objective of Digital Ally’s compensation program is to provide a compensation package that will

attract, retain, motivate and reward superior employees who must operate in a highly competitive and technologically challenging

We seek to do this by linking annual changes in compensation to overall Company performance, as well as each individual’s

7 unchanged sentences

Specifically:

provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic

align our executives’ long-term equity compensation with our shareholders’ interests by linking realizable pay with stock

increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented

through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion.

employees are eligible for health insurance, paid and unpaid leaves, short-term disability, worker’s compensation, long-term

disability, a retirement plan and life and disability/accident coverage.

We also offer a variety of voluntary benefits that allow

employees to select the options that meet their needs.

We provide employee wages

that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location.

We align our executives’

long-term equity compensation with our shareholders’ interests by linking realizable pay with stock performance.

Annual increases and incentive

compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management

process as part of our annual review procedures and upon internal transfer and/or promotion.

All employees are eligible

for health insurance, paid and unpaid leaves, short-term disability, worker’s compensation, long-term disability, a retirement

plan and life and disability/accident coverage.

We also offer a variety of voluntary benefits that allow employees to select the

options that meet their needs.

SOURCES AND AVAILABILITY OF RAW MATERIAL

The Company purchases its raw

materials from multiple suppliers and has a minimum of two suppliers for most of its material requirements.

The largest supplier

in the fiscal year ended December 31, 2024 and 2023 represented less than 5% of total purchases.

of a diminishing number of sources for components and packages in particular, and the increase in the prices of semiconductor and other

components, the Company has been obliged to pay higher prices, which results in higher costs of goods sold.

Recent Developments

Business Combination - In June 2023, the Company, entered into an Agreement and Plan of Merger (the “Proposed 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 Proposed Merger Agreement) for the

stockholders of Clover Leaf in accordance with the terms and conditions of the Merger Agreement, and Kustom.

Pursuant to the Merger Agreement,

subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated by the Proposed 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.

Upon 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 Proposed 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 Proposed Merger Agreement.

Offering of Securities - On February 13, 2025, the Company entered into an underwriting agreement with Aegis Capital Corp.

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.

Pre-Funded Warrants will be immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised

The 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.

The offering closed on February

The net proceeds to the Company from the offering were approximately $13.48 million, after deducting underwriter’s fees

and the payment of other offering expenses associated with the offering payable by the Company.

The Company intends to use the net proceeds

from the offering for working capital and other general corporate purposes, to pay amounts owed under a short-term merchant advance and

to pay in full the aggregate face value of senior secured promissory notes that were previously issued as part of a private placement

that the Company entered into with certain institutional investors on November 6, 2024.

The Company granted the underwriter

an option to purchase additional shares of common stock and/or Series A and Series B warrants of (i) up to 15.0% of the number of shares

of Common Stock sold in the offering, (ii) up to 15.0% of the number of Series A warrants sold in the offering and (iii) up to 15.0% of

the number of Series B warrants sold in the offering.

The Underwriter may exercise this option in whole or in part at any time within

forty-five calendar days after the date of the final prospectus relating to the offering.

The Underwriter may exercise the over-allotment

option with respect to shares of common stock only, Series A and Series B warrants only, or any combination thereof.

The purchase price

to be paid per additional share of Common Stock will be equal to the public offering price of one Unit (less $0.00001 allocated to each

Series A and Series B 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 15,000,000

Series A warrants and 15,000,000 Series B warrants.

Aegis Capital Corp.

the sole book-running manager in the offering, pursuant to the terms of the Underwriting Agreement, and received seven percent (7%) of

the aggregate purchase price paid by investors in the offering, a one percent (1%) non-accountable expense and reimbursement of the legal

fees of its counsel.

The units and pre-funded units

were offered by the Company pursuant to an effective registration statement on Form S-1, as amended, which was declared effective by the

SEC on February 12, 2025.

The final prospectus relating to the offering was filed with the SEC on February 13, 2025.

Risk Factors.

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 1. Business