What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-20 compared with 2024-12-30 · 868 added, 1201 removed, 143 unchanged (94% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operation.

quarterly report on Form 10-Q (the “Report”) of Digital Ally, Inc.

(the “Company”, “we”, “us”,

or “our”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,

and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The words “aim,” “anticipate,”

“believe,” “continue,” “could,” “estimate,” “expect,” “feel,”

“forecast,” “intend,” “may,” “outlook,” “plan,” “potential,”

“predict,” “project,” “seek,” “should,” “will,” “would,” and

similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying

These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate

assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control.

Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned

not to place undue reliance on such forward-looking statements.

undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events

or otherwise.

A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability,

cash flows and capital needs.

There can be no assurance that the forward-looking statements contained in this document will, in fact,

transpire or prove to be accurate.

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

affected include, but are not limited to:

Management’s Discussion and Analysis

of Financial Condition and Results of Operation.

This quarterly report on Form

10-Q (the “Report”) of Digital Ally, Inc.

(the “Company”, “we”, “us”, or “our”)

contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the

Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The words “aim,” “anticipate,” “believe,”

“continue,” “could,” “estimate,” “expect,” “feel,” “forecast,”

“intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,”

“seek,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking

statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements are based largely

on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks

and known and unknown uncertainties, a number of which are beyond our control.

Therefore, actual results could differ materially from

the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking

We undertake no obligation to

publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

A wide variety

of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs.

There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.

Factors that could cause or contribute

to our actual results differing materially from those discussed herein or for our stock price to be adversely affected include, but are

not limited to:

(1) our losses in recent years, including fiscal years 2024 and 2023;

(2) economic and other

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

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

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

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

(4) our operation in developing markets and uncertainty

as to market acceptance of our technology and new products;

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

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

(6) our ability

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

increasing our international revenues;

(2) economic and other risks for our business from

the effects of the COVID-19 pandemic, including the impacts on our law-enforcement and commercial customers, suppliers and employees and

on our ability to raise capital as required;

(3) our ability to increase revenues, increase our margins and return to consistent profitability

in the current economic and competitive environment;

(4) our operation in developing markets and uncertainty as to market acceptance of

our technology and new products;

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

law enforcement agencies, including the timing, amount and restrictions on such funding;

(6) our ability to maintain or expand our share

of the market for our products in the domestic and international markets in which we compete, including increasing our international revenues;

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

(8) competition from larger,

more established companies with far greater economic and human resources;

(8) competition from larger, more established companies with far greater

economic and human resources;

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

risks related to dealing with governmental entities as customers;

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

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

(12) characterization of our market by new products

and rapid technological change;

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

(14) that stockholders

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

(15) defects in our

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

(10) risks related to dealing with governmental

entities as customers;

(11) our expenditure of significant resources in anticipation of sales due to our lengthy sales cycle and the potential

to receive no revenue in return;

(12) characterization of our market by new products and rapid technological change;

(13) our dependence

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

of our products;

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

as trade secrets, through other similar means;

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

(19) risks related

to our license arrangements;

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

(21) sufficient voting power by coalitions

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

effect on us and the other stockholders;

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

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

(23) potential dilution

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

(24) our additional securities available for issuance,

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

(25) the volatility of our stock price due to

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

(26) our ability to integrate and realize the

anticipated benefits from acquisitions;

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

Trends and Recent Developments for the Company

Solutions Operating Segment – Within our video solutions operating segment we supply technology-based products utilizing our

portable digital video and audio recording capabilities for the law enforcement and security industries and for the commercial fleet

and mass transit markets.

We have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create

positive solutions to our customers’ requests.

on sales of our EVO-HD, DVM-800, DVM-250 and FirstVU products;

(14) that stockholders may lose all or part of their investment if we are

unable to compete in our markets and return to profitability;

(15) defects in our products that could impair our ability to sell our products

or could result in litigation and other significant costs;

(16) our dependence on a few manufacturers and suppliers for components of

our products and our dependence on domestic and foreign manufacturers for certain of our products;

(17) our ability to protect technology

through patents and to protect our proprietary technology and information, such as trade secrets, through other similar means;

ability to generate more recurring cloud and service revenues;

(19) risks related to our license arrangements;

(20) the fluctuation of

our operation results from quarter to quarter;

(21) sufficient voting power by coalitions of a few of our larger stockholders, including

directors and officers, to make corporate governance decisions that could have a significant effect on us and the other stockholders;

(22) the issuance or sale of substantial amounts of our Common Stock, or the perception that such sales may occur in the future, which

may have a depressive effect on the market price of our securities;

(23) potential dilution from the issuance of Common Stock underlying

outstanding options and warrants;

(24) our additional securities available for issuance, which, if issued, could adversely affect the

rights of the holders of our Common Stock;

(25) the volatility of our stock price due to a number of factors, including, but not limited

to, a relatively limited public float;

(26) our ability to integrate and realize the anticipated benefits from acquisitions;

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

Current Trends and Recent Developments for the

May 6, 2025, the Company, acting pursuant to authority received at an annual meeting of its stockholders on December 17, 2024, filed

with the Secretary of State of the State of Nevada a certificate of amendment (the “Charter Amendment”) to its articles of

incorporation, as amended (the “Articles of Incorporation”), which effected a one-for-twenty reverse stock split (the “Reverse

Stock Split”) of all of the Company’s outstanding shares of common stock, par value $0.001 per share (the “Common Stock”).

Pursuant to the Charter Amendment, the Reverse Stock Split became effective as of 5:30 p.m.

Eastern Time on May 6, 2025.

of the Reverse Stock Split, every twenty (20) shares of Common Stock were exchanged for one (1) share of Common Stock.

The Common Stock

began trading on the Nasdaq Capital Market on a split-adjusted basis at the start of trading on May 7, 2025.

The Reverse Stock Split

did not affect the total number of shares of capital stock, including the Common Stock, that the Company is authorized to issue, which

remain as set forth pursuant to the Articles of Incorporation.

No fractional shares of Common Stock were issued in connection with the

Reverse Stock Split.

Stockholders who otherwise were entitled to receive fractional shares of Common Stock were automatically entitled

to receive an additional fraction of a share of Common Stock to round up to the next whole share, at a participant level.

Stock Split also had a proportionate effect on all other options and warrants of the Company outstanding as of the effective date of

the Reverse Stock Split.

Notifications

previously disclosed, on December 20, 2024, the Company received notice from the Listing Qualifications Staff (the “Staff”)

of The Nasdaq Stock Market LLC (“Nasdaq”) that the bid price of its listed securities had closed at less than $1 per share

over the previous 30 consecutive business days, and, as a result, did not comply with Nasdaq Listing Rule 5550(a)(2) (the “Minimum

Bid Price Requirement”).

Therefore, in accordance with Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar days,

or until June 18, 2025, to regain compliance with the Minimum Bid Price Requirement.

previously disclosed, on January 2, 2025, the Staff notified the Company that it was not in compliance with Nasdaq Listing Rule 5550(b)(1),

which requires companies listed on Nasdaq to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing (the

“Stockholders’ Equity Requirement”).

The Company reported stockholders’ equity (deficit) of ($2,448,310) in its

Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, and, as a result, did not satisfy the Stockholders’ Equity

Requirement pursuant to Listing Rule 5550(b)(1).

previously disclosed, on March 6, 2025, the Company received notice (the “March 6 Letter”) from the 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”).

Company 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, 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.

The 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:

or before May 2, 2025, the Company shall file Form 10-K for 2024 in compliance with Listing

Rule 5250(c)(1).

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.

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.

or before June 6, 2025, the Company shall demonstrate compliance with the Minimum Bid Price

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.

Segment Overview

Video Solutions Operating Segment

– Within our video solutions operating segment we supply technology-based products utilizing our portable digital video and

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

have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our

customers’ requests.

Our products include:

the EVO-HD, DVM-800 and DVM-800 Lite, which are in-car digital

video systems for law enforcement and commercial markets;

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

and the FirstVU HD;

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

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

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

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

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

We further diversified and broadened our product offerings

in 2020, by introducing two new lines of branded products:

(1) the ThermoVu™ which is a line of self-contained temperature monitoring

stations that provides alerts and controls facility access when an individual’s temperature exceeds a pre-set threshold and (2)

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

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

the sale of Shield disinfectant and personal protective products.

This segment generates revenues through our subscription models offering

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

Revenues for product

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

term of the subscription, typically 3 or 5 years.

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

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

and its majority-owned subsidiary Nobility Healthcare.

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

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

services to healthcare organizations throughout the country.

Our assistance consists of insurance and benefit verification, medical treatment

documentation and coding, and collections.

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

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

revenue cycle management segment consists of our medical billing subsidiaries.

Revenues of this segment are recognized after we perform

the obligations of our revenue cycle management services.

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

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

Entertainment

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

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

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

enforcement and commercial markets;

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

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

for both law enforcement and commercial markets;

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

and commercial market;

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

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

and FleetVu and VuLink, which are our cloud-based

evidence management systems.

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

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

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

which are for use against viruses and bacteria.

Our video solutions segment revenue

encompasses video recording products and services for our law enforcement and commercial customers and the sale of Shield disinfectant

and personal protective products.

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

and hardware sales for video and personal protective safety products and solutions.

Revenues for product sales are recognized upon delivery

of the product, and revenues from our cloud and warranty subscription plans are deferred over the term of the subscription, typically

3 or 5 years.

Revenue Cycle Management Operating

Segment – We entered the revenue cycle management business late in the second quarter of 2021 with the formation of our wholly

owned subsidiary, Digital Ally Healthcare, Inc., and its majority-owned subsidiary Nobility Healthcare.

Nobility Healthcare completed

its first acquisition in June 2021, when it acquired a private medical billing company, and has since completed three additional acquisitions

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

throughout the country.

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

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

to substantial improvements in their operating margins and cash flows.

Our revenue cycle management segment

consists of our medical billing subsidiaries.

Revenues of this segment are recognized after we perform the obligations of our revenue

cycle management services.

Our revenue cycle management services are services, performed and charged monthly, generally based on a contractual

percentage of total customer collections, for which we recognize our net service fees.

Entertainment Operating Segment

- We also entered into live entertainment and events ticketing services through the formation of our wholly owned subsidiary, TicketSmarter

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

TicketSmarter provides ticket sales,

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

TicketSmarter

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

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

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

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

venues throughout the country.

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

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

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

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

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

Entertainment direct expenses include

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

maintenance fees, along with other administrative costs.

of Operations

financial information for the Company’s reportable business segments is provided for the indicated periods and as of September

30, 2024, and September 30, 2023:

the three months ended September 30,

the nine months ended September 30,

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

and performing arts.

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

These services

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

and day of production.

Our entertainment operating segment

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

Revenues of this segment

include ticketing service charges generally determined as a percentage of the face value of the underlying ticket and ticket sales from

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

Entertainment direct expenses include the cost of tickets

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

well as other administrative costs.

Off-Balance Sheet Arrangements

We do not have any off-balance

sheet debt, nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with

any unconsolidated entities or other persons that may have a material current or future effect on financial conditions, changes in the

financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue

or expenses other than the following:

We are a party to operating leases

and license agreements that represent commitments for future payments and we have issued purchase orders in the ordinary course of business

that represent commitments to future payments for goods and services.

Comparison of the Three Months Ended March 31,

2025 and 2024

Summary Financial Data

Summarized financial information

for the Company’s reportable business segments is provided for the three months ended March 31, 2025, and 2024:

Three Months Ended March 31,

Net Revenues:

3 unchanged sentences

Total Net Revenues

Gross Profit:

Gross Profit (loss):

Video Solutions

7 unchanged sentences

Total Operating Income (Loss)

$ (3,639,034 )

Depreciation and Amortization:

7 unchanged sentences

Entertainment

Identifiable Assets

net revenues reported above represent only sales to external customers.

Total Identifiable Assets

The segment net revenues reported

above represent sales to external customers.

Segment gross profit represents net revenues less cost of revenues.

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

cost of revenues, less all operating expenses.

Segment operating income,

which is used in management’s evaluation of segment performance, represents net revenues, less cost of revenues, less all operating

Identifiable assets are those assets used by each segment in its operations.

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

Corporate assets primarily consist of cash, property,

plant and equipment, accounts receivable, inventories, and other assets.

Results of Operations

experienced operating losses for the nine months of 2024 and all quarters during 2023.

The following is a summary of our recent operating

results on a quarterly basis:

For the Three Months Ended:

September 30,

Total revenue

Gross profit margin %

Total selling, general and administrative expenses

Operating income (loss)

Operating income (loss) %

Net income (loss)

$ (5,470,712 )

$ (5,010,551 )

$ (3,943,268 )

$ (7,484,778 )

$ (3,679,043 )

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

results in the above table.

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

(1) the timing of large individual

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

and the Shield™ lines;

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

(4) unusual increases

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

(5) the timing of patent infringement

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

and (7) the completion

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

a net loss of $5,470,712 on revenues of $4,051,711 for the third quarter of 2024.

Sheet Arrangements

do not have any off-balance sheet debt, nor did we have any transactions, arrangements, obligations (including contingent obligations)

or other relationships with any unconsolidated entities or other persons that may have a material current or future effect on financial

conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant

components of revenue or expenses other than the following:

are a party to operating leases and license agreements that represent commitments for future payments and we have issued purchase orders

in the ordinary course of business that represent commitments to future payments for goods and services.

the Three Months Ended September 30, 2024 and 2023

of Operations

immediately below and discussed in more detail in the subsequent subsections is an analysis of our operating results for the three months

ended September 30, 2024 and 2023, represented as a percentage of total revenues for each such quarter:

For the three months ended September 30,

Cost of revenue

Selling, general and administrative expenses:

Research and development expense

Selling, advertising and promotional expense

General and administrative expense

Goodwill and intangible asset impairment charge

Total selling, general and administrative expenses

Operating loss

Change in fair value of derivative liabilities

Gain (loss) on extinguishment of liabilities

Gain on sale of property, plant and equipment

Loss on extinguishment of debt

Other income and interest income (expense), net

Income (loss) before income tax benefit

Income tax (provision)

Net income/(loss)

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

Net income (loss) attributable to common stockholders

Net income/(loss) per share information:

by Type and by Operating Segment

operating segments generate two types of revenues:

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

units, disinfectants, and personal protective equipment.

Additionally, product revenues also include the sale of tickets by our

entertainment operating segment that have been purchased or received through our sponsorships and partnerships and held in inventory

by our entertainment segment until their sale.

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

solutions segment.

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

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

ticketing marketplace transactions.

Lastly, our revenue cycle management segment revenues are included in the service revenues for services

provided to medical providers throughout the country.

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

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

our sales force, comprised of our employees.

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

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

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

The distributor retains the margin

as compensation for its role in the transaction.

The distributor generally maintains product inventory, customer receivables and

all related risks and rewards of ownership.

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

terms of the distribution agreement.

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

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

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

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

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

Service revenues are generally determined as a

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

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

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

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

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

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

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

revenues by operating segment is as follows:

For the three months ended

September 30,

Revenues by Type and by Operating Segment

Our operating segments generate

two types of revenues:

Product revenues primarily includes

video solutions operating segment hardware sales of in-car and body-worn cameras, along with sales of our ThermoVu TM units,

disinfectants, and personal protective equipment.

Additionally, product revenues also include the sale of tickets by our entertainment

operating segment that have been purchased or received through our sponsorships and partnerships and held in inventory by our entertainment

segment until their sale.

Service and other revenues consist

of cloud and warranty services revenues from our subscription plan and storage offerings of our video solutions segment.

Our entertainment

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

We recognize service revenue from

sales generated through its secondary ticketing marketplace as we collect net services fees on secondary ticketing marketplace transactions.

Lastly, our revenue cycle management segment revenues are included in the service revenues for services provided to medical providers

throughout the country.

The following table presents revenues by

type and segment:

Three Months Ended March 31,

Product revenues:

Video solutions

Revenue Cycle Management

Entertainment

Total product revenues

revenues for the three months ended September 30, 2024 and 2023 were $803,945 and $2,095,237 respectively, a decrease of $1,291,292 (62%),

due to the following factors:

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

entertainment operating segment generated $497,700 in product revenues for the three months ended September 30, 2024, compared to

$1,118,044 for the three months ended September 30, 2023, a decrease of $620,344 (55%).

Product revenue relates to the timing of

the first Kustom 440 music festival in 2023 that did not recur in 2024, the initial Country Stampede music festival in 2024, as well

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

to customers.

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

on higher margin events to improve its gross margins.

Company’s video segment operating segment generated revenues totalling $306,245 during the three months ended September 30,

2024 compared to $977,193 for the three months ended September 30, 2023, a decrease of $670,948 (69%).

In general, our video solutions

operating segment has experienced pressure on its product revenues as our in-car and body-worn systems are facing increased competition

because our competitors have released new products with advanced features.

Additionally, our law enforcement revenues declined compared

to the same period in 2023 due to the Company not having inventory in–stock to fulfil existing backlog orders, price-cutting

and competitive actions by our competitors and adverse marketplace effects related to our recent financial condition.

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

service fee model.

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

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

of a recurring monthly service fee.

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

and related equipment during 2020 that allowed law enforcement agencies to pay a monthly service fee to obtain body worn cameras

without incurring a significant upfront capital outlay.

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

and increasing our service revenues.

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

span of three to five years.

and other revenues by operating segment is as follows:

For the three months ended

September 30,

Service and other revenues:

Video solutions

Revenue Cycle Management

Entertainment

Total Service and Other Revenues

and other revenues for the three months ended September 30, 2024 and 2023 were $3,247,766 and $4,242,462, respectively, a decrease of

$994,696 (23%), due to the following factors:

revenues generated by the video solutions operating segment were $710,580 and $526,401 for the three months ended September 30, 2024

and 2023, respectively, an increase of $184,179 (35%).

We have experienced increased interest in our cloud solutions for law enforcement

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

contributed to our slight increase in cloud revenues in the three months ended September 30, 2024.

We expect this trend to continue

throughout 2024 as the migration from local storage to cloud storage continues in our customer base.

solutions operating segment revenues from extended warranty services were $141,716 and $226,056 for the three months ended September

30, 2024 and 2023, respectively, a decrease of $84,340 (37%).

entertainment operating segment generated service revenues totalling $755,857 and $1,785,764 for the three months ended September

30, 2024 and 2023, respectively, a decrease of $1,029,907 (58%).

TicketSmarter collects fees on transactions administered through

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

We expect our entertainment

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

revenue cycle management operating segment generated service revenues totalling $1,601,792 and $1,636,543 for the three months ended

September 30, 2024 and 2023, respectively, a decrease of $34,751 (2%).

Our revenue cycle management operating segment provides revenue

cycle management solutions and back-office services to healthcare organizations throughout the country.

We expect our revenue cycle

management segment to continue to present a strong revenue outlook moving forward.

revenues for the three months ended September 30, 2024 and 2023 were $4,051,711 and $6,337,699, respectively, a decrease of $2,285,988

(36%), due to the reasons noted above.

of Product Revenue

cost of product revenue sold for the three months ended September 30, 2024, and 2023 was $547,562 and $2,587,750, respectively, a decrease

of $2,040,188 (79%).

Overall cost of goods sold for products as a percentage of product revenues for the three months ended September

30, 2024, and 2023 were 68% and 124%, respectively.

Cost of products sold by operating segment is as follows:

For the three months ended

September 30,

Cost of Product Revenues:

Video Solutions

Revenue cycle management

Entertainment

Total Cost of Product Revenues

decrease in cost of goods sold for our video solutions segment products was primarily driven by the sale of repair inventory and components

as compared to the same period in the prior year.

We have been unable to ship backlog due to low inventory levels of finished goods.

Cost of product sold as a percentage of product revenues for the video solutions segment decreased to 51% for the three months ended

September 30, 2024 as compared to 98% for the three months ended September 30, 2023.

decrease in entertainment operating segment cost of product sold was driven by the reduction in sponsored events and primary ticket sales

as we selectively limited our events presented for the three months ended September 30, 2024 compared to September 30, 2023, resulting

in cost of product revenue of $390,226 for the three months ended September 30, 2024, compared to $1,629,763 for the three months ended

September 30, 2023.

Cost of product sold as a percentage of product revenues for the entertainment segment was 78% for the three months

ended September 30, 2024 as compared to 146% for the three months ended September 30, 2023.

of Service Revenue

cost of service revenue sold for the three months ended September 30, 2024, and 2023 was $1,764,175 and $2,523,800, respectively, a decrease

of $759,625 (30%).

Overall cost of goods sold for services as a percentage of service revenues for the three months ended September

30, 2024, and 2023 were 54% and 59%, respectively.

Cost of service revenues by operating shipment is as follows:

For the three months ended

September 30,

Cost of Service Revenues:

Video Solutions

Revenue Cycle Management

Entertainment

Total Cost of Service Revenues

decrease in cost of service revenues for our video solutions segment reflects our staffing reductions implemented during 2024 in order

to right-size our operations commensurate with our service revenues in the three months ended September 30, 2024 compared to the three

months ended September 30, 2023.

Cost of service revenues as a percentage of service revenues for the video solutions segment decreased

to 30% for the three months ended September 30, 2024 as compared to 47% for the three months ended September 30, 2023.

of service revenues as a percentage of service revenues for the revenue cycle management operating segment remained consistent at 58%

for the three months ended September 30, 2024 as compared to 62% for the three months ended September 30, 2023.

decrease in entertainment operating segment cost of service revenues is commensurate with the decrease in service revenues in the three

months ended September 30, 2024, compared to the three months ended September 30, 2023.

Cost of service revenues as a percentage of service

revenues for the entertainment segment was 74% for the three months ended September 30, 2024 as compared to 63% for the three months

ended September 30, 2023.

gross profit for the three months ended September 30, 2024 and 2023 was $1,739,974 and $1,226,149, respectively, an increase of $513,825

Gross profit by operating segment was as follows:

For the three months ended

September 30,

Gross Profit:

Video Solutions

Revenue Cycle Management

Entertainment

Total Gross Profit

overall increase is attributable to the improvement in gross profit generated by the video solutions and entertainment segments for the

three months ended September 30, 2024 compared to 2023 along with a decrease in the overall cost of sales as a percentage of overall

revenues to 57% for the three months ended September 30, 2024 from 81% for the three months ended September 30, 2023.

Our goal is to

continue to improve our margins over the longer term based on the expected margins generated by our new recent revenue cycle management

and entertainment operating segments together with our video solutions operating segment and its expected margins from our EVO-HD, DVM-800,

VuLink, FirstVu Pro, FirstVu II, and our cloud evidence storage and management offering, provided that they gain traction in the marketplace.

In addition, if revenues from the video solutions segment increase, we will seek to further improve our margins from this segment through

expansion and increased efficiency utilizing fixed manufacturing overhead components.

We plan to continue our initiative to more efficiently

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

General and Administrative Expenses

general and administrative expenses were $9,122,273 and $6,374,192 for the three months ended September 30, 2024 and 2023,

respectively, an increase of $2,748,081 (43%).

The increase was primarily attributable to the goodwill and intangible asset

impairment charge recorded during the 2024 period offset by a reduction in new sponsorships being entered into by the Company.

selling, general and administrative expenses as a percentage of sales increased to 225% for the three months ended September 30,

2024 compared to 101% in the same period in 2023.

The significant components of selling, general and administrative expenses are as

For the three months ended

September 30,

Research and development expense

Selling, advertising and promotional expense

General and administrative expense

Goodwill and intangible asset impairment charge

and development expense.

Our research and development expenses totalled $210,818 and $564,146 for the three months ended September

30, 2024 and 2023, respectively which represents a decrease of $353,328 (63%).

We have focused on controlling our expenditures on bringing

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

The decrease in

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

our expenses in this area with our revenues.

advertising and promotional expenses.

Selling, advertising and promotional expense totalled $414,727 and $1,932,982 for the three

months ended September 30, 2024 and 2023, respectively, a decrease of $1,518,255 (79%).

The decrease in selling, advertising and promotional

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

in this area with our revenues.

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

the Company and its subsidiary TicketSmarter.

and administrative expense .

General and administrative expenses totalled $3,666,728 and $3,877,064 for the three months ended

September 30, 2024 and 2023, respectively.

The decrease in general and administrative expenses in the three months ended September 30,

2024 compared to the same period in 2023 is primarily attributable to a decrease in administrative salaries and reductions in headcount

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

The decrease in general and administrative expenses was offset by

a substantial increase legal and professional expenses for the three months ended September 30, 2024 compared to the same period in 2023

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

Goodwill and intangible

asset impairment charge.

We 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 the September 30,

2024 for our reporting units with remaining goodwill.

As a result of our September

30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and entertainment

reporting units exceeded their estimated fair value.

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

representing a portion of the goodwill balance for the revenue cycle management segment, which was included in goodwill and

intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months

ended September 30, 2024.

In addition, we recorded a non-cash goodwill impairment charge of $307,000, representing

a portion of the goodwill balance for the entertainment segment, which was included in goodwill and intangible asset impairment charge

on our Condensed Consolidated Statements of Operations for the three months ended September 30, 2024.

The goodwill impairment was

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

as well as a delay in the projected timing of recovery.

During the three months ended

September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded

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

intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three months ended

September 30, 2024.

The charge was primarily driven by the split-off transaction not being completed when and as expected and our

recent revenue performance of the related business given a decline in demand and overall economic uncertainty.

The remaining

balance for this trade name/trademark was $699,000 as of September 30, 2024.

the reasons stated above, our operating loss was $7,382,299 and $5,148,043 for the three months ended September 30, 2024 and 2023, respectively,

an increase of $2,234,256 (43%).

Operating loss as a percentage of revenues improved to 182% in the three months ended September 30,

2024 from 81% in the same period in 2023.

income increased slightly to $13,775 for the three months ended September 30, 2024, from $12,986 in the same period of 2024.

incurred interest expenses of $771,846 and $959,898 during the three months ended September 30, 2024 and 2023, respectively.

decrease is attributable to the pay-off of the building loan from proceeds of sale of the building and by a reduction and pay-off of the contingent earn-out notes

associated with the four Nobility Healthcare acquisitions in 2024.

income (loss)

income (loss) decreased to $8,920 for the three months ended September 30, 2024, from $25,394 during the three months ended September

30, 2023, which reflects a reduction in rental income related to a warehouse lease within the corporate headquarters that was terminated

when the building was sold.

in Fair Value of Derivative Liabilities

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

with the two secured convertible notes previously described.

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

The underlying

warrant agreement terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain

circumstances.

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

fair value at their issuance date and at each reporting date with any subsequent changes reported in the condensed consolidated statement

of operations as the change in fair value of warrant derivative liabilities.

The change in fair value of the warrant derivative liabilities

from July 1, 2024, to September 30, 2024, totalled $2,530,675 which was recognized as income in the third quarter of 2024.

on Extinguishment of Liabilities

the third quarter of 2024, the Company negotiated a termination of its lease on its former headquarters.

As a result, the Company recorded

a gain of $9,385 on the termination during the three months ended September 30, 2024.

Loss on Extinguishment of Debt

On March 1, 2024, the Company obtained a short-term merchant advance, which totalled $1,000,000, from a single lender

to fund operations.

The Company modified/amended the underlying loan agreement twice during the three months ended September 30, 2024.

The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss during the three and nine months ended

September 30, 2024.

on Sale of Property, Plant and Equipment

the three months ended September 30, 2024, the Company sold its building for $5,900,000 less closing costs of $7,194.

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 $431,183 in the Consolidated

Statement of Operation during the three months ended September 30, 2024.

before Income Tax Benefit

a result of the above results of operations, we reported a loss before income tax benefit of $5,470,712, and $3,679,043 for the three

months ended September 30, 2024 and 2023, respectively, an increase of $1,791,669 (49%).

did not record an income tax expense related to our income for the three months ended September 30, 2024 due to our overall net operating

loss carryforwards available.

We have further determined to continue providing a full valuation reserve on our net deferred tax assets

as of September 30, 2023.

We had approximately $113.3 million of net operating loss carryforwards and $1.8 million of research and development

tax credit carryforwards as of September 30, 2024 available to offset future net taxable income.

a result of the above results of operations, we reported a net loss of $5,470,712, and $3,679,043 for the three months ended September

30, 2024 and 2023, respectively, an increase of $1,791,669 (49%).

Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

Company owns a 51% equity interest in its consolidated, Nobility Healthcare.

As a result, the noncontrolling shareholders or minority

interest is allocated 49% of the income of Nobility Healthcare which is reflected in the statement of income as “net income attributable

to noncontrolling interests of consolidated subsidiary”.

We reported net loss (income) attributable to noncontrolling interests of consolidated

subsidiary of $2,000,206 and $(29,630) for the three months ended September 30, 2024 and 2023, respectively.

Loss Attributable to Common Stockholders

a result of the above, we reported a net loss attributable to common stockholders of $3,470,506 and $3,708,673 for the three months September

30, 2024 and 2023, respectively, an improvement of $238,167 (6%).

and Diluted Loss per Share

basic and diluted loss per share was $0.91 and $1.32 for the three months ended September 30, 2024 and 2023, respectively.

per share is based upon the weighted average number of common shares outstanding during the period.

For the three months ended September

30, 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.

the Nine months Ended September 30, 2024 and 2023

of Operations

immediately below and discussed in more detail in the subsequent subsections is an analysis of our operating results for the nine months

ended September 30, 2024 and 2023, represented as a percentage of total revenues for each such quarter:

For the nine months ended

September 30,

Cost of revenue

Selling, general and administrative expenses:

Research and development expense

Selling, advertising and promotional expense

General and administrative expense

Goodwill and intangible asset impairment charge

Total selling, general and administrative expenses

Operating loss

Loss on accrual for legal settlement

Change in fair value of contingent consideration promissory notes

Change in fair value of derivative liabilities

Gain on extinguishment of liabilities

Loss on extinguishment of debt

Gain on sale of property, plant and equipment

Other income and interest income (expense), net

Income (loss) before income tax benefit

Income tax (provision)

Net income/(loss)

Net loss attributable to noncontrolling interests of consolidated subsidiary

Net income (loss) attributable to common stockholders

Net income/(loss) per share information:

revenues by operating segment is as follows:

For the nine months ended

September 30,

Total service and other revenues

Total revenues

Our video solutions operating segment sells our products

and services to customers in the following manner:

Sales to domestic customers are made directly to the end customer (typically a law enforcement agency or a commercial customer) through our sales force, comprised of our employees.

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

Sales to international customers are made through independent distributors who purchase products from us at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price.

The distributor retains the margin as compensation for its role in the transaction.

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

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

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

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

Our revenue cycle management operating segment sells

its services to customers in the following manner:

Our revenue cycle management operating segment generates service revenues through relationships with medium to large healthcare organizations, in which the underlying service revenue is recognized upon execution of services.

Service revenues are generally determined as a percentage of the dollar amount of medical billings collected by the customer.

Our entertainment operating segment sells our products

and services to customers in the following manner:

Our entertainment operating segment generates product revenues from the sale of tickets directly to consumers for a particular event that the entertainment operating segment has previously purchased and held in inventory for ultimate resale to the end consumer.

Service sales through TicketSmarter are driven largely in part to the usage of the TicketSmarter.com marketplace by buyers and sellers, in which the Company collects service fees for each transaction completed through this platform.

We may discount our prices on

specific orders based upon the size of the order, the specific customer and the competitive landscape.

Product revenues by operating

segment is as follows:

Three Months Ended March 31,

Product Revenues:

3 unchanged sentences

Total Product Revenues

revenues for the nine months ended September 30, 2024 and 2023 were $4,577,392 and $7,626,706 respectively, a decrease of $3,049,314

(40%), due to the following factors:

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

new entertainment operating segment generated $2,929,019 in product revenues for the nine months ended September 30, 2024, compared

to $4,307,891 for the nine months ended September 30, 2023.

This product revenue relates to the first Country Stampede music festival

held by Kustom during 2024, as well as the resale of tickets purchased for live events, sporting events, concerts, and theatre, then

sold through various platforms to customers.

The decrease in revenues is attributable to a reduction in scope of primary ticket sales

by Ticketsmarter as it focuses on higher margin events to improve its gross margins.

Company’s video segment operating segment generated revenues totalling $1,648,373 during the nine months ended September 30,

2024 compared to $3,318,81 for the nine months ended September 30, 2023.

In general, our video solutions operating segment has experienced

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

released new products with advanced features.

Additionally, our law enforcement revenues declined compared to the same period in

2023 due to the Company not having inventory in–stock to fulfill existing backlog orders, price-cutting and competitive actions

by our competitors and adverse marketplace effects related to our recent financial condition.

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

service fee model.

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

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

of a recurring monthly service fee.

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

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

body worn cameras without incurring a significant upfront capital outlay.

This program has gained some traction, resulting in decreased

product revenues and increasing our service revenues.

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

revenues over a span of three to five years.

and other revenues by operating segment is as follows:

For the nine months ended

September 30,

Product revenues for the three months ended March

31, 2025 and 2024 were $721,350 and $1,565,846, respectively, a decrease of $844,496 (53.9%), due to the following factors:

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

The entertainment operating segment generated $667,119 in product revenues for the three months ended March 31, 2025, compared to $844,658 for the three months ended March 31, 2024.

This product revenue relates to the first Country Stampede music festival held by Kustom during 2024, as well as the resale of tickets purchased for live events, sporting events, concerts, and theatre, then sold through various platforms to customers.

The decrease in revenues is attributable to a reduction in scope of primary ticket sales by Ticketsmarter as it focuses on higher margin events to improve its gross margins.

In addition, the wildfires in California caused many event cancellations and postponements during the three months ended March 31, 2025, that also depressed product sales.

The Company’s video segment operating segment generated revenues totaling $54,231 during the three months ended March 31, 2025 compared to $721,188 for the three months ended March 31, 2024.

In general, our video solutions operating segment has experienced pressure on its product revenues as our in-car and body-worn systems are facing increased competition because our competitors have released new products with advanced features.

Additionally, our law enforcement revenues declined compared to the same period in 2024 due to the Company not having inventory in–stock to fulfill existing backlog orders, price-cutting and competitive actions by our competitors and adverse marketplace effects related to our recent financial condition.

We have been able to start the product supply chain during the first quarter 2025 with funds generated by the February 2025 public equity offering which we believe will improve our video solutions product sales during the remainder of 2025.

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

Therefore, we expect a reduction in commercial hardware sales (principally DVM-250’s, FLT-250’s, and a portion of our body-worn camera line) as we convert these customers to a service model under which we provide the hardware as part of a recurring monthly service fee.

In that respect, we introduced a monthly subscription agreement plan for our body worn cameras and related equipment during the second quarter of 2020 that allowed law enforcement agencies to pay a monthly service fee to obtain body worn cameras without incurring a significant upfront capital outlay.

This program has gained some traction, resulting in decreased product revenues and increasing our service revenues.

We expect this program to continue to hold traction, resulting in recurring revenues over a span of three to five years.

Service and other revenues by

operating segment is as follows:

Three months ended March 31,

Service and Other Revenues:

3 unchanged sentences

Total Service and Other Revenues

and other revenues for the nine months ended September 30, 2024 and 2023 were $10,619,905 and $14,687,813, respectively, a decrease of

$4,067,908 (28%), due to the following factors:

revenues generated by the video solutions operating segment were $1,964,038 and $1,421,174 for the nine months ended September 30,

2024 and 2023, respectively, an increase of $542,864 (38%).

We have experienced increased interest in our cloud solutions for law

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

which contributed to our increased cloud revenues in the nine months ended September 30, 2023.

We expect this trend to continue throughout

2024 as the migration from local storage to cloud storage continues in our customer base.

solutions operating segment revenues from extended warranty services were $605,723 and $659,130 for the nine months ended September

30, 2024 and 2023, respectively, a decrease of $53,407 (8%).

This correlates with the decrease in product revenue during the period.

entertainment operating segment generated service revenues totalling $3,167,208 and $7,267,424 for the nine months ended September

30, 2024 and 2023, respectively, a decrease of $4,100,216 (56%).

TicketSmarter collects fees on transactions administered through

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

We expect our entertainment

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

Our entertainment segment

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

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

revenue cycle management operating segment generated service revenues totalling $4,600,745 and $5,142,904 for the nine months ended

September 30, 2024 and 2023, respectively, a decrease of $542,159 (11%).

Our revenue cycle management operating segment has completed

four acquisitions since formation in June of 2021, thus resulting in the new service revenue stream added in the nine months ended

September 30, 2024 and 2023.

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

services to healthcare organizations throughout the country.

The slight decrease in revenue is due to refinement within one of the

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

revenues for the nine months ended September 30, 2024 and 2023 were $15,197,297 and $22,314,519, respectively, a decrease of $7,117,222

(32%), due to the reasons noted above.

of Product Revenue

Overall cost of product revenue sold for the nine months ended September 30, 2024, and 2023 was $5,534,209 and $7,108,366, respectively,

a decrease of $1,574,157 (22%).

Overall cost of goods sold for products as a percentage of product revenues for the nine months ended

September 30, 2024, and 2023 were 121% and 93%, respectively.

Service and other revenues for the three months ended

March 31, 2025 and 2024 were $3,753,914 and $3,963,505, respectively, a decrease of $209,591 (5%), due to the following factors:

Cloud revenues generated by the video solutions operating segment were $594,742 and $616,488 for the three months ended March 31, 2025 and 2024, respectively, a slight decrease of $21,746 (4%).

We continue to experience increased interest in our cloud solutions for law enforcement primarily due to the deployment of our cloud-based EVO-HD in-car system and our next generation body-worn camera products, which contributed to our cloud revenues in the three months ended March 31, 2024.

We expect this trend to continue for 2025 as the migration from local storage to cloud storage continues in our customer base.

Video solutions operating segment revenues from extended warranty services were $228,430 and $380,618 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $152,188 (40%).

T his correlates with the decrease in sales of hardware during the three months ended March 31, 2025.

Our entertainment operating segment generated service revenues totaling $1,535,313 and $1,531,801 for the three months ended March 31, 2025 and 2024, respectively, a slight increase of $3,512 (0.2%).

TicketSmarter collects fees on transactions administered through the TicketSmarter.com platform for the buying and selling of tickets for live events throughout the country.

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

Our entertainment segment has focused on cost cutting and overall improvements in gross margin rather than top line revenues which has resulted in a reduction in revenues for ticketing events that did not meet its gross margin goals.

Our revenue cycle management operating segment generated service revenues totaling $1,350,551 and $1,434,599 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $84,048 (6%).

Our revenue cycle management operating segment provides revenue cycle management solutions and back-office services to healthcare organizations throughout the country.

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

Total revenues for the three months

ended March 31, 2025, and 2024 were $4,475,264 and $5,529,351, respectively, a decrease of $1,054,087 (19%), due to the reasons noted

Cost of Product Revenue

Overall cost of product revenue

sold for the three months ended March 31, 2025, and 2024 was $675,639 and $1,567,393, respectively, a decrease of $891,754 (57%).

cost of goods sold for products as a percentage of product revenues for the three months ended March 31, 2025, and 2024 were 94% and 100%,

respectively.

Cost of products sold by operating segment is as follows:

For the nine months ended

September 30,

Three Months Ended March 31,

Cost of Product Revenues:

3 unchanged sentences

Total Cost of Product Revenues

decrease in cost of goods sold for our video solutions segment products is directly correlated with the decrease in product sales for

the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

In addition, the video solutions segment

recorded valuation allowances for its older product lines and a portion of its Shield products during the first nine months of 2023,

directly increasing cost of goods sold for the period.

Cost of product sold as a percentage of product revenues for the video solutions

segment remained steady at 116% for the nine months ended September 30, 2024 as compared to 110% for the nine months ended September

increase in entertainment operating segment cost of product sold was driven by the costs of the Country Stampede music festival for the

nine months ended September 30, 2024 compared to September 30, 2023, resulting in cost of product revenue of $3,620,853 for the nine

months ended September 30, 2024, compared to $3,449,876 for the nine months ended September 30, 2023.

Cost of product sold as a percentage

of product revenues for the entertainment segment was 124% for the three months ended September 30, 2024 as compared to 80% for the nine

months ended September 30, 2023.

of Service Revenue

Overall cost of service revenue sold for the nine months ended September 30, 2024, and 2023 was $6,159,284 and $9,698,175, respectively,

a decrease of $3,538,891 (36%).

Overall cost of goods sold for services as a percentage of service revenues for the nine months ended

September 30, 2024, and 2023 were 58% and 66%, respectively.

The decrease in cost of goods

sold for our video solutions segment products is due to large decrease in product sales experienced during the three months ended March

We were not able to fulfil open orders due to low inventory levels.

We have utilized funds from the February 2025 public equity

offering to ramp the supply chain which we believe will lead to improved product sales.

Cost of product sold as a percentage of product

revenues for the video solutions segment decreased to 119% for the three months ended March 31, 2025 as compared to 111% for the three

months ended March 31, 2024.

The decrease in entertainment

operating segment cost of product sold directly correlates to the lower product revenues for the three months ended March 31, 2025.

of Product Revenues were $611,087 and $769,899 for the three months ended March 31, 2025 and 2024, a decrease of $158,812 (21%).

of product sold as a percentage of product revenues for the entertainment segment increased to 92% for the three months ended March 31,

2025 as compared to 91% for the three months ended March 31, 2024.

Cost of Service Revenue

Overall cost of service revenue

sold for the three months ended March 31, 2025, and 2024 was $2,198,126 and $2,438,259, respectively, a decrease of $240,133 (10%).

cost of goods sold for services as a percentage of service revenues for the three months ended March 31, 2025, and 2024 were 59% and 62%,

respectively.

Cost of service revenues by operating segment is as follows:

For the nine months ended

September 30,

Three months ended March 31,

Cost of Service Revenues:

3 unchanged sentences

Total Cost of Service Revenues

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

months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Cost of service revenues as a percentage of service

revenues for the video solutions segment decreased to 34% for the nine months ended September 30, 2024 as compared to 45% for the nine

months ended September 30, 2023.

The improved cost of service revenues as a percentage of service revenues reflects the results of cost

cutting efforts and head-count reductions implemented in 2024 to improve our operating results.

revenue cycle management operating segment cost of service revenue was consistent with the prior period.

Cost of service revenues as

a percentage of service revenues for the revenue cycle management operating segment was 62% for the nine months ended September 30, 2024

as compared to 57% for the nine months ended September 30, 2023.

decrease in entertainment operating segment cost of service revenues is commensurate with the decrease in service revenues in the nine

months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Cost of service revenues as a percentage of service

revenues for the entertainment operating segment was 73% for the nine months ended September 30, 2024 as compared to 79% for the nine

months ended September 30, 2023.

gross profit for the nine months ended September 30, 2024 and 2023 was $3,503,804 and $5,507,978, respectively, a decrease of $2,004,174

Gross profit by operating segment was as follows:

For the nine months ended

September 30,

The decrease in cost of service

revenues for our video solutions segment demonstrates the leverage we are enjoying as we increase our service revenues during the three

months ended March 31, 2025 compared to the three months ended March 31, 2024.

Cost of service revenues as a percentage of service revenues

for the video solutions segment decreased to 35% for the three months ended March 31, 2025 as compared to 36% for the three months ended

March 31, 2024.

The decrease in revenue cycle

management operating segment cost of service revenue is commensurate with the decline in revenues due to certain loss generating services

being eliminated during the year.

Cost of service revenues as a percentage of product revenues for the revenue cycle management operating

segment decreased to 65% for the three months ended March 31, 2025 as compared to 68% for the three months ended March 31, 2024.

The decrease in entertainment

operating segment cost of service revenues is due to management right sizing the business working towards profitability.

The Entertainment

cost of service revenue was $1,013,170 for the three months ended March 31, 2025, compared to $1,112,287 for the three months ended March

Cost of service revenues as a percentage of service revenues for the entertainment segment decreased to 66% for the three months

ended March 31, 2025 as compared to 73% for the three months ended March 31, 2024.

Overall gross profit for the three

months ended March 31, 2025 and 2024 was $1,796,034 and $1,523,699, respectively, an increase of $272,335 (18%).

Gross profit by operating

segment was as follows:

Three months ended March 31,

Gross Profit:

3 unchanged sentences

Total Gross Profit

overall decrease is attributable to the overall decrease in revenues for the nine months ended September 30, 2024 and an increase in

the overall cost of sales as a percentage of overall revenues to 77% for the nine months ended September 30, 2024 from 75% for the nine

months ended September 30, 2023.

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

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

expected margins from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, ShieldTM disinfectants and our cloud evidence storage and

management offering, provided that they gain traction in the marketplace.

In addition, if revenues from the video solutions segment increase,

we will seek to further improve our margins from this segment through expansion and increased efficiency utilizing fixed manufacturing

overhead components.

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

quantity purchases and more effective purchasing practices.

General and Administrative Expenses

The increase in

gross profits is primarily due to improvements in our cost of sales as a percentage of sales particularly in our entertainment

segment service revenues.

There was an overall decrease in the cost of sales as a percentage of overall revenues to 64% for the

three months ended March 31, 2025 from 72% for the three months ended March 31, 2024.

This is primarily driven by large head-count

reductions in our work-force during the three months ended March 31, 2025 as compared to 2024, a focus on right sizing recent acquisitions to increase

profitability and a transition to a service subscription-based model in our video solutions segment.

Our goal is to improve our

margins over the longer term based on the expected margins generated by our new recent revenue cycle management and entertainment

operating segments together with our video solutions operating segment and its expected margins from our EVO-HD, DVM-800, VuLink,

FirstVu Pro, FirstVu II, EVO Fleet, FLT-250, DVM-250, DVM-250 Plus and our cloud evidence storage and management offering, provided

that they gain traction in the marketplace.

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

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

Selling, General and Administrative Expenses

Selling, general and administrative

expenses were $18,439,296 and $21,769,532 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $3,330,236

The decrease was primarily attributable to the reduction in new sponsorships being entered into by the Company offset by the goodwill

and intangible asset impairment charge.

Our selling, general and administrative expenses as a percentage of sales increased to 121% for

the nine months ended September 30, 2024 compared to 98% in the same period in 2023.

The significant components of selling, general and

administrative expenses are as follows:

For the nine months ended

September 30,

expenses were $2,576,179 and $5,162,733 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $2,586,554 (50%).

The decrease was primarily attributable to the reduction in new advertising sponsorships being entered into by the Company.

general and administrative expenses as a percentage of sales increased to 58% for the three months ended March 31, 2025 compared to 93%

in the same period in 2024.

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

Three Months ended March 31,

Research and development expense

1 unchanged sentence

General and administrative expense

Goodwill and intangible asset impairment charge

and development expense.

Our research and development expenses totalled $1,244,060 and $2,039,361 for the nine months ended September

30, 2024 and 2023, respectively which represents a decrease of $795,301 (39%).

We have focused on controlling our expenditures on bringing

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

The decrease in

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

our expenses in this area with our revenues.

advertising and promotional expenses.

Selling, advertising and promotional expense totalled $1,902,489 and $5,885,097 for the

nine months ended September 30, 2024 and 2023, respectively, a decrease of $3,982,608 (68%).

The decrease in selling, advertising and

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

expenses in this area with our revenues.

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

into by the Company and its subsidiary TicketSmarter.

and administrative expense .

General and administrative expenses totalled $10,462,747 and $13,845,074 for the nine months ended

September 30, 2024 and 2023, respectively.

The decrease in general and administrative expenses in the three months ended September 30,

2024 compared to the same period in 2023 is primarily attributable to a decrease in administrative salaries and reductions in headcount

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

The decrease in general and administrative expenses was offset by

a substantial increase legal and professional expenses for the nine months ended September 30, 2024 compared to the same period in 2023

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

Goodwill and intangible

asset impairment charge.

We 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 the September 30,

2024 for our reporting units with remaining goodwill.

As a result of our September

30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and entertainment

reporting units exceeded their estimated fair value.

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

representing a portion of the goodwill balance for the revenue cycle management segment, which was included in goodwill and

intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months

ended September 30, 2024.

In addition, we recorded a non-cash goodwill impairment charge of $307,000, representing

a portion of the goodwill balance for the entertainment segment, which was included in goodwill and intangible asset impairment charge

on our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024.

The goodwill impairment was

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

as well as a delay in the projected timing of recovery.

the three months ended September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the

entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000,

which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated

Statements of Operations for the nine months ended September 30, 2024.

The charge was primarily driven by

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

business given a decline in demand and overall economic uncertainty.

The remaining balance for this trade name/trademark was

$699,000 as of September 30, 2024.

For the reasons stated above,

our operating loss was $14,935,492 and $16,261,554 for the nine months ended September 30, 2024 and 2023, respectively, an improvement

of $1,326,062 (8%).

Operating loss as a percentage of revenues changed to 98% in the nine months ended September 30, 2024 from 73% in

the same period in 2023.

income decreased to $63,064 for the nine months ended September 30, 2024, from $84,071 in the same period of 2023, which reflects our

change in cash and cash equivalent levels during the nine months ended September 30, 2024 compared to the same period in 2023.

held higher levels of cash and cash equivalents during the nine months ended September 30, 2023.

incurred interest expense of $2,505,536 and $2,480,947 during the nine months ended September 30, 2024 and 2023, respectively.

increase is attributable additional debt issued in late 2023 and during the nine months ended September 30, 2024 partially offset by

the conversion of the convertible notes entered into in the second quarter of 2023, the payoff of the building debt upon sale of the

building and the pay-off of the contingent earn-out notes associated with the four Nobility Healthcare acquisitions.

income (expense)

income (expense) decreased to $66,966 for the nine months ended September 30, 2024, from $76,180 during the nine months ended September

30, 2023, which reflects income related to a warehouse lease within the corporate headquarters which ceased in 2024 upon the sale of

the building.

in Fair Value of Derivative Liabilities

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

with the two secured convertible notes previously described.

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

The underlying

warrant agreement terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain

Research and development

Our research and development expenses totaled $84,417 and $487,466 for the three months ended March 31, 2025 and 2024,

respectively which represents a decrease of $403,049 (83%).

We have focused on controlling our expenditures on bringing new products to

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

The decrease in research and development

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

with our revenues.

Selling, advertising and

promotional expenses.

Selling, advertising and promotional expense totaled $108,041 and $761,118 for the three months ended March

31, 2025 and 2024, respectively, a decrease of $653,077 (86%).

The decrease in selling, advertising and promotional expenses reflects

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

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

TicketSmarter.

General and administrative

General and administrative expenses totaled $2,383,721 and $3,914,149 for the three months ended March 31, 2025 and 2024,

respectively which represents a decrease of $1,530,428 (39%).

The decrease in general and administrative expenses in the three months

ended March 31, 2025 compared to the same period in 2024 is primarily attributable to a decrease in administrative salaries and reductions

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

The decrease in general and administrative expenses was

offset by a substantial increase legal and professional expenses for the three months ended March 31, 2025 compared to the same period

in 2024 due to the failed merger with CloverLeaf and various capital raises we have undertaken.

Operating Loss

For the reasons previously stated,

our operating loss was $974,680 and $3,639,034 for the three months ended March 31, 2025 and 2024, respectively, an improvement of $2,664,354

Operating loss as a percentage of revenues improved to 22% in 2025 as compared to 66% in 2024.

Interest Income

Interest income increased to $31,975

for the three months ended March 31, 2025, from $19,356 in 2024, which reflects our overall increase in our cash and cash equivalent levels

in 2025 compared to 2024 due to funds generated in the February 2025 public equity offering.

Interest Expense

We incurred interest expenses

of $792,273 and $648,567 during the three months ended March 31, 2025 and 2024, respectively.

The increase is attributable to the amortization

of debt discounts associated with the senior secured promissory notes that were paid off with proceeds from the February 2025 public equity

Other income (expense)

Other income (expense) decreased

to $16,700 for the three months ended March 31, 2025, from $27,602 during the three months ended March 31, 2024, which reflects income

related to a warehouse sublease within the corporate headquarters during early 2024 which ceased upon the sale of the building which occurred

Gain on Extinguishment of Debt - related

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.

The Related Party Note bears interest of 13.25% per annum with repayment beginning January

On October 2, 2023 an additional $375,000 was advanced to Ticketsmarter which increased the loan balance to $2,700,000.

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 condensed consolidated 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 during the three months ended March

On March 20, 2025, the parties

agreed to a second modification of the TicketSmarter Related Party Note.

The modification eliminated all accrued interest totaling $582,203

as of the date of the second modification, reduced the interest rate from 13.25% per annum to 8% per annum, and extended and reduced the

repayment amount from $54,000 per week to $11,000 per week beginning April 1, 2025.

The modification was deemed to be an extinguishment

of debt resulting in a gain of $1,249,372 during the three months ended March 31, 2025.

Gain on Extinguishment of Liabilities

recorded a gain on the extinguishment of liabilities for the three months ended March 31, 2025 and 2024 of $2,220,097, and $682,345,

respectively.

The gains reflect income related to the video solutions and entertainment segment’s ability to negotiate down

payables and other contract obligations during the three months ended March 31, 2025 utilizing funds generated by the closing of the

February 2025 public equity offering on February 13, 2025.

extinguishment of liabilities was $682,345 for the three months ended March 31, 2024, which reflects income related to the

entertainment segment’s ability to negotiate down payables and other contract obligations during the period.

utilized funds from the related party note payable to resolve numerous outstanding payables at a discounted rate, the discount

received was recognized as a gain on extinguishment of liabilities in the condensed consolidated statement of operations for the

three months ended March 31, 2024.

Gain on disposal of intangibles

decreased to $-0- for the three months ended March 31, 2025, from $5,582 during the three months ended March 31, 2024.

Change in Fair Value of Derivative Liabilities

The change in fair value of the

warrant derivative liabilities for the three months ended March 31, 2025 and 2024, respectively totaled a gain of $2,515,891 during the

three months ended March 31, 2025 as compared to a loss of $348,891 during the three months ended March 31, 2024.

During 2024, the Company issued

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

The underlying warrant terms under both of

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

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

shareholders.

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

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

of operations as the change in fair value of warrant derivative liabilities.

The warrants were approved by shareholders at the Company’s

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

the Series A and Series B warrants.

The holders fully exercised their Series B warrants during the three months ended March 31, 2025 which

caused a deterioration in the market value of the Company’s Common Stock which resulted in a large decrease in the estimated fair

value of the remaining Class A warrants resulting in the gain from the change in fair value of warrant derivative liabilities in the condensed

consolidated statement of operations for the three months ended March 31, 2025.

During 2023, the Company issued

detachable warrants to purchase a total of 56,250 shares of Common Stock in association with the two secured convertible notes.

underlying warrant terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain

circumstances.

2 unchanged sentences

of operations as the change in fair value of warrant derivative liabilities.

The change in fair value of the warrant derivative liabilities

from December 31, 2023, to September 30, 2024, totalled $2,178,965 which was recognized as income during the nine months ended September

on Extinguishment of Liabilities

Company recorded a gain on the extinguishment of liabilities for the nine months ended September 30, 2024 of $682,345, which

reflects income related to the video segment’s ability to negotiate down payables and contract liabilities during the period.

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

termination during the nine months ended September 30, 2024.

gain on extinguishment of liabilities was $507,304 for the nine months ended September 30, 2023, which reflects income related to the

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

The Company utilized funds

from the related party note payable to resolve numerous outstanding payables at a discounted rate, the discount received was recognized

as a gain on extinguishment of liabilities in the statement of operations for the nine months ended September 30, 2023.

Loss on Extinguishment of Debt

On March 1, 2024, the Company obtained a short-term merchant advance for its entertainment segment, which totalled

$1,000,000, from a single lender to fund operations.

The Company modified/amended the underlying loan agreement twice during the nine

months ended September 30, 2024.

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

the three and nine months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company refinanced its merchant advance loan for its video segment

and determined the refinancing of the debt should be treated as a debt extinguishment.

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

on the extinguishment during the nine months ended September 30, 2024.

on Sale of Property, Plant and Equipment

the nine months ended September 30, 2024, the Company sold its building for $5,900,000 less closing costs of $7,194.

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 $431,183 in the Consolidated

Statement of Operation during the nine months ended September 30, 2024.

This amount was offset by a separate loss on sale of fixed assets

of $41,661 for the nine months ended September 30, 2024.

on accrual for legal settlement

Company recognized a loss on accrual for legal settlement of $-0- and $1,792,308 during the nine months ended September 30, 2024 and

2023, respectively.

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

on conversion of convertible debt

Company recognized a loss on conversion of convertible debt of $-0- and $93,386 during the nine months ended September 30, 2024 and 2023,

respectively.

This is in connection with the convertible note issued during the nine months ended September 30, 2023 and the conversion

from debt to equity during the period.

in Fair Value of Contingent Consideration Promissory Notes

the nine months ended September 30, 2023, The Company recognized a gain on the change in fair value of contingent consideration promissory

notes of $177,909.

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

There was no similar

transaction during the nine months ended September 30, 2024.

before Income Tax Benefit

As a result of the above results

of operations, we reported a loss before income tax benefit of $14,424,531 and $17,979,171 for the nine months ended September 30, 2024

and 2023, respectively, an improvement of $3,554,640 (20%).

did not record an income tax expense related to our income for the nine months ended September 30, 2024 due to our overall net operating

loss carryforwards available.

We have further determined to continue providing a full valuation reserve on our net deferred tax assets

as of September 30, 2024.

We had approximately $113.3 million of net operating loss carryforwards and $1.8 million of research and development

tax credit carryforwards as of September 30, 2024 available to offset future net taxable income.

As a result of the above results

of operations, we reported a net loss of $14,424,531 and $17,979,171 for the nine months ended September 30, 2024 and 2023, respectively,

The increase in the estimated fair value of the 2023 warrants

resulted in a loss from the change in fair value of warrant derivative liabilities in the condensed consolidated statement of operations

for the three months ended March 31, 2025.

Loss on Sale of Property, Plant and Equipment

The Company reported a loss on

sale of property, plant and equipment of $-0- and $41,661 during the three months ended March 31, 2025, and 2024, respectively.

Income (loss) before Income Tax Benefit

As a result of the above, we reported

net income (loss) before income tax benefit of $4,267,082 and $(3,943,268) for the three months ended March 31, 2025 and 2024, respectively,

an improvement of $8,210,350 (208%).

Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

Income Tax Benefit

We recorded an income tax benefit

of $-0- for the three months ended March 31, 2025 and 2024, respectively.

The effective tax rate for both 2025 and 2024 varied from the

expected statutory rate due to our continuing to provide a 100% valuation allowance on net deferred tax assets.

We determined that it

was appropriate to continue the full valuation allowance on net deferred tax assets as of March 31, 2025 and December 31, 2024 primarily

because of the recurring operating losses.

We have further determined to

continue providing a full valuation reserve on our net deferred tax assets as of March 31, 2025.

We had approximately $159,280,000

of federal net operating loss carryforwards and $1,742,000 of research and development tax credit carryforwards as of March 31, 2025 and

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

Net Income (Loss)

As a result of the above, we reported

a net income (loss) of $4,267,082 and $(3,943,268) for the three months ended March 31, 2025 and 2024, respectively, an improvement of

$8,210,350 (208%).

Net Income Attributable to Noncontrolling Interests

of Consolidated Subsidiary

The Company owns a 51% equity

1 unchanged sentence

As a result, the noncontrolling shareholders or minority interest is allocated

49% of the income of Nobility Healthcare which is reflected in the statement of income as “net income attributable to noncontrolling

interests of consolidated subsidiary”.

We reported net loss (income) attributable to noncontrolling interests of consolidated subsidiary

of $1,939,143 and $228,624 for the nine months ended September 30, 2024 and 2023, respectively.

Loss Attributable to Common Stockholders

49% of the income/loss of Nobility Healthcare which is reflected in the condensed consolidated statement of income (loss) as “net

income (loss) attributable to noncontrolling interests of consolidated subsidiary”.

We reported net income attributable to noncontrolling

interests of consolidated subsidiary of $3,611 and $12,248 for the three months ended March 31, 2025 and 2024, respectively.

Net Loss Attributable to Common Stockholders

As a result of the above, we reported

a net loss attributable to common stockholders of $12,485,388 and $18,207,795 for the nine months September 30, 2024 and 2023, respectively,

an improvement of $5,722,407 (31%).

and Diluted Loss per Share

basic and diluted loss per share was $3.90 and $6.55 for the nine months ended September 30, 2024 and 2023, respectively.

per share is based upon the weighted average number of common shares outstanding during the period.

For the nine months ended September

30, 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.

and Capital Resources

Liquidity Plan.

a net income (loss) of $4,263,471 and $(3,931,020) for the three months ended March 31, 2025 and 2024, respectively, an improvement of

$8,194,491 (208%).

Basic and Diluted Income/(Loss) per Share

The basic and diluted income/(loss)

per share was $1.41 and ($27.48) for the three months ended March 31, 2025 and 2024, respectively, for the reasons previously noted.

outstanding stock options and Common Stock purchase warrants were considered antidilutive and therefore excluded from the calculation

of diluted income (loss) per share for the three months ended March 31, 2025 and 2024 because all potentially dilutive securities were

excluded from the computation because of their exercise price being higher than the market value of our Common Stock in 2025 and the net

loss reported for 2024.

Liquidity and Capital Resources

Management’s Liquidity

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

Based upon our current

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

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

Based upon our current operating

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

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

We are continuously

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

cash equivalents:

As of September 30, 2024, we had cash and cash equivalents with an aggregate balance of $415,131, a decrease from

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

Summarized immediately below and discussed in more detail in the subsequent subsections are

the main elements of the $363,018 net decrease in cash during the nine months ended September 30, 2024:

of net cash used in operating activities.

Net cash used in operating activities was $4,086,023 and $5,842,158 for the nine months

ended September 30, 2024 and 2023, respectively, a decrease of $1,756,136.

The decrease is attributable to the improved net loss and

the usage of cash for operating assets and liabilities during the nine months ended September 30, 2024 compared to the same period

of net cash provided by investing activities.

Cash provided by (used in) investing activities was $392,523 and $(197,241) for the nine

months ended September 30, 2024 and 2023, respectively.

During the nine months ended September 30, 2024, we made expenditures or received

cash for the following:

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

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

and (iii) received proceeds from the sale of

our aircraft.

net cash provided by financing activities.

Cash provided by financing activities was $3,330,482 and $4,715,031 for the nine months

ended September 30, 2024 and 2023, respectively.

During the first nine months of 2024, we most notably refinanced a loan resulting in

proceeds of $1,144,000, obtained an additional merchant advance providing proceeds of $1,308,837, obtained $1,175,000 in new commercial

extension of credits and issued common stock with detachable warrants resulting in $2,194,745 in net cash proceeds.

The cash proceeds

were partially offset by payments on outstanding loans including the payments on merchant advances.

had $415,131 of cash and cash equivalents and net negative working capital of $13,181,861 as of September 30, 2024.

Accounts receivable

and other receivables balances represented $5,253,535 of our net working capital at September 30, 2024.

We intend to collect our outstanding

receivables on a timely basis and reduce the overall level during 2024, which would help to provide positive cash flow to support our

operations during 2024.

Inventory represents $2,325,118 of our net working capital at September 30, 2024.

We are actively managing the

level of inventory and our goal is to reduce such level during the balance of 2024 by our sales activities, the increase of which should

provide additional cash flow to help support our operations during 2024.

Expenditures:

had the following material commitments for capital expenditures at September 30, 2024:

Total lease expense under the five operating leases was approximately $160,751 and $360,934, during the three and

nine months ended September 30, 2024, respectively.

following sets forth the operating lease right of use assets and liabilities as of September 30, 2024:

Cash, cash equivalents:

As of March 31, 2025, we had cash and cash equivalents with an aggregate balance of $3,762,608, an increase from a balance of $454,314

at December 31, 2024.

Summarized immediately below and discussed in more detail in the subsequent subsections are the main elements of

the $3,308,294 net increase in cash during the three months ended March 31, 2025:

Operating activities :

Net cash used in operating activities was $5,754,761 and $918,545 for the three months ended March 31, 2025 and 2024, respectively, a deterioration of $4,836,216.

The decrease is attributable to the repayment of accounts payable from proceeds of our February 2025 public equity offering, an increase in noncash gains from the change in fair value of warrant derivative liabilities, the extinguishment of liabilities and debt and cash used by the change in operating assets and liabilities during the three months ended March 31, 2025 compared to the same period in 2024.

Investing activities :

Net cash provided by (used in) investing activities was $(85,447) and $160,830 for the three months ended March 31, 2025 and 2024, respectively.

During the three months ended March 31, 2025, we made expenditures for the purchase of property plant and equipment and also for patents.

Financing activities :

Net cash provided by financing activities was $9,148,502 and $1,005,027 for the three months ended March 31, 2025 and 2024, respectively.

During 2025, we most notably issued Common Stock in a February 2025 public equity with detachable warrants resulting in $14,308,300 in net cash proceeds and issued an unsecured promissory note raising $600,000 in net cash proceeds.

The cash proceeds were partially offset by payments on outstanding loans including the payments on senior secured promissory notes and merchant advances.

The net result of these activities

was an increase in cash of $3,308,294 to $3,762,608 for the three months ended March 31, 2025.

We had $3,762,608 of cash and

cash equivalents and net positive working capital of $3,385,051 as of March 31, 2025.

Accounts receivable and other receivables balances

represented $4,923,191 of our net working capital at March 31, 2025.

We intend to collect our outstanding receivables on a timely basis

and reduce the overall level during 2025, which would help to provide positive cash flow to support our operations during 2025 and beyond.

Inventory represents $2,489,111 of our net working capital at March 31, 2025.

We are actively managing the level of inventory and our

goal is to reduce such level during 2025 by our sales activities, the decrease of which should provide additional cash flow to help support

our operations during 2025 and beyond.

Capital Expenditures:

We had the following material

commitments for capital expenditures at March 31, 2025:

Lease commitments.

lease expense under the Company’s operating leases was approximately $223,580 during the three months ended March 31, 2025.

The following sets forth the operating

lease right of use assets and liabilities as of March 31, 2025:

Operating lease right of use assets

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Total operating lease obligations

components of lease expense were as follows for the nine months ended September 30, 2024:

Selling, general and administrative expenses

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

Following are the minimum lease

payments for each year and in total.

Year ending December 31:

2024 (October 1, to December 31, 2024)

2025 (April 1, 2025 through December 31, 2025)

2029 and thereafter

Total undiscounted minimum future lease payments

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Total operating lease liability

obligations – Outstanding debt obligations comprises the following:

September 30, 2024

December 31, 2023

Debt obligations - We have the following

outstanding debt as of March 31, 2025 which require future principal payments:

March 31, 2025

Economic injury disaster loan (EIDL)

Contingent consideration promissory note – Nobility Healthcare Division Acquisition

Revolving Loan Agreement

Commercial Extension of Credit- Entertainment Segment

Merchant Advances – Video Solutions Segment

Merchant Advances – Entertainment Segment

Unamortized debt issuance costs

Unsecured Promissory note – Entertainment Segment

Debt obligations

1 unchanged sentence

Debt obligations, long-term

obligations mature on an annual basis as follows as of September 30, 2024:

September 30, 2024

2024 (October 1, 2024 to December 31, 2024)

Debt obligations mature on an annual basis as follows

as of March 31, 2025:

March 31, 2025

2025 (April 1, 2025 to December 31, 2025)

2029 and thereafter

Accounting Estimates

significant accounting policies are summarized in Note 1, “Nature of Business and Summary of Significant Accounting Policies ,”

to our consolidated financial statements.

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

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

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

changing conditions:

Recognition / Allowance for Doubtful Accounts;

for Excess and Obsolete Inventory;

and other intangible assets;

value of warrant derivative liabilities;

Compensation Expense;

for Income Taxes.

Recognition / Allowances for Doubtful Accounts.

Revenue is recognized for the shipment of products or delivery of service when

all five of the following conditions are met:

the contract with the customer;

the performance obligations in the contract;

the transaction price;

the transaction price to the performance obligations in the contract;

revenue when a performance obligation is satisfied.

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

determine we have a contract when the customer order is approved, we can identify each party’s rights regarding the services to

be transferred, we can identify the payment terms for the services, we have determined the customer has the ability and intent to pay

and the contract has commercial substance.

At contract inception we evaluate whether the contract includes more than one performance

We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors,

including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining

to the customer.

obligations promised in a contract are identified based on the services and the products that will be transferred to the customer that

are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources

that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the

services and the products is separately identifiable from other promises in the contract.

Our performance obligations consist of (i)

products, (ii) professional services, and (iii) extended warranties.

transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services to

the customer.

Variable consideration is included in the transaction price if, in our judgment it is probable that a significant future

reversal of cumulative revenue under the contract will not occur.

From time to time, we are notified

that we may be a party to a lawsuit or that a claim is being made against us.

It is our policy to not disclose the specifics of any claim

or threatened lawsuit until the summons and complaint are actually served on us.

After carefully assessing the claim, and assuming we

determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against

We record a liability when losses are deemed probable and reasonably estimable.

When losses are deemed reasonably possible but not

probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim,

if material for disclosure.

In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our

historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing,

the availability of insurance, and the severity of any potential loss.

We re-evaluate and update accruals as matters progress over time.

While the ultimate resolution

is unknown, 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.

See Note 9, “Commitments and Contingencies,” to the condensed consolidated financial

statements of this Quarterly Report on Form 10-Q for information on our litigation.

Critical Accounting Estimates

Our significant accounting policies

are summarized in Note 1, “Nature of Business and Summary of Significant Accounting Policies ,” to our condensed consolidated

financial statements.

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

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

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

Revenue Recognition / Allowance for Doubtful Accounts;

Allowance for Excess and Obsolete Inventory;

Goodwill and other intangible assets;

Warranty Reserves;

Fair value of assets and liabilities acquired in business combinations ;

Fair value of warrant derivative liabilities;

Stock-based Compensation Expense;

Accounting for Income Taxes.

Revenue Recognition / Allowances

for Doubtful Accounts.

Revenue is recognized for the shipment of products or delivery of service when all five of the following

conditions are met:

Identify the contract with the customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract;

Recognize revenue when a performance obligation is satisfied.

We consider the terms and conditions

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

We determine we have a contract when

the customer order is approved, we can identify each party’s rights regarding the services to be transferred, we can identify the

payment terms for the services, we have determined the customer has the ability and intent to pay and the contract has commercial substance.

At contract inception we evaluate whether the contract includes more than one performance obligation.

We apply judgment in determining

the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment

experience or, in the case of a new customer, credit and financial information pertaining to the customer.

Performance obligations promised

in a contract are identified based on the services and the products that will be transferred to the customer that are both capable of

being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily

available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services and the

products is separately identifiable from other promises in the contract.

Our performance obligations consist of (i) products, (ii) professional

services, and (iii) extended warranties.

The transaction price is determined

based on the consideration to which we expect to be entitled in exchange for transferring services to the customer.

Variable consideration

is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under

the contract will not occur.

None of our contracts contain a significant financing component.

the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation

based on the relative standalone selling price (“SSP”).

for our video solutions segment is recognized at the time the related performance obligation is satisfied by transferring the control

of the promised service to a customer.

Revenue is recognized when control of the service is transferred to the customer, in an amount

that reflects the consideration that we expect to receive in exchange for our services.

We generate all our revenue from contracts with

for our revenue cycle management segment is recorded on a net basis, as its primary source of revenue is its end-to-end service fees.

These service fees are reported as revenue monthly upon completion of our performance obligation to provide the agreed upon services.

for our entertainment segment is recorded on a gross or net basis based on management’s assessment of whether we are acting as

a principal or agent in the transaction.

The determination is based upon the evaluation of control over the event ticket, including the

right to sell the ticket, prior to its transfer to the ticket buyer.

sell our tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to the

buyer upon confirmation of the order.

We act as the principal in these transactions as we own the ticket at the time of sale, therefore

we control the ticket prior to transferring to the customer.

In these transactions, revenue is recorded on a gross basis based on the

value of the ticket and is recognized when an order is confirmed.

If the contract contains a single

performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple

performance obligations require an allocation of the transaction price to each performance obligation based on the relative standalone

selling price (“SSP”).

Revenue for our video solutions

segment is recognized at the time the related performance obligation is satisfied by transferring the control of the promised service

to a customer.

Revenue is recognized when control of the service is transferred to the customer, in an amount that reflects the consideration

that we expect to receive in exchange for our services.

We generate all our revenue from contracts with customers.

Revenue for our revenue cycle

management segment is recorded on a net basis, as its primary source of revenue is its end-to-end service fees.

These service fees are

reported as revenue monthly, upon completion of our performance obligation to provide the agreed upon services.

Revenue for our entertainment

segment is recorded on a gross or net basis based on management’s assessment of whether we are acting as a principal or agent in

the transaction.

The determination is based upon the evaluation of control over the event ticket, including the right to sell the ticket,

prior to its transfer to the ticket buyer.

We sell our tickets held in inventory,

which consists of one performance obligation, being to transfer control of an event ticket to the buyer upon confirmation of the order.

We act as the principal in these transactions as we own the ticket at the time of sale, therefore we control the ticket prior to transferring

to the customer.

In these transactions, revenue is recorded on a gross basis based on the value of the ticket and is recognized when an

order is confirmed.

Payment is typically due upon delivery of the ticket.

also act as an intermediary between buyers and sellers through the online secondary marketplace.

Revenues derived from this marketplace

primarily consist of service fees from entertainment operations, and consists of one primary performance obligation, which is facilitating

the transaction between the buyer and seller, being satisfied at the time the order has been confirmed.

As we do not control the ticket

prior to the transfer, we act as an agent in these transactions.

Revenue is recognized on a net basis, net of the amount due to the seller

when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s listing.

is due at the time of sale.

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

financial reporting process to determine compliance with these requirements.

Extended warranties are offered on selected products, and

when a customer purchases an extended warranty, the associated proceeds are treated as contract liability and recognized over the term

of the extended warranty.

our video solutions segment, our principal customers are state, local, and federal law enforcement agencies, which historically have

been low risks for uncollectible accounts.

However, we have commercial customers and international distributors that present a greater

risk for uncollectible accounts than such law enforcement customers and we consider a specific reserve for bad debts based on their individual

We also act as an intermediary

between buyers and sellers through the online secondary marketplace.

Revenues derived from this marketplace primarily consist of service

fees from entertainment operations, and consists of one primary performance obligation, which is facilitating the transaction between

the buyer and seller, being satisfied at the time the order has been confirmed.

As we do not control the ticket prior to the transfer,

we act as an agent in these transactions.

Revenue is recognized on a net basis, net of the amount due to the seller when an order is confirmed,

the seller is then obligated to deliver the tickets to the buyer per the seller’s listing.

Payment is due at the time of sale.

We review all significant, unusual,

or nonstandard shipments of product or delivery of services as a routine part of our accounting and financial reporting process to determine

compliance with these requirements.

Extended warranties are offered on selected products, and when a customer purchases an extended warranty,

the associated proceeds are treated as deferred revenue and recognized over the term of the extended warranty.

For our video solutions segment,

our principal customers are state, local, and federal law enforcement agencies, which historically have been low risks for uncollectible

However, we have commercial customers and international distributors that present a greater risk for uncollectible accounts

than such law enforcement customers and we consider a specific reserve for bad debts based on their individual circumstances.

Our historical

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

For our entertainment segment,

our customers are mainly online visitors that pay at the time of the transaction, and we collect the service fees charged with the transaction.

Thus, leading to minimal risk for uncollectible accounts, to which we then consider a specific reserve for bad debts based on their individual

circumstances.

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

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

fees charged with the transaction.

Thus, leading to minimal risk for uncollectible accounts, to which we then consider a specific reserve

for bad debts based on their individual circumstances.

As we continue to learn more about the collectability related to this recent acquisition,

As we continue to learn more about the collectability related to this recent acquisition, we will track historical bad

debts and continue to assess appropriate reserves.

For our revenue cycle management

segment, our customers are mainly medium to large healthcare organizations that are charged monthly upon the execution of our services.

Being these customers are healthcare organizations with minimal risk for uncollectible accounts, we consider a specific reserve for bad

debts based on their individual circumstances.

As we continue to learn more about the collectability related to this recently added segment,

we will track historical bad debts and continue to assess appropriate reserves.

our revenue cycle management segment, our customers are mainly medium to large healthcare organizations that are charged monthly upon

the execution of our services.

Being these customers are healthcare organizations with minimal risk for uncollectible accounts, we consider

a specific reserve for bad debts based on their individual circumstances.

As we continue to learn more about the collectability related

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

for Excess and Obsolete Inventory.

Allowance for Excess and

Obsolete Inventory.

We record valuation reserves on our inventory for estimated excess or obsolete inventory items.

The amount of the reserve is equal to the difference between the cost of the inventory and the estimated market value based upon assumptions

about future demand and market conditions.

On a quarterly basis, management performs an analysis of the underlying inventory to identify

reserves needed for excess and obsolescence.

of the reserve is equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about

future demand and market conditions.

On a quarterly basis, management performs an analysis of the underlying inventory to identify reserves

needed for excess and obsolescence.

Management uses its best judgment to estimate appropriate reserves based on this analysis.

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

consisted of the following at September 30, 2024 and December 31, 2023:

September 30,

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

Inventories consisted of the following

at March 31, 2025 and December 31, 2024:

Raw material and component parts– video solutions segment

5 unchanged sentences

Total inventories

balance the need to maintain strategic inventory levels to ensure competitive delivery performance to our customers against the risk

of inventory obsolescence due to changing technology and customer requirements.

As reflected above, our inventory reserves represented

65% of the gross inventory balance at September 30, 2024, compared to 54% of the gross inventory balance at December 31, 2023.

$4,222,990 and $4,542,461 in reserves for obsolete and excess inventories at September 30, 2024 and December 31, 2023, respectively.

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

Additionally,

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

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

We believe the reserves are appropriate given our inventory

levels as of September 30, 2024.

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

our products that are not anticipated and appropriately managed, additional inventory write-downs may be required in excess of the inventory

reserves already established.

and other intangible assets.

When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed

on the date of acquisition, which may include a significant amount of intangible assets such as customer relationships, software and

content, as well as goodwill.

When determining the fair values of the acquired intangible assets, we consider, among other factors, analyses

of historical financial performance and an estimate of the future performance of the acquired business.

The fair values of the acquired

intangible assets are primarily calculated using an income approach that relies on discounted cash flows.

This method starts with a forecast

of the expected future net cash flows for the asset and then adjusts the forecast to present value by applying a discount rate that reflects

the risk factors associated with the cash flow streams.

We consider this approach to be the most appropriate valuation technique because

the inherent value of an acquired intangible asset is its ability to generate future income.

In a typical acquisition, we engage a third-party

valuation expert to assist us with the fair value analyses for acquired intangible assets.

the fair values of acquired intangible assets requires us to exercise significant judgment.

We select reasonable estimates and assumptions

based on evaluating a number of factors, including, but not limited to, marketplace participants, consumer awareness and brand history.

Additionally, there are significant judgments inherent in discounted cash flows such as estimating the amount and timing of projected

future cash flows, the selection of discount rates, hypothetical royalty rates and contributory asset capital charges.

Specifically,

the selected discount rates are intended to reflect the risk inherent in the projected future cash flows generated by the underlying

acquired intangible assets.

an acquired intangible asset’s useful life also requires significant judgment and is based on evaluating a number of factors, including,

but not limited to, the expected use of the asset, historical client retention rates, consumer awareness and trade name history, as well

as any contractual provisions that could limit or extend an asset’s useful life.

Company’s goodwill is evaluated in accordance with FASB ASC Topic 350, which requires goodwill to be assessed for impairment at

least annually and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

addition, an impairment evaluation of our amortizable intangible assets may also be performed if events or circumstances indicate potential

Among the factors that could trigger an impairment review are current operating results that do not align with our annual

plan or historical performance;

We balance the need to maintain

strategic inventory levels to ensure competitive delivery performance to our customers against the risk of inventory obsolescence due

to changing technology and customer requirements.

As reflected above, our inventory reserves represented 40% of the gross inventory balance

at March 31, 2025, compared to 46% of the gross inventory balance at December 31, 2024.

We had $1,648,542 and $2,169,655 in reserves for

obsolete and excess inventories at March 31, 2025 and December 31, 2024, respectively.

The decrease in the inventory reserve is primarily

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

Additionally, the Company determined a reasonable reserve for

inventory held at the ticket operating segment, in which some inventory items sell below cost or go unsold, thus having to be fully written-off

following the event date.

We believe the reserves are appropriate given our inventory levels as of March 31, 2025.

If actual future demand or market

conditions are less favorable than those projected by management or significant engineering changes to our products that are not anticipated

and appropriately managed, additional inventory write-downs may be required in excess of the inventory reserves already established.

Goodwill and other intangible

When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed on the date of

acquisition, which may include a significant amount of intangible assets such as customer relationships, software and content, as well

When determining the fair values of the acquired intangible assets, we consider, among other factors, analyses of historical

financial performance and an estimate of the future performance of the acquired business.

The fair values of the acquired intangible assets

are primarily calculated using an income approach that relies on discounted cash flows.

This method starts with a forecast of the expected

future net cash flows for the asset and then adjusts the forecast to present value by applying a discount rate that reflects the risk

factors associated with the cash flow streams.

We consider this approach to be the most appropriate valuation technique because the inherent

value of an acquired intangible asset is its ability to generate future income.

In a typical acquisition, we engage a third-party valuation

expert to assist us with the fair value analyses for acquired intangible assets.

Determining the fair values of

acquired intangible assets requires us to exercise significant judgment.

We select reasonable estimates and assumptions based on evaluating

a number of factors, including, but not limited to, marketplace participants, consumer awareness and brand history.

Additionally, there

are significant judgments inherent in discounted cash flows such as estimating the amount and timing of projected future cash flows, the

selection of discount rates, hypothetical royalty rates and contributory asset capital charges.

Specifically, the selected discount rates

are intended to reflect the risk inherent in the projected future cash flows generated by the underlying acquired intangible assets.

Determining an acquired intangible

asset’s useful life also requires significant judgment and is based on evaluating a number of factors, including, but not limited

to, the expected use of the asset, historical client retention rates, consumer awareness and trade name history, as well as any contractual

provisions that could limit or extend an asset’s useful life.

The Company’s goodwill is

evaluated in accordance with FASB ASC Topic 350, which requires goodwill to be assessed for impairment at least annually and whenever

events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

In addition, an impairment evaluation

of our amortizable intangible assets may also be performed if events or circumstances indicate potential impairment.

Among the factors

that could trigger an impairment review are current operating results that do not align with our annual plan or historical performance;

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

restructuring changes or other changes in our

business segments;

competitive pressures and changes in the general economy or in the markets in which we operate;

and a significant

decline in our stock price and our market capitalization relative to our net book value.

performing our annual assessment of the recoverability of goodwill, we initially perform a qualitative analysis evaluating whether any

events or circumstances occurred or exist that provide evidence that it is more likely than not that the fair value of any of our reporting

units is less than the related carrying amount.

If we do not believe that it is more likely than not that the fair value of any of our

reporting units is less than the related carrying amount, then no quantitative impairment test is performed.

However, if the results

of our qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective

carrying amount, then we perform a two-step quantitative impairment test.

the recoverability of goodwill requires judgments and assumptions regarding future trends and events.

As a result, both the precision

and reliability of our estimates are subject to uncertainty.

Among the factors that we consider in our qualitative assessment are general

economic conditions and the competitive environment;

restructuring changes or other changes in our business segments;

pressures and changes in the general economy or in the markets in which we operate;

and a significant decline in our stock price and our

market capitalization relative to our net book value.

When performing our annual assessment

of the recoverability of goodwill, we initially perform a qualitative analysis evaluating whether any events or circumstances occurred

or exist that provide evidence that it is more likely than not that the fair value of any of our reporting units is less than the related

carrying amount.

If we do not believe that it is more likely than not that the fair value of any of our reporting units is less than the

related carrying amount, then no quantitative impairment test is performed.

However, if the results of our qualitative assessment indicate

that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then we perform a

two-step quantitative impairment test.

Evaluating the recoverability

of goodwill requires judgments and assumptions regarding future trends and events.

As a result, both the precision and reliability of

our estimates are subject to uncertainty.

Among the factors that we consider in our qualitative assessment are general economic conditions

and the competitive environment;

actual and projected reporting unit financial performance;

forward-looking business

measurements;

and external market assessments.

To determine the fair values of our reporting units for a quantitative analysis, we typically

utilize detailed financial projections, which include significant variables, such as projected rates of revenue growth, profitability

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

We 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 the

September 30, 2024 for our reporting units with remaining goodwill.

forward-looking business measurements;

external market assessments.

To determine the fair values of our reporting units for a quantitative analysis, we typically utilize detailed

financial projections, which include significant variables, such as projected rates of revenue growth, profitability and cash flows, as

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

We performed an impairment test

as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the

additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when

and as expected and a further decrease in our stock price.

Therefore, we performed an impairment test for our reporting units with remaining

The fair value of each reporting

22 unchanged sentences

We held goodwill of $5,480,966

as of September 30, 2024 and December 31, 2023, related to businesses within our revenue cycle management segment.

We held goodwill of

$6,112,507 and $5,886,548 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment

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 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024.

The goodwill impairment

was primarily driven by recent performance of the revenue cycle management and entertainment reporting units since our annual impairment

testing date, as well as a delay in the projected timing of recovery.

The remaining balance for the goodwill carrying balance related

to businesses within our revenue cycle management segment and entertainment segment was $1,158,966 and $5,805,507, respectively as of

September 30, 2024.

We held indefinite-lived trade

names/trademarks of $900,000 and $600,000 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our

entertainment segment.

During the three months ended

September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its

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

charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024.

The charge was primarily

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

business given a decline in demand and overall economic uncertainty.

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

as of September 30, 2024.

as of September 30, 2024, related to businesses within our revenue cycle management segment.

We held goodwill of $6,112,507 as of September

30, 2024, 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

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 Condensed Consolidated Statements of Operations

for the three months ended September 30, 2024.

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

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

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

segment was $1,158,966 and $5,805,507, respectively as of March 31, 2025 and December 31, 2024.

Warranty Reserves.

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

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

These estimates are established using historical

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

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

quality and minimize claims.

Our warranty reserves were decreased to $11,615 as of September 30, 2024 compared to $17,699 as of December

31, 2023 due to newer products gaining a long history of claims to consider, which was slightly offset as we begin to slow our warranty

exposures through the roll-off of DVM-750 and DVM-800 units from warranty coverage.

Standard warranty exposure on the DVM-800 and DVM-250plus

are the responsibility of the contract manufacturers which reduced our overall warranty exposure as these are very popular products in

There is a risk that we will have higher warranty claim frequency rates and average cost of claims than our history has indicated

on our legacy mirror products on our new products for which we have limited experience.

Actual experience could differ from the amounts

estimated requiring adjustments to these liabilities in future periods.

derivative liabilities.

On April 5, 2023, the Company issued warrants to purchase a total of 1,125,000 shares of Common Stock.

The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances in the event of tender

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

at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as

the change in fair value of warrant derivative liabilities.

Furthermore, the Company revalues the fair value of warrant derivative liability

as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to equity.

Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the

warrant derivative liability as of their date of issuance and as of September 30, 2024:

September 30, 2024

Volatility - range

Risk-free rate

Remaining contractual term

Exercise price

$ 5.50 – 7.50

Common stock issuable under the warrants

June 25, 2024, the Company issued warrants to purchase a total of 1,195,219 shares of Common Stock.

The warrant terms provide for net

cash settlement outside the control of the Company under certain circumstances.

As such, the Company is required to treat these warrants

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

changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities.

the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant

derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.

Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the

warrant derivative liabilities as of their date of issuance and as of September 30, 2024:

September 30, 2024

Volatility – range

72.1 - 101.1 %

Risk-free rate

4.25 – 5.46 %

Remaining contractual term

0.1 - 5.0 years

Exercise price

Common stock issuable under the warrants

Compensation Expense .

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

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

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

and there were no stock options granted during the three or nine months ended September 30, 2024.

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

significantly from what we have recorded in the current period.

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

models to estimate share-based compensation.

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

values of our share-based compensation.

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

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

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

on the grant date and reported in our financial statements.

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

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

In addition, we account for forfeitures as they occur.

for Income Taxes.

Provisions for estimated expenses

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

These estimates are established using historical information on

the nature, frequency, and average cost of claims.

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

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

our overall warranty exposure as these are very popular products in our line.

There is a risk that we will have higher warranty claim

frequency rates and average cost of claims than our history has indicated on our legacy mirror products compared to our new products for

which we have limited experience.

Actual experience could differ from the amounts estimated requiring adjustments to these liabilities

in future periods.

Warrant derivative liabilities.

The Company accounts for their derivative financial

instruments in accordance with ASC 815 “Derivatives and Hedging” therefore any embedded conversion options and warrants accounted

for as derivatives are to be recorded at their fair values as of the inception date of the agreement and at fair value as of each subsequent

balance sheet date.

Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each

balance sheet date.

The Company reassesses the classification of its derivative instruments at each balance sheet date.

classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the

reclassification.

The Black-Scholes option valuation

model was used to estimate the fair value of the embedded conversion options and warrants.

The model includes subjective input assumptions

that can materially affect the fair value estimates.

Accounting for Income Taxes.

Accounting for income taxes requires significant estimates and judgments on the part of management.

Such estimates

and judgments include, but are not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse

in the future, the sufficiency of taxable income in future periods to realize the benefits of net deferred tax assets and net operating

losses currently recorded and the likelihood that tax positions taken in tax returns will be sustained on audit.

required by authoritative guidance, we record deferred tax assets or liabilities based on differences between financial reporting and

tax bases of assets and liabilities using currently enacted rates that will be in effect when the differences are expected to reverse.

Authoritative guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that

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

As of September 30, 2023, we have fully reserved all of our deferred

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

should be increased by $17,220,000 to a balance of $34,200,000 to fully reserve our deferred tax assets at December 31, 2023.

Such estimates and judgments

include, but are not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse in the future,

the sufficiency of taxable income in future periods to realize the benefits of net deferred tax assets and net operating losses currently

recorded and the likelihood that tax positions taken in tax returns will be sustained on audit.

As required by authoritative guidance,

we record deferred tax assets or liabilities based on differences between financial reporting and tax bases of assets and liabilities

using currently enacted rates that will be in effect when the differences are expected to reverse.

Authoritative guidance also requires

that deferred tax assets be reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax

asset will not be realized.

As of March 31, 2025 and December 31, 2024, we have fully reserved all of our deferred tax assets.

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

$4,680,000 to a balance of $46,290,000 to fully reserve our deferred tax assets at March 31, 2025 and December 31, 2024.

We determined

that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of September 30, 2024, because

of the overall net operating loss carryforwards available.

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

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

To the extent we determine that the

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

valuation allowance will be reversed.

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

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

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

with recognition standards established by the FASB, an uncertain tax position represents our expected treatment of a tax position taken

in a filed tax return or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for

financial reporting purposes.

We have no recorded liability as of September 30, 2024 representing uncertain tax positions.

have generated substantial deferred income tax assets related to our operations primarily from the charge to compensation expense taken

for stock options, certain tax credit carryforwards and net operating loss carryforwards.

For us to realize the income tax benefit of

these assets, we must generate sufficient taxable income in future periods when such deductions are allowed for income tax purposes.

In some cases where deferred taxes were the result of compensation expense recognized on stock options, our ability to realize the income

tax benefit of these assets is also dependent on our share price increasing to a point where these options have intrinsic value at least

equal to the grant date fair value and are exercised.

In assessing whether a valuation allowance is needed in connection with our deferred

income tax assets, we have evaluated our ability to generate sufficient taxable income in future periods to utilize the benefit of the

deferred income tax assets.

that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of March 31, 2025 and December

31, 2024, because of the overall net operating loss carryforwards available.

We expect to continue to maintain a full valuation allowance

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

To the extent we

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

or all of the valuation allowance will be reversed.

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

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

As required by authoritative guidance,

we have performed a comprehensive review of our portfolio of uncertain tax positions in accordance with recognition standards established

by the FASB, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return or planned to be

taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes.

recorded liability as of March 31, 2025 and December 31, 2024 representing uncertain tax positions.

We have generated substantial

deferred income tax assets related to our operations primarily from the charge to compensation expense taken for stock options, certain

tax credit carryforwards and net operating loss carryforwards.

For us to realize the income tax benefit of these assets, we must generate

sufficient taxable income in future periods when such deductions are allowed for income tax purposes.

In some cases where deferred taxes

were the result of compensation expense recognized on stock options, our ability to realize the income tax benefit of these assets is

also dependent on our share price increasing to a point where these options have intrinsic value at least equal to the grant date fair

value and are exercised.

In assessing whether a valuation allowance is needed in connection with our deferred income tax assets, we have

evaluated our ability to generate sufficient taxable income in future periods to utilize the benefit of the deferred income tax assets.

We continue to evaluate our ability to use recorded deferred income tax asset balances.

If we fail to generate

taxable income for financial reporting in future years, no additional tax benefit would be recognized for those losses, since we will

not have accumulated enough positive evidence to support our ability to utilize net operating loss carryforwards in the future.

we may be required to increase our valuation allowance in future periods should our assumptions regarding the generation of future taxable

income not be realized.

and Seasonality

has not materially affected us during the past fiscal year.

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

business is seasonal in nature, however;

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

the calendar year than in the first half.

Quantitative and Qualitative Disclosures about Market Risk.

If we fail to generate taxable income for financial

reporting in future years, no additional tax benefit would be recognized for those losses, since we will not have accumulated enough positive

evidence to support our ability to utilize net operating loss carryforwards in the future.

Therefore, we may be required to increase our

valuation allowance in future periods should our assumptions regarding the generation of future taxable income not be realized.

Inflation and Seasonality

Inflation has not materially affected

us during the past fiscal year.

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

in nature, however;

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

in the first half.

Quantitative and Qualitative Disclosures

about Market Risk.

Not Applicable.

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-Q

Item 2. Management’s Discussion and Analysis