What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-05-02 compared with 2024-04-01 · 552 added, 718 removed, 462 unchanged (73% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operation.

Management’s Discussion

and Analysis of Financial Condition and Results of Operation.

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

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transpire or prove to be accurate.

that could cause or contribute to our actual results differing materially from those discussed herein or for our stock price to be adversely

affected include, but are not limited to:

(1) our losses in recent years, including fiscal years 2023 and 2022;

(2) economic and other

risks for our business from the effects of the COVID-19 pandemic, including the impacts on our law-enforcement and commercial customers,

suppliers and employees and on our ability to raise capital as required;

(3) our ability to increase revenues, increase our margins and

return to consistent profitability in the current economic and competitive environment;

(4) our operation in developing markets and uncertainty

as to market acceptance of our technology and new products;

(5) the availability of funding from federal, state and local governments

to facilitate the budgets of law enforcement agencies, including the timing, amount and restrictions on such funding;

(6) our ability

to maintain or expand our share of the market for our products in the domestic and international markets in which we compete, including

increasing our international revenues;

(7) our ability to produce our products in a cost-effective manner;

(8) competition from larger,

more established companies with far greater economic and human resources;

(9) our ability to attract and retain quality employees;

risks related to dealing with governmental entities as customers;

(11) our expenditure of significant resources in anticipation of sales

due to our lengthy sales cycle and the potential to receive no revenue in return;

(12) characterization of our market by new products

and rapid technological change;

(13) our dependence on sales of our EVO-HD, DVM-800, DVM-250 and FirstVU products;

(14) that stockholders

may lose all or part of their investment if we are unable to compete in our markets and return to profitability;

(15) defects in our

products that could impair our ability to sell our products or could result in litigation and other significant costs;

(16) our dependence

on a few manufacturers and suppliers for components of our products and our dependence on domestic and foreign manufacturers for certain

of our products;

(17) our ability to protect technology through patents and to protect our proprietary technology and information, such

as trade secrets, through other similar means;

(18) our ability to generate more recurring cloud and service revenues;

(19) risks related

to our license arrangements;

(20) the fluctuation of our operation results from quarter to quarter;

(21) sufficient voting power by coalitions

of a few of our larger stockholders, including directors and officers, to make corporate governance decisions that could have a significant

effect on us and the other stockholders;

(22) the issuance or sale of substantial amounts of our Common Stock, or the perception that

such sales may occur in the future, which may have a depressive effect on the market price of our securities;

(23) potential dilution

from the issuance of Common Stock underlying outstanding options and warrants;

(24) our additional securities available for issuance,

which, if issued, could adversely affect the rights of the holders of our Common Stock;

(25) the volatility of our stock price due to

a number of factors, including, but not limited to, a relatively limited public float;

(26) our ability to integrate and realize the

anticipated benefits from acquisitions;

(27) our ability to maintain the listing of our Common Stock on the Nasdaq Capital Market.

should read the following discussion together with our financial statements and the related notes included elsewhere in this Annual Report

on Form 10-K.

This discussion contains forward-looking statements that are based on our current expectations, estimates and projections

about our business and operations

Trends and Recent Developments for the Company

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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;

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

Law enforcement and commercial market;

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

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

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

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

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.

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

three additional acquisitions of private medical billing companies, in which we will assist in providing working capital and back-office

services to healthcare organizations throughout the country.

Our assistance consists of insurance and benefit verification, medical treatment

documentation and coding, and collections.

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

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

Entertainment

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

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

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.

We also offer production and promotion of live music events in third-party

venues throughout the country.

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

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

June 2023, the Company, entered into the Merger Agreement with 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.

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

the Merger Agreement, Merger Sub will 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 is 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”.

reportable segments are:

1) video solutions, 2) revenue cycle management, and 3) entertainment.

Solutions Operating Segment

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

the sale of Shield disinfectant and personal protective products.

This segment generates revenues 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.

judge the health of our video solutions segment, we review the current active subscriptions and deferred service revenues, along with

the quantity and gross margins generated by our video solutions hardware sales.

Cycle Management Operating Segment

This segment generates revenues through our subscription models offering

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

Revenues for product

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

term of the subscription, typically 3 or 5 years.

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

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

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

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

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

Our assistance consists of insurance

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

Through our expertise and experience in this

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

and cash flows.

revenue cycle management segment consists of our medical billing subsidiaries.

Revenues of this segment are recognized after we perform

our obligations of our revenue cycle management services.

Our revenue cycle management segment is services performed and such services

are charged monthly, generally based on a contractual percentage of total customer collections, for which we recognize our net service

judge the health of our revenue cycle management segment, we review the collection success rate and collection timing.

In addition, we

review the associated costs incurred to assist our customers, and any changes in operating margins and cash flows.

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

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

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

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

TicketSmarter

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

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

theatres, and performing arts.

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

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

vendor sourcing, and day of production.

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

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

and ticket sales from our ticket inventory which are recognized when the underlying tickets are sold along with tickets, concession,

merchandise, and other sales from the live events produced by this segment.

Direct expenses include the cost of tickets purchased for

resale by the Company and holds as inventory, artist costs, staging costs, credit card fees, ticketing platform expenses, website maintenance

fees, along with other administrative costs.

judge the health of our entertainment operating segment, we review the gross transaction value, which represents the total value related

to a ticket sale and includes the face value of the ticket as well as the service charge.

In addition, we review the number of visits

to our websites, cost of customer acquisition, the purchase conversion rate, the overall number of customers in our database, and the

number and percentage of tickets sold via the website and mobile app.

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

Entertainment direct expenses include

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

maintenance fees, as well as other administrative costs.

of the Year Ended December 31, 2024 and 2023

Financial Data

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Video Solutions

$ (1,250,277 )

Revenue Cycle Management

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Video Solutions

$ (7,135,584 )

$ (9,278,721 )

Revenue Cycle Management

Entertainment

(11,750,742 )

(13,443,001 )

Total Operating Income (Loss)

$ (22,240,553 )

$ (29,733,258 )

Depreciation and Amortization:

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Total Identifiable Assets

net revenues reported above represent only sales to external customers.

Segment gross profit represents net revenues less cost of revenues.

Segment operating income (loss), which is used in management’s evaluation of segment performance, represents net revenues, less

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.

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

Results of Operations

experienced operating losses for all quarters during 2023 and 2022.

The following is a summary of our recent operating results on a quarterly

the Three Months Ended:

profit margin percentage

selling, general and administrative expenses

loss percentage

income/(loss)

$ (7,484,778 )

$ (3,679,043 )

$ (8,320,549 )

$ (5,979,579 )

$ (9,574,258 )

$ (1,919,071 )

$ (6,698,242 )

business is subject to substantial fluctuations on a quarterly basis as reflected in the significant variations in revenues and operating

results in the above table.

These variations result from various factors, including but not limited to:

(1) the timing of large individual

(2) the traction gained by products, such as the recently released FirstVu Pro, FirstVu II, FLT-250, EVO HD, the ThermoVu™

and the Shield™ lines;

(3) production, quality and other supply chain issues affecting our cost of goods sold;

(4) unusual increases

in operating expenses, such as the timing of trade shows and stock-based and bonus compensation;

(5) the timing of patent infringement

litigation settlements (6) ongoing patent and other litigation and related expenses respecting outstanding lawsuits;

and (7) the completion

of corporate acquisitions including the recent purchases in the revenue cycle management and entertainment operating segments.

net loss of $7,484,778 on revenues of $6,228,351 for the fourth quarter of 2023.

factors and trends affecting our recent performance include:

Company formed two new operating segments in 2021 and continued to make acquisitions within these segments in 2021 and 2022 resulting

in increased revenues and costs.

The Company has since focused on the profitability of these segments and resulting in fluctuating

revenues and costs on a quarterly basis.

The entertainment operating segment generated $14,063,381 and $20,871,500

in revenue during the years ended December 31, 2023 and 2022, respectively, a decrease of $6,808,119 (33%).

The revenue cycle management

operating segment generated $6,713,678 and $7,886,107 in revenue for the years ended December 31, 2023 and 2022, respectively, a decrease

of $1,172,429 (15%).

We expect to continue to experience improved results from our two new operating segments and their recent acquisitions,

along with improved results from the video solutions segment as the recurring revenue model expands.

objective is to expand our video solutions segment’s recurring service revenue to help stabilize our revenues on a quarterly basis.

Revenues from cloud storages have been increasing in recent quarters and reached approximately $572,892 in the fourth quarter of 2023,

an increase of $141,725 (33%) over the fourth quarter of 2022.

Overall, cloud revenues increased to approximately $1,994,066 for the

year ended December 31, 2023 compared to approximately $1,471,860 for the year ended December 31, 2022, an increase of $522,206, or 35%.

We are pursuing several new market channels outside of our traditional law enforcement and private security customers, similar to our

NASCAR and event security customers, which we believe will help expand the appeal of our products and service capabilities to new commercial

If successful, we believe that these new market channels could yield recurring service revenues for us in the future.

Sheet Arrangements

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General and administrative expense

Goodwill and intangible asset impairment charge

Total selling, general and administrative expenses

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

Gain on extinguishment of warrant derivative liability

Loss on accrual for legal settlement

Loss on extinguishment of convertible debt

Gain on extinguishment of debt

Loss on disposal of intangible assets

Loss on litigation

Loss on extinguishment of debt

Gain on extinguishment of liabilities

Gain on sale of property, plant and equipment

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Income tax expense (benefit)

Net loss attributable to noncontrolling interests of consolidated subsidiary

Loss on redemption – Series A & B convertible redeemable preferred stock

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

Net loss attributable to common stockholders

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operating segments generate two types of revenues:

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

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

Additionally, product revenues also include

the sale of tickets by our entertainment operating segment that have been purchased or received through our sponsorships and

partnerships and held in inventory by our entertainment segment until their sale.

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

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

Additionally, product revenues also include the sale

of tickets by our entertainment operating segment that have been purchased or received through our sponsorships and partnerships and

held in inventory by our entertainment segment until their sale.

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

solutions segment.

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

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

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

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

to domestic customers are made directly to the end customer (typically a law enforcement agency or a commercial customer) through

our sales force, comprised of our employees.

Sales to domestic customers

are made directly to the end customer (typically a law enforcement agency or a commercial customer) through our sales force, comprised

of our employees.

Revenue is recorded when the product is shipped to the end customer.

to international customers are made through independent distributors who purchase products from us at a wholesale price and sell

to the end user (typically law enforcement agencies or a commercial customer) at a retail price.

The distributor retains the margin

as compensation for its role in the transaction.

The distributor generally maintains product inventory, customer receivables and

all related risks and rewards of ownership.

Revenue is recorded when the product is shipped to the distributor consistent with the

terms of the distribution agreement.

parts and services for domestic and international customers are generally handled by our inside customer service employees.

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

Sales to international

customers are made through independent distributors who purchase products from us at a wholesale price and sell to the end user (typically

law enforcement agencies or a commercial customer) at a retail price.

The distributor retains the margin as compensation for its

role in the transaction.

The distributor generally maintains product inventory, customer receivables and all related risks and rewards

of ownership.

Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement.

Repair parts and services

for domestic and international customers are generally handled by our inside customer service employees.

Revenue is recognized upon

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

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

revenue cycle management operating segment generates service revenues through relationships with medium to large healthcare organizations,

in which the underlying service revenue is recognized upon execution of services.

Service revenues are generally determined as a

percentage of the dollar amount of medical billings collected by the customer.

Our revenue cycle management

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

service revenue is recognized upon execution of services.

Service revenues are generally determined as a percentage of the dollar

amount of medical billings collected by the customer.

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

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

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

Service sales through TicketSmarter, are driven largely in part to the usage of the TicketSmarter.com marketplace by buyers and sellers,

in which the Company collects service fees for each transaction completed through this platform.

Our entertainment operating

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

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

Service sales through TicketSmarter

are driven largely in part to the usage of the TicketSmarter.com marketplace by buyers and sellers, in which the Company collects

service fees for each transaction completed through this platform.

may discount our prices on specific orders based upon the size of the order, the specific customer and the competitive landscape.

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Total Product Revenues

revenues for the years ended December 31, 2023 and 2022 were $9,347,495 and $10,999,892, respectively, a decrease of $1,651,947 (15%),

due to the following factors:

generated by the entertainment operating segment began with the Company’s acquisition of TicketSmarter on September 1, 2021.

The entertainment operating segment generated $5,044,576 in product revenues for the year ended December 31, 2023, compared to $5,598,803

for the fiscal year ended December 31, 2022.

This largely relates to the Company focusing on right sizing and reducing costs and

working towards profitability.

Company’s video solutions operating segment generated product revenues totaling $4,303,369 during the year ended December 31,

2023 compared to $5,401,089 for the year ended December 31, 2022.

In general, our video solutions operating segment has experienced

pressure on its product revenues as our in-car and body-worn systems are facing increased competition because our competitors have

released new products with advanced features.

Additionally, our law enforcement revenues declined over the year ended December 31,

2023 and 2022 due to price-cutting and competitive actions by our competitors, adverse marketplace effects related to our patent

litigation proceedings and our recent financial condition.

video solutions operating segment management has continued to focus on migrating commercial customers, from a hardware sale to a

service fee model.

Therefore, we expect a reduction in commercial hardware sales (principally DVM-250’s, FLT-250’s, and

a portion of our body-worn camera line) as we convert these customers to a service model under which we provide the hardware as part

of a recurring monthly service fee.

In that respect, we introduced a monthly subscription agreement plan for our body worn cameras

and related equipment during the second quarter of 2020 that allowed law enforcement agencies to pay a monthly service fee to obtain

body worn cameras without incurring a significant upfront capital outlay.

This program has gained some traction, resulting in decreased

product revenues and increasing our service revenues.

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

revenues over a span of three to five years.

Product revenues for the years ended December 31,

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

Revenues generated

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

The new entertainment

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

ended December 31, 2023.

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

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

to customers.

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

on higher margin events to improve its gross margins.

The Company’s video

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

the year ended December 31, 2023.

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

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

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

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

effects related to our recent financial condition.

Our video solutions operating

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

we expect a reduction in commercial hardware sales (principally DVM-250’s, FLT-250’s, and a portion of our body-worn

camera line) as we convert these customers to a service model under which we provide the hardware as part of a recurring monthly

In that respect, we introduced a monthly subscription agreement plan for our body worn cameras and related equipment

during the second quarter of 2020 that allowed law enforcement agencies to pay a monthly service fee to obtain body worn cameras

without incurring a significant upfront capital outlay.

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

and increasing our service revenues.

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

span of three to five years.

and other revenues by operating segment is as follows:

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(25%), due to the following factors:

revenues generated by the video solutions operating segment were $1,994,066 and $1,471,860 for the years ended December 31, 2023 and

2022, respectively, an increase of $522,206 (35%).

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

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

Cloud revenues generated

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

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

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

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

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

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local storage to cloud storage continues in our customer base.

solutions operating segment revenues from extended warranty services were $860,337 and $692,017 for the years ended December 31, 2023

and 2022, respectively, an increase of $168,320 (24%).

T his correlates with consistent sales of

hardware and additional extended warranties sold during the year .

Video solutions operating

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

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

T his correlates with consistent sales of hardware and additional

extended warranties sold during the year .

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

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

The Company completed the acquisitions of Goody Tickets, LLC and TicketSmarter,

LLC in the third quarter of 2021, thus resulting in the new revenue stream for the Company during the last fourth months of 2021

and twelve months ended December 31, 2022.

TicketSmarter collects fees on transactions administered through the TicketSmarter.com

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

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

revenue cycle management operating segment generated service revenues totaling $6,713,678 and $7,886,107 for the years ended December

31, 2023 and 2022, respectively, a decrease of $1,172,429 (15%).

Our revenue cycle management operating segment has completed four

acquisitions since formation in June 2021, thus resulting in the new service revenue stream added in the twelve months ended December

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

healthcare organizations throughout the country.

The decrease in revenue is due to refinement

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

revenues for the years ended December 31, 2023, and 2022 were $28,248,344 and $37,009,895, respectively, a decrease of $8,761,551 (24%),

due to the reasons noted above.

TicketSmarter collects fees on transactions administered through the

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

We expect our entertainment

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

Our entertainment

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

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

Our revenue cycle management

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

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

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

services to healthcare organizations throughout the country.

The decrease in revenue is due

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

Total revenues for the years ended

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

of Product Revenue

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Total Cost of Product Revenues

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

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

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

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

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

ended December 31, 2023.

Cost of Product Revenues were $5,149,923 and $6,039,631 for the year ended December 31, 2023 and 2022, a

decrease of $889,708 (15%).

Cost of product sold as a percentage of product revenues for the entertainment segment decreased to

102% for the year ended December 31, 2023 as compared to 108% for the year ended December 31, 2022.

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

December 31, 2024.

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

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

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

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

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

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Total Cost of Service Revenues

increase in cost of service revenues for our video solutions segment is commensurate with the increase in service revenues in the year

ended December 31, 2023 compared to the year ended December 31, 2022.

Cost of service revenues as a percentage of service revenues for

the video solutions segment increased to 43% for the year ended December 31, 2023 as compared to 41% for the year ended December 31,

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

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

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

Cost of service revenues as a percentage

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

year ended December 31, 2023.

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

loss generating services being eliminated during the year.

6 unchanged sentences

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

gross profit for the years ended December 31, 2023 and 2022 was $5,762,484 and $2,321,941, respectively, an increase of $3,440,543 (148%).

Gross profit by operating segment was as follows:

Overall gross profit for the years

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

Gross profit by operating segment

was as follows:

Years Ended December 31,

1 unchanged sentence

Video Solutions

$ (1,250,278 )

Revenue Cycle Management

1 unchanged sentence

Total Gross Profit

increase is attributable to the decrease in cost of goods sold across our video and entertainment segments for the year ended December

31, 2023, as there was an overall decrease in the cost of sales as a percentage of overall revenues to 80% for the year ended December

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

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

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

This is primarily driven by large inventory reserve being established in 2022,

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

solutions segment.

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

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

from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, Shield TM disinfectants and our cloud evidence storage and management

offering, provided that they gain traction in the marketplace.

We plan to continue our initiative to more efficient management of our

supply chain through outsourcing production, quantity purchases and more effective purchasing practices.

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

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

our video solutions segment.

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

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

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

they gain traction in the marketplace.

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

production, quantity purchases and more effective purchasing practices.

General and Administrative Expenses

selling, general and administrative expenses were $28,003,037 and $32,055,199 for the years ended December 31, 2023 and 2022, respectively,

a decrease of $4,052,162 (13%).

The decrease is primarily attributable to a focus on right-sizing the business with a reduction in administrative

headcount coupled with a reduction in sponsorships and advertising where costs outweighed the returns.

Our selling, general and administrative

expenses as a percentage of sales increased to 99% for 2023 compared to 87% in the same period in 2022.

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

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

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

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

Our selling, general and administrative expenses

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

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

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General and administrative expense

Goodwill and intangible asset impairment charge

and development expense.

Our video solutions operating segment continues to focus on bringing new products to market, including

updates and improvements to current products.

Our research and development expenses totaled $2,618,746 and $2,290,293 for the years ended

December 31, 2023 and 2022, respectively, an increase of $328,453 (14%).

We employed 21 engineers at December 31, 2023 compared to 21

engineers at December 31, 2022.

Most of our engineers are dedicated to research and development

activities for new products, primarily the new generation of body-worn cameras, EVO-HD and EVO Fleet that can be located in multiple

places in a vehicle.

We expect our research and development activities will continue to trend higher in future quarters as we continue

to expand our product offerings based on our new body-worn camera and EVO-HD product platform and as we outsource more development projects .

We consider our research and development capabilities and new product focus to be a competitive advantage and will continue to invest

in this area on a prudent basis and consistent with our financial resources.

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

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

We have focused on controlling our expenditures on bringing

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

The decrease in

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

our expenses in this area with our revenues.

advertising and promotional expenses.

Selling, advertising and promotional expenses totaled $7,137,529 and $9,312,204 for the

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

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

The decrease is primarily attributable to a reduction

in promotional and advertising sponsorships and expenses.

and advertising expenses totaled $5,479,437 during the year ended December 31, 2023 compared to $7,668,641 during the year ended December

31, 2022, a decrease of $2,189,204 (29%).

The overall decrease is primarily attributable to TicketSmarter’s very active approach

to sponsorship and advertising in 2022 as they were aggressively building a brand and gaining recognition.

TicketSmarter accounted for

$2,328,759 and $4,024,748 of the total promotional and advertising expense for the year ended December 31, 2023 and 2022, respectively.

and administrative expenses.

General and administrative expenses totaled $18,246,762 and

$20,452,702 for the years ended December 31, 2023 and 2022, respectively.

The decrease in general and administrative expenses for the

year ended December 31, 2023 compared to the same period in 2022 is primarily attributable to a decrease in administrative salaries,

as payroll begins to adjust from the new acquisitions completed by the Company.

General and administrative expenses also decreased due

to a decline in rent expenses, and legal and professional expenses for the years ended December 31, 2023 compared to the same

period in 2022.

the reasons previously stated, our operating loss was $22,240,553 and $29,733,258 for the years ended December 31, 2023 and 2022, respectively,

a decrease of $7,492,705 (25%).

Operating loss as a percentage of revenues improved to 78% in 2023 from 80% in 2022.

The decrease in selling, advertising and promotional

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

in this area with our revenues.

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

the Company and its subsidiary TicketSmarter.

and administrative expense .

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

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

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

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

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

The decrease in general and administrative expenses was offset

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

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

and intangible asset impairment charge.

We performed an impairment test as of the last day of the fiscal third quarter of 2024

as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged

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

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

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

exceeded their estimated fair value.

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

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

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

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

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

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

The goodwill impairment was

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

in the projected timing of recovery.

the year ended December 31, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment

exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible

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

The charge was primarily driven

by the split-off transaction not being completed when and as expected and our recent revenue performance of the related business given

a decline in demand and overall economic uncertainty.

The remaining balance for this trade name/trademark was $699,000 as of December

For the reasons previously stated, our operating loss was $15,201,540 and

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

Operating loss as a percentage

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

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

1 unchanged sentence

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

The increase is

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

on Accrual for Legal Settlement

Company recognized a loss on accrual for legal settlement of $1,792,308 and $-0- during the years ended December 31, 2023 and 2022, respectively.

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

income (expense)

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

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

the building.

on Litigation

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

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

Considering the loss recorded

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

on Conversion of Convertible Debt

Company recognized a loss on conversion of convertible debt of $1,112,705 and $-0- during the year ended December 31, 2023 and 2022,

respectively.

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

debt to equity and cash settlement of debt during the period.

in Fair Value of Short-Term Investments

recognized a loss on change in fair value of short-term investments totaling $-0- and $84,818 during the years ended December 31, 2023

and 2022, respectively.

Such short-term investments are included in cash and cash equivalents as they contain original maturities of

ninety (90) days or less.

The decrease reflects our overall lower cash and cash equivalent levels in 2023 compared to 2022.

in Fair Value of Warrant Derivative Liabilities

During the second quarter of

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

secured convertible notes previously described.

The underlying warrant agreement terms provide for net cash settlement outside the

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

As such, the Company is required to treat these

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

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

derivative liabilities.

The change in fair value of the warrant derivative liabilities during year ended December 31, 2023 totaled

$1,846,642, compared to $6,726,638 for the year ended December 31, 2022, which was recognized as a gain on the Consolidated

Statements of Operations.

in Fair Value of Contingent Consideration Promissory Notes and Earn-Out Agreements

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”)

Principal payments, since its inception, on this contingent consideration promissory note totaled $232,134.

The estimated

fair value of the June Contingent Note at December 31, 2023 is $58,819, representing a decrease in its estimated fair value of $117,637

as compared to its estimated fair value as of December 31, 2022.

This reduction only relates to the principal payments made for the year

ended December 31, 2023.

Therefore, the Company recorded a gain of $-0- and $27,139 in the Consolidated Statements of Operations for

the years ended December 31, 2023 and December 31, 2022, respectively.

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

Principal payments, since its inception, on this contingent consideration promissory note totaled $552,256.

The estimated fair

value of the August Contingent Note at December 31, 2023 is $129,651, representing a decrease in its estimated fair value of $259,303

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, 2023.

Therefore, the Company recorded a loss of $-0- and $31,907 in the Consolidated Statements of Operations for

the years ended December 31, 2023 and December 31, 2022, respectively.

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.

Principal payments,

since its inception, on this contingent consideration promissory note totaled $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 31, 2023.

Therefore, the Company recorded

a gain of $175,146 and $421,085 in the Consolidated Statements of Operations for the years ended December 31, 2023 and December 31, 2022,

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

respectively.

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”)

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 31, 2023.

Therefore, the Company recorded a gain of $2,763 and

$100,654 in the Consolidated Statements of Operations for the years ended December 31, 2023 and 2022, respectively.

on Extinguishment of Warrant Derivative Liabilities

recognized a gain on the extinguishment of warrant derivative liabilities of $-0- and $3,624,794 during the year ended December 31, 2023

and December 31, 2022, respectively.

This is in connection with the Warrant Exchange Agreements executed by the Company on August 23,

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

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

Loss on Disposal of Intangible assets

During the year ended December

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

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

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

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

in Fair Value of Derivative Liabilities

The change in fair value of the

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

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

During 2024, the Company issued

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

The underlying warrant terms under both of

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

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

shareholders.

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

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

as the change in fair value of warrant derivative liabilities.

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

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

A and Series B warrants.

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

convertible notes.

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

The underlying warrant terms provide for net cash

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

As such, the Company is required

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

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

in Fair Value of Contingent Consideration Promissory Notes

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

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

There was no similar transaction

during the year ended December 31, 2024.

on Extinguishment of Liabilities

on extinguishment of liabilities increased to $550,867 for the year ended December 31, 2023, from $-0- during the year ended December

31, 2022, which reflects income related to the entertainment segment’s ability to negotiate down payables and contract liabilities

during the period.

This gain relates to the TicketSmarter Related Party Note payable for the entertainment segment, as a trust, the beneficiaries

of which are TicketSmarter’s Chief Executive Officer and his spouse, contributed cash in the amount of $2,700,000 to TicketSmarter.

Those funds were then utilized to resolve numerous outstanding payables at a discounted rate, the discount received 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, which will result in much more significant savings over the next several years.

income increased to $144,735 for the year ended December 31, 2023, from $-0- during the year ended December 31, 2022, which largely

reflects income related to a warehouse lease within the corporate headquarters.

expense was $-0- for the year ended December 31, 2023, a decrease from $230,744 during the year ended December 31, 2022, which reflects

expense related to a note receivable adjustment.

Income/(Loss)

Company recorded a gain on the extinguishment of liabilities for the year ended December 31, 2024 of $917,935, which reflects income

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

year ended December 31, 2024.

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

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

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

segment’s ability to negotiate down payables and contract liabilities during the period.

The Company utilized funds from the related

party note payable to resolve numerous outstanding payables at a discounted rate, the discount received was recognized as a gain on extinguishment

of liabilities in the statement of operations for the year ended December 31, 2023.

on Extinguishment of Debt

March 1, 2024, the Company obtained a short-term merchant advance for its entertainment segment, which totaled $1,000,000, from a single

lender to fund operations.

The Company modified/amended the underlying loan agreement twice during the year ended December 31, 2024.

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

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

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

The Company’s full repayment of the outstanding obligations

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

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

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

of the debt should be treated as a debt extinguishment.

As a result, the Company recorded a loss of $68,827 on the extinguishment during

the year ended December 31, 2024.

on Sale of Property, Plant and Equipment

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

The carrying amount of the

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

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

of operations during the year ended December 31, 2024.

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

the year ended December 31, 2024.

before Income Tax Benefit

a result of the above, we reported a net income/(loss) before income tax benefit of ($25,463,949) and ($18,873,758) for the years ended

December 31, 2023 and 2022, respectively, a decline of $6,590,191 (35%).

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

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

recorded an income tax benefit of $-0- for the years ended December 31, 2024 and 2023, respectively.

4 unchanged sentences

have further determined to continue providing a full valuation reserve on our net deferred tax assets as of December 31, 2024.

2023, we decreased our valuation reserve on deferred tax assets by $7,870,000 whereby

our deferred tax assets continue to be fully reserved due to our recent operating losses.

had approximately $145,035,000 of federal net operating loss carryforwards and $1,795,000

of research and development tax credit carryforwards as of December 31, 2023 available to offset future net taxable income.

a result of the above, we reported a net income/(loss) of ($25,463,949) and ($18,873,758) for the years ended December 31, 2023 and 2022,

respectively, a decline of $6,590,191 (35%).

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

due to our recent operating losses.

had approximately $159,280,000 of federal net operating loss carryforwards and $1,742,000 of research and development tax credit carryforwards

as of December 31, 2024 available to offset future net taxable income.

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

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

Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

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We reported net income (loss)

attributable to noncontrolling interests of consolidated subsidiary of $224,598 and $407,933 for the years ended December 31, 2023 and

2022, respectively.

on Redemption – Series A & B Convertible Redeemable Preferred Stock

the year ended December 31, 2022, the Company redeemed 1,400,000 shares of Series A & 100,000 shares of Series B Preferred Stock,

for a redemption price of $15,750,000, with a $13,365,000 carrying amount, resulting in a $2,385,000 loss on redemption.

attributable to noncontrolling interests of consolidated subsidiary of $(1,871,578) and $224,598 for the years ended December 31, 2024

and 2023, respectively.

Loss Attributable to Common Stockholders

a result of the above, we reported a net loss of $25,688,547 and $21,666,691 for the years ended December 31, 2023 and 2022, respectively,

a decline of $4,021,856 (19%).

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

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

and Diluted Income/(Loss) per Share

basic and diluted income/(loss) per share was ($9.22) and ($8.50) for the years ended December 31, 2023 and 2022, respectively, for the

reasons previously noted.

All outstanding stock options and common stock purchase warrants were considered antidilutive and therefore

excluded from the calculation of diluted loss per share for the years ended December 31, 2023 and 2022 because all potentially dilutive

securities during 2023 had exercise prices in excess of the market value of the company’s common stock and because of the net loss

reported for 2023.

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

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

All outstanding stock options and common stock

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

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

for both 2024 and 2023.

and Capital Resources

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

Based upon our

current operating forecast, we anticipate that we will need to restore positive operating cash flows and/or raise additional capital

in the short-term to fund operations, meet our customary payment obligations and otherwise execute our business plan over the next 12

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

there can be no assurance that our capital raising initiatives will be successful.

Our recurring losses and level of cash used in operations,

along with uncertainties concerning our ability to raise additional capital, raise substantial doubt about our ability to continue as

a going concern.

Common Stock is currently listed on The Nasdaq Capital Market.

In order to maintain our listing, we must satisfy minimum financial and

other continued listing requirements and standards, including those regarding director independence and independent committee requirements,

minimum stockholders’ equity, minimum share price, and certain corporate governance requirements.

There can be no assurances that

we will be able to comply with the applicable listing standards.

See “Nasdaq Listing” below.

had $778,149 of available cash, equivalents and restricted cash and net negative working capital of $6,963,943 as of December 31,

Net working capital as of December 31, 2023, included approximately $4.7 million of accounts receivable and other receivables

and $3.8 million of current inventory.

cash equivalents and restricted cash:

As of December 31, 2023, we had cash, cash equivalents and restricted cash with an

aggregate balance of $778,149, a decrease from a balance of $3,532,199 for the year December 31, 2022.

Summarized immediately below

and discussed in more detail in the subsequent subsections are the main elements of the $2,754,050 net decrease in cash during the

year ended December 31, 2023:

of net cash used in operating activities.

Net cash used in operating activities was $9,893,838 and $18,580,385 for the years

ended December 31, 2023 and 2022, respectively, an improvement of $8,686,547.

T he improvement

is attributable to a significant decrease in the non-cash gain attributable to the change in value of the warrant derivative liability

in 2023 compared to 2022, as well as the decline in the usage of cash to increase inventories, prepaid expenses, and other operating

assets along with the increase in operating liabilities during the year ended December 31, 2023 compared to 2022.

of net cash used in investing activities.

Cash used in investing activities was $240,706 and $2,940,591 for the years ended December

31, 2023 and 2022 respectively.

During the year ended December 31, 2023, we made capital expenditures

(i) building improvements of the newly purchased office and warehouse building;

and (ii) patent applications on our proprietary

technology utilized in our new products and included in intangible assets.

The improvement in cash used in investing activities was

due to several large investing activities in 2022 including cost for the purchase of an aircraft for our BirdVu Jets subsidiary and

the closing of one business acquisition and one asset acquisition that did not recur in 2023.

$7,380,494 of net cash provided by financing activities.

Cash provided by financing activities was $7,380,494 for the year ended

December 31, 2023, compared to cash used in financing activities of $6,954,617 for the year ended December 31, 2022.

completed a convertible note agreement, a related party note payable, a revolving loan agreement and a merchant advance for our video

solution segment, received a Commercial Extension of Credit for our Entertainment Segment, receiving net proceeds of $12.5 million.

We also made principal payments on the extension of credit, merchant advance and contingent consideration promissory notes and paid

off the convertible loan totaling $5.2 million in principal payments.

In 2022, we utilized over $4.0 million on the stock

repurchase program, $2.4 million for completion of the preferred stock transaction, as well as over $0.5 million on payments of contingent

consideration promissory notes related to the revenue cycle management segment.

Liquidity Plan.

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

Based upon our current

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

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

We are continuously

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

however, there can be no assurance

that our capital raising initiatives will be successful.

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

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

cash equivalents:

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

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

Summarized immediately below and discussed in more detail in

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

Operating activities :

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

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

The decrease is attributable to the improved net

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

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

Investing activities :

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

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

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

cash for the following:

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

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

and (iii) received proceeds from the sale of

our aircraft.

Financing activities :

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

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

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

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

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

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

The cash proceeds were partially offset by payments on outstanding

loans including the payments on merchant advances.

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

had $778,149 of cash, and cash equivalents, including restricted cash of $97,600 and net negative working capital $6,963,943 as of

December 31, 2023.

Accounts receivable and other receivable balances represented $4,692,296 of our net working capital as of

December 31, 2023.

We intend to collect our outstanding receivables on a timely basis and reduce the overall level during 2024,

which would help to provide positive cash flow to support our operations during 2024.

Inventory represented $3,845,281 of our net

working capital as of December 31, 2023.

We are actively managing the level of inventory and our goal is to reduce such level during

2024 by our sales activities, the increase of which should provide additional cash flow to help support our operations during

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

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

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

at December 31, 2024.

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

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

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

at December 31, 2024.

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

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

Expenditures:

On December 6, 2021, the Board authorized the repurchase of up to $10.0 million of the Company’s outstanding

common stock under the specified terms of a share repurchase program (the “Program”).

During the year ended December 31,

2022, the Company repurchased 186,299 shares of its common stock for $4,026,523, in accordance with the Program.

June 30, 2022, the Board elected to terminate the Program, effective immediately.

The Program began in December 2021, with the Company

purchasing a total of 273,041 shares at a cost of $6,001,602 through its termination on June 30, 2022.

Company’s revenue cycle management segment completed its third medical billing company acquisition using approximately $1.4 million

in cash for the portion of the purchase price during 2022.

The acquisition of

the medical billing company included a contingent consideration promissory note payable to the sellers of $750,000 at closing, which

management estimated its fair value of $-0- and $208,083 as of December 31, 2023 and 2022.

addition, the Company’s revenue cycle management segment completed its fourth medical billing asset acquisition using approximately

$230,000 in cash for a portion of the total purchase price.

The acquisition of the fourth medical billing asset purchase price included

a contingent consideration promissory note payable to the sellers with an estimated fair value of $105,000 at closing which management

estimated its fair value of $-0- and $4,346 as of December 31, 2023 and 2022.

On 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 31, 2026.

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.

The remaining

lease term for the Company’s office and warehouse operating lease as of December 31, 2023 was thirty-six months.

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 was renewed in October 2023.

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, 2023 was forty-six months.

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 is responsible for

property taxes, utilities, insurance and its proportionate share of common area costs related to this location.

The remaining lease term

for the Company’s office operating lease as of December 31, 2023 was seven months.

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 seventy-five months as of December 31, 2023.

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 the intention 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 remaining lease term for the Company’s office and warehouse operating

lease as of December 31, 2023, was seventeen months.

expense related to the office spaces and copier operating leases was recorded on a straight-line basis over the lease term.

expense under the five operating leases was approximately $534,830 for the year ended December 31, 2023 and included in selling, general

and administrative expenses.

weighted-average remaining lease term related to the Company’s lease liabilities as of December 31, 2023 and December 31, 2022

was 4.5 years and 3.3 years, respectively.

discount rate implicit within the Company’s operating leases was not generally determinable, and therefore, the Company determined

the discount rate based on its incremental borrowing rate on the information available at commencement date.

As of commencement date,

the operating lease liabilities reflect a weighted average discount rate of 8%.

following sets forth the operating lease right of use assets and liabilities as of December 31, 2023:

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

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

December 31, 2024.

The following sets forth the operating

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

Operating lease right of use assets

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Total operating lease obligations

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

Following are the minimum lease

payments for each year and in total.

Year ending December 31:

2029 and thereafter

Total undiscounted minimum future lease payments

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Total operating lease liability

obligations is comprised of the following:

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

December 31, 2024

Economic injury disaster loan (EIDL)

Contingent consideration promissory note – Nobility Healthcare Division Acquisition

Revolving Loan Agreement

Commercial Extension of Credit- Entertainment Segment

Merchant Advances – Video Solutions Segment

Senior Secured Promissory Notes

Unamortized debt issuance costs

Merchant Advances

Debt obligations

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Debt obligations, long-term

obligations mature as follows as of December 31, 2023:

obligations mature on an annual basis as follows as of December 31, 2024:

December 31, 2024

2029 and thereafter

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The plan, as amended, requires

the Company 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 $207,463 and $223,084 for the years ended December 31, 2023 and 2022, respectively.

Each participant is 100% vested

at all times in employee and employer matching contributions.

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.

Accounting Estimates

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While the selection and application of any accounting policy may involve some level of subjective

judgments and estimates, we believe the following accounting policies are the most critical to our financial statements, potentially

involve the most subjective judgments in their selection and application, and are the most susceptible to uncertainties and changing

Recognition / Allowance for Doubtful Accounts;

for Excess and Obsolete Inventory;

and other intangible assets;

Compensation Expense;

value of warrants;

value of assets and liabilities acquired in business combinations;

for Income Taxes;

Preferred Stock.

judgments and estimates, we believe the following accounting policies and estimates are the most critical to our financial statements,

potentially involve the most subjective judgments in their selection and application, and are the most susceptible to uncertainties and

changing conditions:

Revenue Recognition / Allowance

for Doubtful Accounts;

Allowance for Excess and

Obsolete Inventory;

Goodwill and other intangible

Warranty Reserves;

Fair value of assets and liabilities acquired in business combinations ;

Fair value of warrant derivative

Stock-based Compensation

Accounting for Income Taxes.

Recognition / Allowances for Doubtful Accounts.

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all five of the following conditions are met:

the contract with the customer;

the performance obligations in the contract;

the transaction price;

the transaction price to the performance obligations in the contract;

revenue when a performance obligation is satisfied.

Identify the contract with the customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations

in the contract;

Recognize revenue when a performance obligation is

consider the terms and conditions of the contract and our customary business practices in identifying our contracts under ASC 606.

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is due at the time of sale.

review all significant, unusual, or nonstandard shipments of products or delivery of services as a routine part of our accounting and

review all significant, unusual, or nonstandard shipments of product or delivery of services as a routine part of our accounting and

financial reporting process to determine compliance with these requirements.

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circumstances.

As of December 31, 2023, our historical bad debts have been negligible, with less than $323,000 charged off as uncollectible

on cumulative revenues of $284.8 million since we commenced deliveries in 2006.

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

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

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

of December 31, 2023, and 2022, we had provided a reserve for doubtful accounts of $200,668 and $152,736, respectively.

periodically perform a specific review of significant individual receivables outstanding for risk of loss due to uncollectability.

on such review, we consider our reserve for doubtful accounts to be adequate as of December 31, 2023.

However, should the balance due

from any significant customer ultimately become uncollectible then our allowance for bad debts will not be sufficient to cover the charge-off

and we will be required to record additional bad debt expense in our statement of operations.

for Excess and Obsolete Inventory.

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

consisted of the following as of December 31, 2023 and 2022:

consisted of the following at December 31, 2024 and 2023:

December 31, 2024

December 31, 2023

Raw material and component parts

Work-in-process

Finished goods – video solutions

Finished goods – entertainment

Reserve for excess and obsolete inventory – video solutions

Reserve for excess and obsolete inventory – entertainment

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

Reserve for excess and obsolete inventory – entertainment segment

Total inventories

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of inventory obsolescence due to changing technology and customer requirements.

As reflected above, our inventory reserves

represented 54.2% of the gross inventory balance as of December 31, 2023, compared to 44.5% of the gross inventory balance as of

December 31, 2022.

We had $4,542,461 and $5,489,541in reserves for obsolete and excess inventories as of December 31, 2023 and 2022,

respectively.

Total raw materials and work-in-process was $3,065,049 and $4,512,329 as of December 31, 2023 and 2022, respectively,

a decrease of $1,447,280 (32%).

Finished goods balances were $5,322,693 and $7,816,618 as of December 31, 2023 and 2022,

respectively, a decrease of $2,493,925 (32%).

The decrease in finished goods was primarily attributable to declining inventory for

the new Shield product line, our new body-worn cameras and docking stations, along with a decline in inventory from our

entertainment segment, acquired in September 2021.

The decrease in the inventory reserve is primarily due to disposal of obsolete

inventory previously reserved.

As reflected above, our inventory reserves represented

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

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

The decrease in

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

Additionally, the Company

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

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

We believe the reserves are appropriate given our inventory

levels as of December 31, 2024.

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

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changes in our strategic plans or the use of our assets;

restructuring charges or other changes in our

restructuring changes or other changes in our

business segments;

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

most recent annual impairment test of goodwill conducted as of December 31, 2023, indicated no impairment.

Subsequent to completing our

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

1 — Nature of Business and Summary of Significant Accounting Policies and Note 8 — Goodwill and Other Intangible Assets in

the Notes to Consolidated Financial Statements provide additional information regarding the Company’s goodwill and other intangible

We generally provide up to a two-year parts and labor standard warranty on our products to our customers.

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

These estimates are established using historical

information on the nature, frequency, and average cost of claims.

We actively study trends of claims and take action to improve product

quality and minimize claims.

Our warranty reserves were increased to $17,699 as of December 31, 2023 compared to $15,964 as of December

31, 2022 as we begin to slow our warranty exposures through the roll-off of DVM-750 and DVM-800 units from warranty coverage.

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

exposure as these are very popular products in our line.

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

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

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

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

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

Therefore, we performed an impairment test

for our reporting units with remaining goodwill.

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

The income approach

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

This analysis requires significant judgments,

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

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

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

The weighted average cost of capital used in our most recent impairment test ranged from 18.3% to 21.3%.

We also applied a market approach,

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

to apply to the operating results of the reporting units.

The primary market multiple used is revenue.

The income and market approaches were equally

weighted in our most recent annual impairment test, for all of the reporting units.

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

date of valuation, while considering a reasonable control premium.

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

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

Based on our most recent impairment test, the video

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

entertainment segments were determined to be impaired.

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

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

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

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

As a result of our impairment test,

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

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

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

segment, both of which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations for

the year ended December 31, 2024.

The goodwill impairment was primarily driven by recent performance of the revenue cycle management and

entertainment reporting units since our annual impairment testing date, as well as a delay in the projected timing of recovery.

The remaining

balance for the goodwill carrying balance related to businesses within our revenue cycle management segment and entertainment segment

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

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

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

the year ended December 31, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment

exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible

asset impairment charge on our Consolidated Statements of Operations for the year ended December 31, 2024.

The charge was primarily driven

by the split-off transaction not being completed when and as expected and our recent revenue and operating performance of the related

business given a decline in demand and overall economic uncertainty.

The remaining balance for this trade name/trademark was $699,000

as of December 31, 2024.

of assets and liabilities acquired in business combinations .

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

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

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

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

of inputs and assumptions that a market participant would use.

The Company allocates any excess purchase price that exceeds

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

The use of alternative valuation assumptions,

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

and amortization expense in current and future periods.

Transaction costs associated with these acquisitions are expensed as incurred

through selling, general and administrative expense on the consolidated statement of operations.

In those circumstances where an acquisition

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

expected to be made as of the acquisition date.

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

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

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

on our products to our customers.

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

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

We actively study trends

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

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

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

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

Standard warranty

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

as these are very popular products in our line.

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

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

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

Compensation Expense .

We grant stock options to our employees and directors and such benefits provided are share-based payment

awards which require us to make significant estimates related to determining the value of our share-based compensation.

stock-price volatility assumption is based on historical volatilities of the underlying stock that are obtained from public data sources

and there were no stock options granted during the year ended December 31, 2023.

factors change and we develop different assumptions in future periods, the compensation expense that we record in the future may differ

significantly from what we have recorded in the current period.

There is a high degree of subjectivity involved when using option pricing

models to estimate share-based compensation.

Changes in the subjective input assumptions can materially affect our estimates of the fair

value of our share-based compensation.

Certain share-based payment awards, such as employee stock options, may expire worthlessly or

otherwise result in zero intrinsic value compared to the fair values originally estimated on the grant date and reported in our financial

Alternatively, values may be realized from these instruments that are significantly in excess of the fair values originally

estimated on the grant date and reported in our financial statements.

Although the fair value of employee share-based awards is determined

using an established option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller

market transaction.

In addition, we account for forfeitures as they occur.

derivative liabilities.

On 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 in the event of tender

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.

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, 2023:

Issuance date assumptions

December 31, 2023 assumptions

Volatility - range

Risk-free rate

Remaining contractual term

Exercise price

$ 5.50 - 7.50

Common stock issuable under the warrants

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

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

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

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

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

The Company reassesses the classification of its derivative instruments

at each balance sheet date.

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

the date of the event that caused the reclassification.

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

conversion options and warrants.

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

for Income Taxes.

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

As of December 31, 2023, cumulative valuation allowances in the amount

of $42,070,000 were recorded in connection with the net deferred income tax assets.

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

by $ 7,870,000 to a balance of $42,070,000

to fully reserve our deferred tax assets at December 31, 2023.

We determined that it was appropriate to continue to provide a full valuation

reserve on our net deferred tax assets as of December 31, 2023, because of the overall net operating loss carryforwards available.

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

our ability to realize these assets.

To the extent we determine that the realization of some or all of these benefits is more likely

than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed.

Such a reversal would

be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’

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

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

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

We determined

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

of the overall net operating loss carryforwards available.

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

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

To the extent we determine that the

realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the

valuation allowance will be reversed.

Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions

for stock option exercises, an increase in shareholders’ equity.

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

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income not be realized.

Preferred Stock.

Preferred stock may be classified as a liability, temporary equity (i.e., mezzanine equity) or permanent equity.

In order 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 is irrelevant.

If no redemption features exist, or if a contingent redemption feature

is within the Company’s control, the preferred stock would be considered equity.

and Seasonality

has not materially affected us during the past fiscal year.

however, we believe that it is likely to have significant impact to all of

our operating segments in 2024 and beyond.

We do not believe that our business is seasonal in nature;

however, we generally generate

higher revenues during the second half of the calendar year compared to the first half.

and Qualitative Disclosures About Market Risk.

Statements and Supplementary Data.

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

business is seasonal in nature, however;

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

the calendar year than in the first half.

Quantitative and Qualitative Disclosures About Market

Financial Statements and Supplementary Data.

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

in and Disagreements with Accountants on Accounting and Financial Disclosure.

Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis