10q10k10q10k.net

What changed in DIGITAL ALLY, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of DIGITAL ALLY, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+297 added−309 removedSource: 10-K (2025-05-02) vs 10-K (2024-04-01)

Top changes in DIGITAL ALLY, INC.'s 2024 10-K

297 paragraphs added · 309 removed · 185 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

64 edited+31 added−22 removed55 unchanged
Biggest changeWe have filed for patent protection in the United States and certain other countries to cover certain design aspects of our products. 9 Some of our patent applications are still under review by the USPTO and, therefore, we have not yet been issued all the patents that we applied for in the United States.
Biggest changeSome of our patent applications are still under review by the USPTO and, therefore, we have not yet been issued all the patents that we applied for in the United States. We were issued several patents in recent years, including a patent on our VuLink product that provides automatic triggering of our body-worn camera and our in-car video systems.
Due to our marketing efforts, commercial fleets are beginning to adopt this technology, and in particular, the ambulance and taxi-cab markets. The FLT-250 offers the same great features of the DVM-250 Plus in a new compact, non-mirrored form factor that allows for multiple mounting options in any vehicle type for commercial fleets.
Due to our marketing efforts, commercial fleets, in particular the ambulance and taxi-cab markets, are beginning to adopt this technology. The FLT-250 offers the same great features of the DVM-250 Plus in a new compact, non-mirrored form factor that allows for multiple mounting options in any vehicle type for commercial fleets.
The latest body worn camera launched by the Company is the FirstVu Pro, the Company’s flagship product in its family of next generation of technology.
The latest body worn camera launched by the Company is the FirstVu Pro, the Company’s flagship product in its family of next generation technology.
Many of these competitors have significant advantages over us, including greater financial, technical, marketing and manufacturing resources, more extensive distribution channels, larger customer bases and faster response times to adapt new or emerging technologies and changes in customer requirements.
Many of these competitors have significant advantages over us, including greater financial, technical, marketing and manufacturing resources, more extensive distribution channels, larger customer bases and faster response times to adapt to new or emerging technologies and changes in customer requirements.
Specifically: ● We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. ● We align our executives’ long-term equity compensation with our shareholders’ interests by linking realizable pay with stock performance. ● Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion. ● All employees are eligible for health insurance, paid and unpaid leaves, short-term disability, worker’s compensation, long-term disability, a retirement plan and life and disability/accident coverage.
Specifically: ● We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. ● We align our executives’ long-term equity compensation with our shareholders’ interests by linking realizable pay with stock performance. 10 ● Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion. ● All employees are eligible for health insurance, paid and unpaid leaves, short-term disability, worker’s compensation, long-term disability, a retirement plan and life and disability/accident coverage.
The Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout the country, as a monthly service fee. The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms.
The Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout the country, charging a monthly service fee. The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms.
In-Car Digital Video “Event Recorder” System – EVO Fleet, DVM-250 Plus and FLT-250 for Commercial Fleets Digital Ally provides commercial fleets and commercial fleet managers with the digital video tools that they need to increase driver safety, track assets in real-time and minimize the company’s liability risk while enabling fleet managers to operate the fleet at an optimal level.
In-Car Digital Video “Event Recorder” System – EVO Fleet, DVM-250 Plus and FLT-250 for Commercial Fleets Digital Ally provides commercial fleets and commercial fleet managers with the digital video tools that they need to increase driver safety, track assets in real-time and minimize the company’s liability risk, all while enabling fleet managers to operate the fleet at an optimal level.
With the market continuing to grow, resale marketplaces and websites can reach a vastly larger audience with more convenient access to tickets for a wide variety of events. We continue to build our brand and recognition, through numerous partnerships and sponsorships throughout the country, in attempt to become a preferred platform for consumers.
With the market continuing to grow, resale marketplaces and websites can reach a vastly larger audience with more convenient access to tickets for a wide variety of events. We continue to build our brand and recognition, through numerous partnerships and sponsorships throughout the country, in an attempt to become a preferred platform for consumers.
The Company has been distributing other personal protective equipment and supplies, since the second quarter of 2021, such as masks and gloves to supplement its Shield brand of products to health care workers as well as other consumers, consisting of vinyl and nitrile gloves, level 3 and N95 NIOSH certified face masks, and disposable wipes.
The Company has been distributing other personal protective equipment and supplies, since the second quarter of 2021, such as masks and gloves to supplement its Shield TM brand of products to health care workers as well as other consumers, consisting of vinyl and nitrile gloves, level 3 and N95 NIOSH certified face masks, and disposable wipes.
TicketSmarter is the official ticket resale partner of more than 35 collegiate conferences, over 300 universities, and hundreds of events and venues. 7 Established in late 2022, Kustom 440 is another piece of the entertainment segment of the Company, whose mission it is to attract, manage and promote concerts, sports and private events.
TicketSmarter is the official ticket resale partner of more than 35 collegiate conferences, over 300 universities, and hundreds of events and venues. Established in late 2022, Kustom 440 is another piece of the entertainment segment of the Company, whose mission it is to attract, manage and promote concerts, sports and private events.
The DVM-250 Plus is designed to capture events, such as wrecks and erratic driving or other abnormal occurrences, for evidentiary or training purposes. The commercial fleet markets may find our units attractive from both a feature and a cost perspective compared to other providers.
The DVM-250 Plus is designed to capture events, such as wrecks and erratic driving or other abnormal occurrences, for evidentiary or training purposes. The commercial fleet markets may find our units attractive from both feature and cost perspective compared to other providers.
Nobility Healthcare, our minority interest partner provides all human capital resources to manage and operate the Company’s revenue cycle management operating segment. 10 Our employees are our most important assets and they set the foundation for our ability to achieve our strategic objectives.
Nobility Healthcare, our minority interest partner, provides all human capital resources to manage and operate the Company’s revenue cycle management operating segment. Our employees are our most important assets and they set the foundation for our ability to achieve our strategic objectives.
There can be no assurance that we will be able to compete successfully in these markets. Further, there can be no assurance that new and existing companies will not enter the law enforcement and security surveillance markets in the future. The commercial fleet security and surveillance markets likewise are also very competitive.
There can be no assurance that we will be able to compete successfully in these markets. Further, there can be no assurance that new and existing companies will not enter the law enforcement and security surveillance markets in the future. The commercial fleet security and surveillance markets are also very competitive.
Market and Industry Overview – Entertainment Operating Segment Our entertainment segment refers to the sale of event tickets primarily through our online and mobile platforms. We will buy inventory of event tickets to then sell tickets through various platforms, including our own.
Market and Industry Overview – Entertainment Operating Segment Our entertainment segment refers to the sale of event tickets primarily through our online and mobile platforms. We buy inventory of event tickets to then sell through various platforms, including our own.
With the recent acquisitions we completed in 2021 and 2022, we hope to utilize the connections we now have to live events, stadiums, and arenas, as well as new medical connections.
With the acquisitions we completed in 2021 and 2022, we hope to utilize the connections we now have to live events, stadiums, and arenas, as well as new medical connections.
Kustom 440 offers the production and promotion of live music events in third-party venues throughout the country. These services begin with the logistical matters of an event, including artist booking and research, ticketing, staging, on-site operations, vendor sourcing, and day of production. These events range in size from small corporate events to full stadium multi-day events.
Kustom 440 offers the production and promotion of live music events in third-party venues throughout the country. These services begin with the logistical matters of events, including artist booking and research, ticketing, staging, on-site operations, vendor sourcing, and day of production. These events range in size from small corporate events to full stadium multi-day events.
Entertainment Operating Segment We also provide live entertainment and events ticketing services through the formation of our wholly owned subsidiary, TicketSmarter, Inc. (“TicketSmarter”) and its completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC, on September 1, 2021. TicketSmarter provides ticket sales, partnerships, and mainly, ticket resale services through its online ticketing marketplace for live events, TicketSmarter.com.
Entertainment Operating Segment We also provide live entertainment and events ticketing services through the formation of our wholly owned subsidiary, TicketSmarter and its completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC, on September 1, 2021. TicketSmarter provides ticket sales, partnerships, and mainly, ticket resale services through its online ticketing marketplace for live events, TicketSmarter.com.
EVO Web is capable of playing back, reviewing, downloading, archiving, unit configuration and management, running customizable reports and maintaining a chain of custody logs. AWS is the most secure cloud platform on the market with features that go beyond simply storing and reviewing video evidence.
EVO Web is capable of playing back, reviewing, downloading and archiving video, as well as unit configuration and management, running customizable reports and maintaining a chain of custody logs. AWS is the most secure cloud platform on the market with features that go beyond simply storing and reviewing video evidence.
Our video solutions segment revenue encompasses video recording products and services for our law enforcement and commercial customers and the sale of Shield TM disinfectant and personal protective products. This segment generates revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video and personal protective safety products and solutions.
Revenue from our video solutions operating segment encompasses video recording products and services for our law enforcement and commercial customers and the sale of Shield TM disinfectant and personal protective 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.
We continue to have sales in the commercial fleet and ambulance service provider market, confirming that our EVO Fleet, DVM-250 Plus and FLT-250 products and FleetVu Manager can become a significant revenue producer for us. Additionally, our body-worn cameras have applications in law enforcement, along with private and event security, as well as commercial segments.
We continue to have sales in the commercial fleet and ambulance service provider market, confirming that our EVO Fleet, DVM-250 Plus and FLT-250 products and FleetVu Manager can become significant revenue producers for us. Additionally, our body-worn cameras have applications in law enforcement, along with private and event security, as well as commercial segments.
Our assistance consists of insurance and benefit verification, medical treatment documentation and coding, and collections. Through our expertise and experience in this field, we aim to maximize our customers’ service revenues collected, leading to substantial improvements in their operating margins and cash flows. 3 Our revenue cycle management segment consists of our medical billing subsidiaries.
Our services consist of insurance and benefit verification, medical treatment documentation and coding, and collections. Through our expertise and experience in this field, we aim to maximize our customers’ service revenues collected, leading to substantial improvements in their operating margins and cash flows. 3 Our revenue cycle management segment consists of our medical billing subsidiaries.
Market and Industry Overview – Revenue Cycle Management Operating Segment Our revenue cycle management segment consists of end-to-end revenue cycle management services that focuses on claim reimbursement billing, verification, and related services to medical providers throughout the country. We offer agreements with customers in which we provide our services and bill the customers monthly for our services.
Market and Industry Overview – Revenue Cycle Management Operating Segment Our revenue cycle management segment consists of end-to-end revenue cycle management services that focus on claim reimbursement billing, verification, and providing related services to medical providers throughout the country. We offer agreements with customers in which we provide our services and bill the customers monthly for our services.
In the fourth quarter of 2022, Digital Ally released the EVO Fleet, offering a full-featured solution utilizing the latest in telematics technology, including immediate driver-assist feedback by recognizing pedestrians, distracted or drowsy driving, and lane shifting.
In the fourth quarter of 2022, Digital Ally released the EVO Fleet, offering a full-featured solution utilizing the latest in telematics technology, including immediate driver-assist feedback by recognizing (i) pedestrians, (ii) distracted or drowsy driving, and (iii) lane shifting.
Our resale services refer to the sale of tickets by a holder, who originally obtained the tickets directly from a venue or entity, through our platform in which we then collect services fees on the transaction. This is commonly referred to as secondary ticketing.
Our resale services refer to the sale of tickets by a holder, who originally obtained the tickets directly from a venue or entity, through our platform, after which we collect services fees on the transaction. This is commonly referred to as secondary ticketing.
(“Kustom”), and its majority-owned subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,” and the “Company”), is divided into three reportable operating segments: 1) the Video Solutions Segment, 2) the Revenue Cycle Management Segment and 3) the Entertainment Segment.
(Kustom 440”), Kustom Entertainment, Inc., (“Kustom”) , and its majority-owned subsidiary Nobility Healthcare, LLC, collectively, “Digital Ally,” “Digital,” and the “Company”), is divided into three reportable operating segments: 1) the Video Solutions Segment, 2) the Revenue Cycle Management Segment and 3) the Entertainment Segment.
(“Worldwide Re”), a Bermuda incorporated captive insurance company that provided primarily liability insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s insurance marketplace. Worldwide Re is subject to capital and other regulatory requirements imposed by the Bermuda Monetary Authority (“BMA”).
(“Worldwide Re”), a Bermuda incorporated captive insurance company that was created primarily to provide liability insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s insurance marketplace. Worldwide Re is subject to capital and other regulatory requirements imposed by the Bermuda Monetary Authority (“BMA”).
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 II, and the FirstVu HD; our patented and revolutionary VuLink product which integrates our body-worn cameras with our in-car systems by providing hands-free automatic activation for both law enforcement and commercial markets; the FLT-250, DVM-250, and DVM-250 Plus, which are our commercial line of digital video mirrors that serve as “event recorders” for the commercial fleet and mass transit markets; and FleetVu and VuLink, which are our cloud-based evidence management systems.
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 II, and the FirstVu HD; our patented and revolutionary VuLink product, which integrates our body-worn cameras with our in-car systems by providing hands-free automatic activation for both law enforcement and commercial markets; 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 believe that, due to the new technology, including the A.I. interface, live tracking capabilities, up to four streams of video, and video on command, this product will become a very prominent product in the market and for our current and potential customers.
We believe that, due to the new technology, including the Artificial Intelligence interface, live tracking capabilities, up to four streams of video, and video on command, this product will become very prominent in the market and for our current and potential customers.
(with its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC (“Digital Ally Healthcare”), TicketSmarter, Inc. (“TicketSmarter”), Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440 (“Kustom 440”), Inc., Kustom Entertainment, Inc.
(with its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC (“Digital Ally Healthcare”), TicketSmarter, Inc. (“TicketSmarter”), Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc.
Human Capital As of December 31, 2023, Digital Ally, and its subsidiaries, had approximately 170 full-time employees spread throughout the country, representing the core values and objectives of the Company.
Human Capital As of December 31, 2024, Digital Ally, and its subsidiaries, had approximately 31 full-time employees spread throughout the country, representing the core values and objectives of the Company.
There are direct competitors for our FLT-250 and DVM-250 Plus “event recorders,” which may have greater financial, technical marketing, and manufacturing resources than we do. Our primary competitors in the commercial fleet sector include Lytx, Inc.
There are direct competitors for our FLT-250 and DVM-250 Plus “event recorders,” which may have greater financial, technical, marketing, and manufacturing resources than we do. Our primary competitors in the commercial fleet sector include Lytx, Inc. (previously DriveCam, Inc.), Samsara and SmartDrive Systems, among others.
On January 2, 2008, we commenced trading on the Nasdaq Capital Market under the symbol “DGLY.” We conduct our business from 14001 Marshall Drive, Lenexa, Kansas 66215. Our telephone number is (913) 814-7774. Our website address is www.digitalallyinc.com. The contents of, or information accessible through, our website are not part of this Annual Report on Form 10-K.
On January 2, 2008, we commenced trading on the Nasdaq Capital Market under the symbol “DGLY.” We conduct our business from 6366 College Blvd., Overland Park, Kansas 66211. Our telephone number is (913) 814-7774. Our website address is www.digitalallyinc.com. The contents of, or information accessible through, our website are not part of this Annual Report on Form 10-K.
Pursuant to the CLOE Merger Agreement, subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated by the CLOE Merger Agreement (the “Closing”), Merger Sub will merge with and into Kustom (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”), with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf.
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated by the Proposed Merger Agreement (the “Closing”), Merger Sub would merge with and into Kustom, with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf.
The innovative EVO-HD technology replaces the current in-car mirror-based systems with a miniaturized system that can be custom-mounted in the vehicle, while offering numerous hardware configurations to meet the varied needs and requirements of our commercial customers.
The EVO-HD has become the platform for a new family of in-car video solution products for the commercial markets. The innovative EVO-HD technology replaces the current in-car mirror-based systems with a miniaturized system that can be custom-mounted in the vehicle, while offering numerous hardware configurations to meet the varied needs and requirements of our commercial customers.
These employees are spread amongst our operating segments as follows: As of December 31, 2023 Employee headcount: Video Solutions 98 Revenue Cycle Management [1] 60 Entertainment 12 Total Employee Headcount 170 [1] Our revenue cycle management operating segment has no direct employees.
These employees are spread amongst our operating segments as follows: As of December 31, 2024 Employee headcount: Video Solutions 14 Revenue Cycle Management [1] 6 Entertainment 11 Total Employee Headcount 31 [1] Our revenue cycle management operating segment has no direct employees.
Competition – Entertainment Operating Segment Our entertainment segment faces robust competition from several sources throughout the industry. As the online and mobile ticketing market continues to increase, it has allowed for more technology-based companies to offer ticketing services and systems. The online environment consists of numerous other websites and platforms for all markets.
As the online and mobile ticketing market continues to increase, it has allowed for more technology-based companies to offer ticketing services and systems. The online environment consists of numerous other websites and platforms for all markets.
Other products in the Shield brand include animal wellness products, wound care, and household cleaning solutions. ThermoVu is a non-contact temperature-screening instrument that measures temperature through the wrist and controls entry to facilities when temperature measurements exceed pre-determined parameters.
Other products in the Shield brand include animal wellness products, wound care, and household cleaning solutions. ThermoVu is a non-contact temperature-screening instrument that measures temperature through the wrist and controls entry to facilities when temperature measurements exceed pre-determined parameters. ThermoVu has optional features such as facial recognition to improve facility security by restricting access based on temperature and/or facial recognition.
The following table sets forth the Company’s total revenue and the revenue derived from each reportable operating segment: Years Ended December 31, 2023 2022 Net Revenues: Video Solutions $ 7,471,285 $ 8,252,288 Revenue Cycle Management 6,713,678 7,886,107 Entertainment 14,063,381 20,871,500 Total Net Revenues $ 28,248,344 $ 37,009,895 Additional information regarding each reportable operating segment is also included in Note 23 entitled Segment Data of “Notes to Consolidated Financial Statements”.
The following table sets forth the Company’s total revenue and the revenue derived from each reportable operating segment: Years Ended December 31, 2024 2023 Net Revenues: Video Solutions $ 5,755,391 $ 7,471,285 Revenue Cycle Management 6,131,650 6,713,678 Entertainment 7,763,761 14,063,381 Total Net Revenues $ 19,650,802 $ 28,248,344 Additional information regarding each reportable operating segment is also included in Note 22 entitled Segment Data of “Notes to Consolidated Financial Statements”.
(previously DriveCam, Inc.) and SmartDrive Systems, among others. 8 Competition – Revenue Cycle Management Operating Segment Our revenue cycle management segment is a highly competitive market that is only intensifying as the market continues to grow.
Competition – Revenue Cycle Management Operating Segment Our revenue cycle management segment is a highly competitive market that is only intensifying as the market continues to grow.
Intellectual Property – Entertainment Operating Segment Our entertainment operating segment’s ability to compete effectively primarily depends on our trade secrets and know-how and does not depend heavily on any proprietary technology or patents.
Intellectual Property – Entertainment Operating Segment Our entertainment operating segment’s ability to compete effectively primarily depends on our trade secrets and know-how and does not depend heavily on any proprietary technology or patents. Government Approval Government approval is not required for us to license our video solutions technology or sell such devices or products.
The unit is self-contained and requires no external battery or storage devices. Our FirstVU HD integrates with our in-car video systems through our patented VuLink system allowing for automatic activation of both systems. With the newly introduced body-worn cameras, Digital Ally also introduced two new QuickVu docking stations compatible with the FirstVu PRO and FirstVu II body-worn cameras.
The unit is self-contained and requires no external battery or storage devices. Our FirstVU HD integrates with our in-car video systems through our patented VuLink system, allowing for automatic activation of both systems.
FleetVu Manager is a web-based software that provides commercial fleet managers with the tools to increase driver safety, track assets in real-time and minimize their companies’ liability risks.
Our products that are compatible with EVO Web include: FirstVu Pro, FirstVu II, FirstVu HD, QuickVu, EVO-HD, DVM-800 and DVM-800 Lite. 6 FleetVu Manager is a web-based software that provides commercial fleet managers with the tools to increase driver safety, track assets in real-time and minimize their companies’ liability risks.
We face competition from a variety of sources, including internal revenue cycle management departments within healthcare organizations, as these organizations are beginning to make internal investments in these departments to keep these services in-house. Additionally, other revenue cycle management providers exist and offer similar services through software vendors, traditional consultants, and information technology sources.
We face competition from a variety of sources, including internal revenue cycle management departments within healthcare organizations, as these organizations are beginning to make internal investments in these departments to keep these services in-house.
The DVM-800 is compatible with the patented VuLink® auto-activation technology and can be paired with a FirstVu HD body-worn camera. The Company also offers the DVM-800 Lite, an entry level system is a self-contained video recorder, microphone and digital storage system that is integrated into a rear-view mirror and is designed for law enforcement.
The Company also offers the DVM-800 Lite, an entry level system with a self-contained video recorder, microphone and digital storage system that is integrated into a rear-view mirror and is designed for law enforcement. The system can record up to two internal HD cameras.
Additionally, we have expanded into event security services where we provide the hardware and software to supplement private security for NASCAR races, football and other sporting events, concerts and other events where people gather. We continue to further expand our focus on private security, homeland security, mass transit, healthcare, general retail, educational, general consumer and other commercial markets.
We have since expanded our scope by pursuing the commercial fleet vehicle and mass transit markets. Additionally, we have expanded into event security services, where we provide the hardware and software to supplement private security for NASCAR races, football and other sporting events, concerts and other events where people gather.
Intellectual Property – Video Solutions Operating Segment Our video solutions operating segment’s ability to compete effectively will depend on our success in protecting our proprietary technology, both in the United States and abroad.
Intellectual Property – Video Solutions Operating Segment Our video solutions operating segment’s ability to compete effectively will depend on our success in protecting our proprietary technology, both in the United States and abroad. We have filed for patent protection in the United States and certain other countries to cover certain design aspects of our products.
Business Combination On June 1, 2023, the Company, entered into an Agreement and Plan of Merger (the “CLOE Merger Agreement”) with Clover Leaf Capital Corp., a Delaware corporation (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company (“Yntegra”), in the capacity as the representative from and after the effective time for the stockholders of Clover Leaf in accordance with the terms and conditions of the CLOE Merger Agreement (the “Sponsor” or the “Purchaser Representative”), and Kustom, with a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies.
Recent Developments Potential Business Combination - In June 2023, the Company, entered into an Agreement and Plan of Merger (the “Proposed Merger Agreement”) with Clover Leaf Capital Corp., a Delaware corporation (Nasdaq: CLOE) (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time (as defined in the Proposed Merger Agreement) for the stockholders of Clover Leaf in accordance with the terms and conditions of the Merger Agreement, and Kustom.
In that regard, we have several installations involving private security on cruise ships and similar markets. We believe there are many potential private uses of our product offerings.
We continue to further expand our focus on private security, homeland security, mass transit, healthcare, general retail, education, general consumer and other commercial markets. In that regard, we have several installations involving private security on cruise ships and similar markets. We believe there are many potential private uses of our product offerings.
For docking with the FirstVu HD body-worn cameras, Digital Ally offers a 12-bay docking station and Mini-Docks. The 12-bay docking station includes a 1TB local memory hard drive which simultaneously upload 4 hours of video from 12 FirstVu HD cameras within a 15-minute shift change and push configuration updates.
The 12-bay docking station includes a 1TB local memory hard drive which can simultaneously upload 4 hours of video from 12 FirstVu HD cameras within a 15-minute shift change and push configuration updates. The Mini-Dock is a single unit, portable smart dock that uploads video evidence to VuVault from a FirstVu HD body camera.
Intellectual Property – Revenue Cycle Management Operating Segment Our revenue cycle management’s operating segment’s ability to compete effectively primarily depends on our trade secrets and know-how and does not depend heavily on any proprietary technology or patents.
Moreover, no assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how. 9 Intellectual Property – Revenue Cycle Management Operating Segment Our revenue cycle management’s operating segment’s ability to compete effectively primarily depends on our trade secrets and know-how and does not depend heavily on any proprietary technology or patents.
ThermoVu has optional features such as facial recognition to improve facility security by restricting access based on temperature and/or facial recognition reasons. ThermoVu provides an instant pass/fail audible tone with its temperature display and controls access to facilities based on such results.
ThermoVu provides an instant pass/fail audible tone with its temperature display and controls access to facilities based on such results.
The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements.
In addition, our Entertainment Segment now includes live event production, including the recently acquired Country Stampede music festival and others. The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements.
AWS GovCloud platform is trusted by the Department of Justice, Defense Digital Services for the US Air Force, U.S. Department of Treasury, and U.S. Department of Homeland Security. Our products that are compatible with EVO Web include: FirstVu Pro, FirstVu II, FirstVu HD, QuickVu, EVO-HD, DVM-800 and DVM-800 Lite.
The AWS GovCloud platform is trusted by the Department of Justice, Defense Digital Services for the US Air Force, U.S. Department of Treasury, and U.S. Department of Homeland Security.
Prior to our VuLink ecosystem, officers had to manually activate each device while responding to emergency scenarios, a requirement that both decreased the usefulness of the existing camera systems and diverted officers’ attention during critical moments. 6 EVO Web and FleetVu Manager EVO Web is a web-based software, powered by and hosted on the AWS GovCloud platform, that enables police departments and security agencies to manage digital video evidence quickly and easily.
Prior to our VuLink ecosystem, officers had to manually activate each device while responding to emergency scenarios, a requirement that both decreased the usefulness of the existing camera systems and diverted officers’ attention during critical moments.
The Company offers the DVM-800, a continuation in the family of highly successful digital video mirrored (DVM) systems developed by the Company. The DVM-800 is a time-tested, compact, powerful and easy-to-use solution designed for law enforcement. The DVM-800 system has built-in road and driver facing cameras and can record up to two external HD cameras.
The DVM-800 is a time-tested, compact, powerful and easy-to-use solution designed for law enforcement. The DVM-800 system has built-in road and driver facing cameras and can record up to two external HD cameras. The DVM-800 is compatible with the patented VuLink® auto-activation technology and can be paired with a FirstVu HD body-worn camera.
Our entertainment operating segment primarily receives compensation for its services generally determined as a percentage of the face-value of the tickets being purchased. Our entertainment operating segment also provides customers with access to tickets which it has purchased or received in return for its sponsorship or partnership from the venue, event or owner.
Our entertainment operating segment primarily receives compensation for its services, generally determined as a percentage of the face-value of the tickets being purchased.
Body-Worn Digital Video System – FirstVu Pro, FirstVu II, and FirstVu HD for Law Enforcement and Private Security Digital Ally launched two next generation body-worn cameras and docking stations, refreshing the Company’s complete ecosystem of evidence recording devices.
An internal cell modem will allow for connectivity to the FleetVu Manager cloud-based system for commercial fleet tracking and monitoring, which is powered by AWS and real time metadata when in the field. 5 Body-Worn Digital Video System – FirstVu Pro, FirstVu II, and FirstVu HD for Law Enforcement and Private Security Digital Ally launched two next generation body-worn cameras and docking stations, refreshing the Company’s complete ecosystem of evidence recording devices.
The QuickVu docking stations provide a comprehensive and elegant solution for storing and charging body cameras while uploading video evidence to the cloud. QuickVu also allows for rapid reviewing of footage right from the interactive touchscreen display, and is available in eight or twenty-four individual docking bays.
QuickVu also allows for rapid reviewing of footage right from the interactive touchscreen display and is available in eight or twenty-four individual docking bays. For docking with the FirstVu HD body-worn cameras, Digital Ally offers a 12-bay docking station and Mini-Docks.
Within the suite, there are powerful mapping and reporting tools that are intended to optimize efficiency, serve as training tools for teams on safety, and, ultimately, generate a significant return on investment for the organization. 5 The EVO-HD has become the platform for a new family of in-car video solution products for the commercial markets.
Digital Ally offers a suite of data management web-based tools to assist fleet managers in the organization, archiving, and management of videos and telematics information. Within the suite, there are powerful mapping and reporting tools that are intended to optimize efficiency, serve as training tools for teams on safety, and, ultimately, generate a significant return on investment for the organization.
We were issued several patents in recent years, including a patent on our VuLink product that provides automatic triggering of our body-worn camera and our in-car video systems. No assurance can be given which, or any, of the patents relating to our existing technology will be issued from the United States or any foreign patent offices.
No assurance can be given which, or any, of the patents relating to our existing technology will be issued from the United States or any foreign patent offices.
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.
This segment’s direct expenses include the cost of tickets purchased for resale by the Company and held as inventory, credit card fees, ticketing platform expenses, website maintenance fees, and other administrative costs. In-Car Digital Video Mirror System for Law Enforcement – EVO-HD, DVM-800 and DVM-800 Lite In-car video systems for patrol cars are a necessity and have generally become standard.
The EVO-HD maximizes space and offers top-end reliability when paired with remote service capabilities. An internal cell modem will allow for connectivity to the VuVault.net cloud, powered by Amazon Web Services (“AWS”) and real time metadata when in the field.
An internal cell modem will allow for connectivity to EVO Web Portal, powered by Amazon Web Services (“AWS”) and real time metadata when in the field. 4 The Company offers the DVM-800, a continuation in the family of highly successful digital video mirrored (DVM) systems developed by the Company.
We also offer a variety of voluntary benefits that allow employees to select the options that meet their needs. Item 1A. Risk Factors. Not applicable.
We also offer a variety of voluntary benefits that allow employees to select the options that meet their needs. SOURCES AND AVAILABILITY OF RAW MATERIAL The Company purchases its raw materials from multiple suppliers and has a minimum of two suppliers for most of its material requirements.
Market and Industry Overview – Video Solutions Operating Segment Our video solutions segment has historically had a primary market of domestic and international law enforcement agencies. We have since expanded our scope by pursuing the commercial fleet vehicle and mass transit markets.
Our entertainment operating segment also provides customers with access to tickets which it has purchased or received in return for sponsorship or partnership from the venue, event or owner. 7 Market and Industry Overview – Video Solutions Operating Segment Our video solutions segment has historically had a primary market of domestic and international law enforcement agencies.
Removed
In the Merger, all of the issued and outstanding capital stock of Kustom immediately prior to the effective time shall no longer be outstanding and shall automatically be cancelled and shall cease to exist in exchange for the right for the Company to receive the Merger Consideration (as defined below).
Added
The EVO-HD maximizes space and offers top-end reliability when paired with remote service capabilities.
Removed
Upon consummation of the Business Combination, Clover Leaf will change its name to “Kustom Entertainment, Inc.” The aggregate merger consideration to be paid pursuant to the CLOE Merger Agreement to the Company as of immediately prior to the effective time will be an amount equal to (the “Merger Consideration”) (i) $125 million, minus (ii) the estimated consolidated indebtedness of Kustom as of the Closing (“Closing Indebtedness”).
Added
With the newly introduced body-worn cameras, Digital Ally also introduced two new QuickVu docking stations (QuickVu 8 and QuickVu 24), compatible with the FirstVu PRO and FirstVu II body-worn cameras. The QuickVu docking stations provide a comprehensive and elegant solution for storing and charging body cameras while uploading video evidence to the cloud.
Removed
The Merger Consideration to be paid to the Company will be paid solely by the delivery of new shares of Clover Leaf Class A Common Stock, each valued at $11.14 per share (the “Merger Consideration Shares”).
Added
EVO Web and FleetVu Manager EVO Web is a web-based software, powered by and hosted on the AWS GovCloud platform, that enables police departments and security agencies to manage digital video evidence quickly and easily.
Removed
The Closing Indebtedness (and the resulting Merger Consideration) is based solely on estimates determined shortly prior to the Closing and is not subject to any post-Closing true-up or adjustment. Kustom is comprised of TicketSmarter and Kustom 440, both currently wholly owned subsidiaries.
Added
Additionally, other revenue cycle management providers exist and offer similar services through software vendors, traditional consultants, and information technology sources. 8 Competition – Entertainment Operating Segment Our entertainment segment faces robust competition from several sources throughout the industry.
Removed
Both TicketSmarter and Kustom 440 will combine their management teams and focus on concerts, entertainment and garnering additional ticketing partnerships in 2024 and beyond. Kustom 440 and TicketSmarter will use their existing sponsorships and sports property partnerships to develop alternative entertainment options for consumers.
Added
As of December 31, 2024, Worldwide Re has not begun its planned operations. The Company has begun the termination of Worldwide Re and it is not likely that it will ever launch the operations of Worldwide Re.
Removed
The combined company will be known as Kustom Entertainment and will operate under the same management team as Kustom which is currently led by Stanton E. Ross, the current CEO of the Company. The transaction contemplates an equity value of $125 million for Kustom.
Added
However, government support for semiconductors and certain of our target markets including law enforcement and commercial vehicles, taxi-cab and private security operations may impact the size and growth rate of video solutions devices and these potential target markets.
Removed
The combined company is expected to have an implied initial pro forma equity value of approximately $222.2 million, with the proposed Business Combination expected to provide approximately $18.1 million in gross proceeds from the cash held in trust by Clover Leaf, assuming no redemptions.
Added
In recent years, there has been a trend in both the United States and abroad to support the adoption of electric vehicles and renewable energy due to increased concern regarding the effects of climate change.
Removed
Additionally, the Company will distribute to its shareholders 20% of the Merger Consideration Shares obtained in Kustom immediately following the closing of the Merger and intends to distribute the balance of such Merger Consideration Shares following a six-month lock-up period.
Added
Under the Trump administration, government support for law enforcement and certain of our potential target markets may or may not continue or may continue at lower levels than seen with the prior administration.

… 37 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+5 added−3 removed7 unchanged
Biggest changeIn connection with the Kompass Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing by and between the Company, as grantor, and Kompass, as grantee, and mortgaged its real property having an address of 14001 Marshall Drive, Lenexa, KS 66215. 11 On June 30, 2021, the Company completed the acquisition of a private medical billing company, through Nobility Healthcare, a majority owned subsidiary.
Biggest changeIn connection with the Kompass Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing by and between the Company, as grantor, and Kompass, as grantee, and mortgaged its real property having an address of 14001 Marshall Drive, Lenexa, KS 66215. 12 During the year ended December 31, 2024 the Company sold its building for $5,900,000 less closing costs of $36,634.
On April 30, 2021, the Company closed on the purchase and sale agreement to acquire a 71,361 square feet commercial office building located in Lenexa, Kansas which is intended to serve as the Company’s future office and warehouse needs for executive offices and for management and warehouse operations for the video solutions operating segment.
Item 2. Properties. On April 30, 2021, the Company closed on a purchase and sale agreement to acquire a 71,361 square feet commercial office building located in Lenexa, Kansas which was intended to serve as the Company’s future office and warehouse needs for executive offices and for management and warehouse operations for the video solutions operating segment.
Removed
Item 2. Properties. On May 13, 2020, the Company entered into an operating lease for new warehouse and office space which had served as its principal executive office and primary business location, prior to the completed building purchase. The Company plans to relocate the entertainment operating segment operations to this existing leased facility in 2023.
Added
The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $401,743 in the Consolidated Statement of Operations during the year ended December 31, 2024.
Removed
This facility contains approximately 16,531 square feet and is located at 15612 College Blvd, Lenexa, Kansas 66219. The lease terms, as amended, include no base rent for the first nine months and monthly payments ranging from $12,398 to $14,741 thereafter, with a termination date of December 31, 2026.
Added
As part of the sale agreement the Company leased the space back for a period of 6 months, ending February 12, 2025. The Company is searching for suitable facilities for its long-term needs.
Removed
Upon completion of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space. The lease terms include monthly payments ranging from $2,648 to $2,774 and terminate in July 2024. The Company plans to relocate the revenue cycle management operating segment acquired operations to existing owned or leased facilities upon termination of this operating lease.
Added
The Company entered into an operating lease with a third party on October 16, 2024, for office space used by the entertainment segment and temporarily by the video solutions segment. The terms of the lease include 36 monthly payments of $7,251.92 with a maturity date of October 31, 2027.
Added
The remaining lease term for the Company’s office space lease as of December 31, 2024 was thirty-four months. On June 30, 2021, the Company completed the acquisition of a private medical billing company, through Nobility Healthcare, a majority owned subsidiary. Upon completion of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space.
Added
The lease terms include monthly payments ranging from $2,648 to $2,774 and terminate in July 2024. The Company was responsible for property taxes, utilities, insurance and its proportionate share of common area costs related to this location. The lease term expired in July 2024 and was not renewed by the Company.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

4 edited+17 added−3 removed4 unchanged
Biggest changeCulp McCauley On May 31, 2022, the Company filed a lawsuit against Culp McAuley, Inc. (“defendant”) in the United States District Court for the District of Kansas. The lawsuit arises from the defendant’s multiple breaches of its obligations to the Company. The Company seeks monetary damages and injunctive relief based on certain conduct by the defendant.
Biggest changeOn May 31, 2022, the Company filed a lawsuit against Culp McAuley, Inc. (“Culp McAuley”) and four individuals (Brandon Culp, Campbell McAuley, Mark Depew and Larry Roberts, collectively the “defendants”) in the United States District Court for the District of Kansas, seeking monetary damages and injunctive relief based on certain conduct by the defendants.
On July 18, 2022, the defendant filed its Answer to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages. On August 8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and any and all liability.
On July 18, 2022, Culp McAuley filed its Answer to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages. On August 8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and any and all liability.
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.
However, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of the pending lawsuit or enforcement of the judgment will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.
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.
While the ultimate resolution is unknown, based on the information currently available, we do not expect that the pending lawsuit or the enforcement of the judgment will have a material adverse effect on our operations, financial condition or cash flows.
Removed
During the second quarter of 2023, we concluded that a $1.8 million loss related to the allegations is probable, with no conclusion on the remaining $2.2 million being a probable loss related to these claims.
Added
On December 20, 2022, the Company filed a motion for leave to file a second amended complaint to add additional claims against the defendants to avoid fraudulent transfers, to pierce the corporate veil of Culp McAuley, and for remedies related to the claims for fraudulent transfers and piercing the corporate veil.
Removed
Although we believe a further loss could be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the potential damages given that the dispute is yet to enter the discovery process.
Added
On December 22, 2022, the Court issued an Order granting the Company’s motion for leave to file a second amended complaint, which was filed with the Court on December 27, 2022. Because Culp McAuley’s original counsel withdrew, Culp McAuley was ordered to obtain new counsel on or before December 2, 2022.
Removed
We will continue to vigorously pursue these claims, and we continue to believe that we have valid grounds for recovery of the disputed deliverables. However, there can be no assurances as to the outcome of the dispute. 12 Item 4. Mine Safety Disclosures. Not applicable. PART II
Added
On December 5, 2022, the Court ordered that Culp McAuley show cause in writing by December 21, 2022, why the Court should not direct the Clerk to enter default against it. On December 22, 2022, the Court directed the Clerk to enter default against Culp McAuley.
Added
On February 21, 2023, the Clerk entered default against Culp McAuley. 13 In February and March, 2023, defendants Larry Roberts and Mark Depew filed separate motions to dismiss, respectively. The Company opposed both motions. On July 7, 2023, the Court issued an Order granting Roberts’ motion to dismiss and denying Depew’s motion to dismiss.
Added
On December 7, 2023, the Company filed an application for the Clerk’s entry of default against defendant Brandon Culp. On December 13, 2023, the Clerk entered default against Brandon Culp. On January 5, 2024, the Company filed a motion for summary judgment against defendants Campbell McAuley and Mark Depew.
Added
On the same date, the Company also filed separate motions for default judgment against Culp McAuley and Brandon Culp, respectively. On January 5, 2024, defendant Mark Depew filed a motion for summary judgment against the Company.
Added
On May 17, 2024, the Court issued Orders which, respectively, (i) granted defendant Mark Depew’s motion for summary judgment against the Company; (ii) denied the Company’s motion for summary judgment against Depew; (iii) granted the Company’s motion for summary judgment against defendant Campbell McAuley; and (iv) granted the Company’s motions for default judgment against defendants Culp McAuley and Brandon Culp.
Added
Finding that defendants Brandon Culp and Campbell McAuley were each the alter ego of Culp McAuley, on June 4, 2024, the Court entered judgment in favor of the Company in the amount of $3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”).
Added
The Company is currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover. On June 14, 2024, the Company filed a Notice of Appeal to the United States Court of Appeals for the Tenth Circuit from the Court’s May 17, 2024 Order that granted summary judgment in favor of Mark Depew.
Added
On December 10, 2024, the Company and Depew filed a Stipulation of Dismissal in the Tenth Circuit that ended the appeal after the Company and Depew reached a settlement. In March 2024, the Company filed a complaint against Larry Roberts (“defendant”) in the Superior Court of the State of California, County of Orange.
Added
The lawsuit arises from the defendant’s multiple breaches of his obligations to the Company. The Company seeks monetary damages based on certain conduct by the defendant. On May 28, 2024, the defendant filed a motion to strike portions of the complaint and a motion for demurrer.
Added
On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer. The Court further denied the defendant’s motion to strike in its entirety. A jury trial has been scheduled for October 19, 2026.
Added
As of December 31, 2024, while we are able to estimate a range of reasonably possible loss related to the Culp McCauley case (when taking into account, among other things, the uncertainty of recovering the judgment amount owed to the Company by Culp McAuley, Brandon Culp and Campbell McAuley, jointly and severally), our estimate of the aggregate reasonably possible could be the entire balance of the judgment.
Added
The Company has recorded an additional loss of $1,959,396 on this matter as of December 31, 2024 which together with the previously recorded losses in prior years, reduces the Company’s net exposure to zero at December 31, 2024.
Added
Our estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time, particularly if and as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding.
Added
Also, the matters underlying the reasonably possible loss will change from time to time. As a result, actual results may vary significantly from the current estimate.
Added
Item 4. Mine Safety Disclosures. Not applicable. 14 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−0 removed3 unchanged
Biggest changeAny future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and such other factors as our Board may deem relevant.
Biggest changeAny future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and such other factors as our Board may deem relevant. Securities Authorized for Issuance under Equity Compensation Plans Reference is made to “ Item 12.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock trades on the Nasdaq Capital Market under the symbol “DGLY”. Holders of Common Stock As of April 1, 2024 , we had approximately 164 shareholders of record for our Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock trades on the Nasdaq Capital Market under the symbol “DGLY”. Holders of Common Stock As of May 2, 2025, we had approximately 157 shareholders of record for our Common Stock.
Added
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters-Securities Authorized for Issuance under Equity Compensation Plans” for the information required by this item.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

112 edited+58 added−96 removed65 unchanged
Biggest changeSummary Financial Data Summarized financial information for the Company’s reportable business segments is provided for the years ended December 31, 2023, and 2022: Years Ended December 31, 2023 2022 Net Revenues: Video Solutions $ 7,471,285 $ 8,252,288 Revenue Cycle Management 6,713,678 7,886,107 Entertainment 14,063,381 20,871,500 Total Net Revenues $ 28,248,344 $ 37,009,895 Gross Profit (loss): Video Solutions $ 1,290,509 $ (1,250,277 ) Revenue Cycle Management 2,772,271 3,303,477 Entertainment 1,699,704 268,741 Total Gross Profit $ 5,762,484 $ 2,321,941 Operating Income (loss): Video Solutions $ (7,135,584 ) $ (9,278,721 ) Revenue Cycle Management 292,543 357,705 Entertainment (3,646,770 ) (7,369,241 ) Corporate (11,750,742 ) (13,443,001 ) Total Operating Income (Loss) $ (22,240,553 ) $ (29,733,258 ) Depreciation and Amortization: Video Solutions $ 836,699 $ 769,228 Revenue Cycle Management 104,352 128,082 Entertainment 1,277,186 1,279,369 Total Depreciation and Amortization $ 2,218,237 $ 2,176,679 Assets (net of eliminations): Video Solutions $ 26,396,559 $ 28,509,706 Revenue Cycle Management 2,260,376 2,201,570 Entertainment 6,324,211 11,190,491 Corporate 12,047,663 14,766,295 Total Identifiable Assets $ 47,028,809 $ 56,668,062 16 Segment net revenues reported above represent only sales to external customers.
Biggest changeEntertainment 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. 16 Comparison of the Year Ended December 31, 2024 and 2023 Summary Financial Data Summarized financial information for the Company’s reportable business segments is provided for the years ended December 31, 2024, and 2023: Years Ended December 31, 2024 2023 Net Revenues: Video Solutions $ 5,755,391 $ 7,471,285 Revenue Cycle Management 6,131,650 6,713,678 Entertainment 7,763,761 14,063,381 Total Net Revenues $ 19,650,802 $ 28,248,344 Gross Profit (loss): Video Solutions $ 2,722,894 $ 1,290,509 Revenue Cycle Management 2,365,314 2,772,271 Entertainment 401,124 1,699,704 Total Gross Profit $ 5,489,332 $ 5,762,484 Operating Income (loss): Video Solutions $ (1,199,855 ) $ (7,135,584 ) Revenue Cycle Management (3,818,614 ) 292,543 Entertainment (4,804,853 ) (3,646,770 ) Corporate (5,378,218 ) (11,750,742 ) Total Operating Income (Loss) $ (15,201,540 ) $ (22,240,553 ) Depreciation and Amortization: Video Solutions $ 598,895 $ 836,699 Revenue Cycle Management 106,878 104,352 Entertainment 1,316,541 1,277,186 Total Depreciation and Amortization $ 2,022,314 $ 2,218,237 Assets (net of eliminations): Video Solutions $ 12,804,820 $ 26,396,559 Revenue Cycle Management 1,771,850 2,260,376 Entertainment 5,741,116 6,324,211 Corporate 7,418,787 12,047,663 Total Identifiable Assets $ 27,736,573 $ 47,028,809 The segments recorded noncash items affecting the gross profit and operating income (loss) through the established inventory reserves based on estimates of excess and/or obsolete current and non-current inventory.
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 charges 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.
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.
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.
Our performance obligations consist of (i) products, (ii) professional services, and (iii) extended warranties. 30 The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services to the customer.
The decrease in revenue cycle management operating segment cost of service revenue is commensurate with the decline in revenues due certain loss generating services being eliminated during the year.
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.
This is in connection with the convertible notes issued during the year ended December 31, 2023, the conversion from debt to equity and cash settlement of debt during the period.
This is in connection with the convertible notes issued during the year ended December 31, 2023, and the related conversion from debt to equity and cash settlement of the convertible debt during the 2023 period.
The decrease in the inventory reserve is primarily due to the disposal of obsolete inventory that was included in the reserves during 2022. 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.
The decrease in the inventory reserve is primarily due to the disposal of obsolete inventory that was included in the reserves during 2024. 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.
Nobility Healthcare completed its first acquisition in June 2021, when it acquired a private medical billing company, and have since completed three additional acquisitions of private medical billing companies, in which we will assist in providing working capital and back-office services to healthcare organizations throughout the country.
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.
We have no recorded liability as of December 31, 2023, 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.
We have no recorded liability as of 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.
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.
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.
We continue to experience increased interest in our cloud solutions for law enforcement primarily due to the deployment of our cloud-based EVO-HD in-car system and our next generation body-worn camera products, which contributed to our increased cloud revenues in the year ended December 31, 2023.
We continue to experience increased interest in our cloud solutions for law enforcement primarily due to the deployment of our cloud-based EVO-HD in-car system and our next generation body-worn camera products, which contributed to our increased cloud revenues in the year ended December 31, 2024.
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.
As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statement of operations as the change in fair value of warrant derivative liabilities.
We determined that it was appropriate to continue the full valuation allowance on net deferred tax assets as of December 31, 2023 and 2022 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 December 31, 2023.
We determined that it was appropriate to continue the full valuation allowance on net deferred tax assets as of December 31, 2024 and 2023 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 December 31, 2024.
We determined that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of December 31, 2023, because of the overall net operating loss carryforwards available.
We determined that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of December 31, 2024, because of the overall net operating loss carryforwards available.
See Item 3, “Legal Proceedings,” of this Annual Report on Form 10-K for information on our litigation. 31 401 (k) Plan. The Company sponsors a 401(k) retirement savings plan for the benefit of its employees.
See Item 3, “Legal Proceedings,” of this Annual Report on Form 10-K for information on our litigation. 29 401 (k) Plan. The Company sponsors a 401(k) retirement savings plan for the benefit of its employees.
We review all significant, unusual, or nonstandard shipments of products or delivery of services as a routine part of our accounting and financial reporting process to determine compliance with these requirements.
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.
The effective tax rate for both 2023 and 2022 varied from the expected statutory rate due to our continuing to provide a 100% valuation allowance on net deferred tax assets.
The effective tax rate for both 2024 and 2023 varied from the expected statutory rate due to our continuing to provide a 100% valuation allowance on net deferred tax assets.
While the selection and application of any accounting policy may involve some level of subjective judgments and estimates, we believe the following accounting policies are the most critical to our financial statements, potentially involve the most subjective judgments in their selection and application, and are the most susceptible to uncertainties and changing conditions: ● Revenue Recognition / Allowance for Doubtful Accounts; ● Allowance for Excess and Obsolete Inventory; ● Goodwill and other intangible assets; ● Warranty Reserves; ● Stock-based Compensation Expense; ● Fair value of warrants; ● Fair value of assets and liabilities acquired in business combinations; ● Accounting for Income Taxes; and ● Redeemable Preferred Stock.
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; and ● Accounting for Income Taxes.
Revenues of this segment are recognized after we perform our obligations of our revenue cycle management services. Our revenue cycle management segment is services performed and such services are charged monthly, generally based on a contractual percentage of total customer collections, for which we recognize our net service fees.
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.
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.
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; 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.
Cost of service revenues as a percentage of product revenues for the revenue cycle management operating segment increased to 59% for the year ended December 31, 2023 as compared to 58% for the year ended December 31, 2022. The decrease in entertainment operating segment cost of service revenues is due to management right sizing the business working towards profitability.
Cost of service revenues as a percentage of product revenues for the revenue cycle management operating segment increased to 61% for the year ended December 31, 2024 as compared to 59% for the year ended December 31, 2023. The decrease in entertainment operating segment cost of service revenues is due to management right sizing the business working towards profitability.
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. Identifiable assets are those assets used by each segment in its operations.
Segment operating income, which is used in management’s evaluation of segment performance, represents net revenues, less cost of revenues, less all operating expenses. Identifiable assets are those assets used by each segment in its operations.
Cost of product sold as a percentage of product revenues for the video solutions segment decreased to 112% for the year ended December 31, 2023 as compared to 154% for the year ended December 31, 2022. The decrease in entertainment operating segment cost of product sold directly correlates to the lower product revenues for the year ended December 31, 2023.
Cost of product sold as a percentage of product revenues for the video solutions segment decreased to 89% for the year ended December 31, 2024 as compared to 112% for the year ended December 31, 2023. The decrease in entertainment operating segment cost of product sold directly correlates to the lower product revenues for the year ended December 31, 2024.
Our goal is to improve our margins over the longer term based on the expected margins generated by our new recent revenue cycle management and entertainment operating segments together with our video solutions operating segment and its expected margins from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, Shield TM disinfectants and our cloud evidence storage and management offering, provided that they gain traction in the marketplace.
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.
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. Stock-based Compensation Expense .
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.
Gain on Extinguishment of Liabilities Gain on extinguishment of liabilities increased to $550,867 for the year ended December 31, 2023, from $-0- during the year ended December 31, 2022, which reflects income related to the entertainment segment’s ability to negotiate down payables and contract liabilities during the period.
The gain on extinguishment of liabilities was $550,867 for the year ended December 31, 2023, which reflects income related to the entertainment segment’s ability to negotiate down payables and contract liabilities during the period.
Overall cost of goods sold for products as a percentage of product revenues for the years ended December 31, 2023, and 2022 were 107% and 131%, respectively.
Overall cost of goods sold for products as a percentage of product revenues for the years ended December 31, 2024, and 2023 were 109% and 107%, respectively.
Overall cost of goods sold for services as a percentage of service revenues for the years ended December 31, 2023, and 2022 were 66% and 78%, respectively.
Overall cost of goods sold for services as a percentage of service revenues for the years ended December 31, 2024, and 2023 were 58% and 66%, respectively.
As a result, the noncontrolling shareholders or minority interest is allocated 49% of the income/loss of Nobility Healthcare which is reflected in the statement of income (loss) as “net income (loss) attributable to noncontrolling interests of consolidated subsidiary”.
Net Income Attributable to Noncontrolling Interests of Consolidated Subsidiary The Company owns a 51% equity interest in its consolidated subsidiary, Nobility Healthcare. As a result, the noncontrolling shareholders or minority interest is allocated 49% of the income/loss of Nobility Healthcare which is reflected in the statement of income (loss) as “net income (loss) attributable to noncontrolling interests of consolidated subsidiary”.
For the Years Ended December 31, 2023 and 2022 Results of Operations Summarized immediately below and discussed in more detail in the subsequent sub-sections is an analysis of our operating results for the years ended December 31, 2023 and 2022, represented as a percentage of total revenues for each respective year: Years Ended December 31, 2023 2022 Revenue 100 % 100 % Cost of revenue 80 % 94 % Gross profit 20 % 6 % Selling, general and administrative expenses: Research and development expense 9 % 6 % Selling, advertising and promotional expense 25 % 25 % General and administrative expense 65 % 55 % Total selling, general and administrative expenses 99 % 86 % Operating loss (79 )% (80 )% Change in fair value of derivative liabilities 7 % 18 % Change in fair value of contingent consideration promissory notes and earn-out agreements 1 % 1 % Gain on extinguishment of warrant derivative liability — % 10 % Loss on accrual for legal settlement (6 )% — % Loss on extinguishment of convertible debt (4 )% — % Gain on extinguishment of debt 2 % — % Gain on sale of property, plant and equipment — % 1 % Interest expense (11 )% — % Interest income and other income, net 1 % (1 )% Loss before income tax benefit (89 )% (51 )% Income tax expense (benefit) — % — % Net loss (89 )% (51 )% Net loss attributable to noncontrolling interests of consolidated subsidiary (1 )% (1 )% Loss on redemption – Series A & B convertible redeemable preferred stock — % (6 )% Net loss attributable to common stockholders (90 )% (58 )% Net loss per share information: Basic $ (9.22 ) $ (8.50 ) Diluted $ (9.22 ) $ (8.50 ) 18 Revenues 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.
For the Years Ended December 31, 2024 and 2023 Results of Operations Summarized immediately below and discussed in more detail in the subsequent sub-sections is an analysis of our operating results for the years ended December 31, 2024 and 2023, represented as a percentage of total revenues for each respective year: Years Ended December 31, 2024 2023 Revenue 100 % 100 % Cost of revenue 72 % 80 % Gross profit 28 % 20 % Selling, general and administrative expenses: Research and development expense 7 % 9 % Selling, advertising and promotional expense 11 % 25 % General and administrative expense 63 % 65 % Goodwill and intangible asset impairment charge 24 % — % Total selling, general and administrative expenses 105 % 99 % Operating loss (77 )% (79 )% Change in fair value of derivative liabilities (6 )% 7 % Change in fair value of contingent consideration promissory notes and earn-out agreements — % 1 % Loss on disposal of intangible assets (1 )% — % Loss on litigation (10 )% (6 )% Loss on extinguishment of debt (4 )% (4 )% Gain on extinguishment of liabilities 5 % 2 % Gain on sale of property, plant and equipment 2 % — % Interest expense (19 )% (11 )% Interest income and other income, net — % 1 % Loss before income tax benefit (110 )% (89 )% Income tax expense (benefit) — % — % Net loss (110 )% (89 )% Net (loss) income attributable to noncontrolling interests of consolidated subsidiary 10 % (1 )% Net loss attributable to common stockholders (100 )% (90 )% Net loss per share information: Basic $ (5.58 ) $ (9.22 ) Diluted $ (5.58 ) $ (9.22 ) 18 Revenues 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.
Basic and Diluted Income/(Loss) per Share The basic and diluted income/(loss) per share was ($9.22) and ($8.50) for the years ended December 31, 2023 and 2022, respectively, for the reasons previously noted.
Basic and Diluted Income/(Loss) per Share The basic and diluted income/(loss) per share was ($5.58) and ($9.22) for the years ended December 31, 2024 and 2023, respectively, for the reasons previously noted.
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. 35 Our most recent annual impairment test of goodwill conducted as of December 31, 2023, indicated no impairment.
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.
Cost of service revenues as a percentage of service revenues for the video solutions segment increased to 43% for the year ended December 31, 2023 as compared to 41% for the year ended December 31, 2022.
Cost of service revenues as a percentage of service revenues for the video solutions segment decreased to 33% for the year ended December 31, 2024 as compared to 43% for the year ended December 31, 2023.
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.
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.
We reported net income (loss) attributable to noncontrolling interests of consolidated subsidiary of $224,598 and $407,933 for the years ended December 31, 2023 and 2022, respectively.
We reported net income (loss) attributable to noncontrolling interests of consolidated subsidiary of $(1,871,578) and $224,598 for the years ended December 31, 2024 and 2023, respectively.
Revenues of this segment include ticketing service charges generally determined as a percentage of the face value of the underlying ticket and ticket sales from our ticket inventory which are recognized when the underlying tickets are sold along with tickets, concession, merchandise, and other sales from the live events produced by this segment.
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.
Cost of products sold by operating segment is as follows: Years Ended December 31, 2023 2022 Cost of Product Revenues: Video Solutions $ 4,824,967 $ 8,332,484 Revenue Cycle Management — — Entertainment 5,149,923 6,039,631 Total Cost of Product Revenues $ 9,974,890 $ 14,372,115 The decrease in cost of goods sold for our video solutions segment products is due to numerous factors including a sizeable increase in the allowance for excess and obsolete inventory in 2022, mostly surrounding the personal protective equipment product line.
Cost of products sold by operating segment is as follows: Years Ended December 31, 2024 2023 Cost of Product Revenues: Video Solutions $ 1,780,284 $ 4,824,967 Revenue Cycle Management — — Entertainment 4,118,846 5,149,923 Total Cost of Product Revenues $ 5,899,130 $ 9,974,890 The decrease in cost of goods sold for our video solutions segment products is due to numerous factors including a sizeable decrease in the allowance for excess and obsolete inventory in 2024, mostly surrounding the personal protective equipment product line.
Based on a review of our deferred tax assets and recent operating performance, we determined that our valuation allowance should be increased by $ 7,870,000 to a balance of $42,070,000 to fully reserve our deferred tax assets at December 31, 2023.
Based on a review of our deferred tax assets and recent operating performance, we determined that our valuation allowance should be increased by $4,680,000 to a balance of $46,290,000 to fully reserve our deferred tax assets at December 31, 2024.
Finished goods balances were $5,322,693 and $7,816,618 for the years ended December 31, 2023 and December 31, 2022, respectively, a decrease of $2,493,925 (32%) which was attributable to a reduction in inventory for the video solutions product lines and a large decrease in ticket inventory for the newly acquired entertainment segment.
Finished goods balances were $2,161,011 and $5,322,693 for the years ended December 31, 2024 and December 31, 2023, respectively, a decrease of $3,161,682 (59%) which was attributable to a reduction in inventory for the video solutions product lines and a large decrease in ticket inventory for the newly acquired entertainment segment.
We do not believe that our business is seasonal in nature; however, we generally generate higher revenues during the second half of the calendar year compared to the first half. Item 7a. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.
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. Item 7a. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.
Our recurring losses and level of cash used in operations, along with uncertainties concerning our ability to raise additional capital, raise substantial doubt about our ability to continue as a going concern. 27 Our Common Stock is currently listed on The Nasdaq Capital Market.
Our recurring losses and level of cash used in operations, along with uncertainties concerning our ability to raise additional capital, raise substantial doubt about our ability to continue as a going concern.
As reflected above, our inventory reserves represented 54.2% of the gross inventory balance as of December 31, 2023, compared to 44.5% of the gross inventory balance as of December 31, 2022. We had $4,542,461 and $5,489,541in reserves for obsolete and excess inventories as of December 31, 2023 and 2022, respectively.
As reflected above, our inventory reserves represented 46% of the gross inventory balance at December 31, 2024, compared to 54% of the gross inventory balance at December 31, 2023. We had $2,169,655 and $4,542,461 in reserves for obsolete and excess inventories at December 31, 2024 and 2023, respectively.
All outstanding stock options and common stock purchase warrants were considered antidilutive and therefore excluded from the calculation of diluted loss per share for the years ended December 31, 2023 and 2022 because all potentially dilutive securities during 2023 had exercise prices in excess of the market value of the company’s common stock and because of the net loss reported for 2023.
All outstanding stock options and common stock purchase warrants were considered antidilutive and therefore excluded from the calculation of diluted loss per share for the years ended December 31, 2024 and 2023 because all potentially dilutive securities were excluded from the computation because of the net loss reported for both 2024 and 2023.
The Entertainment cost of service revenue was $7,213,754 for the year ended December 31, 2023, compared to $14,563,128 for the year ended December 31, 2022. Cost of service revenues as a percentage of service revenues for the entertainment segment decreased to 80% for the year ended December 31, 2023 as compared to 95% for the year ended December 31, 2022.
The Entertainment cost of service revenue was $3,243,791 for the year ended December 31, 2024, compared to $7,213,754 for the year ended December 31, 2023. Cost of service revenues as a percentage of service revenues for the entertainment segment decreased to 74% for the year ended December 31, 2024 as compared to 80% for the year ended December 31, 2023.
Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information on the nature, frequency, and average cost of claims. We actively study trends of claims and take action to improve product quality and minimize claims.
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.
We expect this trend to continue for 2024 as the migration from local storage to cloud storage continues in our customer base. ● Video solutions operating segment revenues from extended warranty services were $860,337 and $692,017 for the years ended December 31, 2023 and 2022, respectively, an increase of $168,320 (24%).
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 $822,839 and $860,337 for the years ended December 31, 2024 and 2023, respectively, a decrease of $37,498 (4%).
T his correlates with consistent sales of hardware and additional extended warranties sold during the year . ● Our entertainment operating segment generated service revenues totaling $9,018,805 and $15,272,697 for the years ended December 31, 2023 and 2022, respectively, a decrease of $6,253,892 (41%).
T his correlates with consistent sales of hardware and additional extended warranties sold during the year . ● Our entertainment operating segment generated service revenues totaling $4,356,833 and $9,018,805 for the years ended December 31, 2024 and 2023, respectively, a decrease of $4,661,972 (52%).
We are actively managing the level of inventory and our goal is to reduce such level during 2024 by our sales activities, the increase of which should provide additional cash flow to help support our operations during 2024. Capital Expenditures .
Inventory represents $2,586,066 of our net working capital at December 31, 2024. We are actively managing the level of inventory and our goal is to reduce such level during 2025 by our sales activities, the decrease of which should provide additional cash flow to help support our operations during 2025.
We intend to collect our outstanding receivables on a timely basis and reduce the overall level during 2024, which would help to provide positive cash flow to support our operations during 2024. Inventory represented $3,845,281 of our net working capital as of December 31, 2023.
Accounts receivable and other receivables balances represented $5,446,098 of our net working capital at December 31, 2024. We intend to collect our outstanding receivables on a timely basis and reduce the overall level during 2025, which would help to provide positive cash flow to support our operations during 2025.
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. 32 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.
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.
Current Trends and Recent Developments for the Company 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.
This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations 15 Current Trends and Recent Developments for the Company 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.
The decrease in the inventory reserve is primarily due to disposal of obsolete inventory previously reserved. 34 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.
We believe the reserves are appropriate given our inventory levels as of December 31, 2024. 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.
The entertainment operating segment generated $5,044,576 in product revenues for the year ended December 31, 2023, compared to $5,598,803 for the fiscal year ended December 31, 2022.
The new entertainment operating segment generated $3,406,928 in product revenues for the year ended December 31, 2024, compared to $5,044,576 for the year ended December 31, 2023.
This segment generates revenues our subscription models offering cloud and warranty solutions, and hardware sales for video and personal protective safety products and solutions. Revenues for product sales are recognized upon delivery of the product, and revenues from our cloud and warranty subscription plans are deferred over the term of the subscription, typically 3 or 5 years.
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.
The plan, as amended, requires the Company to provide 100% matching contributions for employees, who elect to contribute up to 3% of their compensation to the plan and 50% matching contributions for employee’s elective deferrals on the next 2% of their contributions.
The plan, as amended, requires it to provide 100% matching contributions for employees, who elect to contribute up to 3% of their compensation to the plan and 50% matching contributions for employee’s elective deferrals on the next 2% of their contributions. The Company made matching contributions totaling $144,589 and $207,463 for the years ended December 31, 2024 and 2023, respectively.
The Company made matching contributions totaling $207,463 and $223,084 for the years ended December 31, 2023 and 2022, respectively. Each participant is 100% vested at all times in employee and employer matching contributions. Critical Accounting Estimates Our significant accounting policies are summarized in Note 1, “Nature of Business and Summary of Significant Accounting Policies ,” to our consolidated financial statements.
Each participant is 100% vested at all times in employee and employer matching contributions. Critical Accounting Estimates Our significant accounting policies are summarized in Note 1, “Nature of Business and Summary of Significant Accounting Policies ,” to our consolidated financial statements.
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 Overall selling, general and administrative expenses were $28,003,037 and $32,055,199 for the years ended December 31, 2023 and 2022, respectively, a decrease of $4,052,162 (13%).
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 $20,690,872 and $28,003,037 for the year ended December 31, 2024 and 2023, respectively, a decrease of $7,312,165 (26%).
We believe the reserves are appropriate given our inventory levels as of December 31, 2023. Cost of Service Revenue Overall cost of service revenue sold for the years ended December 31, 2023, and 2022 was $12,510,970 and $20,315,839, respectively, a decrease of $7,804,869 (38%).
We believe the reserves are appropriate given our inventory levels as of December 31, 2024. Cost of Service Revenue Overall cost of service revenue sold for the years ended December 31, 2024, and 2023 was $8,262,340 and $12,510,970, respectively, a decrease of $4,248,630 (34%).
Product revenues by operating segment is as follows: Years ended December 31, 2023 2022 Product Revenues: Video Solutions $ 4,303,369 $ 5,401,089 Revenue Cycle Management — — Entertainment 5,044,576 5,598,803 Total Product Revenues $ 9,347,495 $ 10,999,892 Product revenues for the years ended December 31, 2023 and 2022 were $9,347,495 and $10,999,892, respectively, a decrease of $1,651,947 (15%), due to the following factors: ● Revenues generated by the entertainment operating segment began with the Company’s acquisition of TicketSmarter on September 1, 2021.
Product revenues by operating segment is as follows: Years ended December 31, 2024 2023 Product Revenues: Video Solutions $ 1,997,389 $ 4,303,369 Revenue Cycle Management — — Entertainment 3,406,928 5,044,576 Total Product Revenues $ 5,404,317 $ 9,347,945 Product revenues for the years ended December 31, 2024 and 2023 were $5,404,317 and $9,347,945, respectively, a decrease of $3,943,628 (42.2%), due to the following factors: ● Revenues generated by the entertainment operating segment began with the Company’s September 2021 acquisition of TicketSmarter.
Additionally, our law enforcement revenues declined over the year ended December 31, 2023 and 2022 due to price-cutting and competitive actions by our competitors, adverse marketplace effects related to our patent litigation proceedings and our recent financial condition. ● Our video solutions operating segment management has continued to focus on migrating commercial customers, from a hardware sale to a service fee model.
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. 20 ● Our video solutions operating segment management has continued to focus on migrating commercial customers, from a hardware sale to a service fee model.
If successful, we believe that these new market channels could yield recurring service revenues for us in the future. 17 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.
Corporate assets primarily consist of cash, property, plant and equipment, accounts receivable, inventories, and other assets. 17 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.
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 offers.
During 2023, the Company issued detachable warrants to purchase a total of 1,125,000 shares of Common Stock in association with the two secured convertible notes. The Company issued an additional 1,195,219 warrants in June 2024. The underlying warrant terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain circumstances.
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, we will track historical bad debts and continue to assess appropriate reserves.
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. Allowance for Excess and Obsolete Inventory.
Inventories consisted of the following as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Raw material and component parts $ 3,044,653 $ 4,509,165 Work-in-process 20,396 3,164 Finished goods – video solutions 4,623,489 6,846,091 Finished goods – entertainment 699,204 970,527 Subtotal 8,387,742 12,328,947 Reserve for excess and obsolete inventory – video solutions (4,355,666 ) (5,230,261 ) Reserve for excess and obsolete inventory – entertainment (186,795 ) (259,280 ) Total inventories $ 3,845,281 $ 6,839,406 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.
Inventories consisted of the following at December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Raw material and component parts– video solutions segment $ 2,589,804 $ 3,044,653 Work-in-process– video solutions segment 4,906 20,396 Finished goods – video solutions segment 1,655,317 4,623,489 Finished goods – entertainment segment 505,694 699,204 Subtotal 4,755,721 8,387,742 Reserve for excess and obsolete inventory– video solutions segment (2,037,252 ) (4,355,666 ) Reserve for excess and obsolete inventory – entertainment segment (132,403 ) (186,795 ) Total inventories $ 2,586,066 $ 3,845,281 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.
This is in connection with the ongoing lawsuit with Culp McCauley, Inc. Loss on Conversion of Convertible Debt The Company recognized a loss on conversion of convertible debt of $1,112,705 and $-0- during the year ended December 31, 2023 and 2022, respectively.
Loss on Litigation The Company recognized a loss on litigation of $1,959,396 and $1,792,308 during the years ended December 31, 2024 and 2023, respectively. This is in connection with the ongoing lawsuit with Culp McCauley, Inc.
Cash, cash equivalents and restricted cash: As of December 31, 2023, we had cash, cash equivalents and restricted cash with an aggregate balance of $778,149, a decrease from a balance of $3,532,199 for the year December 31, 2022.
Cash, cash equivalents: As of December 31, 2024, we had cash and cash equivalents with an aggregate balance of $454,314, a decrease from a balance of $778,149 (including restricted cash) at December 31, 2023.
Summarized immediately below and discussed in more detail in the subsequent subsections are the main elements of the $2,754,050 net decrease in cash during the year ended December 31, 2023: ● Operating activities : $9,893,838 of net cash used in operating activities.
Summarized immediately below and discussed in more detail in the subsequent subsections are the main elements of the $323,835 net decrease in cash during the year ended December 31, 2024: ● Operating activities : Net cash used in operating activities was $5,114,718 and $9,893,838 for the years ended December 31, 2024 and 2023, respectively, an improvement of $4,779,120.
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.
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.
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 December 31, 2023, cumulative valuation allowances in the amount of $42,070,000 were recorded in connection with the net deferred income tax assets.
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 December 31, 2024, we have fully reserved all of our deferred tax assets.
We recorded $4,542,461 and $5,489,541 in reserves for obsolete and excess inventories for the years ended December 31, 2023 and 2022, respectively. Total raw materials and component parts were $3,044,653 and $4,509,165 for the years ended December 31, 2023 and 2022, respectively, a decrease of $1,464,512 (32%).
We recorded $2,169,655 and $4,542,461 in reserves for obsolete and excess inventories for the years ended December 31, 2024 and 2023, respectively. Total raw materials and component parts were $2,589,804 and $3,044,653 for the years ended December 31, 2024 and 2023, respectively, a decrease of $454,849 (15%).
Net Loss Attributable to Common Stockholders As a result of the above, we reported a net loss of $25,688,547 and $21,666,691 for the years ended December 31, 2023 and 2022, respectively, a decline of $4,021,856 (19%).
Net Loss Attributable to Common Stockholders As a result of the above, we reported a net loss of $19,844,147 and $25,688,547 for the years ended December 31, 2024 and 2023, respectively, an improvement of $5,844,400 (23%).
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.
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.
This is primarily driven by large inventory reserve being established in 2022, a focus on right sizing recent acquisitions to increase profitability and a transition to a service subscription-based model in our video solutions segment.
This is primarily driven by large head-count reductions in our work force during the year ended December 31, 2024, a focus on right sizing recent acquisitions to increase profitability and a transition to a service subscription-based model in our video solutions segment.
The following sets forth the operating lease right of use assets and liabilities as of December 31, 2023: Assets: Operating lease right of use assets $ 1,053,159 Liabilities: Operating lease obligations-current portion $ 279,538 Operating lease obligations-less current portion $ 827,836 Total operating lease obligations $ 1,107,374 Following are the minimum lease payments for each year and in total.
The following sets forth the operating lease right of use assets and liabilities as of December 31, 2024: Assets: Operating lease right of use assets $ 718,509 Liabilities: Operating lease obligations-current portion 158,304 Operating lease obligations-less current portion 560,205 Total operating lease obligations $ 718,509 Following are the minimum lease payments for each year and in total.
The following table presents revenues by type and segment: Year Ended December 31, 2023 % Change 2022 Product revenues: Video solutions $ 4,303,369 (20.3 )% $ 5,401,089 Entertainment 5,044,576 (9.9 )% 5,598,803 Total product revenues 9,347,945 (15.0 )% 10,999,892 Service and other revenues: Video solutions 3,167,916 11.1 % 2,851,199 Entertainment 9,018,805 (40.9 )% 15,272,697 Revenue cycle management 6,713,678 (14.9 )% 7,886,107 Total service and other revenues 18,900,399 (27.3 )% 26,010,003 Total revenues $ 28,248,344 (23.7 )% $ 37,009,895 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.
The following table presents revenues by type and segment: Year Ended December 31, 2024 % Change 2023 Product revenues: Video solutions $ 1,997,389 (53.6 )% $ 4,303,369 Entertainment 3,406,928 (32.5 )% 5,044,576 Total product revenues 5,404,317 (42.2 )% 9,347,945 Service and other revenues: Video solutions 3,758,002 18.6 % 3,167,916 Entertainment 4,356,833 (51.7 )% 9,018,805 Revenue cycle management 6,131,650 (8.7 )% 6,713,678 Total service and other revenues 14,246,485 (24.6 )% 18,900,399 Total revenues $ 19,650,802 (30.4 )% $ 28,248,344 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.
Income/(Loss) before Income Tax Benefit As a result of the above, we reported a net income/(loss) before income tax benefit of ($25,463,949) and ($18,873,758) for the years ended December 31, 2023 and 2022, respectively, a decline of $6,590,191 (35%). 26 Income Tax Benefit We recorded an income tax benefit of $-0- for the years ended December 31, 2023 and 2022, respectively.
Loss before Income Tax Benefit As a result of the above, we reported a net loss before income tax benefit of $21,715,725 and $25,463,949 for the years ended December 31, 2024 and 2023, respectively, an improvement of $3,748,224 (15%). Income Tax Benefit We recorded an income tax benefit of $-0- for the years ended December 31, 2024 and 2023, respectively.
Cost of service revenues by operating segment is as follows: Years Ended December 31, 2023 2022 Cost of Service Revenues: Video Solutions $ 1,355,809 $ 1,170,081 Revenue Cycle Management 3,941,407 4,582,630 Entertainment 7,213,754 14,563,128 Total Cost of Service Revenues $ 12,510,970 $ 20,315,839 22 The increase in cost of service revenues for our video solutions segment is commensurate with the increase in service revenues in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cost of service revenues by operating segment is as follows: Years Ended December 31, 2024 2023 Cost of Service Revenues: Video Solutions $ 1,252,213 $ 1,355,809 Revenue Cycle Management 3,766,336 3,941,407 Entertainment 3,243,791 7,213,754 Total Cost of Service Revenues $ 8,262,340 $ 12,510,970 22 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 year ended December 31, 2024 compared to the year ended December 31, 2023.
Gross profit by operating segment was as follows: Years Ended December 31, 2023 2022 Gross Profit: Video Solutions $ 1,290,509 $ (1,250,278 ) Revenue Cycle Management 2,772,271 3,303,477 Entertainment 1,699,704 268,742 Total Gross Profit $ 5,762,484 $ 2,321,941 The increase is attributable to the decrease in cost of goods sold across our video and entertainment segments for the year ended December 31, 2023, as there was an overall decrease in the cost of sales as a percentage of overall revenues to 80% for the year ended December 31, 2023 from 94% for the year ended December 31, 2022.
Gross profit by operating segment was as follows: Years Ended December 31, 2024 2023 Gross Profit: Video Solutions $ 2,722,894 $ 1,290,509 Revenue Cycle Management 2,365,314 2,772,271 Entertainment 401,124 1,699,704 Total Gross Profit $ 5,489,332 $ 5,762,484 The decrease is commensurate with the decrease in overall revenues offset by a decrease in cost of goods sold across our video and entertainment segment for the year ended December 31, 2024.
Total revenues for the years ended December 31, 2023, and 2022 were $28,248,344 and $37,009,895, respectively, a decrease of $8,761,551 (24%), due to the reasons noted above. 21 Cost of Product Revenue Overall cost of product revenue sold for the years ended December 31, 2023, and 2022 was $9,974,890 and $14,372,115, respectively, a decrease of $4,397,225 (31%).
Total revenues for the years ended December 31, 2024, and 2023 were $19,650,802 and $28,248,344, respectively, a decrease of $8,597,542 (30%), due to the reasons noted above. 21 Cost of Product Revenue Overall cost of product revenue sold for the years ended December 31, 2024, and 2023 was $5,899,130 and $9,974,890, respectively, a decrease of $4,075,760 (41%).
The change in fair value of the warrant derivative liabilities during year ended December 31, 2023 totaled $1,846,642, compared to $6,726,638 for the year ended December 31, 2022, which was recognized as a gain on the Consolidated Statements of Operations.
Change in Fair Value of Derivative Liabilities The change in fair value of the warrant derivative liabilities for the years ended December 31, 2024 and 2023, respectively totaled a loss of $1,240,407 during the year ended December 31, 2024 as compared to a gain of $1,846,642 during the year ended December 31, 2023.
Cost of Product Revenues were $5,149,923 and $6,039,631 for the year ended December 31, 2023 and 2022, a decrease of $889,708 (15%). Cost of product sold as a percentage of product revenues for the entertainment segment decreased to 102% for the year ended December 31, 2023 as compared to 108% for the year ended December 31, 2022.
Cost of Product Revenues were $4,118,846 and $5,149,923 for the year ended December 31, 2024 and 2023, a decrease of $1,031,077 (20%). Cost of product sold as a percentage of product revenues for the entertainment segment increased to 121% for the year ended December 31, 2024 as compared to 102% for the year ended December 31, 2023.

… 186 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7a. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8. Financial Statements and Supplementary Data 38 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 38 Item 9A Controls and Procedures 38 Item 9B. Other Information 39
Biggest changeItem 7a. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8. Financial Statements and Supplementary Data 36 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 36 Item 9A Controls and Procedures 36 Item 9B. Other Information 37

Other KUST 10-K year-over-year comparisons