What changed in this filing

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Item 9A. Controls and Procedures

2025-05-02 compared with 2024-04-01 · 2306 added, 1956 removed, 1658 unchanged (72% of the section changed)

and Procedures.

Controls and Procedures.

Regarding the Effectiveness of Disclosure Controls and Procedures

the supervision and with the participation of our management, including our principal executive officer and principal financial

officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures to

provide reasonable assurance of achieving the control objectives, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.

Based on their evaluation as of December 31, 2023, the end of the period covered by this Annual Report on Form 10-K, our principal

executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a

reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Exchange

Act, including this Annual Report on Form 10-K, was recorded, processed, summarized and reported within the time periods specified

in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer

and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

the supervision and with the participation of our management, including our principal executive officer and principal financial officer,

we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures to provide reasonable

assurance of achieving the control objectives, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.

Based on their evaluation

as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal

financial officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level to ensure

that the information required to be disclosed in reports filed or submitted under the Exchange Act, including this Annual Report on Form

10-K, was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was

accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate

to allow timely decisions regarding required disclosure.

Report on Internal Control Over Financial Reporting

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and procedures that:

to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance

with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations

of our management and directors;

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that

could have a material effect on the financial statements.

Pertain to the maintenance

of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance

that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted

accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management

and directors;

Provide reasonable assurance

regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material

effect on the financial statements.

internal control systems, no matter how well designed, have inherent limitations.

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control over financial reporting is not effective.

Material Weakness

In connection

with the audit of our consolidated financial statements as of December 31, 2023 and 2022, we identified a material weakness in our internal

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

constitute a material weakness.

Remediation Activities

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

In connection with the audit of our consolidated financial statements as

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

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

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

We have implemented,

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in Internal Control Over Financial Reporting

have completed the process of integrating our recent business acquisition, which was acquired at the beginning of 2022, into our overall

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

internal control over the financial reporting process.

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appropriate design and operating effectiveness.

Other Information.

of the Company’s directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement

during the Company’s fiscal quarter ended December 31, 2024.

Regarding Foreign Jurisdictions that Prevent Inspections.

Executive Officers and Corporate Governance.

names of the members of our Board of Directors and certain information about them as of the date of this Annual Report on Form 10-K are

set forth below:

Disclosure Regarding

Foreign Jurisdictions that Prevent Inspections.

Directors, Executive

Officers and Corporate Governance.

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

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

of Board of Director Member (4)

and Chief Executive Officer

President and Chief Executive Officer

Richie (1)(2)(3)

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Chairman of Audit Committee

Anderson (1)(2)(3)

of Executive Officer (4)

Officer Since

President, Chief Financial Officer, Treasurer & Secretary

Operating Officer

of Audit Committee

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of Nominating Committee

address of each executive officer and director listed is 14001 Marshall Drive, Lenexa, Kansas 66215.

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

Blvd., Overland Park, Kansas 66211.

Board has determined that Messrs.

Richie, and Daughtery are “independent directors,” as defined by the rules and

listing standards of The Nasdaq Stock Market LLC (“Nasdaq”).

In making this determination, the Board considered the transactions

and relationships disclosed under “Certain Relationships and Related Transactions” below.

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

From March 1992 to June

Richie, Daughtery and Anderson are “independent directors,” as defined by the rules and

listing standards of Nasdaq.

In making this determination, the Board considered the transactions and relationships disclosed under “Certain

Relationships and Related Transactions” below.

Information - Directors

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

From March 1992

to June 2005, Mr.

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

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

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

subsidiaries.

He resigned from all his positions with AMGAS in June 2005, except Chairman, but was reappointed President in October 2006.

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

acquisitions, and financing for corporations in the Midwest.

From 1990 to 1991, Mr.

Ross was employed by Duggan Securities, Inc., an

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

From 1989 to 1990, he was employed by Stifel,

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

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

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

AMGAS’s subsidiaries.

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

in October 2006.

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

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

From 1990 to 1991, Mr.

Ross was self-employed

as a business consultant.

Ross was employed by Duggan

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

From 1989 to 1990, he

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

Ross was self-employed as a business consultant.

From 1985 to 1987, Mr.

Ross was President and founder of Kansas Microwave, Inc., which developed a radar detector

From 1981 to 1985, he was employed by Birdview Satellite Communications, Inc., which manufactured and marketed home satellite

television systems, initially as a salesman and later as National Sales Manager.

Ross estimates he devoted most of his time to Digital

Ally and the balance to AMGAS in 2020.

In late 2007, AMGAS sold a substantial portion of its operating assets and has not required a

substantial amount of his time since such point.

Ross holds no public company directorships other than with the Company and AMGAS

and has not held any others during the previous five years.

Ross was President and founder of Kansas Microwave,

Inc., which developed a radar detector product.

From 1981 to 1985, he was employed by Birdview Satellite Communications, Inc., which

manufactured and marketed home satellite television systems, initially as a salesman and later as National Sales Manager.

Ross estimates

he devoted most of his time to Digital Ally and the balance to AMGAS in 2020.

In late 2007, AMGAS sold a substantial portion of its operating

assets and has not required a substantial amount of his time since such point.

Ross holds no public company directorships other than

with the Company and AMGAS and has not held any others during the previous five years.

The Company believes that Mr.

Ross’s broad entrepreneurial, financial,

and business expertise and his experience with micro-cap public companies and his role as President and Chief Executive Officer give

him the qualifications and skills to serve as a Director.

entrepreneurial, financial, and business expertise and his experience with micro-cap public companies and his role as President and Chief

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

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

He is also the Chairman of the

Compensation Committee and Nominating Committee and a member of the Audit Committee.

He is also the Chairman of the Compensation

Committee and Nominating Committee and a member of the Audit Committee.

Since June 1, 1999, Mr.

Richie has been a

director of AMGAS.

Richie has been a director of AMGAS.

Additionally, until 2017, Mr.

Richie served as a member of the board of directors of Columbia Mutual Funds, (or

mutual fund companies acquired by or merged with Columbia Mutual Funds), a family of investment companies managed by Ameriprise

Financial, Inc.

From 2004 to 2015, he was of counsel to the Detroit law firm of Lewis & Munday, P.C.

Richie served as a member of the board of directors of Columbia Mutual Funds (or mutual fund companies

acquired by or merged with Columbia Mutual Funds), a family of investment companies managed by Ameriprise Financial, Inc.

2015, he was of counsel to the Detroit law firm of Lewis & Munday, P.C.

From 2007 to 2014, Mr.

Richie served as a member of the board of directors of OGE Energy Corp.

He holds no other public directorships and has not held any

others during the previous five years.

Until 2019, Mr.

Richie served as the Vice-Chairman of the Board of Trustees and Chairman of

the Compensation Committee for the Henry Ford Health System, in Detroit.

Richie was formerly Vice President of Chrysler

Corporation and General Counsel for automotive legal affairs, where he directed all legal affairs for its automotive operations from

1986 until his retirement in 1997.

Before joining Chrysler, he was an associate with the New York law firm of White & Case

(1973-1978) and served as director of the New York office of the Federal Trade Commission (1978-1983).

Richie served as a member of the board

of directors of OGE Energy Corp.

He holds no other public directorships and has not held any others during the previous five years.

Richie served as the Vice-Chairman of the Board of Trustees and Chairman of the Compensation Committee for the Henry Ford Health

System, in Detroit.

Richie was formerly Vice President of Chrysler Corporation and General Counsel for automotive legal affairs,

where he directed all legal affairs for its automotive operations from 1986 until his retirement in 1997.

Before joining Chrysler, he

was an associate with the New York law firm of White & Case (1973-1978) and served as director of the New York office of the Federal

Trade Commission (1978-1983).

Richie received a B.A.

from City College of New York, where he was valedictorian, and a J.D.

from the New York University School of Law, where he was

awarded an Arthur Garfield Hays Civil Liberties Fellowship.

The Company believes that Mr.

Richie’s extensive experience as a

lawyer and as an officer or director of public companies gives him the qualifications and skills to serve as a Director.

Duke Daughtery joined the board of directors of Digital Ally in October 2023.

He serves as Chairman of the Audit Committee

and is the Board’s financial expert.

New York University School of Law, where he was awarded an Arthur Garfield Hays Civil Liberties Fellowship.

The Company believes that

Richie’s extensive experience as a lawyer and as an officer or director of public companies gives him the qualifications and

skills to serve as a Director.

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

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

From 1987 to 2019, Mr.

Daughtery was an assurance partner and audit practice leader with

Grant Thornton and Deloitte & Touche in Kansas City.

Daughtery was instrumental in the significant growth of Grant

Thornton’s Kansas City audit practice.

Daughtery served numerous companies ranging from high growth private equity backed

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

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

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

considers Mr.

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

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

Daughtery served numerous companies

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

ranging from smaller public companies to the Fortune 500.

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

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

and capital transactions.

The Company considers Mr.

Daughtery to be an audit committee financial expert.

Daughtery obtained his Bachelor of Arts in Accounting and in

Management and Business Administration from Saint Ambrose University.

Daughtery holds no public company directorships other than

with the Company and has only held the forementioned position in Digital Ally during the previous five years.

Daughtery obtained his Bachelor

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

Daughtery holds no public company

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

From 2019 to 2023, Mr.

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The Company believes that Mr.

Daughtery’s extensive experience as an accountant of

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

Daughtery’s extensive experience

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

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

Anderson has served as

Chief Executive Officer at Alien Audio since 2007.

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

the music industry.

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

Moving to Nashville, Tennessee in 1975, Mr.

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

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

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

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

and Edwin McCain.

From 1991 to 2001 Mr.

Anderson was on tour with Reba McIntire.

In 2007, he founded his own bass guitar

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

His dynamic bass lines have featured on numerous hit

albums, earning him a reputation for innovation and reliability.

His contributions to music have earned him several awards and

accolades, celebrating his technical proficiency and creative approach.

His lasting impact on the music world continues to inspire

both current and future generations of musicians.

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

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

Anderson’s extensive experience in the

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

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

and qualified.

Officers are elected annually and serve at the discretion of the Board of Directors.

There is no family relationship between

any of our directors, director nominees and executive officers.

Officers are elected annually and serve at the discretion of the Board.

There is no family relationship between any of

our directors, director nominees and executive officers.

Board vacancies are filled by a majority vote of the Board.

Information - Executive Officers

Heckman has served as our Chief Financial Officer, Secretary and Treasurer since September 2007.

During the years 2001-2007,

Heckman provided consulting and business investment services to publicly traded and private companies.

He has been involved in the

successful completion of a number of initial public offerings (IPOs), reverse mergers and other transactions;

drafted, filed and achieved

SEC effectiveness for Form SB-2 filings;

assisted in the raising of capital for private companies in a variety of industries;

and developed

multiple private placement memorandums.

From 1983 until 2001, Mr.

Heckman was employed by Deloitte and Touche, LLP, a subsidiary of Deloitte

Touche Tohmatsu, one of the largest auditing, consulting, and financial advisory, risk management, and tax services organizations in

During his 18 years with Deloitte and Touche, LLP, including six years as Accounting and Auditing Partner in the Kansas City

Heckman specialized in IPOs and public reporting entities.

He served as partner in charge of a high-technology and emerging/high-growth

company market segment for cross-discipline marketing efforts, assisted companies in preparing for public offerings and other liquidity

events, and was involved in numerous initial/secondary financings and merger / acquisition transactions for public and private companies.

He is experienced in all facets of SEC financial reporting and compliance matters.

Heckman earned his Bachelor of Arts degree in

Accounting at the University of Missouri - Columbia.

Han has served as Chief Operating Officer since November 2021.

Joining Digital Ally in February 2010, Mr.

Han served as Lead

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

With over two decades of experience in spearheading the

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

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

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

From 2005 to 2010, Mr.

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

From 2004 to 2005, Mr.

Han was employed by WMS Gaming, an electronic game entertainment company, where he worked as Core Software Engineer.

From 2001 to 2003,

he was employed as a Software Engineer by Tellabs, a telecommunication software and hardware solution provider.

Han received his

Master of Science degree in Computer Science at Iowa State University in Ames, Iowa.

in Certain Legal Proceedings

of Directors and Committee Meetings

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

December 31, 2023.

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

he was appointed and served in the fiscal year ended December 31, 2023.

Our directors are expected, absent exceptional

circumstances, to attend all Board meetings and meetings of committees on which they serve and are also expected to attend our

annual meeting of stockholders.

All directors then in office attended the 2023 annual meeting of stockholders.

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

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

fiscal year ended December 31, 2024.

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

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

All directors then in office attended

the 2024 annual meeting of stockholders.

of the Board of Directors

Board of Directors currently has three committees:

Board currently has three committees:

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

Each committee

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

These charters are

also available on the Investor Relations page of our website.

All of our directors, other than our Chairman and Chief Executive Officer,

have met in executive sessions without management present on a regular basis in 2023 and year-to-date 2024.

Each committee has a written

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

These charters are also available on the Investor

Relations page of our website.

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

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

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

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that the SEC requires in our annual proxy statement.

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

The report of the Audit Committee for the year-ended December 31, 2024 was included

in our annual proxy statement for 2024.

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

Nasdaq Rule 5605(a)(2).

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The members of our Audit Committee

Duke Daughtery (Chairman), and Leroy C.

The Board of Directors determined that

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

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

Duke Daughtery (Chairman), Leroy C.

Richie and Charles M.

The Board determined that Mr.

Daughtery qualifies as an “audit

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

and is independent as noted above.

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

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

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

and employees.

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

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

reviewing the performance

objectives and actual performance of our officers;

reviewing the performance objectives

and actual performance of our officers;

administering our stock option and other equity compensation plans;

and reviewing

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

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

listing standards of Nasdaq and SEC rules and regulations.

and reviewing and discussing

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

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

standards of Nasdaq and SEC rules and regulations.

The members of our Compensation Committee are Leroy C.

Richie (Chairman)

Duke Daughtery.

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

during the year ended December 31, 2023.

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

compensation or the compensation of directors.

However, he makes recommendations to the Compensation Committee regarding the amount

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

Richie (Chairman), D.

Daughtery and Charles M.

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

resolutions during the year ended December 31, 2024.

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

of his own compensation or the compensation of directors.

However, he makes recommendations to the Compensation Committee regarding the

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

Committee’s deliberations about such persons’ compensation.

Heckman, our Chief Financial Officer

(“CFO”), also assists the Compensation Committee in its deliberations regarding executive officer, director and employee

compensation.

No other executive officers participate in the determination of the amount or the form of the compensation of

executive officers or directors.

The Compensation Committee does not utilize the services of an independent compensation consultant

to assist in its oversight of executive and director compensation.

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

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

Specific responsibilities include the following:

evaluating the composition, size and governance of our Board of Directors and its committees

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

establishing a policy for considering

stockholder nominees for election to our Board of Directors;

and evaluating and recommending candidates for election to our Board of

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

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

executive officers participate in the determination of the amount or the form of the compensation of executive officers or directors.

The Compensation Committee does not utilize the services of an independent compensation consultant to assist in its oversight of executive

and director compensation.

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

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

Specific responsibilities

include the following:

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

future planning and appointing directors to our committees;

establishing a policy for considering stockholder nominees for election to

and evaluating and recommending candidates for election to our Board.

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

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Accordingly, although diversity

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

the consideration of diversity in identifying director nominees.

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

of diversity in identifying director nominees.

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

1 unchanged sentence

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

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

In its evaluation

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

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

of the Board, and such factors as judgment, independence, character and integrity, age, area of expertise, diversity of experience, length

of service and potential conflicts of interest.

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

In relation to such nomination

process, the Nominating Committee:

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

In its evaluation of director

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

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

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

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

In relation to such nomination process,

the Nominating Committee:

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

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an understanding of the fiduciary responsibilities that are

required of a member of the Board of Directors;

required of a member of the Board;

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

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

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

be nominated to the Board, and the Board of Directors determines the nominees after considering the recommendation and report of the

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

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

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

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

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The members of our Nominating Committee are Leroy C.

Richie (Chairman) and D.

Duke Daughtery.

Richie (Chairman), D.

Duke Daughtery and Charles M.

of Directors’ Role in the Oversight of Risk Management

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

In fulfilling its risk oversight role, our Board of

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

Our Board of Directors believes

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

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

integrate consideration of risk and risk management into our business decision-making;

and (iv) include policies and procedures that

adequately transmit necessary information regarding material risks to senior executives and, as appropriate, to the Board or

relevant committee.

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

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

In this role,

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

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

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

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

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

This is principally accomplished through Audit Committee reports

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

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

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

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

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

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

In fulfilling its risk oversight role, our Board focuses

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

Our Board believes that an effective risk management

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

(ii) implement appropriate risk management strategies

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

(iii) integrate consideration of risk and risk management

into our business decision-making;

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

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

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

Accordingly, the Audit Committee

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

In this role, the Audit Committee receives reports

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

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

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

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

system and the most significant risks that we face.

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

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

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

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

Our risk management

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

As a result, the Board and

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

any significant potential vulnerability.

Leadership Structure

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

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

be an employee.

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

best interest of us and our stockholders.

The Board of Directors believes that Mr.

Ross’s service as both Chief Executive Officer

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

Ross possesses detailed and in-depth knowledge of the

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

Richie, the lead independent

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

His combined role enables decisive

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

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

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

To this end, the

Board has appointed Mr.

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

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

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

The Board believes that Mr.

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

us and our stockholders.

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

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

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

time and attention are focused on the most critical matters.

His combined role enables decisive leadership, ensures clear accountability,

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

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

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

To this end, the Board has appointed

Richie as the lead independent director.

The independent directors meet regularly in executive sessions at which

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

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

and the lead independent director chairs those sessions.

As the lead independent director, Mr.

Richie calls meetings

of the independent directors as needed;

Richie calls meetings of the independent

directors as needed;

sets the agenda for meetings of the independent directors;

presides at meetings of the independent

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

and management;

presides at meetings of the independent directors;

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

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

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

and oversees the directors’ evaluation of

the Board’s overall performance.

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

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

board member leadership and each of the directors, other than Mr.

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

and oversees the directors’ evaluation of the Board’s

overall performance.

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

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

leadership and each of the directors, other than Mr.

Ross, is independent.

Our Board of Directors believes that independent

directors provide effective oversight of management.

Our Board believes that the independent directors provide

effective oversight of management.

Communications with the Board of Directors

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

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

Digital Ally, Inc., attention:

Corporate Secretary, 14001 Marshall

Drive, Lenexa, Kansas 66215.

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

and the communication will be forwarded as appropriate.

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

Stockholders who would like their

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

for Director Recommendations and Nominations

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

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

accordance with our Bylaws.

A director candidate recommended by our stockholders will be considered in the same manner as a nominee recommended

by a Board member, management or other sources.

In addition, a stockholder may nominate a person directly for election to the Board of

Directors at an annual meeting of stockholders, provided the stockholder meets the requirements set forth in our Bylaws.

We do not pay

a fee to any third party to identify or evaluate or assist in identifying or evaluating potential nominees.

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

the Company’s bylaws (the “Bylaws”).

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

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

In addition, a stockholder may nominate a person

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

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

Recommendations for Director Nominations .

Stockholder recommendations for director nominations may be submitted to the

Company at the following address:

Stockholder recommendations for director nominations may be submitted to

the Company at the following address:

Digital Ally, Inc., Attention:

Corporate Secretary, 14001 Marshall Drive, Lenexa, Kansas 66215.

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

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

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

The submission must be accompanied by a written consent of the

individual to stand for election if nominated by the Board of Directors and to serve if elected and to cooperate with a background check.

Corporate Secretary, 6366 College Blvd., Overland

Park, Kansas 66215.

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

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

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

The submission must be accompanied by

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

Nominations of Directors.

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have in such business or with such nominee.

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

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

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

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

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

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of Ethics and Conduct

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

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

ethical standards.

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

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

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

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

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

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

such reporting person:

of Late Reports

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Ross’ Form 4 was not filed on timely basis.

Trading Arrangements and Policies

have a written insider trading policy that applies to our directors, officers, employees and contractors, including our principal executive

officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.

to disclose future amendments to such policy, or any waivers of its requirements, applicable to any principal executive officer, principal

financial officer, principal accounting officer or controller, or persons performing similar functions or our directors on our website

identified above or in a current report on Form 8-K that we would file with the SEC.

directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy

or sell shares of our common stock on a periodic basis.

Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established

by the director or officer when entering into the plan, without further direction from them.

The director or officer may amend a Rule

10b5-1 plan in some circumstances and may terminate a plan at any time.

Our directors and executive officers also may buy or sell additional

shares outside of a Rule 10b5-1 plan when they are not in possession of material non-public information subject to compliance with the

terms of our insider trading policy.

Compensation.

following table presents information concerning the total compensation of the Company’s Chief Executive Officer (“CEO”),

Chief Financial Officer (“CFO”) and Chief Operating Officer (“COO”) and collectively with the CEO and the CFO,

the “Named Executive Officers”) for services rendered to the Company in all capacities for the years ended December 31, 2023

and 2022, as required by Item 402(m)(2) of Regulation S-K.

The Company’s Policies and Practices Related

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

We do not have any formal policy that requires the

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

We do not grant equity awards in anticipation of the

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

release of such information based on award grant dates.

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

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

commencement of employment or promotion effective date).

During the year ended December 31, 2024, there were

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

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

with the Securities and Exchange Commission.

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

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

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

Compensation Table

Name and principal position

Stock awards ($)

Option awards

All other compensation ($) (2)

$ 374,500 (3)

Chairman and CEO

Chairman, CEO and President

CFO, Treasurer and Secretary

$ 107,000 (5)

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

to Note 14 to the consolidated financial statements for a further description of the awards and the underlying assumptions utilized to

determine the amount of grant date fair value related to such grants.

Amounts included in all other compensation include the following items:

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

included in all other compensation include the following items:

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

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We are required to provide a 100% matching contribution

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

deferral between 4% and 5%.

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

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

elective deferral between 4% and 5%.

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

contributions;

(ii) receives Company paid healthcare insurance;

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

and (iv) receives

Company paid life, accident and disability insurance.

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

See “All Other Compensation Table” below.

Stock awards include the following restricted stock granted during 2022 to Mr.

17,500 shares at $21.40 per share that vest 50%

on January 7, 2023 and 50% on January 7, 2024, subject to Mr.

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

Stock awards include the following restricted stock granted during 2022 to Mr.

3,750 shares at $21.40 per share that on January

7, 2023, subject to Mr.

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

Stock awards include the following restricted stock granted during 2022 to Mr.

5,000 shares at $21.40 per share that vest 20% annually

on the anniversary of January 7 from 2023 to 2027, subject to Mr.

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

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

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

Stock awards include the following restricted stock granted during 2024

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

Ross remaining an employee of the Company

at that point in time.

Stock awards include the following restricted stock granted during 2024

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

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

Han remaining an employee

of the Company at that point in time.

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

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

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

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

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

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

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

April 1, 2023.

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

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

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

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Other Compensation Table

Name and Principal Position

401(k) Plan contribution by Company

paid healthcare insurance

Flexible & health savings account contributions by Company

paid life, accident & disability insurance

Other Contractual payments

Chairman and CEO

contributions

Chairman, CEO and President

CFO, Treasurer and Secretary

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

January 7, 2022, the Compensation Committee restored the annual base salaries of Stanton E.

Ross, Chief Executive Officer, Thomas J.

Heckman, Chief Financial Officer, Treasurer and Secretary, and Peng Han, Chief Operating Officer, at $300,000, $120,000, and $250,000,

respectively for 2022.

January 10, 2023, the Compensation Committee restored the annual base salaries of Stanton E.

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

salaries of Stanton E.

Ross, Chief Executive Officer, Thomas J.

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

respectively for 2023.

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

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

However, the officers voluntarily reduced their

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

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

Base salary adjustments will be

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

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

role and responsibility with us.

Options and Restricted Stock Awards .

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

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

our performance.

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

to certain executive’s responsibilities with us.

The Compensation Committee determined stock option and restricted stock

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

us, as well as our performance.

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

directly related to certain executive’s responsibilities with us.

The Compensation Committee determined that Messrs.

Ross, Heckman, and Han were

eligible for awards of stock options or restricted stock in 2022 based on their performance.

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

Refer to the “Grants of Plan-Based

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

The Compensation Committee determined to award bonuses to each of the executive officers in 2023 and 2022, as set forth in the

foregoing table.

Refer to the “Summary Compensation Table” above for the bonuses paid to Messrs.

Ross, Heckman, and Han in

2023 and 2022.

In fiscal 2023, Messrs.

Ross, Heckman, and Han were eligible for bonuses of up to $250,000, $120,000, and $250,000, respectively.

On January 31, 2024, the Compensation Committee awarded Stanton

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

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

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

an officer on such dates.

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

Refer to the “Summary Compensation Table” above.

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

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

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

elective deferrals between 4% and 5%.

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

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

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

deferrals between 4% and 5%.

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

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

As of December 31, 2023, a

total of 66,946 shares of our Common Stock were held in the 401(k) Plan.

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

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

We have no profit-sharing plan in place for our employees.

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

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

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

We have no profit-sharing plan in place for our

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

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

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of Plan-Based Awards

All other stock

of shares of stock

Exercise or base

price of option

Grant date fair

value of stock

All other stock awards:

Number of shares of stock or units:

Exercise or base price of option awards

Grant date fair value of stock awards

Chairman and CEO

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

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

period (50% on January 10, 2024 and 50% on January 10, 2025) contingent upon whether the individual is still employed by us at that point.

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

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

period (20% on each anniversary of January 10 from 2024 to 2028) contingent upon whether the individual is still employed by us at that

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

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

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

Please refer to Note 16

to the consolidated financial statements that appear in our Annual Report on Form 10-K, filed with the SEC on March 31, 2023, for a further

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

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

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payment due based

upon successful

completion of

upon successful completion of transaction

Severance payment

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

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

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

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

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

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

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

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

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

of Directors;

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

the approval of the Board of Directors;

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

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

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

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

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

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

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

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

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

by the Company’s current Board;

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

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

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

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

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

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Option Awards

of securities underlying unexercised options (#) exercisable (1)

of securities underlying unexercised options (#) unexercisable

incentive plan awards:

Number of securities underlying unexercised options (#) exercisable (1)

Number of securities underlying unexercised options (#) unexercisable

Equity incentive plan awards:

Number of securities underlying unexercised unearned options (#)

Option exercise price ($)

expiration date

of shares or units of stock that have not vested (1)

Option expiration date

Number of shares or units of stock that have not vested (1)

Market value of shares or units of stock that have not vested (2)

incentive plan awards:

Equity incentive plan awards:

Number of unearned shares, units or other rights that have not vested

incentive plan awards:

Equity incentive plan awards:

Market or Payout value of unearned shares, units or other rights that have not vested

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Option Awards

Number of Shares acquired realized on exercise (#)

Shares acquired realized on exercise

Value realized

on exercise ($)

Number of Shares acquired on vesting

Value on vesting

Chairman and CEO

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on the closing market price of our common stock of $2.13 on January 31, 2024, the date of vesting for 3,000 shares of common stock,

and the closing market price of our Common Stock of $4.62 on March 31, 2023, the date of vesting for 3,750 shares of Common Stock

on the closing market price of our Common Stock of $4.78 on January 7, 2023, the date of vesting for 1,000 shares of Common Stock

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

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

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

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the administrator and therefore cannot be determined in advance.

The Board of Directors’ policy in 2023 was to grant officers an

award of 17,500 restricted shares of Common Stock to our CEO and 3,750 restricted shares of Common Stock to our CFO/Treasurer and each

non-employee director an award of options to purchase 5,000 shares of Common Stock, all subject to vesting requirements.

The Board’s policy in 2024 was to grant officers an award of 20,000

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

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

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

ended December 31, 2024 and (b) the average per share exercise price of such options.

Options and Restricted Stock Grants

Share Exercise

Name of Individual or Group

Number of Restricted

Shares of Common

Stock Granted

Share Exercise

Ross, Chairman of the Board of Directors & CEO

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All employees who are not executive officers, as a group

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

on the Board of Directors in 2023, including on the Audit, Nominating and Compensation Committees.

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

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

compensation for the year ended December 31, 2024 was as follows:

Fees earned or paid in

Fees earned or paid in cash

Option awards

Ross, Chairman of the Board of Directors (1)

Duke Daughtery

D Duke Daughtery (2)

Charles M Anderson (3)

a Named Executive Officer, Mr.

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services as a director.

November 17, 2023, our board of directors adopted a clawback policy (the “Clawback Policy”) permitting the Company to

seek the recovery of incentive compensation received by any of the Company’s current and former executive officers (as

determined by the board in accordance with Section 10D of the Exchange Act) and such other senior executives/employees who may from

time to time be deemed subject to the Clawback Policy by the board (collectively, the “Covered Executives”).

to be recovered will be the excess of the incentive compensation paid to the Covered Executive based on the erroneous data over the

incentive compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined

by the board.

If the board cannot determine the amount of excess incentive compensation received by the Covered Executive directly

from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect

of the accounting restatement.

Refer to Exhibit 97 of this Annual Report for the Company’s Clawback Policy.

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

following table sets forth, as of April 1, 2024, information regarding beneficial ownership of our Common Stock for:

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

The amounts shown represent the respective Director’s

accrued but unpaid fees for the first quarter of 2024.

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

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

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

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

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

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

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

The amount to be recovered will be the excess

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

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

If the board cannot determine

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

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

Stock Options Held by Directors

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

Equity Awards at Fiscal Year-End

unexercisable

Chairman, CEO and President

Lead Outside Director

D Duke Daughtery

Charles M Anderson

Versus Performance

following table sets forth compensation information for our Chief Executive Officer, Stanton E.

Ross, referred to in the tables below

as the PEO, and our Chief Financial Officer, Thomas J.

Heckman, and our Chief Operating Officer, Peng Han, referred to in the tables

below as the Non-PEO NEOs, for purposes of comparing their respective compensation to our net loss, calculated in accordance with SEC

regulations, for the fiscal years ended December 31, 2024 and 2023.

Table Total for

Actually Paid

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

Ross in the Summary Compensation Table for the fiscal

years ended December 31, 2024 and 2023.

dollar amounts reported represent the amount of “compensation actually paid”, as computed in accordance with SEC rules.

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

Ross during the applicable year, but also include

(i) the year-end fair value of equity awards granted during the reported year that are outstanding and unvested, (ii) the change

in the fair value of equity awards that were outstanding and unvested at the end of the prior year, measured through the date on

which the awards vested, or through the end of the reported fiscal year, and (iii) the fair value of equity awards that were issued

and vested during the reported fiscal year.

See the table under “PEO Equity Award Adjustment Breakout” below for further

dollar amounts reported are the average total compensation reported for our Non-PEO NEO in the Summary Compensation Table for the

fiscal years ended December 31, 2024 and 2023.

dollar amounts reported represent the average amount of “compensation actually paid”, as computed in accordance with

SEC rules, for our Non-PEO NEOs.

The dollar amounts reported are the average total compensation reported for our Non-PEO NEOs in

the Summary Compensation Table for the fiscal years ended December 31, 2024 and 2023, but also include (i) the year-end fair value

of equity awards granted during the reported year that are outstanding and unvested, (ii) the change in the fair value of equity

awards that were outstanding and unvested at the end of the prior year, measured through the date on which the awards vested, or

through the end of the reported fiscal year, and (iii) the fair value of equity awards that were issued and vested during the reported

See the table under “Non-PEO NEOs Equity Award Adjustment Breakout” below for further information.

Equity Award Adjustment Breakout

calculate the amounts in the “Compensation Actually Paid to PEO” column in the table above, the following amounts were deducted

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

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

NEOs Equity Award Adjustment Breakout

calculate the amounts in the “Compensation Actually Paid to Non-PEO NEOs” column in the table above, the following amounts

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

Reported Value of Equity

Fair Value as of Year End

for Awards Granted

Fair Value Year over Year

Increase or Decrease in

Fair Value Increase or Decrease from Prior Year end for Awards

Actually Paid

the amounts are average for Non-PEO NEOs.

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

Security Ownership of

Certain Beneficial Owners and Management and Related Stockholder Matters.

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

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

otherwise indicated, the address of each beneficial owner listed in the table below is c/o Digital Ally, Inc., 14001 Marshall Drive.,

Lenexa, KS 66215.

Unless otherwise indicated, the address of each beneficial owner listed

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

Number of Shares of Common

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Duke Daughtery

All executive officers and directors as a group (five individuals)

less than 1%.

on 2,800,754 shares of Common Stock issued and outstanding as of April 1, 2024 and, with respect only to the ownership by all executive

officers and directors as a group.

All executive officers and directors as a group (six individuals)

Represents less than 1%.

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

executive officers and directors as a group.

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

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

Heckman’s total shares of Common Stock include 66,946 shares of Common Stock held in the Company’s 401(k) Plan (on December

31, 2023) as to which Mr.

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

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

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

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

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

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

Authorized for Issuance Under Equity Compensation Plans

Board of Directors adopted the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”) on September 1, 2005.

Plan authorized us to reserve 15,625 shares of our Common Stock for issuance upon exercise of options and grant of restricted stock awards.

The 2005 Plan terminated in 2015 with 1,078 shares of Common Stock reserved for awards that are now unavailable for issuance.

Stock options

granted under the 2005 Plan that remain unexercised and outstanding as of December 31, 2023 total 284.

January 17, 2006, our Board adopted the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”).

The 2006 Plan authorizes

us to reserve 9,375 shares of Common Stock for future grants under it.

The 2006 Plan terminated in 2016 with 2,739 shares of Common Stock

reserved for awards that are now unavailable for issuance.

Stock options granted under the 2006 Plan that remain unexercised and outstanding

as of December 31, 2023 total 531.

January 24, 2007, our Board adopted the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”).

The 2007 Plan authorizes

us to reserve 9,375 shares of Common Stock for future grants under it.

The 2007 Plan terminated in 2017 with 4,733 shares of Common Stock

reserved for awards that are now unavailable for issuance.

There are no stock options granted under the 2007 Plan that remain unexercised

and outstanding as of December 31, 2023.

January 2, 2008, our Board adopted the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”).

The 2008 Plan authorizes

us to reserve 6,250 shares of Common Stock for future grants under it.

The 2008 Plan terminated in 2018 with 2,025 shares of Common Stock

reserved for awards that are now unavailable for issuance.

There are no stock options granted under the 2008 Plan that remain unexercised

and outstanding as of December 31, 2023.

March 18, 2011, our Board adopted the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”).

The 2011 Plan authorizes

us to reserve 3,125 shares of Common Stock for future grants under it.

At December 31, 2023, there were 438 shares of Common Stock reserved

for awards available for issuance under the 2011 Plan.

Stock options granted under the 2011 Plan that remain unexercised and outstanding

as of December 31, 2023 total 50.

March 22, 2013, our Board adopted the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”).

The 2013 Plan was amended

on March 28, 2014 and November 14, 2014 to increase the number of shares of Common Stock authorized and reserved for issuance under the

2013 Plan to a total of 15,000.

At December 31, 2023, there were no shares of Common Stock reserved for awards available for issuance

under the 2013 Plan.

Stock options granted under the 2013 Plan that remain unexercised and outstanding as of December 31, 2023 total

March 27, 2015, our Board of Directors adopted the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”).

Plan was amended on February 25, 2016 and May 31, 2017 to increase the number of shares of Common Stock authorized and reserved for issuance

under the 2015 Plan to a total of 62,500.

At December 31, 2023, there were no shares of Common Stock reserved for awards available for

issuance under the 2015 Plan, as amended.

Stock options granted under the 2015 Plan that remain unexercised and outstanding as of December

31, 2023 total 6,500.

April 12, 2018, our Board of Directors adopted the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”).

Plan was amended on May 21, 2019 to increase the number of shares of Common Stock authorized and reserved for issuance under the 2018

Plan to a total of 87,500.

At December 31, 2023, there were 31,275 shares of Common Stock reserved for awards available for issuance

under the 2018 Plan.

Stock options granted under the 2018 Plan that remain unexercised and outstanding as of December 31, 2023 total

Board of Directors adopted the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”) on June 30, 2020 and the Company’s

stockholders approved the 2020 Plan at the Annual Meeting held on September 9, 2020.

The Company’s stockholders approved an amendment

to the 2020 Plan at the Annual Meeting held on June 22, 2021 which increased the number of shares of Common Stock authorized and reserved

for issuance under the 2020 Plan to a total of 125,000.

At December 31, 2023, there were 12,042 shares of Common Stock reserved for awards

available for issuance under the 2020 Plan.

Stock options granted under the 2020 Plan that remain unexercised and outstanding as of December

31, 2023 total 29,000.

Board of Directors adopted the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”) on October 28, 2022 and the

Company’s stockholders approved the 2022 Plan at the Annual Meeting held on December 7, 2022.

The number of shares of Common Stock

authorized and reserved for issuance under the 2022 Plan totals 125,000.

At December 31, 2023, there were no shares of Common Stock reserved

for awards available for issuance under the 2022 Plan.

Stock options granted under the 2022 Plan that remain unexercised and outstanding

as of December 31, 2023 total 125,000.

2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan, 2020 Plan, and 2022 Plan are collectively referred

to as the “Plans.”

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

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

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

The Compensation Committee of our Board (the “Compensation

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

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

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

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

Stock as of the date of grant.

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

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

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

Non-statutory stock options may have

exercise prices as determined by our Compensation Committee.

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

A restricted stock award is a grant of shares

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

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

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

a total of 408,750 shares of Common Stock issued or to be issued underlying the awards under the Plans.

following table sets forth certain information regarding the Plans as of December 31, 2023:

Compensation Plan Information

Securities Authorized for Issuance Under Equity

Compensation Plans

As of December 31, 2024, the Company

had adopted ten separate stock option and restricted stock plans:

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

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

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

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

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

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

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

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

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

Stock option grants.

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

Option awards have been

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

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

These option awards typically provide for accelerated vesting

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

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

its Plans with the SEC.

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

The Plans authorize us to grant

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

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

stock options and restricted stock.

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

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

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

The Plans allow for the grant

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

Incentive stock options

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

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

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

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

Non-statutory stock options may have exercise prices as determined

by our Compensation Committee.

The Compensation Committee is

also authorized to grant restricted stock awards under the Plans.

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

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

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

We have filed various registration

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

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

The following table sets forth

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

Equity Compensation Plan Information

Plan category

5 unchanged sentences

Total all plans

Relationships and Related Transactions, and Director Independence.

2023, a trust, the beneficiaries of which are the Chief Executive Officer of TicketSmarter, and his spouse, contributed cash in the

amount of $2,700,000 to support TicketSmarter’s operations and to repay approved debts and obligations of TicketSmarter in

exchange for the TicketSmarter Related Party Note (the “TickerSmarter Related Party Note”).

The TicketSmarter Related Party Note

bears interest of 13.25% per annum with weekly repayments of the principal amount of $54,000.00 each, together with accrued

interest, for fifty weeks, or until the principal is paid in full, commencing on January 2, 2024.

The use of proceeds of the

TicketSmarter Related Party Note was 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.

Accountant Fees and Services.

Certain Relationships

and Related Transactions, and Director Independence.

Transactions with Managing Member of Nobility

The Company accrued reimbursable

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

Total management fees

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

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

Transactions with Related Party of TicketSmarter

On September 22, 2023, a trust,

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

TicketSmarter to support TicketSmarter’s operations.

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

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

The TicketSmarter Related

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

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

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

respectively.

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

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

of operations.

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

On August 19, 2024, the parties

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

weeks plus interest.

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

The amendment was determined to be a modification

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

No payments have been made to date in 2025.

Company Related Party Note

On August 22, 2024, Digital Ally’s

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

In addition, on October 24,

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

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

The Company Related

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

As of December 31, 2024,

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

Principal Accountant

Fees and Services.

and Related Fees

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

6 unchanged sentences

Audit-Related

Consists of fees billed for assurance and related services that are reasonably related to the performance of the

audit or review of our financial statements and are not reported under “Audit Fees.” These services include employee benefit

plan audits, consents issued for certain filings with the SEC, accounting consultations in connection with acquisitions, attest services

that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.

Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit

or review of our financial statements and are not reported under “Audit Fees.” These services include employee benefit plan

audits, consents issued for certain filings with the SEC, accounting consultations in connection with acquisitions, attest services that

are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.

Tax fees consist of fees billed for professional services related to tax compliance, tax advice and tax planning.

2 unchanged sentences

Consists of fees for products and services other than the services reported above.

Policy of Services Performed by Independent Registered Public Accounting Firm.

The Audit Committee’s policy is to pre–approve

all audit and non–audit related services, tax services and other services.

Pre–approval is generally provided for up to one

year, and any pre–approval is detailed as to the particular service or category of services and is generally subject to a specific

The Audit Committee has delegated the pre–approval authority to its chairperson when expedition of services is necessary.

The independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding

the extent of services provided by the independent registered public accounting firm in accordance with this pre–approval and the

fees for the services performed to date.

and Financial Statement Schedules.

following documents are filed as part of this Annual Report on Form 10-K:

Financial Statements :

consolidated financial statements required to be included in Part II, Item 8, Financial Statements and Supplementary Data, begin

on Page F-1 and are submitted as a separate section of this Annual Report on Form 10-K.

Audit Committee’s practice is to consider and approve in advance all proposed audit and non-audit services to be provided by our

independent registered public accounting firm.

All the fees shown above were pre-approved by the Audit Committee.

Exhibits and Financial

Statement Schedules.

schedules are omitted because they are not applicable or are not required, or because the required information is included in the

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

The following documents

are filed as part of this Annual Report on Form 10-K:

Consolidated Financial

The consolidated financial

statements required to be included in Part II, Item 8, Financial Statements and Supplementary Data, begin on Page F-1 and are submitted

as a separate section of this Annual Report on Form 10-K.

Financial Statement

All schedules are omitted

because they are not applicable or are not required, or because the required information is included in the consolidated financial

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

Description of Exhibit

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

and DGLY Subsidiary.

Agreement and Plan of Merger, dated June 1, 2023, by and among Clover Leaf Capital Corp., CL Merger Sub, Inc., Yntegra Capital Investments LLC, in the capacity as the Purchaser Representative, Kustom Entertainment, Inc.

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

and Digital Ally, Inc.

Articles of Incorporation.

Articles of Merger.

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

Certificate of Amendment to Articles of Incorporation of Digital Ally, Inc., dated February 6, 2023.

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

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

Amendment to Bylaws

Form of Common Stock Certificate.

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

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

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

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

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

Form of Senior Secured Convertible Note, issued by Digital Ally, Inc., dated April 5, 2023.

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

and the investors named therein.

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

and certain Purchasers, who are signatories thereto.

Form of Warrant of Digital Ally, Inc., dated April 5, 2023.

Revolving Note, dated October 26, 2023, issued by Digital Ally, Inc.to Kompass Kapital Funding, LLC.

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

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

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

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

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

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

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

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

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

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

23 unchanged sentences

and Brickell Key Investments LP.

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

and the Investors.

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

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

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

and the Investors.

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

1 unchanged sentence

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

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

and the warrant holders who are signatories thereto.

Unit Purchase Agreement, dated September 2, 2021.

of Exchange Agreement, dated August 23, 2022.

Form of Exchange Agreement, dated August 23, 2022.

Form of Securities Purchase Agreement, dated October 13, 2022, between Digital Ally, Inc.

and the investors thereto.

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

and the investors named therein.

Form of Securities Purchase Agreement, dated April 5, 2023, between Digital Ally, Inc.

9 unchanged sentences

and its direct and indirect subsidiaries and a lender.

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

and certain Purchasers, who are signatories thereto.

Loan and Security Agreement, dated October 26, 2023, by and between Digital Ally, Inc., Digital Ally Healthcare, LLC, and Kompass Kapital Funding, LLC.

2 unchanged sentences

Lock-Up Agreement, dated June 1, 2023, by and between Clover Leaf Capital Corp., Yntegra Capital Investments, LLC, and Digital Ally, Inc.

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

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

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

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

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

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

and the investors thereto.

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

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

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

and Serenity Now, LLC

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

and the investors thereto.

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

and the investors thereto.

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

and its direct and indirect subsidiaries.

Code of Ethics and Code of Conduct.

22 unchanged sentences

by specific reference in such filing or document.

as an exhibit to the Company’s Annual Report on Form 10KSB for the Year ended December 31, 2007.

as an exhibit to the Company’s October 2006 Form SB-2.

as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2009.

as an exhibit to the Company’s Form 8-K filed June 1, 2011.

as an exhibit to the Company’s Form S-8 filed May 23, 2016.

as an exhibit to the Company’s Form 8-K filed August 25, 2017.

as an exhibit to the Company’s Form 8-K filed April 4, 2018.

as an exhibit to the Company’s Form 8-K filed August 2, 2018.

as an exhibit to the Company’s Registration Statement on Form S-8 filed August 20, 2018.

as an exhibit to the Company’s Form 8-K filed August 5, 2019.

as an exhibit to the Company’s Registration Statement on Form S-8 filed November 16, 2020.

as an exhibit to the Company’s Form 8-K filed January 12, 2021.

as an exhibit to the Company’s Form 8-K filed January 28, 2021.

as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed April 27, 2021.

as an exhibit to the Company’s Form 8-K filed May 3, 2021.

as an exhibit to the Company’s Form 8-K filed June 9, 2021.

as an exhibit to the Company’s Form 8-K filed August 19, 2021.

as an exhibit to the Company’s Form 8-K filed September 9, 2021.

as an exhibit to the Company’s Form 8-K filed August 23, 2022.

as an exhibit to the Company’s Form 8-K filed October 19, 2022.

as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed October 28, 2022.

as an exhibit to the Company’s Form 8-K filed December 8, 2022.

as an exhibit to the Company’s Form 8-K filed February 7, 2023.

as an exhibit to the Company’s Registration Statement on Form S-8 filed February 28, 2023.

as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2022.

as an exhibit to the Company’s Form 8-K filed April 7, 2023.

as an exhibit to the Company’s Form 8-K filed June 6, 2023.

as an exhibit to the Company’s Form 8-K filed October 27, 2023.

Filed as an exhibit to the Company’s Annual Report on Form 10KSB for the Year ended December 31, 2007.

Filed as an exhibit to the Company’s October 2006 Form SB-2.

Filed as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2009.

Filed as an exhibit to the Company’s Form 8-K filed June 1, 2011.

Filed as an exhibit to the Company’s Form S-8 filed May 23, 2016.

Filed as an exhibit to the Company’s Form 8-K filed August 2, 2018.

Filed as an exhibit to the Company’s Registration Statement on Form S-8 filed August 20, 2018.

Filed as an exhibit to the Company’s Registration Statement on Form S-8 filed November 16, 2020.

Filed as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed April 27, 2021.

Filed as an exhibit to the Company’s Form 8-K filed May 3, 2021.

Filed as an exhibit to the Company’s Form 8-K filed June 9, 2021.

Filed as an exhibit to the Company’s Form 8-K filed September 9, 2021.

Filed as an exhibit to the Company’s Form 8-K filed August 23, 2022.

Filed as an exhibit to the Company’s Form 8-K filed October 19, 2022.

Filed as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed October 28, 2022.

Filed as an exhibit to the Company’s Form 8-K filed December 8, 2022.

Filed as an exhibit to the Company’s Form 8-K filed February 7, 2023.

Filed as an exhibit to the Company’s Registration Statement on Form S-8 filed February 28, 2023.

Filed as an exhibit to the Company’s Annual Report on Form 10K for the Year ended December 31, 2022.

Filed as an exhibit to the Company’s Form 8-K filed April 7, 2023.

Filed as an exhibit to the Company’s Form 8-K filed June 6, 2023.

Filed as an exhibit to the Company’s Form 8-K filed October 27, 2023.

Filed as an Exhibit to the Company’s Form 8-K filed March 5, 2024

Filed as an Exhibit to the Company’s Form 8-K filed April 5, 2024

Filed as an Exhibit to the Company’s Form 8-K filed June 28, 2024

Filed as an Exhibit to the Company’s Form 8-K filed July 18, 2024

Filed as an Exhibit to the Company’s Form 8-K filed August 6, 2024

Filed as an Exhibit to the Company’s Form 8-K filed September 13, 2024

Filed as an Exhibit to the Company’s Form 8-K filed September 27, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 1, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 7, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 8, 2024

Filed as an Exhibit to the Company’s Form 8-K filed December 11, 2024

Filed as an Exhibit to the Company’s Form 8-K filed November 15, 2024

Filed as an Exhibit to the Company’s Form 8-K filed February 19, 2025

Filed as an Exhibit to the Company’s Annual Report on Form 10-K filed April 1, 2024

financial statement schedules have been provided because the information is not required or is shown either in the financial statements

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on its behalf by the undersigned, thereunto duly authorized.

Nevada corporation

DIGITAL ALLY, INC.,

a Nevada corporation

Executive Officer

Executive Officer)

April 1, 2024

person whose signature appears below authorizes Stanton E.

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registrant and in the capacities and on the dates indicated.

April 1, 2024

Ross, Director and Chief Executive Officer

April 1, 2024

Ross, Director

and Chief Executive Officer

Richie, Director

Duke Daughtery

April 1, 2024

Duke Daughtery

April 1, 2024

Heckman, Chief Financial Officer, Secretary, Treasurer and

Principal Accounting Officer

(Principal Financial Officer and Principal Accounting Officer)

Accounting Officer

Financial Officer and Principal Accounting Officer)

AND SUBSIDIARIES

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Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023 and 2022

Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

6 unchanged sentences

and subsidiaries

Overland Park,

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Digital Ally, Inc.

and its subsidiaries (the Company) as of December 31,

2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in

the two year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements).

In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and

2022, and the results of its operations and its cash flow for each of the years in the two year period ended December 31, 2023, in conformity

with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Digital Ally, Inc.

and its subsidiaries (the Company)

as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ (deficit) equity and cash flows

for each of the years in the two year period ended December 31, 2024, and the related notes (collectively referred to as the consolidated

financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flow for each of the years in the two

year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Company’s Ability to Continue as a Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

1 to the financial statements, the Company has incurred substantial operating losses and will require additional capital to continue

as a going concern.

This raises substantial doubt about the Company’s ability to continue as a going concern.

plans regarding these matters are also described in Note 1.

The financial statements do not include any adjustments to reflect the possible

future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from

the outcome of this uncertainty.

financial statement are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

New York, NY Washington DC Mumbai & Pune, India Boca Raton, FL

San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece

ANTEA International with affiliated offices worldwide

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as

a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred substantial operating losses

and will require additional capital to continue as a going concern.

This raises substantial doubt about the Company’s ability to

continue as a going concern.

Management’s plans regarding these matters are also described in Note 1.

The consolidated financial

statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or

the amounts and classification of liabilities that may result from the outcome of this uncertainty.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility

is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm

registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect

to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform

the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether

due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for

the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial

statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining,

on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating

the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated

financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

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accounts or disclosures to which they relate.

Indefinite Life Intangibles and Other Intangibles Impairment Assessments – Entertainment/Ticketing Reporting Unit – Refer

to Notes 1, 8 and 22 to the consolidated financial statements

Indefinite Life Intangibles and Other Intangibles Impairment Assessments – Entertainment Segment – Refer to Notes 1 and 8

to the consolidated financial statements

Audit Matter Description

described in Note 22 to the consolidated financial statements, the Company’s goodwill and indefinite life intangible asset balance

was $5,886,547 and $600,000, respectively as of December 31, 2023.

described in Note 8 to the financial statements, the Company’s goodwill and indefinite life intangible asset balance was $5,805,507

and $699,000, respectively as of December 31, 2024.

The Company also has amortizable identifiable intangible assets of $1,866,667 –

$5,600,000 and $600,000 which are being amortized over 5 years and 4 years, respectively, and are related to the Entertainment/Ticketing

reporting unit.

Management tests these assets annually for impairment or more frequently when potential impairment triggering events

Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying value.

uses a market approach to estimate the fair value of its reporting unit.

The key assumptions and estimates utilized in the market approach

primarily include market multiples, peer group and comparable transaction selection and selection of relevant financial matrices for

concluding the fair value of reporting unit, and future levels of revenue growth.

sponsorship agreement network and $100,000 – SEO content, which are being amortized over 5 years and 4 years, respectively, and

are related to the entertainment segment.

Management tests these assets annually for impairment or more frequently when potential impairment

triggering events are present.

Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying

Management uses a weighting of income and market approaches to estimate the fair value of its reporting unit.

The key assumptions

and estimates utilized in the weighting of income and market approaches primarily include future levels of revenue growth, gross profit

margin, EBITDA as a percentage of revenue, cash-free debt-free net working capital as a percentage of revenue, capital expenditures as

a percentage of revenue, discount rate, selection of guideline public companies and revenue market multiples.

principal considerations for our determination that performing procedures relating to the goodwill and intangible asset impairment assessments

of the Entertainment/Ticketing reporting unit is a critical audit matter because (i) the significant judgment used by management when

determining the fair value estimates of the reporting units;

(ii) the high degree of auditor judgment, subjectivity and effort in performing

procedures and evaluating the significant assumptions used in management’s fair value estimates;

and (iii) the audit effort involved

in the use of professionals with specialized skill and knowledge.

of the entertainment reporting unit is a critical audit matter because (i) the significant judgment used by management when determining

the fair value estimates of the reporting units;

(ii) the high degree of auditor judgment, subjectivity and effort in performing procedures

and evaluating the significant assumptions used in management’s fair value estimates;

and (iii) the audit effort involved in the

use of professionals with specialized skill and knowledge.

the Critical Audit Matter Was Addressed in the Audit

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated

financial statements.

procedures included, among others, (i) testing management’s process for determining the fair value estimates of the entertainment/ticketing

reporting unit;

(ii) testing the completeness and accuracy of the underlying data used in the market approach;

and (iii) evaluating

the reasonableness of the significant assumptions used by management related to market multiples, peer group and comparable transaction

selection and selection of relevant financial matrices for concluding the fair value of reporting unit and future levels of revenue

management’s assumptions related to the future levels of revenue growth and involved evaluating whether the assumptions were

reasonable considering (i) current and past performance of the reporting units;

(ii) the consistency with external market and industry

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals

with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the market approach and (ii) the

reasonableness of significant assumptions related to the market multiples, peer group and comparable transaction selection and selection

of relevant financial matrices for concluding the fair value of reporting unit and future levels of revenue growth.

We have served as the Company’s auditor since 2019.

April 1, 2024

PCAOB ID Number 587

New York, NY Washington DC Mumbai & Pune, India Boca Raton, FL

San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial

These procedures included,

among others, (i) testing management’s process for determining the fair value estimates of the entertainment segment;

testing the completeness and accuracy of the underlying data used in the income and market approach;

and (iii) evaluating the reasonableness

of the significant assumptions used by management related to future levels of revenue growth, gross profit margin, EBITDA as a percentage

of revenue, cash-free debt-free net working capital as a percentage of revenue, capital expenditures as a percentage of revenue,

discount rate, selection of guideline public companies and revenue market multiples.

Evaluating management’s

assumptions related to the future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue, cash-free debt-free

net working capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate, selection of guideline

public companies and revenue market multiples and involved evaluating whether the assumptions were reasonable considering (i) current

and past performance of the entertainment segment;

(ii) the consistency with external market and industry data;

and (iii) whether these

assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized

skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market approach and (ii) the reasonableness

of significant assumptions related to the future levels of revenue growth, gross profit margin, EBITDA as a percentage of revenue,

cash-free debt-free net working capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount rate,

selection of guideline public companies and revenue market multiples.

and Other Intangibles arising from the acquisition of Country Stampede – Refer to Notes 1 and 21 to the consolidated financial

Audit Matter Description

disclosed in Note 1, Goodwill arises in connection with acquisitions.

The excess purchase price over the fair value of net tangible assets

and identifiable intangible assets acquired is recorded as goodwill.

disclosed in Note 21, on March 1, 2024, the Company completed an acquisition referred to as the Country Stampede Acquisition in accordance

with the asset purchase agreement.

The consideration included payment of cash of $542,959 of which $400,000 was paid on March 1, 2024

and remainder on or before thirty days.

Auditing the accounting for the acquisition was complex due to the significant estimation uncertainty

in determining the fair values of identified intangible assets, which consisted of trademarks and trade names of $300,000 and Goodwill

principal considerations for our determination that performing procedures relating to the intangible assets acquired with the Country

Stampede Acquisition is a critical audit matter because (i) the significant judgment used by management when determining the fair value

estimates of the intangible assets acquired;

(ii) the high degree of auditor judgment, subjectivity and effort in performing procedures

and evaluating the significant assumptions used in management’s fair value estimates;

and (iii) the audit effort involved in the

use of professionals with specialized skill and knowledge.

the Critical Audit Matter Was Addressed in the Audit

personnel with specialized knowledge and skill in valuation to assist in:

a) assessing the appropriateness of valuation methodology

for the trademarks and trade names using Relief from Royalty, b) evaluating the reasonableness of the growth rates, percent of revenues

lost without existing agreements, discount rate used in the income approach.

Evaluate the reasonableness

of management’s significant estimates and assumptions including revenue growth rates, percent of revenues lost without existing

agreements and discount rate in the valuation of the trademarks and trade names.

Evaluate if there have

been events and circumstances that might indicate that intangible asset and goodwill has been impaired.

have served as the Company’s auditor since 2019.

ID Number 587

York, NY Washington DC Mumbai & Pune, India Boca Raton, FL

TX San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece

ANTEA International with affiliated offices worldwide

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Accounts receivable-trade, less allowance for doubtful accounts of $ 314,304 – 2024 and $ 200,668 – 2023

Other receivables, net of $ 5,000 allowance – 2023 and $ 0 - 2022 (including $- 0 - due from related parties – 2023 and $ 138,384 – 2022, refer to Note 19)

Other receivables, net of $ 25,000 allowance – 2024 and $ 5,000 - 2023

Inventories, net

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Operating lease right of use assets, net

Liabilities and Equity

Liabilities and Equity (Deficit)

Current liabilities:

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Commitments and contingencies

Stockholders’ Equity (Deficit):

Preferred stock, $ 0.001 par value per share, 10,000,000 shares authorized;

none issued or outstanding – 2024 and 2023

Common stock, $ 0.001 par value;

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Noncontrolling interest in consolidated subsidiary

( 1,198,286 )

Accumulated deficit

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( 117,668,781 )

Total liabilities and equity

Total equity (deficit)

( 9,013,430 )

Total liabilities and equity (deficit)

Notes to Consolidated Financial Statements.

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General and administrative expense

Goodwill and intangible asset impairment charge

Total selling, general and administrative expenses

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( 3,815,323 )

Other expense

Loss on accrual for legal settlement

( 3,134,253 )

Loss on conversion of convertible debt

Loss on litigation

( 1,959,396 )

Change in fair value of short-term investments

( 1,792,308 )

Loss on extinguishment of convertible debt

( 1,112,705 )

Loss on disposal of intangibles

Change in fair value of warrant derivative liabilities

( 1,240,407 )

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

Gain on the extinguishment of liabilities

Gain on extinguishment of warrant derivative liabilities

Loss on extinguishment of debt

Gain on sale of property, plant and equipment

Total other income (loss)

Total other expense

( 6,514,185 )

( 3,223,396 )

Loss before income tax benefit (provision)

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( 25,463,949 )

Net income attributable to noncontrolling interests of consolidated subsidiary

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

( 2,385,000 )

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

Net loss attributable to common stockholders

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Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF EQUITY

STATEMENTS OF EQUITY (DEFICIT)

ENDED DECEMBER 31, 2024 AND 2023

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Restricted common stock forfeitures

Distribution to noncontrolling interest in consolidated subsidiary

Issuance of common stock under rule 144 restrictions related to contemplated spin-off transaction

Repurchase and cancellation of common stock

( 4,026,337 )

( 4,026,523 )

Issuance of common stock through warrant exchange agreement

Loss on redemption of Series A and Series B Preferred Stock

( 2,385,000 )

Conversion of convertible note into common stock

Issuance due to rounding from reverse stock split

( 25,688,547 )

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Restricted common stock forfeitures

Conversion of convertible note into common stock

Issuance due to rounding from reverse stock split

Sale of common stock and pre-funded warrants, net of offering costs

Fair value of warrants issued along with sale of common stock

( 2,075,300 )

Issuance of commitment shares in connection with bridge financing

Issuance of common stock upon exercise of pre-funded warrants

Allocation of fair value of Series B warrants approved by shareholders

Transition of warrant derivative liability to equity upon exercise of Series

Issuance of common stock upon exercise of common stock purchase warrants

( 1,871,578 )

( 19,844,147 )

( 21,715,725 )

Balance, December 31, 2024

3 unchanged sentences

$ ( 9,013,430 )

$ 129,691,976

$ ( 1,198,286 )

$ ( 137,512,928 )

$ ( 9,013,430 )

Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS

ENDED DECEMBER 31, 2024 AND 2023

5 unchanged sentences

Gain on sale of property, plant and equipment

Loss on disposal of intangible assets

Goodwill and intangible asset impairment charge

Stock based compensation

3 unchanged sentences

Convertible debt discount amortization

Loss on conversion of debt

Loss on extinguishment of convertible debt

Loss on accrual for legal settlement

Loss on extinguishment of debt

Loss on litigation

Provision for doubtful accounts receivable

3 unchanged sentences

( 1,846,642 )

( 6,726,638 )

Gain on extinguishment of warrant derivative liabilities

( 3,624,794 )

Provision for inventory obsolescence

( 2,372,806 )

Change in operating assets and liabilities:

6 unchanged sentences

( 1,343,751 )

( 3,048,382 )

Increase (decrease) in:

8 unchanged sentences

( 9,893,838 )

( 18,580,385 )

Cash Flows from Investing Activities:

Purchases of property, plant and equipment

( 2,068,508 )

Proceeds from sale of property, plant and equipment

1 unchanged sentence

Proceeds from sale of intangible assets

Cash paid for acquisition of Medical Billing Company

( 1,153,627 )

Cash paid for asset acquisition of Medical Billing Company

Net cash used in investing activities

( 2,940,591 )

Cash paid for acquisition of Country Stampede

Proceeds from sale of land and building

Net cash provided by (used in) investing activities

Cash Flows from Financing Activities:

Repurchase and cancellation of common stock

( 4,026,523 )

Distribution to noncontrolling interest in consolidated subsidiary

Net proceeds of equity offering with detachable warrants

Net proceeds of senior promissory notes with commitment shares

Net proceeds of convertible debt with detachable warrants

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Proceeds – Commercial Extension of Credit – Entertainment Segment

Payments on Commercial Extension of Credit – Entertainment Segment

( 1,367,715 )

Proceeds – Merchant Advances – Video Solutions Segment

Payments on Merchant Advances – Video Solutions Segment

( 1,551,250 )

Payments on convertible debt

( 3,162,500 )

Payments on Commercial Extension of Credit – Entertainment Segment

Proceeds – Merchant Advances – Entertainment Segment

Payments on Merchant Advances – Entertainment Segment

( 2,714,456 )

Payments on Merchant Advances – Video Solutions Segment

Principal payment on EIDL loan

Principal payment on contingent consideration promissory notes

Proceeds from issuance of Series A & B convertible redeemable preferred shares, net of issuance costs

Redemption of Series A & B convertible redeemable preferred shares

( 15,750,000 )

Net cash provided by (used in) financing activities

( 6,954,617 )

Proceeds from issuance of common shares upon exercise of Series B warrants

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

( 2,754,050 )

( 28,475,593 )

Cash, cash equivalents and restricted cash, beginning of year

6 unchanged sentences

Restricted common stock forfeitures

Issuance of contingent consideration earn-out agreement for business acquisitions

Issuance of contingent consideration promissory note for asset acquisitions

Commercial extension of credit repaid through accrued revenue – Entertainment segment

ROU and lease liability recorded on extension (termination) of lease

Assets acquired in business acquisitions

1 unchanged sentence

Liabilities assumed in business acquisitions

ROU and lease liability recorded on extension of lease

Common stock issued due to rounding from reverse stock split

Adjustments of accounts payable with the sale proceeds of property, plant and equipment

Fair value of warrants issued with sale of shares

Transition of warrant derivative liability to equity upon exercise of warrants

Reduction in proceeds from sale of building for loan, prepaid rent, and other accrued expenses

Issuance of common stock upon exercise of pre-funded warrants

Payments to vendors directly from proceeds of sale of common stock

Issuance of commitment shares in connection with bridge financing

Conversion of convertible notes payable into common stock

Issuance of common stock through warrant exchange agreement

Debt discount on convertible note

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(such merged entity, the “Predecessor Registrant”).

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

DGLY Subsidiary Inc., a Nevada corporation (the “ Registrant ”), pursuant to an agreement and plan of merger, dated

as of August 23, 2022 (the “ Merger Agreement ”), between the Predecessor Registrant and the Registrant, with the Registrant

as the surviving corporation in the merger (such transaction, the “ Merger ”).

At the Effective Time, Articles of Merger

were filed with the Secretary of State of the State of Nevada, pursuant to which the Registrant was renamed “Digital Ally, Inc.”

and, by operation of law, succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor Registrant

immediately prior to the Merger.

Under the Nevada Revised Statutes, shareholder approval was not required in connection with the Merger

Agreement or the transactions contemplated thereby.

the Effective Time, pursuant to the Merger Agreement, (i) each outstanding share of Predecessor Registrant’s common stock, par

value $ 0.001 per share (the “ Predecessor Common Stock ”) automatically converted into one share of common stock, par

value $ 0.001 per share, of the Registrant (“ Registrant Common Stock ”), (ii) each outstanding option, right or warrant

to acquire shares of Predecessor Common Stock converted into an option, right or warrant, as applicable, to acquire an equal number of

shares of Registrant Common Stock under the same terms and conditions as the original options, rights or warrants, and (iii) the directors

and executive officers of the Predecessor Registrant were appointed as directors and executive officers, as applicable, of the Registrant,

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

business of the Registrant, Digital Ally, Inc.

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per share of the Company’s common stock was not affected by the Reverse Stock Split.

Business Combination

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

7 unchanged sentences

Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein

upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with

upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub would merge with

and into Kustom, with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf.

the Closing which is subject to the approval of Clover Leaf’s shareholders and the satisfaction or waiver of certain other customary

the Closing which was subject to the approval of Clover Leaf’s shareholders and the satisfaction or waiver of certain other customary

closing conditions, the common stock of the combined company is expected to be listed on the Nasdaq under a mutually agreed new ticker

symbol that reflects the name “Kustom Entertainment”.

November 8, 2024, Clover Leaf and Kustom mutually agreed to terminate their previously announced Merger Agreement and Plan of Merger

effective as of November 7, 2024 by entering into a mutual termination and release agreement among the parties.

The parties released

each other of all obligations related to the Merger Agreement.

following is a summary of the Company’s Significant Accounting Policies:

17 unchanged sentences

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

The Company formed Digital Connect, Inc.

and BirdVu Jets, Inc.

for travel and transportation purposes in 2022.

formed Kustom 440, Inc.

in 2022 to create unique entertainment experiences directly for consumers, and Kustom Entertainment, Inc.

2023 to serve as the participant in the Business Combination.

The Company formed Kustom 440, Inc.

in 2022 to create unique entertainment experiences directly for consumers.

Value of Financial Instruments :

15 unchanged sentences

generated by all segments are reported net of sales taxes.

Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the

In situation where sales are to a distributor, the Company had concluded its contracts are with the distributor as the Company

holds a contract bearing enforceable rights and obligations only with the distributor.

As part of part of its consideration for the contract,

the Company evaluates certain factors including the customers’ ability to pay (or credit risk).

For each contract, the Company

considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.

In determining the

transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which

it expects to be entitled.

As the Company’s standard payment terms are less than one year, it has elected the practical expedient

under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

The Company allocates the transaction

price to each distinct product based on its relative standalone selling price.

The product price as specified on the purchase order is

considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar

circumstances.

Revenue is recognized when control of the product is transferred to the customer (i.e.

when the Company’s performance

obligations is satisfied), which typically occurs at shipment.

Further in determining whether control has been transferred, the Company

considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the

Customers do not have a right to return the product other than for warranty reasons for which they would only receive repair

services or replacement products.

The Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions for

product sales when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than

Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with

the customer.

In situations where sales are to a distributor, the Company has concluded its contracts are with the distributor as

the Company holds a contract bearing enforceable rights and obligations only with the distributor.

As part of its consideration for

the contract, the Company evaluates certain factors including the customers’ ability to pay (or credit risk).

contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance

In determining the transaction price, the Company evaluates whether the price is subject to refunds or adjustment to

determine the net consideration to which it expects to be entitled.

As the Company’s standard payment terms are generally less

than one year for product sales (although some subscriptions for services may reach out 3-5 years), it has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant

financing component.

The Company allocates the transaction price to each distinct product based on its relative standalone selling

The product price, as specified on the purchase order, is considered the standalone selling price as it is an observable

input which depicts the price as if sold to a similar customer in similar circumstances.

Revenue is recognized when control of the

product is transferred to the customer (i.e.

when the Company’s performance obligations is satisfied), which typically occurs

Further in determining whether control has been transferred, the Company considers if there is a present right to

payment and legal title, along with risks and rewards of ownership having transferred to the customer.

Customers do not have a right

to return the product other than for warranty reasons for which they would only receive repair services or replacement products.

Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions for product sales when incurred as the

amortization period of the commission asset the Company would have otherwise recognized is less than one year.

and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue.

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is generally determined as a percentage of the invoice amounts collected.

These service fees are reported as revenue monthly upon completion

These service fees are reported as monthly revenue upon completion

of the Company’s performance obligation to provide the agreed upon service.

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The Company acts as the principal in these transactions as the ticket is owned by the Company

at the time of sale, therefore controlling the ticket prior to transferring to the customer.

at the time of the sale, therefore controlling the ticket prior to transferring to the customer.

In these transactions, revenue is recorded

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Total contract liabilities consist of the following:

OF CONTRACT LIABILITIES

SCHEDULE OF CONTRACT LIABILITIES

December 31, 2024

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of Estimates :

preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United

States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and

expenses during the reporting period.

preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States

of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during

the reporting period.

Actual results could differ from those estimates.

Management utilizes various other estimates,

including but not limited to, determining the estimated lives of long-lived assets, determining the potential impairment of

long-lived assets, the fair value of warrants, options, the recognition of revenue, inventory valuation reserve, allowances for

doubtful accounts and other receivables, incremental borrowing rate on leases, the valuation allowance for deferred tax assets and other legal

claims and contingencies.

The results of any changes in accounting estimates are reflected in the financial statements in the period

in which the changes become evident.

Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected

in the period that they are determined to be necessary.

Management utilizes various other estimates, including but not

limited to, determining the estimated lives of long-lived assets, determining the potential impairment of long-lived assets, the fair

value of warrants, options, the recognition of revenue, inventory valuation reserve, allowances for doubtful accounts and other receivables,

incremental borrowing rate on leases, the valuation allowance for deferred tax assets and other legal claims and contingencies.

of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident.

and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

and cash equivalents :

and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less.

The following table shows the Company’s cash and cash equivalents by significant investment category as of December 31, 2023 and

OF SHORT TERM INVESTMENTS

December 31, 2023

Demand deposits

Short-term investments with original maturities of 90 days or less (Level 1):

Money market funds

December 31, 2022

Demand deposits

Short-term investments with original maturities of 90 days or less (Level 1):

Money market funds

Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that

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The Company minimizes this risk by placing its cash deposits

with numerous major financial institutions.

At December 31, 2023 and 2022, the uninsured balance amounted to $ 29,700 and $ 2,495,189 ,

respectively.

with major financial institutions.

At December 31, 2024 and December 31, 2023, the uninsured balance amounted to $ 0 and $ 29,700 , respectively.

cash of $- 0 - and $ 97,600 was included in other assets as of December 31, 2024 and 2023, respectively.

Restricted cash consists of bank

deposits that collateralize our debt obligations.

following table provides a reconciliation of cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents

and restricted cash in the consolidated statements of cash flows:

OF RECONCILIATION OF CASH AND CASH EQUIVALENTS

deposits that collateralize a debt obligation.

Such debt obligation was paid off as of December 31, 2024.

following table provides a reconciliation of cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents and

restricted cash in the consolidated statements of cash flows:

SCHEDULE OF RECONCILIATION OF CASH AND CASH EQUIVALENTS

December 31, 2024

December 31, 2023

Cash and cash equivalents

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Total cash, cash equivalents and restricted cash in the statements of cash flows

receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding

receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding

amounts on a weekly basis.

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and Other Intangibles :

- In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations , using the acquisition

method of accounting.

The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired

is recorded as goodwill.

In accordance with ASC 350, Intangibles - Goodwill and Other , the Company assesses goodwill for impairment

annually as of December 31, and more frequently if events and circumstances indicate that goodwill might be impaired.

- In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method

of accounting.

The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded

In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of

December 31st, and more frequently if events and circumstances indicate that goodwill might be impaired.

impairment testing is performed at the reporting unit level.

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by which the carrying amount exceeded the reporting unit’s fair value.

Company determines the fair value of its reporting units using the market approach.

Under the market approach, we estimate the fair value

based on multiples of comparable public companies and precedent transactions.

Significant estimates in the market approach include:

similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing

comparable revenue and operating income multiples in estimating the fair value of the reporting unit.

Company determines the fair value of its reporting units using a weighting of the income and market valuation approaches.

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

This analysis requires significant judgments,

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

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

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

Under the market approach, we estimate the fair value based on multiples of comparable public companies and precedent transactions.

estimates in the income and market approach include:

future levels of revenue growth, gross profit margin, EBITDA as a percentage of

revenue, cash-free debt-free net working capital as a percentage of revenue, capital expenditures as a percentage of revenue, discount

rate, selection of guideline public companies and revenue market multiples.

and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with

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The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level.

considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating

considered by the Company include, but are not limited to, significant underperformance relative to historical or projected

operating results;

significant changes in the manner of use of the acquired assets or the strategy for the overall business;

and significant negative

industry or economic trends.

When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or

more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use

of the asset and its eventual disposition.

If the sum of the expected future undiscounted cash flows and eventual disposition is less

than the carrying amount of the asset, the Company recognizes an impairment loss.

An impairment loss is reflected as the amount by which

the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows,

if fair value is not available.

The Company assessed potential impairments of its long-lived assets as of December 31, 2023 and concluded

that there was no impairment.

assets such as property, plant and equipment and purchased intangible assets subject to amortization are reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If circumstances require a long-lived

asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by

that asset or asset group to its carrying value.

If the carrying value of the long-lived asset or asset group is not recoverable on an

undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value.

Fair value is

determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party appraisals,

as considered necessary.

assets include deferred patent costs and license agreements and intangibles related to acquisitions.

Legal expenses incurred in preparation of

patent application have been deferred and will be amortized over the useful life of granted patents.

Costs incurred in preparation

of applications that are not granted will be charged to expense at that time.

The Company has entered into several sublicense

agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products.

sublicense agreements generally require upfront payments to obtain the exclusive rights to such material.

The Company capitalizes

the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight-line

significant negative industry or economic trends.

When the carrying value of a long-lived asset may not be recoverable based upon

the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows

expected to result from the use of the asset and its eventual disposition.

If the sum of the expected future undiscounted cash flows

and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss.

An impairment

loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair

value if available, or discounted cash flows, if fair value is not available.

The Company assessed potential impairments of its

long-lived assets as of an interim date of September 30, 2024 and concluded that there was an impairment which was recorded during the year ended December 31, 2024.

Subsequent to completing

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

until the fiscal third quarter of 2024, when events occurred that we considered triggering events.

the third fiscal quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in

demand for our services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease

in our stock price.

Therefore, we performed an interim impairment test as of September 30, 2024.

Refer to Note 8.

Goodwill and Other

Intangible Assets for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value measurements.

The Company also assessed potential impairments of its long-lived assets as of December 31, 2024 and concluded that there was no additional

impairment as compared to its September 30, 2024 interim assessment.

assets include deferred patent costs, license agreements, trademarks and trade names.

Legal expenses incurred in preparation of patent

application have been deferred and will be amortized over the useful life of granted patents.

Costs incurred in preparation of applications

that are not granted will be charged to expense at that time.

The Company has entered into several sublicense agreements under which

it has been assigned the exclusive rights to certain licensed materials used in its products.

These sublicense agreements generally require

upfront payments to obtain exclusive rights to such material.

The Company capitalizes the upfront payments as intangible assets and amortizes

such costs over their estimated useful life on a straight-line method.

value of assets and liabilities acquired in business combinations :

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

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

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

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

of inputs and assumptions that a market participant would use.

The Company allocates any excess purchase price that exceeds

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

The use of alternative valuation assumptions,

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

and amortization expense in current and future periods.

Transaction costs associated with these acquisitions are expensed as incurred

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

In those circumstances where an acquisition

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

expected to be made as of the acquisition date.

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

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

Inventories :

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include material, labor and manufacturing overhead.

Inventories for the entertainment segment consists of tickets to live events purchased,

Inventories for the entertainment segment consist of tickets to live events purchased,

which are held at lower of cost or net realizable value and written-off after the event has occurred.

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segment are carried at lower of cost or net realizable value and fully written off at the time the event occurs if the ticket is unsold

and remaining in inventory after the completion of the event.

and remains in inventory after the completion of the event.

Management has established inventory reserves based on estimates of excess

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However, if there has been no recent usage for a consumable service spare part, but the part is still necessary to

support systems under service contracts, the part is considered to be non-current and included within non-current inventories within

our consolidated balance sheet.

support systems under service contracts, the part is non-current and included within non-current inventories within our consolidated

balance sheet.

Consumables are charged to cost of goods sold when issued during the service call.

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Operating leases are included in the right of use assets

(ROU) and operating lease liabilities on the consolidated balance sheet as of December 31, 2023.

Finance leases would be included in

property, plant and equipment, net and long-term debt and finance lease obligations on the balance sheet.

The Company had operating leases

for copiers, offices and warehouse space at December 31, 2023 but no financing leases.

(ROU) and operating lease liabilities on the consolidated balance sheet as of December 31, 2024 and 2023.

Finance leases would be included

in property, plant and equipment, net and long-term debt and finance lease obligations on the balance sheet.

The Company had operating

leases for copiers, offices and warehouse space on December 31, 2024 and 2023 but no financing leases.

assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement

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Company is subject to taxation in the United States and various states.

As of December 31, 2023, the Company’s tax returns filed

for 2020, 2021 and 2022 and to be filed for 2023 are subject to examination by the relevant taxing authorities.

With a few exceptions,

as of December 31, 2023, the Company is no longer subject to Federal, state, or local examinations by tax authorities for taxable years

prior to 2020.

The Company’s 2022 federal tax return was recently examined by the Internal Revenue Service resulting in no proposed adjustments.

and Development Expenses :

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products are released soon after technological feasibility has been established.

Costs incurred subsequent to achievement of technological

feasibility were not significant, and software development costs were expensed as incurred during 2023 and 2022.

Costs incurred after achievement of technological feasibility

were not significant, and software development costs were expensed as incurred during 2024 and 2023.

Derivative Liabilities :

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be classified as an asset or a liability rather than as equity.

We have determined because the terms of the warrants issued during the

first quarter of 2021, and remain outstanding, include a provision that entitles all the warrant holders to receive cash for their warrants

in the event of a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled

to cash, our warrants should be classified as liability measured at fair value, with changes in fair value each period reported in earnings.

Volatility in the price of our common stock may result in significant changes in the value of the derivatives and resulting gains and

losses on our statement of operations.

We have determined that because the terms of the various warrants issued

and remain outstanding, include a provision that entitles all the warrant holders to receive cash for their warrants in the event of

a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled to cash,

our warrants should be classified as liability measured at fair value, with changes in fair value each period reported in earnings.

in the price of our common stock may result in significant changes in the value of the derivatives and resulting gains and losses on

our statement of operations.

Compensation :

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estimate compensation expense are determined as follows:

term is determined using the contractual term and vesting period of the award;

volatility of award grants made in the Company’s plan is measured using the weighted average of historical daily changes in

the market price of the Company’s common stock over the period equal to the expected term of the award;

dividend rate is determined based on expected dividends to be declared;

interest rate is equivalent to the implied yield on zero-coupon U.S.

Treasury bonds with a maturity equal to the expected term of

are accounted for as they occur.

Expected term is determined

using the contractual term and vesting period of the award;

Expected volatility of

award grants made in the Company’s plan is measured using the weighted average of historical daily changes in the market price

of the Company’s common stock over the period equal to the expected term of the award;

Expected dividend rate

is determined based on expected dividends to be declared;

Risk-free interest rate

is equivalent to the implied yield on zero-coupon U.S.

Treasury bonds with a maturity equal to the expected term of the awards;

Forfeitures are accounted

for as they occur.

accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial

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and is not considered a separate business segment for financial reporting purposes.

The Company adopted

ASU 2023-07 in 2024 and applied the amendment retrospectively to all periods presented in the Company’s consolidated financial

See Note 22, Operating Segments, for more information.

Consideration

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the acquisition date.

The Company remeasures this liability each reporting period and records changes in the fair value through the consolidated

statement of operations.

and Cancellation of Shares

time to time, the Board may authorize share repurchases of common stock.

repurchased under Board authorizations are held in treasury for general corporate purposes and cancelled when it is determined appropriate

by management.

The Company accounts for repurchases of common stock under the cost method.

Shares repurchased and cancelled during the

period were recorded as a reduction to stockholders’ equity.

See further discussion of the Company’s share repurchase program

in Note 18–Stockholders’ Equity.

The Company remeasures this liability for each reporting period and records changes in the fair value through the

consolidated statement of operations.

Non-Controlling

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Consolidated Statements of Operations.

Preferred Stock

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.

receivable are carried at the original invoice amount less the total payments received pertaining to each individual customer’s

receivables are carried at the original invoice amount less the total payments received pertaining to each individual customer’s

lease agreement.

These agreements range from three to five years and are removed from lease receivables upon termination of the agreement.

These agreements range from three to five years and are removed from lease receivable upon termination of the agreement.

The Company determines if an allowance for doubtful accounts by regularly evaluating individual customer lease receivables and considering

a customer’s financial condition, credit history, and current economic conditions.

No allowance was deemed necessary for the year

ended December 31, 2023.

receivable are carried at the original note amount less an estimate made for doubtful receivables based on a review of all outstanding

notes on a quarterly basis.

The Company determines the allowance for doubtful accounts by regularly evaluating each note receivable and

considering the borrower’s financial condition, credit history, and current economic conditions.

The Company entered into a promissory

note, through its entertainment segment, as part of a co-marketing agreement, with a principal amount of $ 3,000,000 .

Principal payment,

since its inception, on this promissory note totaled $ 2,849,846 as of December 31, 2023, resulting in a remaining balance of $ 150,154

maturing December 31, 2023 .

The allowance for uncollectible accounts totaled $ 25,000 and $ 5,000 as of December 31, 2024 and 2023, respectively.

Accounting Standards

November 2023, the FASB issued Accounting Standards Update No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable

Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily

through enhanced disclosures about significant segment expenses.

The guidance is effective for fiscal years beginning after December

15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The guidance is to

be applied retrospectively to all prior periods presented in the financial statements.

Upon transition, the segment expense categories

and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in

the period of adoption.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial

statements and related disclosures.

December 2023, the FASB issued Accounting Standards Update No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”

(“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories

in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between

domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign).

2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among

other changes.

The guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual

financial statements that have not yet been issued or made available for issuance.

ASU 2023-09 should be applied on a prospective basis,

but retrospective application is permitted.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated

financial statements and related disclosures.

Adopted Accounting Standard Updates.

- ASU 2023-07, Improvements to Reportable Segment Disclosures , which requires companies

to disclose significant segment expenses provided to the chief operating decision maker (“CODM”) and a description of other

segment items.

Additionally, all existing annual disclosures must be provided on an interim basis.

This ASU is effective for annual periods

beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

This ASU is required to

be applied retrospectively to all prior periods presented in the consolidated financial statements.

The Company adopted ASU 2023-07 in

2024 and applied the amendment retrospectively to all periods presented in the Company’s consolidated financial statements.

Note 22, Operating Segments, for more information.

Issued Accounting Pronouncements.

- ASU 2023-09, Improvements to Income Tax Disclosures, requires improved disclosures related

to the rate reconciliation and income taxes paid.

This ASU requires companies to reconcile the income tax expense attributable to continuing

operations to the U.S.

statutory federal income tax rate applied to pre-tax income from continuing operations.

Additionally, this ASU

requires companies to disclose the total amount of income taxes paid during the period.

This ASU is effective for annual periods beginning

after December 15, 2024, with early adoption permitted.

The guidance is required to be applied on a prospective basis with the option

to apply retrospectively to all prior periods presented in the consolidated financial statements.

The Company is currently evaluating

the impact to the Company’s consolidated financial statements.

2024-03, Disaggregation of Income Statement Expenses, requires disaggregated disclosures in the notes to the consolidated financial

statements of certain categories of expenses that are included in expense line items on the Consolidated Statement of Income.

is effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with

early adoption permitted.

The guidance is required to be applied on a prospective basis with the option to apply retrospectively to all

prior periods presented in the consolidated financial statements.

The Company is currently evaluating the impact to the Company’s

consolidated financial statements.

2024-04, Induced Conversions of Convertible Debt Instruments, clarifies the requirement for determining whether certain settlements

of convertible debt instruments should be accounted for as induced conversions or extinguishments.

This ASU is effective for annual periods

beginning after December 15, 2025.

Early adoption is permitted and can be applied either on a prospective basis or retrospective basis.

The Company is currently evaluating the impact of this ASU to the Company’s consolidated financial statements, however the Company

does not anticipate this guidance having a material impact to the consolidated financial stat

other recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) are not expected to have

a significant impact on the Company’s consolidated financial statements and related disclosures.

Concern Matters and Management’s Plans

accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of

assets and the satisfaction of liabilities in the normal course of business.

The Company incurred substantial operating losses in

the years ended December 31, 2023 and December 31, 2022 primarily due to reduced gross margins caused by a combination of

competitors’ introduction of newer products with more advanced features together with significant price cutting of their

products and the recent acquisitions with much smaller margins than the video solutions segment, historically.

The Company incurred

operating losses of approximately $ 22.2

million for the year ended December 31, 2023 and $ 29.7

million during the year ended December 31, 2022 and it had an accumulated deficit of $ 117.7

accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets

and the satisfaction of liabilities in the normal course of business.

The Company incurred substantial operating losses in the years

ended December 31, 2024 and December 31, 2023 primarily due to reduced gross margins caused by a combination of competitors’ introduction

of newer products with more advanced features together with significant price cutting of their products and the recent acquisitions with

much smaller margins than the video solutions segment, historically.

The Company incurred operating losses of approximately $ 15.2 million

for the year ended December 31, 2024 and $ 22.2 million during the year ended December 31, 2023 and it had an accumulated deficit of $ 137.5

million as of December 31, 2024.

These matters raise substantial doubt about Company’s ability to continue as a going

In recent years the Company has accessed the public and private capital markets to raise funding through the issuance of

debt and equity.

In that regard, the Company raised approximately $ 66.6 million

in the year ended December 31, 2021 through two underwritten public offerings.

These equity raises were utilized to fund its

operations and acquisitions.

Management expects to continue this pattern until it achieves positive cash flows from operations,

although it can offer no assurance in this regard.

These matters raise substantial doubt about Company’s ability to continue as a going concern.

In recent years the Company has accessed the public and private capital markets to raise funding through the issuance of debt and equity.

In that regard, the Company raised approximately $ 4.9 million in the year ended December 31, 2024 through a private placement transaction

and an underwritten public offering.

During February 2025, the Company raised net proceeds of approximately $ 13.48 million through an

underwritten public offering.

These equity raises were utilized to fund its operations and acquisitions.

Management expects this pattern

to continue until it achieves positive cash flow from operations, although it can offer no assurance in this regard.

Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund

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Company has significantly cut costs in its entertainment segment through the removal of several large partnerships and sponsorships.

These were not yielding the results management expected;

thus, it is not expected that these costs with significantly hinder total revenues

These did not yield the results management expected;

thus, it is not expected that these costs will significantly hinder total revenues

in 2025 and beyond.

Company has significantly cut costs in its video segment through the reduction in headcount and relocating to smaller and less costly

facilities after completing the sale of its warehouse/office building.

addition to the initiatives described above, the Board of Directors is conducting a review of a full range of strategic alternatives

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implementation of the Company’s business plan.

There can be no assurance that any additional transactions or financings will result

There can be no assurance that any additional transactions or financing will result

from this process.

that regard, the Company, entered into an Agreement and Plan of Merger with Clover Leaf Capital Corp., with a focus and mission to own

and produce events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies.

Pursuant to the

Merger Agreement, the entertainment segment will become a separate publicly traded Company while the video and revenue cycle management

segments will be retained by Digital Ally, Inc.

on the uncertainties described above, the Company believes its business plan does not alleviate the existence of substantial doubt about

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CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable.

instruments that potentially subject the Company to concentration of credit risk consist of accounts receivable.

Sales to domestic customers

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receivable are presented net of an allowance for doubtful accounts.

The allowance for doubtful accounts totaled $ 200,668

as of December 31, 2023 and

$ 152,736 as of December 31, 2022.

The allowance for doubtful accounts totaled $ 314,304 as of December

31, 2024 and $ 200,668 as of December 31, 2023.

Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that

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At December 31, 2024 and 2023, the uninsured balance amounted to $- 0 - and $ 29,700 , respectively.

The Company uses primarily a network of unaffiliated distributors for international sales and an employee-based direct sales force for

domestic sales.

Company uses primarily a network of unaffiliated distributors for international sales and an employee-based direct sales force for domestic

No international distributor individually exceeded 10 % of total revenues.

No one individual customer receivable balance

exceeded 10 % of total accounts receivable as of December 31, 2023.

No one individual customer receivable balance exceeded

10 % of total accounts receivable as of December 31, 2024 and 2023.

Company’s video solutions segment purchases finished circuit boards and other proprietary component parts from suppliers located

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allowance for doubtful accounts receivable was comprised of the following for the years ended December 31, 2024 and 2023:

OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

December 31, 2024

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OTHER RECEIVABLES

receivables were the following at December 31, 2023 and December 31, 2022:

SCHEDULE OF OTHER

receivables were the following at December 31, 2024 and 2023:

SCHEDULE OF OTHER RECEIVABLES

December 31, 2024

December 31, 2023

Notes receivable

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Total other receivables

receivable decreased by over $ 1.4 million at December 31, 2023 compared to December 31, 2022, primarily due to payments on a note receivable

issued by the Company during 2022.

The Company entered into a promissory note, through its entertainment segment, as part of a co-marketing

agreement, with a principal amount of $ 3,000,000 .

Principal payment, since its inception, on this promissory note totaled $ 2,849,846

as of December 31, 2023, resulting in a remaining balance of $ 150,154 maturing December 31, 2023.

Lease receivable increased by $ 0.6

million primarily due to increased sales under the Company’s subscription model during 2023.

The Company determines if an allowance

for doubtful accounts by regularly evaluating notes receivable and individual customer lease receivables, by considering a customer’s

financial condition, credit history, and current economic conditions.

The Company recorded an allowance of $ 5,000 and $- 0 - for the years

ended December 31, 2023 and 2022.

Other receivables relate to a related party receivable further described in Note 19.

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

OF INVENTORIES

SCHEDULE OF INVENTORIES

December 31, 2024

December 31, 2023

Raw material and component parts– video solutions segment

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expenses were the following at December 31, 2024 and 2023:

OF PREPAID EXPENSE

SCHEDULE OF PREPAID EXPENSE

December 31, 2024

December 31, 2023

Prepaid inventory

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Total prepaid expenses

expenses decreased by approximately $ 2.1 million primarily due to a decline in prepaid inventory purchases and advertising in 2023.

PROPERTY, PLANT AND EQUIPMENT

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

OF PROPERTY, PLANT AND EQUIPMENT

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

December 31, 2024

December 31, 2023

Office furniture, fixtures, equipment, and aircraft

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or charged to income.

The Company retired fixed assets during 2023 totaling $ 89,562 resulting in no gain or loss for the year ended December

31, 2023 on the Company’s Consolidated Statement of Operations.

The Company retired fixed assets during 2022 totaling $ 549,104

resulting in a gain on sale of assets of $ 212,831 for the year ended December 31, 2022 on the Company’s Consolidated Statement

of Operations.

the year ended December 31, 2024 the Company sold its aircraft for $ 1,100,000

less closing costs of $ 1,500 .

The carrying amount of the aircraft on the date of sale was $ 1,141,661 .

As a result of the sale the Company recorded a loss of $ 41,661

in the Consolidated Statement of Operations.

In addition, during the year ended December 31, 2024 the Company sold its building for $ 5,900,000

less closing costs of $ 36,634 .

The 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.

GOODWILL AND OTHER INTANGIBLE ASSETS

assets consisted of the following at December 31, 2023 and 2022:

assets consisted of the following as of December 31, 2024 and 2023:

SCHEDULE OF INTANGIBLE ASSETS

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December 31, 2023

Accumulated Impairment

Amortized intangible assets:

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SEO content (entertainment segment)

Personal seat licenses (entertainment

Personal seat licenses (entertainment segment)

Website enhancements (entertainment segment)

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Indefinite life intangible assets:

Goodwill (entertainment and revenue cycle management segments)

Trade name (entertainment segment)

Patents and trademarks pending

(video solutions segment)

Goodwill (Entertainment segment)

Goodwill (Revenue cycle management segment)

Trade name and trademarks (entertainment segment)

Patents and trademarks pending (video solutions segment)

and trademarks pending will be amortized beginning at the time they are issued by the appropriate authorities.

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patent or trademark is denied, then the amount deferred will be immediately charged to expense.

expense for the years ended December 31, 2023 and 2022 was $ 1,507,134 and $ 1,562,558 , respectively.

Estimated amortization for intangible

assets with definite lives for the next five years ending December 31, 2023, and thereafter is as follows:

OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS

for the years ended December 31, 2024 and 2023 was $ 1,477,712 and $ 1,507,134 , respectively.

Estimated amortization for intangible assets

with definite lives for the next five years ending December 31 and thereafter is as follows:

SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS

Year ending December 31:

2030 and thereafter

assets were the following at December 31, 2023 and December 31, 2022:

Annual impairment test

We performed an annual impairment

test as of December 31, 2024 for each of our reporting units with remaining goodwill.

The fair value of each reporting

unit was estimated using a weighting of the income and market valuation approaches.

The income approach applied a fair value methodology

to each reporting unit based on discounted cash flows.

This analysis requires significant judgments, including estimation of future cash

flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for

our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital,

which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

The weighted average cost of capital used

in our most recent impairment test ranged from 18.3 % to 21.3 %.

We also applied a market approach, which develops a value correlation based

on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the

reporting units.

The primary market multiples used are revenue and earnings before interest, taxes, depreciation, and amortization.

income and market approaches were equally weighted in our most recent annual impairment test, for all of the reporting units.

The combined fair values for all

reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering

a reasonable control premium.

We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s

carrying value at a 25 % premium or greater.

Based on our most recent impairment test, the video solutions reporting unit’s fair

value was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined

not to be impaired, as well,

impairment test

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

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

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

Therefore, we performed an interim

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

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

The income approach

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

This analysis requires significant judgments,

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

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

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

The weighted average cost of capital used in our most recent impairment test ranged from 20.9 % to 32.5 %.

We also applied a market approach,

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

to apply to the operating results of the reporting units.

The primary market multiples used are revenue and earnings before interest,

taxes, depreciation, and amortization.

The income and market approaches were equally weighted in our most recent annual impairment test,

for all of the reporting units.

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

date of valuation, while considering a reasonable control premium.

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

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

Based on our most recent impairment test, the video

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

entertainment segments were determined to be impaired.

held goodwill of $ 5,480,966 as of September 30, 2024 and December 31, 2023, related to businesses within our revenue cycle management

We held goodwill of $ 6,112,507 and $ 5,886,548 as of September 30, 2024 and December 31, 2023, respectively, related to businesses

within our entertainment segment.

As a result of our September 30, 2024 interim impairment test, we concluded that the carrying amount

of the revenue cycle management and the entertainment reporting units exceeded its estimated fair values.

Thus, we recorded a non-cash

goodwill impairment charge of $ 4,322,000 , related to the goodwill carrying balance for the revenue cycle management segment, and a non-cash

goodwill impairment charge of $ 307,000 , related to the goodwill carrying balance for the entertainment segment, both of which was included

in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations for the year ended December

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

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

The remaining balance for the

goodwill carrying balance related to businesses within our revenue cycle management segment and entertainment segment was $ 1,158,966

and $ 5,805,507 , respectively as of December 31, 2024.

Indefinite-lived

intangible assets

held indefinite-lived trade names/trademarks of $ 900,000 and $ 600,000 as of September 30, 2024 and December 31, 2023, respectively, related

to businesses within our entertainment segment.

a result of our interim impairment test as of the last day of the fiscal third quarter of 2024 management concluded that the carrying

amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment

charge of $ 201,000 , which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of

Operations for the year ended December 31, 2024.

The charge was primarily driven by the split-off transaction not being completed when

and as expected and our recent revenue and operating performance of the related business given a decline in demand and overall economic

The remaining balance for this trade name/trademark was $ 699,000 as of December 31, 2024.

assets were the following at December 31, 2024 and 2023:

SCHEDULE OF OTHER ASSETS

Lease receivable

Sponsorship network

Restricted Cash

2 unchanged sentences

obligations is comprised of the following:

OF DEBT OBLIGATIONS

SCHEDULE OF DEBT OBLIGATIONS

Economic injury disaster loan (EIDL)

Contingent consideration promissory note – Nobility Healthcare Division Acquisition

Contingent consideration promissory note –

Nobility Healthcare Division Acquisition

Contingent consideration promissory note –

Nobility Healthcare Division Acquisition

Revolving Loan Agreement

Commercial Extension of Credit- Entertainment Segment

Merchant Advances

Unamortized debt issuance costs

Commercial Extension of Credit- Entertainment

Merchant Advances – Video Solutions Segment

Senior Secured Promissory Notes

Unamortized debt issuance

Debt obligations

current maturities of debt obligations

current maturities

of debt obligations

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:

SCHEDULE OF MATURITY OF DEBT OBLIGATIONS

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Small Business Administration Notes .

May 12, 2020, the Company received $ 150,000 in loan funding from the SBA under the EIDL program administered by the SBA, which program

was expanded pursuant to the recently enacted CARES Act.

The EIDL is evidenced by an unsecured promissory note, dated May 8, 2020, in

the original principal amount of $ 150,000 with the SBA, the lender.

May 12, 2020, the Company received $ 150,000 in loan funding from the SBA under the Economic Injury Disaster Loan (“EIDL”)

program administered by the SBA, which program was expanded pursuant to the recently enacted CARES Act.

The EIDL is evidenced by a secured

promissory note, dated May 8, 2020, in the original principal amount of $ 150,000 with the SBA, the lender.

the terms of the note issued under the EIDL program, interest accrues on the outstanding principal at the rate of 3.75 % per annum.

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Such note may be prepaid in part or in full, at any time, without penalty.

The Company granted the secured party a continuing interest

in and to any and all collateral, including but not limited to tangible and intangible personal property.

Company made principal payments of $ 2,219 and $- 0 - for the years ended December 31, 2023 and 2022 and recorded interest expense of $ 5,606

The Company granted the SBA a continuing interest in and to

any and all collateral, including but not limited to tangible and intangible personal property.

Company made principal payments of $ 3,286 and

$ 2,219 during the years ended December 31, 2024 and 2023, respectively, and recorded interest expense of $ 5,486 and

$ 5,606 for the years ended December 31, 2024 and 2023, respectively.

Consideration Promissory Notes

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of $ 350,000 .

The Contingent Note has a three-year term and bears interest at a rate of 3.00 % per annum.

Quarterly principal and interest

payments are deferred for six months and is due in equal quarterly installments on the seventh business day of each quarter.

The principal

amount of the June Contingent Note is subject to an earn-out adjustment, being the difference between the $ 975,000 (the “June Projected

Revenue”) and the cash basis revenue (the “June Measurement Period Revenue”) collected by the June Seller in its normal

course of business from the clients existing on June 30, 2021, during the period from October 1, 2021 through September 30, 2022 (the

“June Measurement Period”) measured on a quarterly basis and annualized as of the relevant period.

If the June Measurement

Period Revenue is less than the June Projected Revenue, such amount will be subtracted from the principal balance of this June Contingent

Note on a dollar-for-dollar basis.

If the June Measurement Period Revenue is more than the June Projected Revenue, such amount will be

added to the principal balance of this June Contingent Note on a dollar-for-dollar basis.

In no event will the principal balance of this

June Contingent Note become a negative number.

The maximum downward earn-out adjustment to the principal balance will be to zero.

are no limits to the increases to the principal balance of the June Contingent Note as a result of the earn-out adjustments.

June Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability

is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition.

Management has recorded the contingent consideration promissory note at its estimated fair value of $ 350,000 at the acquisition date.

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.

The June Contingent Note has a three-year 3

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh

business day of each quarter.

The principal amount of the June Contingent Note is subject to an earn-out adjustment, being the difference

between $ 975,000

(the “June Projected Revenue”) and the cash basis

revenue (the “June Measurement Period Revenue”) collected by the June Seller in its normal course of business from the clients

existing on June 30, 2021, during the period from October 1, 2021 through September 30, 2022 (the “June Measurement Period”)

measured on a quarterly basis and annualized as of the relevant period.

If the June Measurement Period Revenue is less than the June

Projected Revenue, such amount will be subtracted from the principal balance of this June Contingent Note on a dollar-for-dollar basis.

If the June Measurement Period Revenue is more than the June Projected Revenue, such amount will be added to the principal balance of

this June Contingent Note on a dollar-for-dollar basis.

In no event will the principal balance of this June Contingent Note become a

negative number.

The maximum downward earn-out adjustment to the principal balance will be a reduction to zero.

There are no limits to

the increases to the principal balance of the June Contingent Note as a result of the earn-out adjustments.

The June Contingent Note is considered to be additional purchase price;

therefore, the estimated fair value of the

contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid

for the acquisition with subsequent changes in fair value recorded as a gain or loss in the Consolidated Statements of Operations.

recorded the contingent consideration promissory note at its estimated fair value of $ 350,000 at the acquisition date.

Total principal

payments, since inception, on this contingent consideration promissory note totaled $ 290,073 .

The estimated fair value of the June Contingent

Note at December 31, 2024 is $- 0 -, representing a reduction in its estimated fair value of $ 58,819 as compared to its estimated fair value

as of December 31, 2023.

This reduction only relates to the principal payments made for the year ended December 31, 2024.

Therefore, the Company recorded 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.

Therefore, the

Company recorded no gain or loss in the Consolidated Statements of Operations for the year ended December 31, 2024.

August 31, 2021, Nobility Healthcare, issued another contingent consideration promissory note (the “August Contingent Payment Note”)

in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “August Sellers”) of

The August Contingent Payment Note has a three-year term and bears interest at a rate of 3.00 % per annum.

Quarterly principal

and interest payments are deferred for six months and is due in equal quarterly installments on the seventh business day of each quarter.

The principal amount of the August Contingent Payment Note is subject to an earn-out adjustment, being the difference between the $ 3,000,000

(the “August Projected Revenue”) and the cash basis revenue (the “August Measurement Period Revenue”) collected

by the August Sellers in its normal course of business from the clients existing on September 1, 2021, during the period from December

1, 2021 through November 30, 2022 (the “August Measurement Period”) measured on a quarterly basis and annualized as of the

relevant period.

If the August Measurement Period Revenue is less than the August Projected Revenue, such amount will be subtracted from

the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis.

If the August Measurement Period Revenue is

more than the August Projected Revenue, such amount will be added to the principal balance of this August Contingent Payment Note on

a dollar-for-dollar basis.

The August Contingent Payment Note has a three-year 3

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh

business day of each quarter.

The principal amount of the August Contingent Payment Note is subject to an earn-out adjustment, being

the difference between the $ 3,000,000

(the “August Projected Revenue”) and the cash basis revenue (the “August Measurement Period Revenue”)

collected by the August Sellers in its normal course of business from the clients existing on September 1, 2021, during the period from

December 1, 2021 through November 30, 2022 (the “August Measurement Period”) measured on a quarterly basis and annualized

as of the relevant period.

If the August Measurement Period Revenue is less than the August Projected Revenue, such amount will be subtracted

from the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis.

If the August Measurement Period Revenue

is more than the August Projected Revenue, such amount will be added to the principal balance of this August Contingent Payment Note

on a dollar-for-dollar basis.

In no event will the principal balance of this August Contingent Payment Note become a negative number.

maximum downward earn-out adjustment to the principal balance will be to zero.

The maximum downward earn-out adjustment to the principal balance will be to zero.

There are no limits to the increases to the principal

balance of the August Contingent Payment Note as a result of the earn-out adjustments.

August Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability

is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition.

Management has recorded the contingent consideration promissory note at its estimated fair value of $ 650,000 at the acquisition date.

Principal payments, since its inception, on this contingent consideration promissory note 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

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.

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

The January Contingent Payment Note has a two-and-a-half-year term and bears interest at a rate of 3.00 % per annum.

principal and interest payments are deferred for seven months and is due in equal quarterly installments on the tenth business day of

each quarter.

The principal amount of the January Contingent Payment Note is subject to an earn-out adjustment, being the difference

between $ 3,500,000 (the “January Projected Revenue”) and the cash basis revenue (the “January Measurement Period Revenue”)

collected by the January Sellers in its normal course of business from the clients existing on January 1, 2022, during the period from

April 1, 2022 through March 31, 2023 (the “January Measurement Period”) measured on a quarterly basis and annualized as of

the relevant period.

If the January Measurement Period Revenue is less than the January Projected Revenue, such amount will be subtracted

from the principal balance of this January Contingent Payment Note on a dollar-for-dollar basis.

If the January Measurement Period Revenue

is more than the January Projected Revenue, such amount will be added to the principal balance of this January Contingent Payment Note

on a dollar-for-dollar basis.

The August Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value

of the contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration

paid for the acquisition.

Management has recorded the contingent consideration promissory note at its estimated fair value of $ 650,000

at the acquisition date.

Principal payments, since its inception, on this contingent consideration promissory note totalled $ 681,907 .

The estimated fair value of the August Contingent Note at December 31, 2024 is $- 0 -, representing a decrease in its estimated fair value

of $ 129,651 as compared to is estimated fair value as of December 31, 2023.

This reduction only relates to the principal payments made

for the year ended December 31, 2024.

Therefore, the Company recorded no gain or loss in the Consolidated Statements of Operations for

the year ended December 31, 2024.

On January 1, 2022, Nobility Healthcare

issued another contingent consideration promissory note (the “January Contingent Payment Note”) in connection with a stock

purchase agreement between Nobility Healthcare and a private company (the “January Sellers”) of $ 750,000 .

The January Contingent

Payment Note has a two-and-a-half-year term and bears interest at a rate of 3.00 % per annum.

Quarterly principal and interest

payments are deferred for seven months and is due in equal quarterly installments on the tenth business day of each quarter.

The principal

amount of the January Contingent Payment Note is subject to an earn-out adjustment, being the difference between $ 3,500,000 (the

“January Projected Revenue”) and the cash basis revenue (the “January Measurement Period Revenue”) collected

by the January Sellers in its normal course of business from the clients existing on January 1, 2022, during the period from April 1,

2022 through March 31, 2023 (the “January Measurement Period”) measured on a quarterly basis and annualized as of the relevant

If the January Measurement Period Revenue is less than the January Projected Revenue, such amount will be subtracted from the

principal balance of this January Contingent Payment Note on a dollar-for-dollar basis.

If the January Measurement Period Revenue is

more than the January Projected Revenue, such amount will be added to the principal balance of this January Contingent Payment Note on

a dollar-for-dollar basis.

In no event will the principal balance of this January Contingent Payment Note become a negative number.

The maximum downward earn-out adjustment to the principal balance will be a reduction to zero.

There are no limits to the increases to

the principal balance of the January Contingent Payment Note as a result of the earn-out adjustments.

January 1, 2022, Nobility Healthcare issued another contingent consideration promissory note (the “January Contingent Payment Note”)

maximum downward earn-out adjustment to the principal balance will be a reduction to zero.

There are no limits to the increases to the

principal balance of the January Contingent Payment Note as a result of the earn-out adjustments.

On January 1,

2022, Nobility Healthcare issued another contingent consideration promissory note (the “January Contingent Payment Note”)

in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “January Sellers”) of

Principal payments, since its inception, on this contingent consideration promissory note 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

Principal payments, since its inception, on this contingent consideration promissory note totalled $ 153,769 .

The estimated

fair value of the January Contingent Note at December 31, 2023 is $- 0 -, representing a decrease in its estimated fair value of $ 208,083 as

compared to its estimated fair value as of December 31, 2022, of which $ 32,936 represents payments made during the year ended December

Therefore, the Company recorded a gain of $ 175,146 and $ 421,085 in the Consolidated Statements of Operations for the years

ended December 31, 2023 and December 31, 2022, 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”)

of $ 105,000 .

The February Contingent Payment Note has a three-year term and bears interest at a rate of 3.00 % per annum.

Quarterly principal

and interest payments are deferred for seven months and are due in equal quarterly installments on the tenth business day of each quarter.

The principal amount of the February Contingent Payment Note is subject to an earn-out adjustment, being the difference between $ 440,000

Therefore, the Company recorded a gain of $ 175,146 in the Consolidated Statements of Operations for the year ended December

On February 1, 2022,

Nobility Healthcare issued another contingent consideration promissory note (the “February Contingent Payment Note”) in connection

with an asset purchase agreement between Nobility Healthcare and a private company (the “February Sellers”) of $ 105,000 .

The February Contingent Payment Note has a three-year 3

term and bears interest at a rate of 3.00 %

Quarterly principal and interest payments are deferred for seven months and are due in equal quarterly installments on the

tenth business day of each quarter.

The principal amount of the February Contingent Payment Note is subject to an earn-out adjustment,

being the difference between $ 440,000

(the “February Projected Revenue”) and the cash basis revenue (the “February Measurement Period Revenue”) collected

10 unchanged sentences

the principal balance of the February Contingent Payment Note as a result of the earn-out adjustments.

February Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent

liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the

Management has recorded the contingent consideration promissory note at its estimated fair value of $ 105,000 at the acquisition

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.

consideration earn-out Agreement – TicketSmarter Acquisition

September 1, 2021, TicketSmarter, Inc., a subsidiary of the Company, issued a contingent consideration earn-out agreement (the “TicketSmarter

Earn-Out”) in connection with the Stock Purchase Agreement between TicketSmarter, Inc., Goody Tickets, LLC and TicketSmarter, LLC

(“TicketSmarter”) of up to $ 4,244,400 with a fair value at acquisition of $ 3,700,000 .

The TicketSmarter Earn-Out shall be

payable with ninety percent ( 90 %) readily available funds and ten percent ( 10 %) in stock consideration.

The principal amount of the TicketSmarter

Earn-Out is subject to an earn-out adjustment, being the difference between the $ 2,896,829 (the “Projected EBITDA”) and the

actual EBITDA (the “Measurement Period EBITDA”) generated by TicketSmarter in its normal course of business, during the period

from September 1, 2021 through December 31, 2021 (the “Measurement Period”).

If the Measurement Period EBITDA is less than

seventy percent ( 70 %) of the Projected EBITDA, there will be zero contingent payment.

If the Measurement Period EBITDA is between seventy

percent ( 70 %) and one hundred percent ( 100 %) of the Projected EBITDA, then a fractional amount of the contingent payment will be paid

If the Measurement Period EBITDA is more than the Projected EBITDA, the full principal balance of this TicketSmarter Earn-Out will

In no event will the principal balance of this TicketSmarter Earn-Out become a negative number.

The maximum downward earn-out

adjustment to the earn-out balance will be to reduce the balance to zero.

contingent consideration earn-out is considered to be additional purchase price, therefore the estimated fair value of the contingent

liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the

Management has recorded the contingent consideration earn-out at its estimated fair value of $ 3,700,000 at the acquisition

Management determined that the actual Measurement Period EBITDA generated by TicketSmarter was less than 70% of the Projected EBITDA

Therefore, no TicketSmarter Earn-Out payments amounts were due under the agreement.

Therefore, the fair value of the contingent

consideration earn-out agreement was reduced to zero, and the resulting gain of $- 0 - and $- 0 - was reported in our Consolidated Statements

of Operations for the years ended December 31, 2023 and December 31, 2022, respectively.

The February Contingent

Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability is recorded

as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition.

has recorded the contingent consideration promissory note at its estimated fair value of $ 105,000 at the acquisition date.

The estimated

fair value of the February Contingent Note at December 31, 2023 is $- 0 -, representing a decrease in its estimated fair value of $ 4,347

as compared to its estimated fair value as of December 31, 2022, of which $ 1,584 represents payments made during the year ended December

Therefore, the Company recorded a gain of $ 2,763 in the Consolidated Statements of Operations for the year ended December 31,

Commercial Extension of Credit

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to extend, subject to the conditions hereof, and Borrower agreed to take, a Loan for Principal Sum of $ 1,000,000 .

shall retain 25 % of each remittance owed to Borrower under the terms of the Private Label Agreement.

Such remittances shall include regular

Lender retains 25 % of each remittance owed to Borrower under the terms of the Private Label Agreement.

Such remittances includes regular

weekly remittances and any additional incentive payments to which the Borrower may be entitled.

The 25% withholding of the Borrower’s

applicable remittance shall be deemed a “Payment” under the terms of this Note, and Payments shall continue until the earlier

of (i) repayment of the Principal Sum, accrued Interest, and a fee of $35,000.00 or (ii) expiration of the Private Label Agreement on

December 31, 2023.

the year ended December 31, 2023, the Entertainment segment drew an additional $ 455,643 on this agreement, with the principal balance

never exceeding $ 1,000,000 .

During the year ended December 31, 2023, the Company’s Entertainment segment had repaid $ 1,367,715

towards the principal on the loan through remittances and had an outstanding balance of $ 87,928 .

applicable remittance is deemed a “Payment” under the terms of this Note, and Payments shall continue until the earlier of

(i) repayment of the Principal Sum, accrued Interest, and a fee of $35,000 or (ii) expiration of the Private Label Agreement on December

the year ended December 31, 2023, the Entertainment segment drew an additional $ 455,643 on

this agreement, with the principal balance never exceeding $ 1,000,000 .

During the year ended December 31, 2023, the Company’s Entertainment segment had repaid $ 1,367,715 towards

the principal on the loan through remittances and had an outstanding balance of $ 87,928 .

During the year ended December 31, 2024, the Company’s Entertainment segment repaid the outstanding principal of $ 87,928 and

did not renew this agreement.

During the year ended December 31, 2024, the Company’s Entertainment segment fully amortized $ 35,000 fees.

Commercial Extension of Credit

January 22, 2024, the Company’s Entertainment segment entered into an extension of credit in the form of a loan to use in marketing

and operating its business in accordance with the Ticket Solution Agreement.

The Lender, Ticket Evolution, Inc., agreed to extend, subject

to the conditions hereof, and Borrower agreed to take, an advance for a sum of $ 75,000 with monthly advances of $ 100,000 .

advances made are recoupable from client service fees with no more than $ 25,000 being recouped in any one week.

The total advances received

for the year ended December 31, 2024 were $ 1,275,000 and payments made totaled $ 1,175,000 .

The outstanding balance as of December 31, 2024

was $ 100,000 .

On August 7, 2024 and as amended on September 25, 2024, the Company’s

Entertainment segment entered into an extension of credit (the “Agreement”) with Vegas Tickets in the form of a prepayment

for the rights to acquire certain Major League Baseball and National Football League playoff and season tickets.

Vegas Tickets agreed

to advance, subject to the conditions of the Agreement, and the Company’s Entertainment segment agreed to take, an advance for a

sum of $ 200,000 .

Under the Agreement, the Company’s Entertainment segment has the right to reacquire the tickets for a cash amount

of $ 220,000 by November 1, 2024.

The repurchase date was extended to December 1, 2024 by an amendment dated October 31, 2024.

The repurchase

was completed and the remaining balance is $- 0 - as of December 31, 2024.

April 5, 2023, the Company entered into and consummated the initial closing (the “First Closing”) of the transactions contemplated

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derivative value exceeded the net proceeds from the issuance, the excess amount is recognized as a loss on the date of the issue date.

Thus, the Company recorded a loss of $ 576,380 as an interest expense on the date of issuance relating to the Convertible note.

The following

is the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted

in connection with the Convertible Note:

OF WARRANT TO PURCHASE COMMON STOCK GRANTED

Thus, the Company recorded a loss of $ 576,380 as an interest expense on the date of issuance relating to the Notes.

The following is

the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted in

connection with the Notes:

SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED

April 5, 2023

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Exercise price

$ 5.50 – 7.50

Common stock issuable under the warrants

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The loss on conversion of convertible note into common shares, of $ 93,386 , was recorded during the period.

October 26, 2023, the Company entered into a Revolving Loan Agreement of which a portion of the net proceeds were used to repay the principal

amount of the Convertible debt.

The Company made an aggregate payment of $ 3,162,500 from the proceeds, inclusive of fees to retire the

convertible notes.

In 2023, the Company amortized $ 2,169,545 in debt issuance costs associated with the convertible notes and expensed

the remaining balance of $ 731,819 upon extinguishment of the notes.

As a result a loss on extinguishment of debt totaling $ 1,019,319

October 26, 2023, the Company entered into a Revolving Loan Agreement of which a portion of the net proceeds were used to repay the

principal amount of the Convertible debt.

The Company made an aggregate payment of $ 3,162,500

from the proceeds, inclusive of fees to retire the convertible notes.

In 2023, the Company amortized $ 2,169,545

in debt issuance costs associated with the convertible notes and expensed the remaining balance of $ 731,819

upon extinguishment of the notes.

As a result, a loss on extinguishment of convertible debt totaling $ 1,112,705

was recorded in our Consolidated Statements of Operations for the year ended December 31, 2023.

The warrants associated with the convertible

debt remain outstanding.

The warrants associated with

the convertible debt remain outstanding.

Loan Agreement

October 26, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”)

by and between the Company, Digital Ally Healthcare, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Digital

Ally Healthcare” and, together with the Company, the “Borrower”), and Kompass Kapital Funding, LLC, a Kansas limited

liability company (“Kompass”).

In connection with the Loan Agreement, on October 26, 2023, the Company entered into a Mortgage,

Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “Mortgage”) by and between the Company, as grantor,

and Kompass, as grantee, and issued a Revolving Note (the “Revolving Note”) to Kompass.

The gross proceeds to the Company

are $ 4,880,000 before repaying those certain Senior Secured Convertible Notes issued on April 5, 2023 in the aggregate amount of $ 3,162,500

and paying customary fees and expenses.

October 26, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) by and between the Company,

Digital Ally Healthcare, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Digital Ally Healthcare”

and, together with the Company, the “Borrower”), and Kompass Kapital Funding, LLC, a Kansas limited liability company (“Kompass”).

In connection with the Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security

Agreement and Fixture Filing (the “Mortgage”) by and between the Company, as grantor, and Kompass, as grantee, and issued

a Revolving Note (the “Revolving Note”) to Kompass.

The gross proceeds to the Company were $ 4,880,000 before repaying those

certain Senior Secured Convertible Notes issued on April 5, 2023 in the aggregate amount of $ 3,162,500 and paying customary fees and

to the Loan Agreement, Kompass agreed to make revolving loans (the “Revolving Loans”) available to the Borrower as the Borrower

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provided, however, that the aggregate principal balance of the Revolving Loans outstanding at any time shall not exceed the lesser of

$ 4,880,000.00 or an amount equal to eighty percent of the value of the mortgaged property, which consists of the real property owned

by the Company having an address of 14001 Marshall Drive, Lenexa, KS 66215 (the “Mortgaged Property”).

$ 4,880,000 or an amount equal to eighty percent of the value of the mortgaged property, which consists of the real property owned by

the Company having an address of 14001 Marshall Drive, Lenexa, KS 66215 (the “Mortgaged Property”).

Under the Loan Agreement,

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The Mortgage contains customary covenants, representations and warranties by the Company.

In addition, the

Company recorded debt issuance costs of $ 188,255 .

During the year ended December 31, 2023, the Company amortized $ 16,997 of debt discount

under interest expense, compared to $- 0 - for the year ended December 31, 2022.

Cash Advances

November 2023, the Company obtained a short-term merchant advance, which totaled $ 1,050,000 ,

from a single lender to fund operations.

These advances included origination fees totaling $ 50,000

for net proceeds of $ 1,000,000 .

The advance is, for the most part, is secured by expected future sales transactions of the Company with expected payments on a weekly

August 12, 2024, the Company sold the Mortgaged Property and paid off the $ 4,880,000 outstanding

principal balance together with all accrued and unpaid interest.

In addition, upon origination of the Revolving Loan, the Company

recorded debt issuance costs of $ 188,255 which

was fully amortized as of the date the Mortgage was paid in full.

The remaining unamortized discount was $- 0 -

and $ 171,258 as

December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024 and 2023, the Company amortized $ 171,258

and $ 16,997 of debt discount under interest expense, respectively.

Cash Advances – Video Solutions Segment

November 2023, the Company obtained a short-term merchant advance, which totaled $ 1,050,000 , from a single lender to fund operations.

These advances included origination fees totaling $ 50,000 for net proceeds of $ 1,000,000 .

The advance is, for the most part, secured

by expected future sales transactions of the Company with expected payments on a weekly basis.

The Company will repay an aggregate of

$ 1,512,000 to the lender.

During 2023, the

Company made repayments totaling $ 162,000

and $ 1,350,000

remained outstanding, which is

expected to be repaid in 2024.

the year ended December 2023 the Company amortized $ 142,829 of debt discount under interest expense, compared to $- 0 - for year ended

December 31, 2022.

The loan bears interest at 2.9 % per week.

the year ended December 31, 2024, the Company made repayments totaling $ 1,551,250

and received additional proceeds of $ 1,144,000

and recorded additional discount of $ 980,000 .

The Company refinanced this loan in April 2024 resulting in the additional proceeds received during the year ended December 31,

The refinancing was deemed to be an extinguishment of debt and a loss on extinguishment of debt was recorded during the year

ended December 31, 2024 of $ 68,827 .

of December 31, 2024 the outstanding principal balance was $ 1,922,750 which

is expected to be repaid in early 2025.

The remaining unamortized discount was $- 0 -

and $ 369,171 as

of December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024 and 2023, the Company amortized

$ 1,180,343 and $ 142,829 , of debt discount under interest expense, respectively.

During 2024 and 2023, the Company made repayments

totaling $ 1,551,250 and $ 162,000 , respectively.

Cash Advances – Entertainment Segment

March 1, 2024, the Company obtained a short-term merchant advance, which totaled $ 1,000,000 , from a single lender to fund operations.

These advances included origination and issuance fees totaling $ 85,000 for net proceeds of $ 915,000 .

The advance is, for the most part,

secured by expected future sales transactions of the Company with expected payments on a weekly basis.

The Company will repay an aggregate

of $ 1,425,000 to the lender.

The loan bears interest at a 40.4523 % annual effective rate based on latest debt modification.

Company entered into the original agreement on March 1, 2024.

On July 13, 2024, the Company entered into a letter agreement with the

Purchaser, amending the terms of the note agreement, and on September 12, 2024, the Company entered into a second letter agreement further

amending the terms of the note agreement.

The two amendments to the underlying loan agreement, resulting in additional proceeds totaling

The modifications were both deemed to be extinguishments of debt resulting in a $ 310,505

loss on the extinguishment of debt during the year ended December

July 13, 2024, the Company entered into a Letter Agreement with the note holder, which modified the note payable by increasing the principal

amount of the note payable from $ 1,425,000 to $ 1,725,000 ;

provided, however, that if the Borrowers repay the Note in full on or before

August 15, 2024, then the principal amount of the Note shall be reduced automatically by $ 100,000 .

Pursuant to the Letter Agreement,

the Borrowers’ failure to adhere to certain repayment requirements of the underlying note purchase agreement did not constitute

an event of default, as defined in the note purchase agreement.

Pursuant to the modified/amended note, the Company agreed to make a cash

payment to the note holder in the amount of $ 150,000 on or before July 26, 2024.

The Company also agreed to sell or enter into a firm

commitment to sell the office building owned by the Company and pay to the Purchaser:

(i) $ 325,000 , if the Company sells or enters into

a firm commitment to sell the building on or before August 7, 2024;

or (ii) $ 400,000 , if the Company sells or enters into a firm commitment

to sell the building after August 7, 2024.

Pursuant to the modified/amended note, the Company’s failure to sell or enter into a

firm commitment to sell the building prior to September 1, 2024 shall constitute an event of default, as defined in the note purchase

The Company also agreed to pay to the note holder $ 100,000 per month until the modified/amended note is repaid in full, with

the first such payment occurring on August 12, 2024, and each subsequent payment occurring on the 12th calendar day of each month thereafter.

September 25, 2024, the Company and the note holder agreed to an amended and restated senior secured promissory note with a new principal

amount of up to $ 2,000,000 .

The amended note evidences the new principal amount and amends and restates in its entirety, the terms and

provisions of the Note.

Pursuant to the amended note the Company promised to pay to the note holder the new principal amount, together

with accrued interest or the amount outstanding under the amended note from time to time, to be computed from the date of the amended

note at the rates and in the amounts set forth in the amended note.

The amount of the unpaid balance, including such interest, that shall

be due and payable under the Amended Note may increase and decrease as advances and payments are made thereunder.

The Amended Note bears

interest at a rate of 1.58 % per month.

Company can request advances in writing to the note holder and upon approval by the note holder to be determined in its sole discretion,

(but which shall not be unreasonably withheld), the note holder can either make payment directly to specified vendor(s) or other creditors

on behalf of the Company or deposit the advance into the Company’s account.

amended note, requires the Company to repay the amended note, in full, on the earlier of (i) November 1, 2024, and (ii) the consummation

of the merger between Kustom Entertainment and CL Merger Sub, Inc.

(“CL Merger Sub”) pursuant to the merger agreement among

the Company, Kustom Entertainment, Clover Leaf Capital Corp.

the Company is also required to pay in arrears in cash an amount equal to

50% of revenues from all ticket sales generated by Kustom Entertainment, up to nine thousand tickets sold, and thereafter equal to 10%

of all revenues from all ticket sales until the earlier of the date on which the amended note is repaid in full or the November 1, 2024

maturity date.

The Company has the right, but not the obligation, under the amended note to prepay the amended note, upon written notice

to the Company, by payment in full of the entire outstanding principal balance plus interest.

pursuant to the amended note, the parties agreed to extend the repayment date of $ 100,000 , by the Company to the note holder, from September

26, 2024, to October 10, 2024.

Company was unable to make certain required payments under the terms of the amended note.

October 22, 2024, the Company received a Default and Reservation Letter (the “Default Notice”) from counsel for the administrative

agent for the amended note, (i) notifying the Company that it was in default under the amended note for, among other reasons, failing

to make a $ 100,000 payment that was due on October 10, 2024, (ii) accelerating all principal and interest payments due under the amended

note, and (iii) demanding the Borrowers enter into a lockbox control agreement within ten (10) business days of the date of the Default

As of the date of the Default Notice, the outstanding obligation of the Company under the amended note was approximately $ 1,600,000 .

October 24, 2024, the Company received a Notice of UCC Article 9 Public Sale (the “Sale Notice”) from counsel to the administrative

agent for the amended note notifying the Company that it intended to conduct a public sale of the collateral securing the Company’s

obligations under the Note and Security Agreement on November 5, 2024.

further described below (see Securities Purchase Agreement and Senior Secured Promissory Notes ), the Company raised sufficient

funds through a private placement which closed on November 7, 2024, to repay the amended note in full.

The Company’s full repayment

of the outstanding obligations under such amended note effectively cured all defaults under the Agreement and terminated the public sale

process of the collateral securing the Borrowers’ obligations thereunder.

During the year

ended December 31, 2024 and 2023, the Company amortized $ 384,302

of debt discount under interest expense, respectively.

The Company recorded total losses of $ 684,512 from the extinguishments of such debt during the year ended December 31, 2024.

Purchase Agreement and Senior Secured Promissory Notes

November 6, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors

(the “Purchasers”), pursuant to which the Company agreed to issue and sell to such Purchasers, in a private placement transaction,

(i) senior secured promissory notes in aggregate principal amount of $ 3,600,000 (the “Notes”), and (ii) 808,377 shares (the

“Commitment Shares”) of the Company’s common stock, for aggregate gross proceeds of approximately $ 3.0 million, before

deducting placement agent fees and other offering expenses payable by the Company.

This private placement closed on November 7, 2024

(the “Closing Date”).

to the SPA, the Company was required to use approximately $ 2,015,623 of the net proceeds from the private placement to pay, in full,

all liabilities, obligations and indebtedness owing by the Company and its subsidiary, Kustom Entertainment, Inc., to Mosh Man, LLC (the

See Merchant Cash Advances – Entertainment Segment.

Company’s full repayment of the outstanding obligations under such promissory note effectively cured all defaults under the promissory

note and terminated the public sale process of the collateral securing the Borrowers’ obligations thereunder.

The Company’s

recorded a loss of $ 374,007 from the extinguishment of such debt during the year ended December 31, 2024.

to the SPA, the Company is required to file within 30 days of the Closing Date a registration statement with the SEC for a public offering

and use its reasonable best efforts to pursue and consummate a follow-on financing transaction within 90 days of the Closing Date.

proceeds of the public offering shall be first used for the repayment of the principal amounts of the Notes.

The Company is also required

to file within 30 days of the Closing Date a registration statement on Form S-1 (or other appropriate form if the Company is not then

S-1 eligible) providing for the resale by the Purchasers of the Commitment Shares issued under the SPA.

The Company is required to use

commercially reasonable efforts to cause such registration statement to become effective within 60 days following the filing thereof

and to keep such registration statement effective at all times until no Purchaser owns any Commitment Shares.

pursuant to the SPA, the Company was required to complete the following:

(i) the Company’s board of directors shall approve an

amendment to the Company’s bylaws setting the quorum required for a special meeting of stockholders to one-third of all stockholders

entitled to vote at such special meeting and (ii) the Company shall file with the SEC a preliminary proxy statement on Schedule 14A announcing

a meeting of stockholders for the purpose of approving the Series A and Series B warrants issued by the Company on June 25, 2024.

senior secured promissory notes mature ninety (90) days following their issuance date (the “Maturity Date”) and shall accrue

no interest unless and until an Event of Default (as defined in the senior secured promissory notes) has occurred, in which case interest

shall accrue at a rate of 14% per annum during the pendency of such Event of Default.

In addition, upon customary Events of Default,

the Purchasers may require the Company to redeem all or any portion of the senior secured promissory notes in cash with a 125% redemption

The Purchasers may also require the Company to redeem all or any portion of the senior secured promissory notes in cash upon

a Change of Control, as defined in the senior secured promissory notes, at the prices set forth therein.

Upon a Bankruptcy Event of Default

(as defined in the senior secured promissory notes), the Company shall immediately pay to the Purchasers an amount in cash representing

100% of all outstanding principal, accrued and unpaid interest , if any, in addition to any and all other amounts due under the senior

secured promissory notes, without the requirement for any notice or demand or other action by the Purchaser or any other person.

the Company engages in one or more subsequent financings while the senior secured promissory notes are outstanding, the Company will

be required to use at least 100 % of the gross proceeds of such financing to redeem all or any portion of the senior secured promissory

notes outstanding.

The Company may also prepay the senior secured promissory notes in whole or in part at any time or from time to time.

The senior secured promissory notes also contain customary representations and warranties and covenants of each of the parties.

to certain exceptions, the senior secured promissory notes are secured by a first lien and continuing security interest in and to the

Collateral (as defined in the senior secured promissory notes).

net proceeds of the private placement on November 7, 2024 was $ 2,669,250 (after $ 330,750 deduction of costs of the offering).

allocated the net proceeds from the private placement of the senior secured promissory notes and the commitment shares based upon their

relative fair values as of the date of issuance as follows:

SCHEDULE OF ALLOCATED NET PROCEEDS FROM PRIVATE PLACEMENT OF SENIOR SECURED PROMISSORY NOTES AND COMMITMENT SHARES

Allocated to the following:

Senior secured

promissory notes

Commitment shares

is analysis of the senior secured promissory notes balance:

SCHEDULE OF SENIOR SECURED PROMISSORY NOTES BALANCE

Balance, as of December 31, 2023

senior secured promissory notes, at par

Discount recognized at

issuance date

( 1,470,205 )

Amortization of discount

Balance, as of December 31, 2024

FAIR VALUE MEASUREMENT

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basis as of December 31, 2024 and 2023.

OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS

December 31, 2023

SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS

Warrant derivative liabilities

Contingent consideration promissory notes and contingent consideration earn-out agreement

December 31, 2022

Contingent consideration

promissory notes and contingent consideration earn-out agreement

Warrant derivative liabilities

Contingent consideration promissory notes and contingent consideration earn-out agreement

Contingent consideration

promissory notes and contingent consideration earn-out agreement

following table represents the change in Level 3 tier value measurements:

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Promissory Notes and Earn-Out Agreement

Balance, December 31, 2023

Issuance of Series A and pre-funded warrant

derivative liabilities in

June 2024 Private Placement

Issuance of Series B warrant derivative

liabilities in June 2024 Private Placement upon Stockholder Approval

Transition of warrant derivative liability

to equity due to exercise of common stock purchase warrants

Change in fair value of warrant derivative

Principal payments on

contingent consideration promissory notes – Revenue Cycle Management Acquisitions

Balance, December 31, 2024

Consideration

Promissory Notes and Earn-Out Agreement

Warrant Derivative

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Accrued interest - related party

Accrued board of directors’ fees

Customer deposits

Total accrued

Total accrued expenses

warranty expense was comprised of the following for the years ended December 31, 2024 and 2023:

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Provision for warranty expense

Charges applied to warranty reserve

Charges applied to warranty

Ending balance

components of income tax provision (benefit) for the years ended December 31, 2024 and 2023 are as follows:

OF COMPONENTS OF INCOME TAX PROVISION (BENEFIT)

SCHEDULE OF COMPONENTS OF INCOME TAX PROVISION (BENEFIT)

Current taxes:

Total current taxes

Deferred tax provision (benefit)

Income tax provision (benefit)

Deferred tax provision

Income tax provision

reconciliation of the income tax (provision) benefit at the statutory rate of 21 % for the years ended December 31, 2024, and 2023 to

the Company’s effective tax rate is as follows:

OF RECONCILIATION OF INCOME TAX (PROVISION) BENEFIT

SCHEDULE OF RECONCILIATION OF INCOME TAX (PROVISION) BENEFIT

Statutory tax rate

1 unchanged sentence

Stock based compensation

Change in valuation reserve on deferred tax assets

Termination of warrant derivative liabilities

Change in valuation reserve on deferred tax

Contingent consideration for acquisition

Extinguishment of convertible debt

Income tax (provision) benefit

Income tax (provision)

effective tax rate for the years ended December 31, 2024, and 2023 varied from the expected statutory rate due to the Company continuing

3 unchanged sentences

components of the Company’s deferred tax assets (liabilities) as of December 31, 2024 and 2023 are as follows:

OF SIGNIFICANT COMPONENTS OF DEFERRED TAX ASSETS (LIABILITIES)

SCHEDULE OF SIGNIFICANT COMPONENTS OF DEFERRED TAX ASSETS (LIABILITIES)

Deferred tax assets:

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Inventory reserves

Uniform capitalization of inventory costs

Warrant derivative liabilities

Investment in subsidiaries

Research & development expenses

Allowance for doubtful accounts receivable

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Charitable contributions carryforward

Uniform capitalization

of inventory costs

Total deferred tax assets

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Intangible assets

Domestic international sales company

Domestic international

sales company

Total deferred tax liabilities

Net deferred tax assets (liability)

( 1,020,000 )

Net deferred tax assets

valuation allowance on deferred tax assets totaled $ 46,290,000 and $ 41,610,000 as of December 31, 2024, and 2023, respectively.

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

of December 31, 2023, the Company had available approximately $ 140,940,000 of Federal net operating loss carry-forwards available to

offset future taxable income generated.

Such tax net operating loss carry-forwards expire between 2025 and 2043, with $ 91,352,000 of

the tax net operating loss carry-forwards have an indefinite life since the enactment of the Tax Cuts and Jobs Act of 2017.

the Company had research and development tax credit carry-forwards totaling $ 1,794,000 available as of December 31, 2023, which expire

of December 31, 2024, the Company had the following Federal net operating loss carry-forwards available to offset future taxable income:

OF FEDERAL NET OPERATING LOSS CARRY FORWARDS

Tax years generated:

2017 and before

2018 and after

Federal net operating loss carry-forwards available

$ 159,280,000

tax net operating loss carry-forwards expire between 2025 and 2043 relative to Federal net operating loss carry-forwards generated

in tax years 2017 and prior.

Federal net operating loss carry-forwards generated in tax years 2018 and after cannot be carried back

to prior years and have an indefinite life since the enactment of the Tax Cuts and Jobs Act of 2017.

The Tax Cuts and Jobs Act of

2017 further provides for an annual limitation on usage equivalent to 80% of taxable income.

In addition, the Company had research

and development tax credit carry-forwards totaling $ 1,742,000 available

as of December 31, 2024, which expire

between 2025 and 2040 .

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Current estimates prepared by the

Company indicate that due to ownership changes which have occurred, approximately $ 765,000 of its net operating loss and $ 175,000 of

its research and development tax credit carry-forwards are currently subject to an annual limitation of approximately $ 1,151,000 and

may be further limited by additional ownership changes which may occur in the future.

As stated above, the net operating loss and research

and development credit carry-forwards expire between 2024 and 2039 , allowing the Company to potentially utilize all of the limited net

operating loss carry-forwards during the carry-forward period.

Company indicate that there may have been ownership changes in the past that could limit our ability to utilize a portion of our net

operating loss carryforwards and our research and development tax credit carry-forwards.

discussed in Note 1, “Summary of Significant Accounting Policies,” tax positions are evaluated in a two-step process.

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valuation allowance on net deferred tax assets as of December 31, 2024, primarily because of the current year operating losses.

Company’s federal and state income tax returns are closed for examination purposes by relevant statute and by examination for 2019

and all prior tax years.

Company’s 2022 federal tax return was recently examined by the Internal Revenue Service resulting in no proposed adjustments.

OPERATING LEASE

Company entered into an operating lease with a third party in October 2019 for copiers used for office and warehouse purposes.

of the lease include 48 monthly payments of $ 1,598 with a maturity date of October 2023.

The Company has the option to purchase such

equipment at maturity for its estimated fair market value at that point in time.

The lease for the Company’s copier operating lease

expired and was renewed in October 2023.

The Company entered into an operating

lease with a third party in October 2019 for copiers used for office and warehouse purposes.

The terms of the lease include 48 monthly

payments of $ 1,598 with a maturity date of October 2023.

The Company has the option to purchase such equipment at maturity for its estimated

fair market value at that point in time.

The lease for the Company’s copier operating lease expired and was renewed in October

Company entered into an operating lease with a third party in October 2023 for copiers used for office and warehouse purposes.

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The remaining lease term for the Company’s copier

operating lease as of December 31, 2023 was forty-six months .

operating lease as of December 31, 2024 was thirty-four 34 months.

Company entered into an operating lease with a third party on November 27, 2024 for a copier used for office purposes.

the lease include 36

monthly payments of $ 90

with a maturity date of November 27, 2027 .

The Company has the option to purchase such equipment at maturity for its estimated fair

market value at that point in time.

The remaining lease term for the Company’s copier operating lease as of December 31, 2024

was thirty-five

The Company entered into an operating

lease with a third party on October 16, 2024 for office space used by the entertainment segment and temporarily by the video solutions

The terms of the lease include 36 monthly payments of $ 7,251.92 with a maturity date of October 31, 2027 .

The remaining lease

term for the Company’s office space lease as of December 31, 2024 was thirty-four 34 months.

May 13, 2020, the Company entered into an operating lease for new warehouse and office space, which served as its new principal executive

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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 .

On September 16, 2024, the Company and the landlord

agreed to terminate the lease and the Company relinquished possession and control of the premises.

The Company reversed the related right

of use asset by $ 349,710 and its $ 37,500 rent deposit.

In addition, the Company reversed its right of use lease liability by $ 396,595 ,

resulting in a net gain from the lease extinguishment totaling $ 9,385 for the year ended December 31, 2024 .

June 30, 2021, the Company completed the acquisition of its first medical billing company, through Nobility Healthcare.

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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 .

The Company was responsible

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

The lease term expired

in July 2024 and was not renewed by the Company.

August 31, 2021, the Company completed the acquisition of its second acquired medical billing company, through Nobility Healthcare.

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to this location.

The remaining term for the Company’s office operating lease was seventy-five months as of December 31, 2023.

The remaining term for the Company’s office operating lease was sixty-three 63 months as of December 31, 2024.

September 1, 2021, the Company completed the acquisition of Goody Tickets, LLC and TicketSmarter, LLC through TicketSmarter.

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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.

The Company terminated this lease in January 2024 and reversed the right of use

asset and lease liability by $ 73,894 .

expense related to the Company’s office space and copier operating leases was recorded on a straight-line basis over the

Total lease expense under the five operating leases was approximately $ 627,212

for the year ended December 31, 2024.

weighted-average remaining lease-term related to the Company’s lease liabilities as of December 31, 2024 and December 31, 2023

was 4.5 years and 3.3 years, respectively.

were 4.3 years and 4.5 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,

As of the 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, 2024:

OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

Operating lease right of use assets

SCHEDULE OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES

lease right of use assets

Operating lease obligations-current portion

Operating lease obligations-less current portion

Total operating lease obligations

Operating lease obligations-less

current portion

Total operating lease

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

OF FUTURE MINIMUM LEASE PAYMENTS

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Year ending December 31:

2029 and thereafter

Total undiscounted minimum future lease payments

Imputed interest

Total operating lease liability

operating lease liability

COMMITMENTS AND CONTINGENCIES

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May 31, 2022, the Company filed a lawsuit against Culp McAuley, Inc.

(“defendant”) in the United States District Court for

the District of Kansas.

The lawsuit arises from the defendant’s multiple breaches of its obligations to the Company.

seeks monetary damages and injunctive relief based on certain conduct by the defendant.

On July 18, 2022, the defendant filed its Answer

to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages.

8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and

any and all liability.

of December 31, 2023, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case, our estimate of

the aggregate reasonably possible loss (in excess of any accrued amounts) was approximately $ 1.8 million.

Our estimate with respect to

the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety

of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time, particularly if and

as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding.

Also, the matters underlying the reasonably

possible loss will change from time to time.

As a result, actual results may vary significantly from the current estimate.

the ultimate resolution is unknown, based on the information currently available, we do not expect that these lawsuits will individually,

or in the aggregate, have a material adverse effect to our results of operations, financial condition or cash flows.

However, the outcome

of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result

from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance

coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.

(“Culp McAuley”) and four individuals (Brandon Culp,

Campbell McAuley, Mark Depew and Larry Roberts) (collectively the “defendants”) in the United States District Court for the

District of Kansas, seeking monetary damages and injunctive relief based on certain conduct by the defendants.

On July 18, 2022, Culp

McAuley filed its Answer to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking

monetary damages.

On August 8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things,

denying the allegations and any and all liability.

December 20, 2022, the Company filed a motion for leave to file a second amended complaint to add additional claims against the defendants

to avoid fraudulent transfers, to pierce the corporate veil of Culp McAuley, and for remedies related to the claims for fraudulent transfers

and piercing the corporate veil.

On December 22, 2022, the Court issued an Order granting the Company’s motion for leave to file

a second amended complaint, which was filed with the Court on December 27, 2022.

Because Culp McAuley’s original counsel withdrew,

Culp McAuley was ordered to obtain new counsel on or before December 2, 2022.

On December 5, 2022, the Court ordered that Culp McAuley

show cause in writing by December 21, 2022, why the Court should not direct the Clerk to enter default against it.

On December 22, 2022,

the Court directed the Clerk to enter default against Culp McAuley.

On February 21, 2023, the Clerk entered default against Culp McAuley.

February and March, 2023, defendants Larry Roberts and Mark Depew filed separate motions to dismiss, respectively.

The Company opposed

both motions.

On July 7, 2023, the Court issued an Order granting Roberts’ motion to dismiss and denying Depew’s motion to

On December 7, 2023, the Company filed an application for the Clerk’s entry of default against defendant Brandon Culp.

On December 13, 2023, the Clerk entered default against Brandon Culp.

January 5, 2024, the Company filed a motion for summary judgment against defendants Campbell McAuley and Mark Depew.

On the same date,

the Company also filed separate motions for default judgment against Culp McAuley and Brandon Culp, respectively.

On January 5, 2024,

defendant Mark Depew filed a motion for summary judgment against the Company.

On May 17, 2024, the Court issued Orders which, respectively,

(i) granted defendant Mark Depew’s motion for summary judgment against the Company;

(ii) denied the Company’s motion for

summary judgment against Depew;

(iii) granted the Company’s motion for summary judgment against defendant Campbell McAuley;

(iv) granted the Company’s motions for default judgment against defendants Culp McAuley and Brandon Culp.

Finding that defendants

Brandon Culp and Campbell McAuley were each the alter ego of Culp McAuley, on June 4, 2024, the Court entered judgment in favor of the

Company in the amount of $ 3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”).

The Company is currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover.

June 14, 2024, the Company filed a Notice of Appeal to the United States Court of Appeals for the Tenth Circuit from the Court’s

May 17, 2024 Order that granted summary judgment in favor of Mark Depew.

On December 10, 2024, the Company and Depew filed a Stipulation

of Dismissal in the Tenth Circuit that ended the appeal after the Company and Depew reached a settlement.

March 2024, the Company filed a complaint against Larry Roberts (“defendant”) in the Superior Court of the State of California,

County of Orange.

The lawsuit arises from the defendant’s multiple breaches of his obligations to the Company.

The Company seeks

monetary damages based on certain conduct by the defendant.

On May 28, 2024, the defendant filed a motion to strike portions of the complaint

and a motion for demurrer.

On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer.

The Court further denied the defendant’s motion to strike in its entirety.

A jury trial has been scheduled for October 19, 2026.

of December 31, 2024, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case (when taking into

account, among other things, the uncertainty of recovering the judgment amount owed to the Company by Culp McAuley, Brandon Culp and

Campbell McAuley, jointly and severally), our estimate of the aggregate reasonably possible loss could be the entire balance of the judgment.

The Company has recorded an additional loss of $ 1,959,396

on this matter as of December 31, 2024 which

together with the previously recorded losses in prior years, reduces the Company’s net exposure to zero at December 31, 2024.

Our estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is subject to significant

judgment and a variety of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time,

particularly if and as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding.

Also, the matters

underlying the reasonably possible loss will change from time to time.

As a result, actual results may vary significantly from the current

the ultimate resolution is unknown, based on the information currently available, we do not expect that the pending lawsuit or the enforcement

of the judgment will have a material adverse effect on our operations, financial condition or cash flows.

However, the outcome of any

litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from

the resolution of the pending lawsuit or enforcement of the judgment will be covered by our insurance or will not be in excess of amounts

recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition

or cash flows.

The Company sponsors a 401(k) retirement savings plan for the benefit of its employees.

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STOCK-BASED COMPENSATION

Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $ 452,071 and $ 1,282,757

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

Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $ 128,519

and $ 452,071 for the years ended December 31, 2024 and 2023, respectively.

of December 31, 2024, the Company had adopted ten separate stock option and restricted stock plans:

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

Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others for up to a total of

333,750 shares of common stock.

The 2005 Plan terminated during 2015 with 1,078 shares not awarded or underlying options, which shares

are now unavailable for issuance.

Stock options granted under the 2005 Plan that remain unexercised and outstanding as of December 31,

2023 total 284 .

The 2006 Plan terminated during 2016 with 2,739 shares not awarded or underlying options, which shares are now unavailable

for issuance.

Stock options granted under the 2006 Plan that remain unexercised and outstanding as of December 31, 2023 total 531 .

2007 Plan terminated during 2017 with 4,733 shares not awarded or underlying options, which shares are now unavailable for issuance.

There are no stock options granted under the 2007 Plan that remain unexercised and outstanding as of December 31, 2023.

The 2008 Plan

terminated during 2018 with 2,025 shares not awarded or underlying options, which shares are now unavailable for issuance.

no stock options granted under the 2008 Plan that remain unexercised and outstanding as of December 31, 2023.

Board of Directors adopted the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”) on June 30, 2020 and the Company’s

stockholders approved the 2020 Plan at the Annual Meeting held on September 9, 2020.

The Company’s stockholders approved an amendment

to the 2020 Plan at the Annual Meeting held on June 22, 2021 which increased the number of shares of Common Stock authorized and reserved

for issuance under the 2020 Plan to a total of 125,000 .

A total of 112,958 options and restricted stock have been granted under the 2020

Plan to date.

The 2020 Plan also authorizes us to grant (i) to the key employees’ incentive stock options to purchase shares of

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

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

Board of Directors adopted the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”) on October 28, 2022 and the

Company’s stockholders approved the 2022 Plan at the Annual Meeting held on December 7, 2022.

The number of shares of Common Stock

authorized and reserved for issuance under the 2022 Plan totals 125,000 .

The 2022 Plan also authorizes us to grant (i) to the key employees’

incentive stock options to purchase shares of Common Stock and non-qualified stock options to purchase shares of Common Stock and restricted

stock awards and (ii) to non-employee directors and consultants non-qualified stock options and restricted stock.

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

Option awards have been

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

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

These option awards typically provide for accelerated

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

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

under its Plans with the SEC.

A total of 137,042 shares remained available for awards under the various Plans as of December 31, 2023.

option grants.

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

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

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

These option awards typically

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

The Company has registered all shares of common

stock that are issuable under its Plans with the SEC.

A total of 137,042 shares remained available for awards under the various Plans

as of December 31, 2024.

fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model.

in the various Plans during the years ended December 31, 2024 and 2023 is reflected in the following table:

SUMMARY OF STOCK OPTIONS OUTSTANDING

SCHEDULE OF STOCK OPTIONS OUTSTANDING

Exercise Price

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fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model

The total estimated grant

date fair value stock options issued during the year ended December 31, 2023 and 2022 was $- 0 - and $ 22,768 , respectively.

Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated grant date fair

value of the options during the years ended December 31, 2023 and 2022:

SCHEDULE OF FAIR VALUE OF STOCK OPTIONS ASSUMPTION

Volatility – range

Risk-free rate

Expected term

Exercise price

Plans allow for the cashless exercise of stock options.

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SCHEDULE OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE

Outstanding options

Exercisable options

Exercise price

contractual life

Weighted average

contractual life

$ 0.01 to $ 49.99

$ 50.00 to $ 69.99

$ 70.00 to $ 89.99

stock grants.

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summary of all restricted stock activity under the equity compensation plans for the years ended December 31, 2024 and 2023 is as follows:

SUMMARY OF RESTRICTED STOCK ACTIVITY

SCHEDULE OF RESTRICTED STOCK ACTIVITY

Nonvested balance, January 1, 2024

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As of December 31, 2024, there was $ 58,534 of total unrecognized compensation costs related to all remaining non-vested restricted stock

grants, which will be amortized over the next forty-eight months in accordance with their respective vesting scale.

grants, which will be amortized over the next thirty-seven months in accordance with their respective vesting scale.

nonvested balance of restricted stock vests as follows:

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Purchase Warrants

Company has issued Common Stock purchase warrants in conjunction with various debt and equity issuances.

The warrants are either immediately

exercisable or have a delayed initial exercise date, no more than nine months from their respective issue date and allow the holders

to purchase up to 1,148,286 shares of common stock at $ 5.50 to $ 52.00 per share as of December 31, 2023.

The warrants expire from July

31, 2023 through April 5, 2028 and under certain circumstances allow for cashless exercise.

January 14, 2021 and February 1, 2021, the Company issued warrants to purchase a total of 2,127,500 shares of Common Stock.

terms provide for net cash settlement outside the control of the Company under certain circumstances in the event of tender offers.

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

issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change

in fair value of warrant derivative liabilities.

Furthermore, the Company re-values the fair value of warrant derivative liability as

of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant

derivative liabilities through the consolidated statement of operations.

August 19, 2021, the Company entered into a Warrant Exchange Agreement (the “Exchange Agreement”) with the Investors cancelling

February Warrants exercisable for an aggregate of 384,077 shares of Common Stock in consideration for its issuance of (i) new warrants

(the “Exchange Warrants”) to the Investors exercisable for an aggregate of up to 384,077 shares of Common Stock.

also issued warrants (the “Replacement Original Warrants”) replacing the February Warrants for the remaining shares of Common

Stock exercisable thereunder, representing an aggregate of 330,923 shares of Common Stock, and extended the expiration date of the February

Warrants to September 18, 2026 .

The Exchange Warrants provide for an initial exercise price of $ 65.00 per share, subject to customary

adjustments thereunder, and are immediately exercisable upon issuance for cash and on a cashless basis.

On the date of the exchange,

the Company calculated the fair value, using the Black-Scholes method, of the cancelled February Warrants and the newly issued Exchange

Warrants, the difference in fair value measurement of the respective warrants was attributed to warrant modification expense in the consolidated

statement of operations.

August 23, 2022, the Company entered into Warrant Exchange Agreements (the “Warrant Exchange Agreements”) with certain investors

(the “Investors”), pursuant to which the Company agreed to issue to the Investors an aggregate of 303,750 shares of Common

Stock in exchange for the cancellation by the Investors of the January Warrants, the Exchange Warrants and the Replacement Originals

On the date of the exchange, the Company calculated the fair value of the issuance of shares of common stock pursuant to the

Warrant Exchange Agreements, attributing that value to common stock and additional paid in capital.

The remaining value of the warrant

derivative liability was attributed to an income from change in fair market value of warrant derivative liabilities and gain on extinguishment

of warrant derivative liabilities in the consolidated statement of operations.

On the date of the Warrant Exchange Agreement, using the

Black-Scholes method, the fair value of the warrant derivative liability was $ 8.1 million, compared to $ 9.3 million at June 30, 2022,

resulting in income from change in fair market value of warrant derivative liabilities of $ 1.2 million during the year ended December

Further, the value of the issued shares of Common Stock was $ 4.5 million, applied to additional paid in capital, resulting

in a gain on the extinguishment of warrant derivative liabilities of $ 3.6 million during the year ended December 31, 2022.

June 25, 2024, the Company issued Series A and prefunded warrants to purchase a total of 1,768,227 shares of Common Stock along with

the sale of common stock.

The Company also issued Series B Warrants that will be issuable and exercisable at any time or times on or

after the date Stockholder Approval is obtained in addition to the Series A warrants that are not included in outstanding warrants until

such time as Stockholder Approval is obtained.

Both the Series A and Series B warrants have reset provisions that are activated upon

the date Stockholder Approval is obtained.

The warrant terms provide for net cash settlement outside the control of the Company under

certain circumstances.

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

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

as the change in fair value of warrant derivative liabilities.

Furthermore, the Company re-values the fair value of warrant derivative

liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value

of warrant derivative liabilities through the consolidated statement of operations.

the year ended December 31, 2024, prefunded warrants to purchase 573,008

shares of common stock were fully exercised.

Series B warrants issued in this transaction became issuable and exercisable on the date Stockholder Approval is obtained.

approval was obtained on December 17, 2024 which activated the Series B warrants.

Both the Series A and Series B warrants also contain

price and warrant reset provisions that were activated upon the date of Stockholder Approval.

The reset provisions increased the number

of common shares issuable under the Series A warrant from 1,195,219

shares and the exercise price per Series A warrant was reduced

per share effective December 17, 2024.

In addition, the Series

B warrants became effective and exercisable upon Stockholder Approval on December 17, 2024 which resulted in 4,766,777

common shares issuable under the Series B warrants with an

exercise price of $ 0.001

per share effective December 17, 2024.

The Company recognized

the full Series B warrant derivative liability value of $ 2,865,727

as of the date of Stockholder Approval when it became effective and exercisable

of which $ 454,150 was recorded in equity and $ 2,411,577 was charged as a loss in the statement of operations for the year ended December

The following are the assumptions used in calculating the estimated fair value of the detachable Series B warrants to

purchase common stock which became effective and exercisable upon Stockholder Approval on December 17, 2024 and on December 31, 2024:

SCHEDULE OF WARRANT MODIFICATION

August 23, 2022

B issuance date - December 17, 2024

B - December 31, 2024

Volatility – range

Risk-free rate

3.17 - 3.36 %

Remaining contractual term

3.4 - 4.1 years

Exercise price

Common stock issuable under the warrants

in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period.

the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases,

therefore increasing the liability on the Company’s balance sheet.

Additionally, stock price volatility is one of the significant

unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

The simulated fair value

of these liabilities is sensitive to changes in the Company’s expected volatility.

Increases in expected volatility would generally

result in higher fair value measurement.

A 10 % change in pricing inputs and changes in volatilities and correlation factors would not

result in a material change in our Level 3 fair value.

the year ended December 31, 2024, Series B warrants to purchase 973,000

shares of common stock were fully exercised.

In conjunction

with the exercise of the Series B warrants, the Company transitioned the related warrant derivative liability totaling $ 584,955

to equity as of their exercise date.

The warrant derivative

liability related to the Series B warrants was $ 1,989,806 as of December 31, 2024.

The change in fair value of the Series B warrant derivative

liability from their issuance date through December 31, 2024 totaled $ 290,965 which was included as a loss in the statement of operations

for the year ended December 31, 2024.

Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of

the derivative liability relative to the prefunded warrants and Series A warrants as of their date of issuance and as of December

date assumptions

Volatility – range

Risk-free rate

Remaining contractual term

Exercise price

Common stock issuable under the warrants

The Company recognized the fair value

of the Series A warrants of $ 1,998,074 as a warrant derivative liability as of the date of issuance.

During the year ended December 31,

2024, there were no Series A warrants exercised.

The fair value of the warrant derivative liability related to the Series A warrants

was $ 2,408,598 as of December 31, 2024.

The change in fair value of the Series A warrant derivative liability from their issuance date

through December 31, 2024 totaled $ 410,524 which was included as a loss in the statement of operations for the year ended December 31,

Purchase Warrants

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warrant derivative liabilities as of their date of issuance and as of December 31, 2024:

Issuance date assumptions

December 31, 2023 assumptions

date assumptions

31, 2024 assumptions

Volatility - range

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following table summarizes information about shares issuable under warrants outstanding during the years ended December 31, 2024 and

SUMMARY OF WARRANT ACTIVITY

SCHEDULE OF WARRANT ACTIVITY

exercise price

Vested Balance, January 1, 2022

Balance, January 1, 2024

Issuance – Series A and Prefunded Warrants

Issuance - Series B warrants

Series A warrant reset provisions

( 1,546,008 )

Vested Balance, December 31, 2022

Terminated/Cancelled

Balance, December 31, 2024

exercise price

Vested Balance, January 1, 2023

Forfeited/cancelled

Vested Balance, December 31, 2023

total intrinsic value of all outstanding warrants aggregated $- 0 - as of December 31, 2023 and 2022, and the weighted average remaining

term was 51.2 and 3.9 months as of December 31, 2023 and 2022, respectively.

Balance, January 1, 2023

Terminated/Cancelled

Balance, December 31, 2023

total intrinsic value of all outstanding warrants aggregated $ 2,128,320 and $- 0 - as of December 31, 2024 and 2023, respectively and the

weighted average remaining term was 52.3 and 51.2 months as of December 31, 2024 and 2023, respectively.

following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable

warrants to purchase shares of common stock as of December 31, 2024:

SUMMARY OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS

Outstanding and exercisable warrants

Weighted average

SCHEDULE OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS

and exercisable warrants

contractual life

2 unchanged sentences

January 10, 2023, the board of directors approved the grant of 22,500 shares of common stock to officers of the Company.

Such shares will

vest over various periods ranging from one to five years on the anniversary of the grant date, provided that each grantee remains an

officer or employee on such dates.

various dates in January 2022, the board of directors approved the grant of 9,500 shares of common stock to employees of the Company.

Most shares will generally vest in varying amounts over the next two to five years , provided that each grantee remains an employee on

such vesting dates.

of Restricted Stock

the year ended December 31, 2023, the Company cancelled 3,625 shares for various reasons.

Stock Transaction

October 13, 2022, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional

investors (the “Preferred Stock Investors”), pursuant to which the Company agreed to issue and sell, in a private placement

(the “2022 Offering”), 1,400,000 shares of the Company’s Series A Convertible Redeemable Preferred Stock, par value

$ 0.001 per share (the “Series A Preferred Stock”), and 100,000 shares of the Company’s Series B Convertible Redeemable

Preferred Stock, par value $ 0.001 per share (the “Series B Preferred Stock”, and together with the Series A Preferred Stock,

the “Preferred Stock”), at an offering price of $ 9.50 per share, representing a 5 % original issue discount to the stated

value of $ 10.00 per share, for gross aggregate proceeds of $ 15 million in the 2022 Offering, before the deduction of discounts, fees

and offering expenses.

The shares of Preferred Stock will, under certain circumstances, be convertible into shares of the Company’s

common stock, at the option of the holders of the Preferred Stock and, in certain circumstances, by the Company.

In connection with the

2022 Offering, the Company paid A.G.P./Alliance Global Partners (the “Financial Advisor”) an aggregate cash fee equal to

$ 750,000 and reimbursed the Financial Advisor for certain of its expenses in an amount not to exceed $135,000 .

to the Purchase Agreement, the Company filed on October 17, 2022 certificates of designation (the “Certificates of Designation”)

with the Secretary of the State of Nevada designating the rights, preferences and limitations of the shares of Series A Preferred Stock

and Series B Preferred Stock.

The Certificate of Designation for the Series A Preferred Stock provides, in particular, that the Series

A Preferred Stock will have no voting rights other than the right to vote on the Amendments on an as-if-converted-to-Common-Stock basis.

The Certificate of Designation for the Series B Preferred Stock provides, in particular, that the Series B Preferred Stock will have

no voting rights other than the right to vote on the Amendments and each share of Series B Preferred Stock entitles the holder thereof

the right to cast 2,500 votes on the Amendments .

holders of Preferred Stock will be entitled to dividends, on an as-if converted-to-Common-Stock basis, equal to dividends actually paid,

if any, on shares of Common Stock.

The Preferred Stock is convertible, at the option of the holders and, in certain circumstances, by

the Company, into shares of Common Stock at a conversion price of $ 20.00 per share.

The conversion price can be adjusted pursuant to

the Certificates of Designation for stock dividends and stock splits, subsequent rights offering, pro rata distributions of dividends

or other distribution of its assets, or the occurrence of a fundamental transaction (as defined in the applicable Certificate of Designation).

holders of the Series A Preferred Stock and Series B Preferred Stock have the right to require the Company to redeem their shares of

the relevant series at a price per share equal to 105% of the stated value of such shares commencing (i) after the earlier of (1) the

receipt of stockholder approval of the Amendments and (2) sixty (60) days after the closing of the 2022 Offering and (ii) before the

date that is ninety (90) days after such closing.

The Company has the option to redeem the Series A Preferred Stock and Series B Preferred

Stock at a price per share equal to 105% of the stated value of such shares commencing after the 90th day following the closing of the

2022 Offering, subject to the holders’ rights to convert the shares prior to such redemption .

proceeds of the 2022 Offering were held in an escrow account, along with the additional amount that would be necessary to fund the 105 %

redemption price until the expiration of the redemption period for the Preferred Stock, as applicable, subject to the earlier payment

to redeeming holders.

Upon expiration of the redemption period, any proceeds remaining in the escrow account will be disbursed to the

2022 Offering closed on October 19, 2022.

In December 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

of Common Stock as Consideration for the Potential Spin-Off Transaction.

December 28, 2022, the Company issued a total of 25,000 shares of common stock as a portion of the consideration paid for the advisory

services associated with the potential spin-off transaction.

Repurchase Program

December 6, 2021, the board of directors of the Company 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.

SCHEDULE OF STOCK REPURCHASE

December 2021

February 2022

Total all plans

June 30, 2022, the board of directors of the Company elected to terminate the Program, effective immediately.

The Program began in December

2021, with the Company purchasing a total of 273,042 shares at a cost of $ 6,001,602 through June 30, 2022.

Issuance of Restricted Common Stock

January 10, 2023, the board of directors approved the grant of 22,500 shares of Common Stock to officers of the Company.

will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided

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anniversary dates in January through January 2025, provided that each grantee remains an employee of the company on such dates.

Issuance of Restricted Common Stock

January 2024, the board of directors approved the grant of 55,000 shares of common stock to officers of the Company.

Such shares will

generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that

each grantee remains an officer or employee on such dates.

Additionally, the board of directors approved the grant of 25,197 restricted

common shares to certain new employees of the Company.

Such shares will generally vest over a period of one 1 to two years on their respective

anniversary dates in January through January 2026, provided that each grantee remains an employee of the company on such dates.

Private Placement Transaction

June 24, 2024, the Company entered into a private placement transaction (the “Private Placement”), pursuant to a Securities

Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”)

for aggregate gross proceeds of approximately $ 2.9 million, before deducting fees to the placement agent and other expenses payable by

the Company in connection with the Private Placement.

part of the Private Placement, the Company issued an aggregate of 1,195,219

units and pre-funded units (collectively, the “June Units”) at a purchase price of $ 2.51

per unit (less $ 0.0001

per pre-funded unit).

Each June Unit consists of (i) one share of common stock, par value $ 0.001

per share, of the Company (the “Common Stock”) (or one pre-funded warrant to purchase one share of Common Stock (the

“Pre-Funded Warrants”)), (ii) one Series A warrant to purchase one share of Common Stock (the “Series A

Warrant”) and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset

Date and in accordance with the terms therein (the “Series B Warrant”, and together with the Series A Warrant, the

Purchase Agreement and Senior Secured Promissory Notes

November 6, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors,

pursuant to which the Company agreed to issue and sell to such investors, in a private placement transaction, (i) senior secured promissory

notes in aggregate principal amount of $ 3,600,000 , and (ii) 808,377 shares (the “Commitment Shares”) of the Company’s

common stock, for aggregate gross proceeds of approximately $ 3.0 million, before deducting placement agent fees and other offering expenses

payable by the Company.

This private placement closed on November 7, 2024.

net proceeds of the private placement on November 7, 2024 was $ 2,669,250 (after $ 330,750 deduction of costs of the offering).

allocated the net proceeds from the private placement of the senior secured promissory notes and the commitment shares based upon their

relative fair values as of the date of issuance as follows:

SCHEDULE OF NET PROCEEDS FROM THE PRIVATE PLACEMENT

Allocated to the following:

Senior secured promissory notes

Commitment shares

of Restricted Stock

the years ended December 31, 2024 and 2023, the Company cancelled 49,947 and 3,625 shares due to termination of employees, respectively.

of Prefunded Warrants

the year ended December 31, 2024, prefunded warrants to purchase 573,008

shares of common stock were fully exercised at an exercise

price of $ 0.0001 per share .

the year ended December 31, 2024, Series B warrants to purchase 973,000

shares of common stock were fully exercised for $ 973 .

In conjunction with the exercise of the Series B warrants, the Company transitioned

the related warrant derivative liability totaling $ 584,955

to equity as of their exercise date.

Conversion of Convertible Note

the year ended December 31, 2023, pursuant to the Convertible Note, the Purchasers elected to convert $ 125,000 principal, at the fixed

price of $ 5.00 per share of common stock, 25,000 shares valued at $ 119,750 .

February 6, 2023, we filed a Certificate of Amendment to the Articles of Incorporation, as amended, with the Secretary of State of the

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The par value per share of our common stock was not affected by the Reverse Stock Split.

a result of the Reverse Stock Split, no fractional shares of new common stock will be issued in connection with the Reverse Stock Split,

all of which shares of new common stock shall be rounded up to the nearest whole number of such shares.

Therefore, the Company issued

24,206 shares pursuant to Reverse Stock Split related to rounding up to the nearest whole number of shares.

Noncontrolling

3 unchanged sentences

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

We reported net income attributable

to noncontrolling interests of consolidated subsidiary of $ 224,598 and $ 407,933 for the year ended December 31, 2023 and 2022, respectively.

of Convertible Note

the year ended December 31, 2023, pursuant to the Convertible Note, the Purchasers elected to convert $ 125,000 principal, at the fixed

price of $ 5.00 per share of common stock, 25,000 shares valued at $ 119,750 .

of Common Stock

the year ended December 31, 2023, the Company cancelled 3,625 shares for various reasons.

reported net loss (income) attributable to noncontrolling interests of consolidated subsidiary of $ 1,871,578 and $( 224,598 ) for the years

ended December 31, 2024 and 2023, respectively.

RELATED PARTY TRANSACTIONS

with Managing Member of Nobility Healthcare

January 27, 2022, the board of directors appointed Christian J.

Hoffmann, III as a member of the Board, effective immediately.

is a principal owner and manager of Nobility, LLC which is currently the managing member of our consolidated subsidiary Nobility Healthcare,

Company has advanced a total of $ 158,384 in the form of a working capital loan to Nobility, LLC in order to fund capital expenditures

necessary for the initial growth of the joint venture during 2022.

The outstanding balance of the working capital loan was $- 0 - as of

December 31, 2023.

The Company paid distributions to the noncontrolling in consolidated subsidiary totaling $- 0 - and $ 15,692 , for the

years ended December 31, 2023 and 2022, respectively.

The Company also

accrued reimbursable expenses payable to Nobility, LLC totaling $ 619,301 and $ 265,241 for the years ended December 31, 2023 and 2022

and management fees in accordance with the operating agreement of $ 49,014 and $ 36,502 for the years ended December 31, 2023 and 2022.

August 1, 2022, Mr.

Hoffmann resigned as a member of the Board, effective immediately.

He remains as a principal owner and manager of

Nobility, LLC.

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

Total management fees accrued and payable in accordance with the operating agreement totaled $ 38,625 and $ 49,014 as of December 31, 2024

and 2023, respectively.

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

2023, respectively.

with Related Party of TicketSmarter

September 22, 2023, a trust, the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse,

contributed cash in the amount of $ 2,325,000

September 22, 2023, a trust, the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse, made a

loan in the amount of $ 2,325,000

to TicketSmarter to support TicketSmarter’s operations.

On October 2, 2023 an additional $ 375,000 was contributed to

Ticketsmarter.

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

On October 2, 2023 an additional $ 375,000

was advanced to Ticketsmarter.

The transaction was recorded as a related party note payable (the “TicketSmarter Related Party

The TicketSmarter Related Party Note bears interest of 13.25 %

per annum with repayment beginning January 2, 2024.

As of December 31, 2023, the entire TicketSmarter Related Party note is $ 2,700,000 ,

is classified as current, with an accrued interest balance of $ 95,031 .

As of December 31, 2024 and 2023, the entire TicketSmarter Related Party note

balance totaled $ 2,700,000 ,

and is classified as current, with an accrued interest balance of $ 488,711 and $ 95,031 , respectively.

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

discount received 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.

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

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

On August 19,

2024, the parties agreed to amend the note whereby the repayment dates were extended to begin on January 2, 2025 and continue at

for 50 consecutive weeks plus interest.

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

The amendment was

determined to be a modification of the note rather than an extinguishment and reissuance of a new note.

No payments have been made to date in 2025.

Related Party Note

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

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

Company to support its operations.

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

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

As of December 31, 2024, the entire Company Related Party note of $ 140,000 , is classified as current, with an accrued interest

balance of $ 3,465 .

NET LOSS PER SHARE

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SCHEDULE OF WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING AND LOSS PER SHARE OUTSTANDING

Year ended December 31,

Numerator for basic and diluted loss per share – Net loss attributable to common stockholders

ended December 31,

for basic and diluted loss per share – Net loss attributable to common stockholders

$ ( 19,844,147 )

$ ( 25,688,547 )

Denominator for basic loss per share – weighted average shares outstanding

Dilutive effect of shares issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding

Denominator for diluted loss per share – adjusted weighted average shares outstanding

Denominator for basic loss per share – weighted average shares

Dilutive effect of shares

issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding

Denominator for diluted loss per share

– adjusted weighted average shares outstanding

Net loss per share:

Basic loss per share is based upon the weighted average number of shares of common stock outstanding during the period.

For the years

ended December 31, 2023 and 2022, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options

and warrants were antidilutive, and, therefore, not included in the computation of diluted loss per share.

DIGITAL ALLY HEALTHCARE VENTURE

June 4, 2021, Digital Ally Healthcare, a wholly-owned subsidiary of the Company, entered into a venture with Nobility LLC (“Nobility”),

an eight-year-old revenue cycle management (“RCM”) company servicing the medical industry, to form Nobility Healthcare, LLC

(“Nobility Healthcare”).

Digital Ally Healthcare is capitalizing the venture with $ 13.5 million to support the venture’s

business strategy to make acquisitions of RCM companies.

Digital Ally Healthcare owns 51% of the venture that entitles it to 51% of the

distributable cash as defined in the venture’s operating agreement plus a cumulative preferred return of 10% per annum on its invested

Nobility will receive a management fee and 49% of the distributable cash, subordinated to Digital Ally Healthcare’s preferred

The venture comprises the Company’s revenue cycle management segment.

June 30, 2021, the Company’s revenue cycle management segment completed the acquisition of a private medical billing company (the

“Healthcare Acquisition”).

In accordance with the stock purchase agreement, the Company’s revenue cycle management

segment agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $ 850,000 .

In addition to the Initial

Payment Amount, the Company’s revenue cycle management segment agreed to issue a promissory note to the stockholders of the Healthcare

Acquisition in the principal amount of $ 350,000 that is subject to an earn-out adjustment.

Management’s estimate of the fair value

of this Contingent Note at December 31, 2021 is $ 317,212 .

The gain associated with the adjustment in the estimated fair value of this

contingent promissory note is recorded as a gain in the Consolidated Statements of Operations for the year ended December 31, 2021.

the Company’s revenue cycle management segment agreed to pay $ 162,552 representing the principal and accrued interest balance due

under a promissory note issued to the selling shareholders prior to the acquisition closing date.

The Company’s revenue cycle management

segment anticipates the estimated fair value of the contingent promissory note to be paid in full, therefore, the total aggregate purchase

price was determined to be approximately $ 1,376,509 .

Total acquisition related costs aggregated $ 164,630 , which was expensed as incurred.

Subsequent to the acquisition date, the Company received further information regarding the purchased assets and assumed liabilities.

As a result, the initial allocation of the purchase price was adjusted by increasing accounts receivable by $ 75,000 with a corresponding

reduction of goodwill during the year ended December 31, 2021.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

S-X dated May 21, 2020 and has concluded that this acquisition was not significant.

Accordingly, the presentation of the assets acquired,

historical financial statements under Rule 3-05 and related pro forma information under Article 8 of Regulation S-X, respectively, are

not required to be presented.

Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to the

acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the

Healthcare Acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing

or amounts recognized in our financial statements.

Our assumptions and estimates are based upon information obtained from the management

of the Company’s revenue cycle management segment.

The acquisition was structured as stock purchase, therefore the excess purchase

price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing

The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition

purchase price of the Healthcare Acquisition was allocated to the tangible assets, and assumed liabilities based on their preliminary

estimated fair values at the time of the Healthcare Acquisition.

The preliminary and final estimated fair value of assets acquired and

liabilities assumed in the Healthcare Acquisition were as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

June 30, 2021

June 30, 2022

Purchase price allocation

June 30, 2021

June 30, 2022

Assets acquired:

Tangible assets acquired, consisting of acquired cash, accounts receivable and right of use asset

Tangible assets acquired

Intangible assets acquired – client agreements

Liabilities assumed consisting of a promissory note issued by the selling shareholders which was paid off at closing, net of lease liability assumed

Liabilities assumed pursuant

to stock purchase agreement

Net assets acquired and liabilities assumed

Consideration:

Cash paid at Healthcare Acquisition date

Contingent consideration earn-out agreement

Total Healthcare Acquisition purchase price

following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of

the date of acquisition:

SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

Amortization through

Identifiable intangible assets:

Client agreements

the period from the date of the Healthcare Acquisition to June 30, 2022, the Company adjusted its preliminary fair value estimates and

estimated useful lives based upon information obtained through June 30, 2022, which resulted in adjustments to the preliminary allocation

of the purchase price.

These adjustments primarily related to estimated identifiable intangible asset fair values of client agreements

and goodwill.

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there

could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained

about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these

assets or liabilities as of that date.

The change in fair value of the contingent consideration is more fully described in Note 10, “Debt

Obligations”.

August 31, 2021, the Company’s revenue cycle management segment completed the acquisition of another private medical billing company

(the “Medical Billing Acquisition”).

In accordance with the stock purchase agreement, Nobility Healthcare agreed to a non-refundable

initial payment (the “Initial Payment Amount”) of $ 2,270,000 .

In addition to the Initial Payment Amount, the Company’s

revenue cycle management segment agreed to issue a contingent promissory note to the stockholders of the Medical Billing Acquisition

in the principal amount of $ 650,000 that is subject to an earn-out adjustment.

The Company’s revenue cycle management segment anticipates

the estimated fair value of the contingent promissory note to be paid in full, therefore, the total aggregate purchase price was determined

to be approximately $ 2,920,000 .

Total acquisition related costs aggregated $ 5,602 , which was expensed as incurred.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

S-X dated May 21, 2020 and has concluded that this acquisition was not significant.

Accordingly, the presentation of the assets acquired,

historical financial statements under Rule 3-05 and related pro forma information under Article 8 of Regulation S-X, respectively, are

not required to be presented.

Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to the

acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the

Healthcare Acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing

or amounts recognized in our financial statements.

Our assumptions and estimates are based upon information obtained from the management

of the Company’s revenue cycle management segment.

The acquisition was structured as stock purchase, therefore the excess purchase

price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing

The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition

purchase price of the Medical Billing Acquisition was allocated to the tangible assets, and assumed liabilities based on their preliminary

estimated fair values at the time of the Medical Billing Acquisition.

The preliminary and final estimated fair value of assets acquired,

and liabilities assumed in the Medical Billing Acquisition were as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Preliminary As

Purchase price

Preliminary As

September 30,

Assets acquired:

Tangible assets acquired

Identifiable intangible assets acquired – client agreements

Liabilities assumed pursuant to stock purchase agreement

Net assets acquired and liabilities assumed

Consideration:

Cash paid at Healthcare Acquisition date

Contingent consideration earn-out agreement

Total Healthcare Acquisition purchase price

following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of

the date of acquisition:

SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

Amortization through

December 31, 2023

Identifiable intangible assets:

Client agreements

the period from the date of the Healthcare Acquisition to August 31, 2022, the Company adjusted its preliminary fair value estimates

and estimated useful lives based upon information obtained through August 31, 2022, which resulted in adjustments to the preliminary

allocation of the purchase price.

These adjustments primarily related to estimated identifiable intangible asset fair values of client

agreements and goodwill.

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there

could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained

about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these

assets or liabilities as of that date.

The change in fair value of the contingent consideration is more fully described in Note 10, “Debt

Obligations”.

January 1, 2022, the Company’s revenue cycle management segment completed the acquisition of another private medical billing company

(the “Medical Billing Acquisition”).

In accordance with the stock purchase agreement, Nobility Healthcare agreed to a non-refundable

initial payment (the “Initial Payment Amount”) of $ 1,153,626 .

In addition to the Initial Payment Amount, the Company’s

revenue cycle management segment agreed to issue a contingent promissory note to the stockholders of the Medical Billing Acquisition

in the principal amount of $ 750,000 that is subject to an earn-out adjustment.

The Company’s revenue cycle management segment anticipates

the estimated fair value of the contingent promissory note to be paid in full, therefore, the total aggregate purchase price was determined

to be approximately $ 1,903,626 .

Total acquisition related costs aggregated $ 7,996 , which was expensed as incurred.

loss per share is based upon the weighted average number of shares of common stock outstanding during the period.

For the years ended

December 31, 2024 and 2023, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options and

warrants were antidilutive, and, therefore, not included in the computation of diluted loss per share.

COUNTRY STAMPEDE ACQUISITION

March 1, 2024, Kustom 440, entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment,

LLC, a Kansas limited liability company (“JC Entertainment”).

Pursuant to the Acquisition Agreement, Kustom 440 acquired

certain assets associated with a music entertainment event (“Country Stampede”), including all intellectual property arising

out of and relating to Country Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment

is a party to host and operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede

Intellectual Property, the “Purchased Assets”).

consideration for acquiring the Purchased Assets, Kustom 440 paid JC Entertainment the aggregate purchase price amount $ 542,959 , with

the sum of $ 400,000 paid at the time of closing (“Closing”), and the remainder to be paid on or before thirty days from the

time of Closing.

Kustom 440 shall receive a credit for all non-refunded festival ticket sales for the 2024 Country Stampede to be calculated

immediately prior to Closing, and JC Entertainment shall be entitled to keep all ticket sale proceeds made and/or received prior to Closing.

Kustom 440 shall be obligated, to the extent a refund is sought after Closing, to provide such refund, if appropriate, to the customer

requesting a refund, and shall indemnify and hold harmless JC Entertainment from any and all claims, liabilities, costs, suits, or the

like relating to such refund request.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

3 unchanged sentences

not required to be presented.

Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to the

acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the

Healthcare Acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing

or amounts recognized in our financial statements.

Our assumptions and estimates are based upon information obtained from the management

of the Company’s revenue cycle management segment.

The acquisition was structured as stock purchase, therefore the excess purchase

price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing

The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition

purchase price of the Medical Billing Acquisition was allocated to the tangible assets, and assumed liabilities based on their preliminary

estimated fair values at the time of the Medical Billing Acquisition.

There was no change from the preliminary estimated fair value to

the final estimated fair value of assets acquired, and liabilities assumed in the Healthcare Acquisition, those value were as follows:

Under the acquisition method, the purchase price of the Country Stampede Acquisition has been allocated

to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time

of the Country Stampede Acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially

affect the timing or amounts recognized in our financial statements.

The Country Stampede Acquisition was structured as an asset purchase;

however the parties agreed to coordinate the election to invoke IRS Section 338(h)(10) relative to this transaction for tax purposes.

Therefore, the excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will be amortized

over 15 years for income tax filing purposes.

Likewise, the other acquired assets were stepped up to fair value and is deductible for

income tax purposes.

The results of operations of acquired businesses are included in the consolidated financial statements from the

acquisition date.

purchase price of the Country Stampede Acquisition was allocated to tangible assets, goodwill, identifiable intangible assets, and assumed

liabilities based on their preliminary estimated fair values at the time of the acquisition.

The Company retained the services of an

independent valuation firm to determine the fair value of these identifiable intangible assets.

The Company has finalized the estimated fair value of assets acquired, and liabilities assumed

in the Country Stampede Acquisition which are as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Assets acquired:

Assets acquired (provisional):

Tangible assets acquired

Liabilities assumed pursuant to stock purchase agreement

Total assets acquired and liabilities assumed

Consideration:

Cash paid at acquisition date

Contingent consideration promissory note

Total acquisition purchase price

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there

could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained

about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these

assets or liabilities as of that date.

The change in fair value of the contingent consideration is more fully described in Note 10, “Debt

Obligations”.

February 1, 2022, the Company’s revenue cycle management segment completed an asset acquisition from another private medical billing

company (the “Medical Billing Asset Acquisition”).

In accordance with the asset purchase agreement, Nobility Healthcare agreed

to a non-refundable initial payment (the “Initial Payment Amount”) of $ 230,000 .

In addition to the Initial Payment Amount,

the Company’s revenue cycle management segment agreed to issue a contingent promissory note to the stockholders of the Medical

Billing Asset Acquisition in the principal amount of $ 105,000 that is subject to an earn-out adjustment.

The Company’s revenue

cycle management segment anticipates the estimated fair value of the contingent promissory note to be paid in full, therefore, the total

aggregate purchase price was determined to be approximately $ 335,000 .

Total acquisition related costs aggregated $ 10,322 , which was expensed

accordance with ASC 805, “Business Combinations”, the acquisition method of accounting is used, and recognition of the assets

acquired is at fair value as of the acquisition dates.

All acquisition costs were expensed as incurred.

The consideration paid has been

allocated to the assets acquired based on their estimated fair values at the acquisition date.

The estimate of fair values for the intangible

assets acquired were agreed to by both buyer and seller.

The estimated fair value of intangible assets acquired in the Medical Billing

Asset Acquisition were as follows:

SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION

Assets acquired:

Intangible assets acquired – client agreements

Total assets acquired and liabilities assumed

Consideration:

Cash paid at acquisition date

Contingent consideration promissory note

Total acquisition purchase price

following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of

the date of acquisition:

SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED AND THEIR ESTIMATED USEFUL LIVES

Amortization through

Identifiable intangible assets:

Client agreements

change in fair value of the contingent consideration is more fully described in Note 10, “Debt Obligations” and will be estimated

on a quarterly basis.

TICKETSMARTER ACQUISITION

September 1, 2021, Digital Ally, Inc.

formed TicketSmarter, Inc.

(“TicketSmarter”), through which the Company completed the

acquisition of Goody Tickets, LLC, a Kansas limited liability company (“Goody Tickets”) and TicketSmarter, LLC, a Kansas

limited liability company (“TicketSmarter LLC”), collectively the “TicketSmarter Acquisition”.

TicketSmarter,

comprises the Company’s entertainment business segment.

In accordance with the stock purchase agreement, the Company agreed

to an initial payment (the “Initial Payment Amount”) of $ 9,403,600 through a combination of cash and common stock.

to the Initial Payment Amount, the Company agreed to issue an earn-out agreement to the stockholders of Goody Tickets and TicketSmarter

LLC in the contingent amount of $ 4,244,400 that is subject to an earn-out adjustment based on actual EBITDA achieved in 2021, of which

the Company gave a fair value of $ 3,700,000 on the date of acquisition.

However, following the completion of 2021, it was determined

that the actual EBITDA threshold for any earn-out adjustment to be paid was not met.

Thus, in accordance with U.S.

GAAP, the fair value

of the contingent earn-out is reduced to zero, and the associated gain related to this revaluation is recorded in our Consolidated Statements

of Operations for the year ended December 31, 2021.

Lastly, included in the agreement, the Company agreed to place $ 500,000 in escrow,

subject to a working capital adjustment based on actual working capital amounts on the acquisition date as defined in the agreement,

this amount was subject to disbursement 45 days following the close of the acquisition.

The parties completed the working capital adjustment

resulting in the Company retaining $ 297,726 of the escrow amount with the $ 202,274 released to the Sellers.

The total acquisition related

costs aggregated $ 40,625 , which was expensed as incurred.

Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation

S-X dated May 21, 2020 and has concluded that this acquisition was not significant.

Accordingly, the presentation of the assets acquired,

historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are

not required to be presented.

Under the acquisition method, the purchase price of the TicketSmarter Acquisition has been allocated to

Goody Tickets’ and TicketSmarter LLC’s acquired tangible and identifiable intangible assets and assumed liabilities based

on their estimated fair values at the time of the TicketSmarter Acquisition.

This allocation involves a number of assumptions, estimates,

and judgments that could materially affect the timing or amounts recognized in our financial statements.

The TicketSmarter Acquisition

was structured as a stock purchase;

however the parties agreed to coordinate the election to invoke IRS Section 338(h)(10) relative to

this transaction for tax purposes.

Therefore, the excess purchase price over the fair value of net tangible assets acquired was recorded

as goodwill, which will be amortized over 15 years for income tax filing purposes.

Likewise, the other acquired assets were stepped up

to fair value and is deductible for income tax purposes.

The results of operations of acquired businesses are included in the consolidated

financial statements from the acquisition date.

purchase price of the TicketSmarter Acquisition was allocated to Goody Tickets’ and TicketSmarter LLC’s tangible assets,

goodwill, identifiable intangible assets, and assumed liabilities based on their preliminary estimated fair values at the time of the

TicketSmarter Acquisition.

The Company retained the services of an independent valuation firm to determine the fair value of these identifiable

intangible assets.

The preliminary and final estimated fair value of assets acquired, and liabilities assumed in the TicketSmarter Acquisition

were as follows:

SCHEDULE OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION

Final as allocated

Purchase price allocation

Final as allocated

September 30, 2021

December 31, 2021

Assets acquired:

Tangible assets acquired, including $ 51,432 of cash acquired

Identifiable intangible assets acquired

Identifiable intangible assets acquired (Trademarks

and trade names)

Liabilities assumed

( 5,128,964 )

Liabilities assumed pursuant to stock purchase agreement

( 5,128,964 )

Net assets acquired and liabilities assumed

Net assets acquired

and liabilities assumed

Consideration:

Cash paid at TicketSmarter Acquisition date

Common stock issued as consideration for TicketSmarter Acquisition at date of acquisition

Contingent consideration earn-out agreement

Cash paid at closing to escrow amount

Cash retained from escrow amount pursuant to settlement of working capital target

Total TicketSmarter Acquisition purchase price

following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives in years as of

the date of acquisition:

SCHEDULE OF COMPONENTS OF IDENTIFIABLE INTANGIBLE ASSETS ACCRUED ACQUIRED

Amortization through

December 31, 2023

Identifiable intangible assets:

Sponsorship agreement network

Search engine optimization/content

the period from the date of the TicketSmarter Acquisition to December 31, 2021, the Company adjusted its preliminary fair value estimates

and estimated useful lives based upon information obtained through December 31, 2021, which resulted in adjustments to the preliminary

allocation of the purchase price.

These adjustments primarily related to estimated identifiable intangible asset fair values (primarily

related to the sponsorship agreement network), the estimated fair value of the contingent earn-out agreement liability and goodwill.

There were no adjustments to the allocation of the purchase price during the year ended December 31, 2023.

Cash paid at Country Stampede Acquisition date

Cash paid subsequent to

Total Country Stampede

Acquisition purchase price

the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to

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assets or liabilities as of that date.

The change in fair value of the contingent consideration is more fully described in Note 10, “Debt

Obligations”.

accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial

statements and requires selected information of those segments to be presented in financial statements.

Operating segments are identified

as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision

maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess

The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which

has specific personnel responsible for that business and reports to the CODM.

Corporate expenses capture the Company’s corporate

administrative activities, is also to be reported in the segment information.

The Company’s captive insurance subsidiary provides

services to the Company’s other business segments and not to outside customers.

Therefore, its operations are eliminated in consolidation

and is not considered a separate business segment for financial reporting purposes.

Video Solutions Segment encompasses our law, commercial, and shield divisions.

This segment includes both service and product revenues

through our subscription models offering cloud and warranty solutions, and hardware sales for video and health safety solutions.

Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout

the country, as a monthly service fee.

The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our

secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms.

OPERATING SEGMENTS

Company adopted ASU 2023-07 in 2024 and applied the amendment retrospectively to all periods presented in the Company’s consolidated

financial statements.

Segment financial information is prepared in accordance with GAAP and our significant accounting policies described

Resources are allocated and performance is assessed using segment operating income by our Chief Executive Officer, whom we

have determined to be our Chief Operating Decision Maker (“CODM”).

Our CODM utilizes segment operating income when making

decisions about allocating capital and personnel to the segments, predominantly in the annual budget and quarterly forecasting processes.

In addition, our CODM uses operating income, including comparison of actual results to budget and forecast, in assessing the performance

of each segment and in evaluating product pricing, distribution strategies and marketing investments.

Our CODM reviews balance sheet

information at a consolidated level.

We compute segment operating income based on net sales revenue, less cost of goods sold, SG&A,

asset impairment charges and restructuring charges.

The SG&A used to compute each segment’s operating income is directly associated

with the segment.

We do not allocate non-operating income and expense, including interest or income taxes, to operating segments.

operate in three strategic business segments.

The Video Solutions Segment encompasses our law, commercial, and shield divisions.

This segment includes both service and product revenues through our subscription models offering cloud and warranty solutions, and

hardware sales for video and health safety solutions.

The Revenue Cycle Management Segment provides working capital and back-office

services to a variety of healthcare organizations throughout the country, as a monthly service fee.

The Entertainment Segment acts

as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire

tickets from primary sellers to then sell through various platforms.

Company’s corporate administration activities are reported in the corporate line item.

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SCHEDULE OF SEGMENT REPORTING

Years Ended December 31,

Net Revenues:

Year ended December 31, 2024

Video Solutions

Revenue Cycle Management

Entertainment

Total Net Revenues

Gross Profit (loss):

Video Solutions

$ ( 1,250,277 )

Revenue cycle Management

Entertainment

Total Gross Profit

Operating Income (loss):

Video Solutions

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Cost of Revenue - Product

Cost of Revenue – Service and

Research and development expense

Selling, advertising and

promotional expense

General and administrative

Goodwill and intangible asset

impairment charge

Total segment operating income (loss)

$ ( 1,199,855 )

$ ( 4,804,853 )

Revenue Cycle Management

Entertainment

$ ( 3,818,614 )

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$ ( 15,201,540 )

Interest expense

( 3,815,323 )

Total Operating Income (Loss)

Loss on litigation

( 1,959,396 )

Change in fair value of derivative liabilities

( 1,240,407 )

Depreciation and Amortization:

Gain on the extinguishment of liabilities

Loss on extinguishment of debt

Gain on sale of property, plant and equipment

Other non-operating income (loss)

Total non-operating income (loss)

( 6,514,185 )

Loss before income tax benefit (provision)

$ ( 21,715,725 )

Depreciation and amortization expense

Total identifiable assets, net of

Year ended December 31, 2023

Video Solutions

Revenue Cycle Management

Entertainment

Total Depreciation and Amortization

Assets (net of eliminations):

Video Solutions

Revenue cycle Management

Entertainment

Total Identifiable Assets

Corporate and other

Net revenues:

Total segment net revenues

Less significant segment

Cost of Revenue - Product

Cost of Revenue – Service and

Research and development

Selling, advertising and

promotional expense

General and administrative

Goodwill and intangible asset

impairment charge

Total segment operating

income (loss)

$ ( 7,135,584 )

$ ( 3,646,770 )

$ ( 11,750,742 )

$ ( 22,240,553 )

Interest expense

( 3,134,253 )

Change in fair value of derivative liabilities

Gain on the extinguishment of liabilities

Loss on litigation

( 1,792,308 )

Loss on extinguishment of convertible debt

( 1,112,705 )

Other non-operating income (loss)

Total non-operating income (loss)

( 3,223,396 )

Loss before income tax benefit (provision)

$ ( 25,463,949 )

Depreciation and amortization

Total identifiable assets, net of

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

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SUBSEQUENT EVENTS

Issuance of Restricted Common Stock

January 31, 2024, the Compensation Committee of the Board of Directors (the “Committee”) awarded Stanton E.

Ross 20,000 shares

of restricted common stock, half of these share will vest on January 31, 2025 and half on January 1, 2026, or in full at the completion

of the previously disclosed Transaction entered into by the Company’s wholly-owned subsidiary, Kustom Entertainment, pursuant to

the Merger Agreement with Clover Leaf, and the Company, whichever occurs first, provided that he remains an officer on such dates.

Han was awarded 15,000 shares of restricted common stock that will vest 3,000 shares on January 31, 2024, January 31, 2025, January 31,

2026, January 31, 2027 and January 31, 2028, or in full at the completion of the Transaction, whichever occurs first, provided that he

remains an officer on such dates.

of Michael J.

January 31, 2024, Michael J.

Caulfield notified the Board of Directors (the “Board”) of Digital Ally, Inc.

(the “Company”)

that he resigns as a director of the Board, effective immediately.

Stampede Acquisition

March 1, 2024, Kustom 440, entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment,

LLC, a Kansas limited liability company (“JC Entertainment”).

Pursuant to the Acquisition Agreement, Kustom 440 acquired

certain assets associated with a music entertainment event (“Country Stampede”), including all intellectual property arising

out of and relating to Country Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment

is a party to host and operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede

Intellectual Property, the “Purchased Assets”).

Secured Promissory Note

March 1, 2024, the Company entered into a Note Purchase Agreement (the “Note Agreement”), by and between the Company, Kustom

Entertainment (together with the Company, the “Borrowers”), and Mosh Man, LLC, a New Jersey limited liability company (the

“Purchaser”), pursuant to which the Borrowers issued to the Purchaser a Senior Secured Promissory Note (the “Note”)

with a principal amount of $ 1,425,000 .

In connection with the Agreement, the Borrowers entered into a Security Agreement (the “Security Agreement”) by and between

the Borrowers, as grantor, and the Purchaser, as grantee.

The gross proceeds to the Company are $ 1,000,000 ,

before paying customary fees and expenses.

to the Note, the Borrowers shall repay the Note, in full, on the earlier of (i)

November 1, 2024, and (ii) the consummation of the merger between Kustom Entertainment and Clover Leaf pursuant to the Merger Agreement

among the Company, Kustom Entertainment, Clover Leaf Capital Corp., Yntegra Capital Investments LLC and CL Merger Sub, dated as of June

The Borrowers shall pay in arrears in cash an amount equal to 50% of revenues from all ticket sales generated by Kustom Entertainment,

up nine thousand tickets sold, and thereafter equal to 10% of all revenues from all ticket sales until the earlier of the date on which

the Note is repaid in full or the Maturity Date.

The Note bears interest at a rate of 1.58% per month.

The Borrowers have the right,

but not the obligation, under the Note to prepay the Note, upon written notice to the Purchaser, by payment in full of the entire outstanding

principal balance plus interest.

Upon a change of control of either Borrower or a sale or all or substantially all of either Borrower’s

assets, the Purchaser may require the Borrowers to repay the Note, upon written notice to the Borrowers, by payment in full of the entire

outstanding principal balance plus interest.

addition, upon the receipt of proceeds from any financing or extraordinary receipts, the Borrowers are required to repay the Note as

(A) if the aggregate proceeds of all such financings and extraordinary receipts are less than $ 3,000,000 ,

the Borrowers shall prepay an amount equaling to 50% of the outstanding principal of the Note, and (B) if the aggregate proceeds of all

such financings and extraordinary receipts are equal to or greater than $ 3,000,000 ,

the Borrowers shall prepay the Note in full.

to the Security Agreement, the Borrowers’ obligations under the Note and Agreement are secured by substantially all of the assets

of the Borrowers, other than any real property.

Offering of Securities

February 13, 2025, the Company entered into an underwriting agreement with Aegis Capital Corp.

for the sale and issuance of (i) 7,850,000

units (the “Units”) at a public offering price per Unit of $ 0.15 with each Unit consisting of one share of common stock, par value

$ 0.001 per share, one Series A warrant to purchase one share of common stock at an exercise price of $ 0.1875 per share and one Series

B warrant to purchase one share of common stock at an exercise price of $ 0.30 and (ii) 92,150,000 pre-funded units at a public offering

price of $ 0.149 per pre-funded unit, with each pre-funded unit consisting of one pre-funded warrant exercisable for one share of Common

Stock at an exercise price of $ 0.001 per share, one Series A Warrant and one Series B Warrant.

The Pre-Funded Warrants will be immediately

exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full.

Series A and Series B warrants will be exercisable only upon receipt of stockholder approval of (i) certain terms in the Series A and

B warrants and the issuance of the shares of common stock issuable upon the exercise of such Series A and Series B warrants, as may be

required by the applicable rules and regulations of The Nasdaq Stock Market LLC and (ii) if necessary, a proposal to amend the Company’s

Articles of Incorporation, to increase the authorized share capital of the Company to an amount sufficient to cover the shares of common

stock issuable upon the exercise of the Series A and Series B warrants.

The Series A warrants will be exercisable commencing upon the

date of Stockholder Approval until five years after such approval date, and the Series B Warrants will be exercisable commencing upon

the date of Stockholder Approval until two and one-half years after such date.

offering closed on February 14, 2025.

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

underwriter’s fees and the payment of other offering expenses associated with the offering payable by the Company.

intends to use the net proceeds from the offering for working capital and other general corporate purposes, to pay amounts owed under

a short-term merchant advance and to pay in full the aggregate face value of senior secured promissory notes that were previously issued

as part of a private placement that the Company entered into with certain institutional investors on November 6, 2024.

Company granted the underwriter an option to purchase additional shares of common stock and/or Series A and Series B warrants of (i)

of the number of shares of Common Stock sold in the offering, (ii) up to 15.0 %

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

of the number of Series B warrants sold in the offering.

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

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

The Underwriter may exercise the

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

The purchase price to be paid per additional share of Common Stock will be equal to the public offering price of one Unit (less

allocated to each Series A and Series B warrant), as applicable, less the underwriting discount, and the purchase price to be paid

per over-allotment Series A and Series B warrant will be $ 0.00001 .

On February 14, 2025, the Underwriter exercised its over-allotment option with respect to 6,000,000

pre-funded warrants/common shares, 15,000,000

Series A warrants and 15,000,000

Series B warrants.

Settlement occurred on April 17, 2025.

Capital Corp.

served as the sole book-running manager in the offering, pursuant to the terms of the Underwriting Agreement, and received

seven percent ( 7 %)

of the aggregate purchase price paid by investors in the offering, a one percent ( 1 %)

non-accountable expense and reimbursement of the legal fees of its counsel.

units and pre-funded units were offered by the Company pursuant to an effective registration statement on Form S-1, as amended, which

was declared effective by the SEC on February 12, 2025.

The final prospectus relating to the offering was filed with the SEC on February

to December 31, 2024, the holders of Series B warrants remaining outstanding pursuant to the June 2024 private placement were exercised

to acquire a total of 3,793,777 shares at an exercise price of $ .001 per share.

The Series B warrants issued pursuant to the June 2024

private placement are now fully exercised.

Company issued 98,150,000 pre-funded warrants at a public offering price of $ 0.149 per pre-funded warrant at an exercise price of $ 0.001

Subsequent to their issuance on February 13, 2025, all 98,150,000 pre-funded warrants were exercised in full.

Shareholder Meeting

Company has called a special meeting of stockholders to be held on April 1, 2025 for the following purpose:

approve an amendment to our articles of incorporation to increase the number of authorized shares of our capital stock that we may

issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified as common stock, par value

$ 0.001 per share;

approve a proposal to authorize the board of directors of the Company, in its sole and absolute discretion, and without further action

of the stockholders, to file an amendment to our articles of incorporation, to effect a reverse stock split of our issued and outstanding

Common Stock at a ratio to be determined by the Board, ranging from one-for-five (1:5) to one-for-one hundred (1:100) , with such

reverse stock split to be effected at such time and date, if at all, as determined by the Board in its sole discretion, but no later

than April 1, 2026;

authorize, for purposes of complying with Nasdaq listing rule 5635(d), the issuance of Series A Warrants to purchase shares of Common

Stock and Series B Warrants to purchase shares of Common Stock shares of Common Stock underlying the Warrants and certain provisions

of the Warrants, issued in connection with an offering and sale of securities of the Company that was consummated on February 14,

approve one or more adjournments of the Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the

Authorized Share Increase Proposal, the Reverse Stock Split Proposal or the Issuance Proposal if there are not sufficient votes at

the Special Meeting to approve and adopt the proposals

April 1, 2025, the Company convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow

the Company to solicit additional votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase

the number of authorized shares of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000

shares shall be classified as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting

to reconvene on April 13, 2025.

On April 13, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on April

On April 13, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on April 21,

On April 21, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on April

On April 29, 2025, the Company

convened a special meeting of stockholders and immediately adjourned the Special Meeting in order to allow the Company to solicit additional

votes on its proposal to approve an amendment to its articles of incorporation, as amended, to increase the number of authorized shares

of its capital stock that it may issue from 210,000,000 shares to 5,010,000,000 shares, of which 5,000,000,000 shares shall be classified

as common stock, par value $ 0.001 per share.

The chairman of the Special Meeting adjourned the Special Meeting to reconvene on May 5,

of Failure to Satisfy a Continued Listing Rule

March 14, 2024, the Nasdaq Listing Qualifications staff notified Digital Ally, Inc.

(the “Company”), that due to resignation

Caulfield from the Company’s board of directors (the “Board”) effective on January 31, 2024, the

Company no longer complies with the audit committee and compensation committee requirements as set forth in Listing Rule 5605 of The

Nasdaq Stock Market LLC (“Nasdaq”), including the requirements that there are at least three independent directors on the

Company’s audit committee and at least two independent directors on the Company’s compensation committee.

notification has no immediate effect on the Company’s listing on the Nasdaq Capital Market.

In accordance with Nasdaq Listing Rules,

the Company is provided a cure period until the earlier of the Company’s next annual shareholders’ meeting (or July 29, 2024

if the next shareholders’ meeting will be held before July 29, 2024) or January 31, 2025 (the “Cure Period”).

Company does not regain compliance by within the Cure Period, Nasdaq will provide written notice that the Company’s common stock,

par value $ 0.001 per share, will be subject to delisting from the Nasdaq Capital Market, at which time, the Company may appeal the delisting

determination to a Hearings Panel.

management of the Company has resolved to take commercially reasonable steps to fill the vacancy on the Board with a new director who

qualifies as independent under the Nasdaq Listing Rules as soon as is practical and anticipates regaining compliance during the Cure

However, there can be no assurance that the Company will be able to satisfy Nasdaq Listing Rule 5605 or will otherwise be in

compliance with other Nasdaq listing criteria.

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

2 to a Registration Statement on Form S-4 by

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

Report on Form 10-Q - On November 25, 2024, the Company received a notice (the “Notice”) from the Nasdaq Stock Market

LLC, which indicated that, as a result of the Company’s delay in filing its Quarterly Report on Form 10-Q for the period ended

September 30, 2024, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires Nasdaq-listed companies to

timely file all required periodic financial reports with the U.S.

Securities and Exchange Commission.

December 30, 2024, the Company filed the Quarterly Report.

On January 2, 2025, Nasdaq delivered a written notification notifying the

Company that it had regained compliance with the Quarterly Report Requirement.

Bid Price Requirement - December 20, 2024, the Company received a written notification from The Nasdaq Stock Market LLC indicating

that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), as the

Company’s closing bid price for its common stock was below $1.00 per share for the prior thirty (30) consecutive business days.

The Company has been granted a 180-calendar day compliance period, or until June 18, 2025, to regain compliance with the Minimum Bid

Price Requirement.

If the Company is not in compliance by June 18, 2025, the Company may be afforded a second 180-calendar day compliance

If the Company does not regain compliance within such compliance period, including any granted extensions, its common stock may

be subject to delisting, which delisting may be appealed to a Nasdaq hearings panel.

Stockholders’ Equity Standard - On January 2, 2025, the Company received a notice (the “Notice”) from the staff

of the Listing Qualifications department (the “Staff”) of Nasdaq, which indicated that the Company was not in compliance

with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”), as the Company’s stockholders’

equity of ($ 2,448,310 ), as reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30,

2024, was below the required minimum of $ 2.5 million, and the Company did not meet either the alternative compliance standards relating

to market value of listed securities of at least $ 35 million or net income from continuing operations of at least $ 500,000 in the most

recently completed fiscal year or in two of the last three most recently completed fiscal years.

Nasdaq listing rules and as specified in the Notice, the Company has 45 calendar days from the date of the Notice to submit to the Staff

a plan to regain compliance with the Stockholders’ Equity Requirement.

If the Company’s plan to regain compliance is accepted,

Nasdaq may grant an extension of up to 180 calendar days from the date of the Notice for the Company to evidence compliance.

Company submitted its plan to Nasdaq to regain compliance with the Stockholders’ Equity Requirement on February 17, 2025.

can be no assurance that the Company’s plan will be accepted or that if it is, that the Company will be able to regain compliance

with the Stockholders’ Equity Requirement.

the Company does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq,

Nasdaq will provide notice that the common stock will be subject to delisting from the Nasdaq Capital Market.

At that time, the Company

may appeal any such delisting determination to a Nasdaq hearings panel.

Company continues to work diligently to regain compliance with the Minimum Bid Price Requirement and Stockholders’ Equity Requirement

as promptly as possible to regain compliance with such continued listing rules of the Nasdaq.

Bid Price Requirement - On March 6, 2025, the Company received notice (the “March 6 Letter”) from the Nasdaq Staff that

the Staff had determined that as of March 5, 2025, the Company’s securities had a closing bid price of $0.10 or less for ten consecutive

trading days triggering application of Listing Rule 5810(c)(3)(A)(iii) which states in part:

if during any compliance period specified

in Rule 5810(c)(3)(A), a company’s security has a closing bid price of $0.10 or less for ten consecutive trading days, the Listing

Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security (the “Low Priced

Stocks Rule”).

As a result, the Staff determined to delist the Company’s securities from Nasdaq, unless the Company timely

requests an appeal of the Staff’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth

in the Nasdaq Listing Rule 5800 Series.

The Company must request a hearing no later than 4:00 p.m.

Eastern Time on March 13, 2025.

timely requested a hearing before the Panel to appeal the March 6 Letter and to address all outstanding matters, including

compliance with the Minimum Bid Price Requirement, the Low Priced Stocks Rule and the Stockholders’ Equity Requirement, which

hearing date has not been set as of the date of this Form 10-K.

While the appeal process is pending, the suspension of trading of

the Company’s common stock, par value $ 0.001 per share (the “Common Stock”), will be stayed and the Common Stock

will continue to trade on the Nasdaq Capital Market until the hearing process concludes and the Panel issues a written decision.

Company held its hearing with the Panel as scheduled on April 17, 2025.

May 1, 2025, the Panel rendered its decision which granted the Company’s request for continued listing on the Nasdaq Exchange.

Such decision is subject to the following conditions:

On or before May 2, 2025, the Company

shall file Form 10-K for 2024 in compliance with Listing Rule 5250(c)(1).

On or before May 20, 2025, the Company must file a

public disclosure describing any transactions undertaken by the Company to increase its equity and providing an indication of its

equity following those transactions.

In addition, on or before May 20, 2025, the Company

must provide the Panel with an update on its fundraising plans, and updated income projections for the next 12 months, with all underlying

assumptions clearly stated.

On or before June 6, 2025,

the Company shall demonstrate compliance with the Bid Price Rule.

If, prior to September

2, 2025, the Company becomes non-compliant with any Listing Rule, the Company will be delisted.

are no assurances however, that the Company will be able to meet and maintain all such conditions required by the Panel.

Note - On February 1, 2025, the Company’s Entertainment Segment entered into a $ 600,000 unsecured promissory note with a third

The promissory note bears an interest rate of 10.0 % per annum, compounded monthly.

Payments of principal and interest are

due on May 5, 2025 .

Extension of Credit - On January 31, 2025, the Company’s Entertainment Segment entered into a $300,000 purchase agreement

with TFL, LLC (“TFL”).

TFL agreed to purchase Major League Baseball tickets from the Company’s Entertainment Segment

for $177,227.93 as well as pay off the remaining balance due to those teams for the Company’s Entertainment Segment season tickets of $122,772.07.

Profits generated from 2025 All Star Game and 2025 Post season tickets will be split 50/50 between the Parties, paid upon completion of

the respective events.

payable - The Company continues to negotiate with its vendors to settle outstanding balances owed for lesser amounts.

In that regard,

the Company’s Video Solutions Segment and one of its significant vendor’s agreed to extinguish accounts payable totaling

for an immediate payment of $ 500,000 .

The payment was made on February 25, 2025 resulting in a gain on the extinguishment of liabilities of $ 1,750,000 .

The Company continues to negotiate with its vendors to settle outstanding balances owed for lesser amounts.

of Co-Marketing Agreement - On February 20, 2025, the Company’s Entertainment Segment entered into a settlement agreement with

TicketSocket, Inc.

to terminate their Co-Marketing Agreement (which had been in place since September 15, 2022.

Both parties acknowledged

and agreed that $ 650,000 was still outstanding and due to the Company’s Entertainment Segment under the provisions of the Co-Marketing

However, the parties agreed that $ 500,000 would be accepted by the Company’s Entertainment Segment as payment in full

if such amount was paid before Tuesday, February 25, 2025.

This $ 500,000 was received before February 25, 2025 so, as such, the amounts

receivable from TicketSocket, Inc.

was fully extinguished.

The Company’s Entertainment Segment had recorded a reserve for

loss on the termination of the Co-Marketing Agreement of $ 150,000 as of December 31, 2024.

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

What changed 10-K

Item 9A. Controls and Procedures