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What changed in DIGITAL ALLY, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of DIGITAL ALLY, INC.'s 2024 and 2025 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 2025 report.

+297 added−327 removedSource: 10-K (2026-04-13) vs 10-K (2025-05-02)

Top changes in DIGITAL ALLY, INC.'s 2025 10-K

297 paragraphs added · 327 removed · 184 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

57 edited+26 added−59 removed34 unchanged
Biggest changeEntertainment 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.
Biggest change(“TicketSmarter”), which was formed through the completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC on September 1, 2021. Through its online marketplace, TicketSmarter.com, TicketSmarter offers ticket sales, resale, and partnership services for over 125,000 live events nationwide, spanning concerts, sporting events, theatre, and performing arts. Our Entertainment Segment encompasses all services provided through TicketSmarter and TicketSmarter.com.
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. We have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our customers’ requests.
Video Solutions Operating Segment Within our Video Solutions Segment, we supply technology-based products utilizing our portable digital video and audio recording capabilities for the law enforcement and security industries and for the commercial fleet and mass transit markets. We have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our customers’ requests.
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.
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.
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.
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.
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.
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.
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.
Intellectual Property – Video Solutions Operating Segment Our Video Solutions 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.
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.
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 the law enforcement 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, which is our cloud-based evidence management system for commercial fleets.
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.
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 tools to increase driver safety, track assets in real-time and minimize their companies’ liability risks.
We have entered into supply and distribution agreements with several companies that produce certain of our products, including our FirstVu Pro & FirstVu II body cameras, QuickVu docking stations, EVO Fleet, DVM-250 and DVM-800 products. These supply and distribution agreements contain certain confidentiality provisions that protect our proprietary technology, as well as that of the third-party manufacturers.
We have entered into supply and distribution agreements with several companies that produce certain of our products, including our FirstVu Pro & FirstVu II body cameras, QuickVu docking stations, EVO Fleet, DVM-250 and DVM-800 products. These supply and distribution agreements contain certain confidentiality provisions that protect our proprietary technology, as well as those of the third-party manufacturers.
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.
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. 9 ● 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 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.
The Company also offers the DVM-800 Lite, an entry level system that 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 system can record up to two internal HD cameras.
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.
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.
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.
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.
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.
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 The Company launched two next generation body-worn cameras and docking stations, refreshing the Company’s complete ecosystem of evidence recording devices.
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.
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.
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.
The 12-bay docking station includes a 1TB local memory hard drive which simultaneously uploads 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.
From that date until November 30, 2004, when we entered into a Plan of Merger with Digital Ally, Inc., a Nevada corporation which was formerly known as Trophy Tech Corporation (the “Predecessor Registrant”), we had not conducted any operations and were a closely-held company. In conjunction with the merger, we were renamed Digital Ally, Inc.
From that date until November 30, 2004, when we entered into a Plan of Merger with Digital Ally, Inc., a Nevada corporation formerly known as Trophy Tech Corporation (the “Predecessor Registrant”), we had not conducted any operations and were a closely held company. In conjunction with the merger, we were renamed Digital Ally, Inc.
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.
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 maintains a minimum of two suppliers for most of its material requirements.
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.
In-Car Digital Video “Event Recorder” System – EVO Fleet, DVM-250 Plus and FLT-250 for Commercial Fleets The Company provides commercial fleets and commercial fleet managers with 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.
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.
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, the company offers a 12-bay docking station and Mini-Docks.
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.
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.
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.
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.
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.
With the newly introduced body-worn cameras, the company 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.
Digital Ally still carries the FirstVu HD, the two-piece body-worn camera which allows for multiple mounting options while minimizing space and weight. It can be used in law enforcement, private and event security and commercial segments.
The Company still carries the FirstVu HD, the two-piece body-worn camera which allows for multiple mounting options while minimizing space and weight. It can be used in law enforcement, private and event security and commercial segments.
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.
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.
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.
The Company offers a suite of data management web-based tools to assist fleet managers in the organization, archival, and management of videos and telematics information. Within the suite, there are powerful mapping and reporting tools that are intended to optimize efficiency, serve as training tools for teams on safety, and, ultimately, generate a significant return on investment for the organization.
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.
On January 2, 2008, our common stock commenced trading on the Nasdaq Capital Market. 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.
All of our employees contribute to Digital Ally’s success and, in particular, the employees in our manufacturing, sales, research and development, and quality assurance departments are instrumental in driving operational execution and strong financial performance, advancing innovation and maintaining a strong quality and compliance program.
All of our employees contribute to Kustom Entertainment’s success and, in particular, the employees in our manufacturing, sales, research and development, and quality assurance departments are instrumental in driving operational execution and strong financial performance, advancing innovation and maintaining a strong quality and compliance program.
Digital Ally also seeks fairness in total compensation, with reference to external comparisons, internal comparisons and the relationship between management and non-management remuneration. The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.
Kustom Entertainment also seeks fairness in total compensation with reference to external comparisons, internal comparisons and the relationship between management and non-management remuneration. The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.
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.
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. 8 Intellectual Property – Entertainment Operating Segment Our Entertainment 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.
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.
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.
Our key programs and initiatives that are focused to attract, develop and retain our diverse workforce include: ● Compensation Programs and Employee Benefits: the main objective of Digital Ally’s compensation program is to provide a compensation package that will attract, retain, motivate and reward superior employees who must operate in a highly competitive and technologically challenging environment.
Our key programs and initiatives that are focused on attracting, developing and retaining our diverse workforce include: ● Compensation Programs and Employee Benefits: the main objective of Kustom Entertainment’s compensation program is to provide a compensation package that will attract, retain, motivate and reward superior employees who must operate in a highly competitive and technologically challenging environment.
For the purposes of this Annual Report on Form 10-K, unless the context otherwise requires, (i) the term “our,” or “us” refers to the Predecessor Registrant and its subsidiaries with respect to the period prior to the Effective Time and to the Registrant and its subsidiaries with respect to the period on and after the Effective Time; (ii) as of any period prior to the Effective Time, references to the “directors” mean the directors of the Predecessor Registrant, and, as of any period at and after the Effective Time, the directors of the Registrant, (iii) as of any period prior to the Effective Time, references to “stockholders” mean the holders of Predecessor Common Stock, and, as of any period at and after the Effective Time, the holders of Registrant Common Stock, and (iv) as of any period prior to the Effective Time, references to “Common Stock” means the Predecessor Common Stock, and, as of any period at and after the Effective Time, Registrant Common Stock. 2 The business of the Registrant, Digital Ally, Inc.
For the purposes of this Annual Report on Form 10-K, unless the context otherwise requires, (i) the term “our,” or “us” refers to the Predecessor Registrant and its subsidiaries with respect to the period prior to the Effective Time and to the Registrant and its subsidiaries with respect to the period on and after the Effective Time; (ii) as of any period prior to the Effective Time, references to the “directors” mean the directors of the Predecessor Registrant, and, as of any period at and after the Effective Time, the directors of the Registrant, (iii) as of any period prior to the Effective Time, references to “stockholders” mean the holders of Predecessor Common Stock, and, as of any period at and after the Effective Time, the holders of Registrant Common Stock, and (iv) as of any period prior to the Effective Time, references to “Common Stock” means the Predecessor Common Stock, and, as of any period at and after the Effective Time, Registrant Common Stock. 2 On January 8, 2026, the Company amended its Articles of Incorporation to change its corporate name from Digital Ally, Inc. to Kustom Entertainment, Inc.
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.
Human Capital As of December 31, 2025, Kustom Entertainment, Inc, and its subsidiaries, had approximately 30 full-time employees spread throughout the country, representing the core values and objectives of the Company.
Our Entertainment Operating Segment Products and Services Through our entertainment segment, we provide customers with access to the online live event ticketing marketplace through our online platform - TicketSmarter.com . Offering over 48 million tickets for sale for over 125,000 live events, TicketSmarter is a national ticket marketplace, offering tickets for live events featuring sports, concerts and theatre.
Our Entertainment Operating Segment Products and Services Through our entertainment operating segment, we provide customers with access to live event tickets via our online marketplace, TicketSmarter.com. With over 48 million tickets available across more than 125,000 live events, TicketSmarter operates as a national ticketing marketplace offering tickets for sports, concerts, and theatre events throughout the United States.
Revenue Cycle Management Operating Segment We entered the revenue cycle management business late in the second quarter of 2021 with the formation of our wholly owned subsidiary, Digital Ally Healthcare, Inc. and its majority-owned subsidiary Nobility Healthcare, LLC (“Nobility Healthcare”).
Revenue Cycle Management Segment (Discontinued Operations) The Company entered the revenue cycle management business (the “Revenue Cycle Management Segment”) in the second quarter of 2021 through the formation of its wholly owned subsidiary, Digital Ally Healthcare, Inc. (“Digital Ally Healthcare”), and its majority-owned subsidiary, Nobility Healthcare.
The EVO-HD is a revolutionary in-car system that delivers versatility and reliability for law enforcement. With built-in, patented auto-activation technology, EVO-HD captures multiple recording angles in sync from a FirstVu PRO or FirstVu HD body-worn camera and up to four HD in-car cameras – all from a single trigger.
With built-in, patented auto-activation technology, EVO-HD captures multiple recording angles in sync from a FirstVu PRO or FirstVu HD body-worn camera and up to four HD in-car cameras – all from a single trigger. The EVO-HD maximizes space and offers top-end reliability when paired with remote service capabilities.
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. 3 Entertainment Operating Segment We provide live entertainment and events ticketing services through our wholly owned subsidiary, TicketSmarter, Inc.
Revenues of this segment include ticketing service charges generally determined as a percentage of the face value of the underlying ticket and ticket sales from our ticket inventory which are recognized when the underlying tickets are sold.
Entertainment Segment revenues include ticketing service charges, generally calculated as a percentage of the face value of the underlying ticket, as well as ticket sales from Company-held inventory, both of which are recognized upon the sale of the underlying tickets.
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.
AWS is the most secure cloud platform on the market with features that go beyond simply storing and reviewing video evidence. AWS GovCloud platform is trusted by the Department of Justice, Defense Digital Services for the US Air Force, U.S. Department of Treasury, and U.S. Department of Homeland Security.
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.
EVO Web and FleetVu Manager EVO Web is a web-based software, powered by and hosted on the AWS GovCloud platform, which enables police departments and security agencies to manage digital video evidence quickly and easily. EVO Web is capable of playing back, reviewing, downloading, archiving, unit configuration and management, running customizable reports and maintaining a chain of custody logs.
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”.
The following table sets forth the Company’s total revenue and revenue derived from each reportable operating segment: Years Ended December 31, 2025 2024 Net Revenues: Video Solutions $ 5,100,757 $ 5,755,391 Entertainment 8,653,398 7,763,761 Total Net Revenues $ 13,754,155 $ 13,519,152 Additional information regarding each reportable operating segment is also included in Note 22, Operating Segments of “Notes to Consolidated Financial Statements”.
Item 1. Business. Overview We were incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc.
Item 1. Business. References to “Kustom Entertainment,” the “Company,” “we,” “us” and “our” refer to Kustom Entertainment, Inc. Overview We were incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc.
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.
Accounting guidance on segment reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected financial information for those segments to be presented.
Current systems are primarily digital based systems, with cameras mounted on the windshield and the recording device generally in the trunk, headliner, dashboard, console or under the seat of the vehicle. The Company launched its in-car digital video platform under the name EVO-HD during the second quarter of 2019.
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. Current systems are primarily digital based systems with cameras mounted on the windshield and the recording device generally in the trunk, headliner, dashboard, console or under the seat of the vehicle.
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.
This segment generates revenues through subscription models offering cloud and warranty solutions, and hardware sales for video and personal protective safety products and solutions.
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.
TicketSmarter serves as the official ticket resale partner of more than 35 collegiate conferences, over 300 universities, and hundreds of events and venues nationwide. Established in late 2022, Kustom 440 further supports our entertainment segment through the production and promotion of live music, sports, and private events at third-party venues across the country.
The Video Solutions Segment is our legacy business that produces digital video imaging, storage products, disinfectant and related safety products for use in law enforcement, security and commercial applications. This segment includes both service and product revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video and health safety solutions.
The Video Solutions Segment represents the Company’s legacy operations and includes the development, manufacture and sale of digital video imaging and storage products, disinfectant and related safety products for use in law enforcement, security and commercial applications. Revenues are derived from a combination of product sales and recurring service revenues, including subscription-based cloud storage and extended warranty offerings.
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.
Direct expenses include the cost of tickets purchased for resale and held as inventory, credit card fees, ticketing platform expenses, website maintenance, and other administrative costs.
(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.
(together with its wholly owned subsidiaries, including Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440 and Kustom, collectively, the “Company”) is conducted through two reportable operating segments: (1) the video solutions segment (the “Video Solutions Segment”) and (2) the entertainment segment (the “Entertainment Segment”).
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.
Kustom 440 provides end-to-end event services, including artist booking, ticketing, staging, vendor sourcing, on-site operations, and day-of production management, for events ranging from small corporate gatherings to large-scale, multi-day stadium productions.
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.
These employees are spread amongst our operating segments as follows: As of December 31, 2025 Employee headcount: Video Solutions 22 Entertainment 8 Total Employee Headcount 30 Our employees are our most important assets, and they set the foundation for our ability to achieve our strategic objectives.
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.
Competition included internal revenue cycle management departments within healthcare organizations, as certain providers elected to make internal investments to perform these services in-house. The segment also faced competition from other revenue cycle management providers offering similar services, including software vendors, traditional consulting firms and information technology-based service providers.
Because of a diminishing number of sources for components and packages in particular, and the increase in the prices of semiconductor and other components, the Company has been obliged to pay higher prices, which results in higher costs of goods sold.
The largest supplier in the fiscal years ended December 31, 2025 and 2024 represented less than 5% of total purchases. Due to a diminishing number of sources for certain components and packaging materials, combined with rising prices for semiconductors and other key components, the Company has been obligated to pay higher prices, resulting in increased costs of goods sold.
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.
Over time, we have expanded our market presence to include the commercial fleet and mass-transit industries and have also entered the event-security market, where we provide integrated hardware and software solutions that support private-security operations at large public gatherings, such as NASCAR races, football games, concerts, and other live events.We continue to broaden our focus to include private-security, homeland-security, mass-transit, healthcare, retail, education, consumer, and other commercial markets.
Nobility Healthcare completed its first acquisition on June 30, 2021, when it acquired a private medical billing company, and has since completed three more acquisitions of private medical billing companies, in which we assist in providing working capital and back-office services to healthcare organizations throughout the country.
Nobility Healthcare completed its first acquisition on June 30, 2021, when it acquired a private medical billing company, and subsequently completed additional acquisitions of private medical billing companies. The segment served a diverse customer base across multiple medical specialties, including radiology, oncology, orthopedics, pediatrics, internal medicine and cardiology. The Revenue Cycle Management Segment operated in a highly competitive environment.
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 Revenue Cycle Management Segment’s ability to compete effectively primarily depends on trade secrets and operational know-how and did not depend heavily on proprietary technology or patents. On January 8, 2026, the Company completed the sale of Nobility Healthcare.
Removed
(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.
Added
The Company’s common stock continues to trade on the Nasdaq Capital Market under the symbol “KUST.” This change in corporate name did not affect the Company’s legal structure, subsidiaries, assets, liabilities, or obligations. The business of Kustom Entertainment, Inc.
Removed
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.
Added
The Entertainment Segment operates a secondary ticketing platform through TicketSmarter.com, acting as an intermediary between ticket buyers and sellers. The Company also acquires tickets from primary sellers for resale through various distribution platforms. In addition, this segment includes live event production and promotion activities, including the Country Stampede music festival and other entertainment events.
Removed
We further diversified and broadened our product offerings in 2020, by introducing two new lines of branded products: (1) the ThermoVu® which is a line of self-contained temperature monitoring stations that provides alerts and controls facility access when an individual’s temperature exceeds a pre-set threshold and (2) our Shield™ disinfectants and cleansers, which are for use against viruses and bacteria.
Added
The Company previously reported a Revenue Cycle Management Segment, which primarily reflected the operations of Nobility Healthcare, LLC (“Nobility Healthcare”). Following the sale of Nobility Healthcare on January 8, 2026, the results of this business have been classified as discontinued operations, and the segment is no longer reported.
Removed
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.
Added
Revenue from our Video Solutions Segment is derived from the sale of video recording products and related services to law enforcement and commercial customers, as well as from the sale of our Shield™ disinfectant and personal protective equipment products.
Removed
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.
Added
Through this segment, the Company provided end-to-end revenue cycle management services to medical providers throughout the United States, focusing on claim reimbursement billing, insurance and benefits verification, medical treatment documentation and coding, and collection services.
Removed
TicketSmarter offers tickets for over 125,000 live events through its platform, for a wide range of events, including concerts, sporting events, theatres, and performing arts, throughout the country. Our entertainment operating segment consists of entertainment services provided through TicketSmarter and its online platform, TicketSmarter.com.
Added
As a result, the operations of the Revenue Cycle Management Segment have been classified as discontinued operations in the Company’s consolidated financial statements for all periods presented.
Removed
The EVO-HD maximizes space and offers top-end reliability when paired with remote service capabilities.
Added
Refer to Note 22 – Operating Segments and Note 23 – Discontinued Operations in the Notes to Consolidated Financial Statements for additional information regarding the Company’s segments and discontinued operations, including net sales, operating earnings and total assets by segment.
Removed
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.
Added
The Company launched its in-car digital video platform under the name EVO-HD during the second quarter of 2019. The EVO-HD is a revolutionary in-car system that delivers versatility and reliability for law enforcement.
Removed
Shield TM Heath Protection Products The Company’s Shield TM brand offers a variety of products to help keep you safe, including Shield Cleansers, ThermoVu, Shied Disinfectant, and a variety of personal protection equipment including masks, gloves and sanitizer wipes.
Added
Revenues within our entertainment operating segment are derived primarily from service charges calculated as a percentage of the face value of tickets sold, as well as from the sale of tickets obtained through direct purchase or received in exchange for sponsorship and partnership arrangements with venues, events, and rights holders.
Removed
Shield Cleansers is a full line of safe and effective hypochlorous acid (HOCl) based products - and is free of toxic bleach, ammonia, methanol, ethanol, and alcohol ingredients. Shield Disinfectant is EPA approved and has shown effectiveness against SARS-COV-2, the virus that causes the novel COVID-19 disease.
Added
Direct expenses include the cost of tickets purchased for resale and held as inventory, credit card fees, ticketing platform expenses, website maintenance fees, and other associated administrative costs. Market and Industry Overview – Video Solutions Operating Segment Our Video Solutions segment has historically focused on serving domestic and international law-enforcement agencies.
Removed
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.
Added
Our products have been deployed in a variety of private security settings, including cruise-ship operations, demonstrating the versatility and adaptability of our technology. Our EVO Fleet, DVM-250 Plus, and FLT-250 video systems, along with our FleetVu Manager platform, continue to gain traction within the commercial-fleet and ambulance-service markets.
Removed
ThermoVu provides an instant pass/fail audible tone with its temperature display and controls access to facilities based on such results.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeGovernance Our management and the Board recognize the critical importance of maintaining the trust and confidence of our business partners and employees, including the importance of managing cybersecurity risks as part of our larger risk management program.
Biggest changeGovernance Our management and the board of directors (the “Board”) recognize the critical importance of maintaining the trust and confidence of our business partners and employees, including the importance of managing cybersecurity risks as part of our larger risk management program.

Item 2. Properties

Properties — owned and leased real estate

7 edited+4 added−4 removed3 unchanged
Biggest changeThe 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.
Biggest changeTicketSmarter now occupies office space provided by the entertainment segment, and no separate lease obligation related to this location remained outstanding as of December 31, 2025. During the period of occupancy, the Company was responsible for property taxes, utilities, insurance, and its proportionate share of common area maintenance costs.
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.
Item 2. Properties. 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.
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.
On October 16, 2024, the Company entered into an operating lease with a third party for office space used by the Video Solutions Segment and temporarily by the Entertainment Segment. The lease provides for 36 monthly payments of $7,251.92 and matures on October 31, 2027.
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.
During the year ended December 31, 2024, the Company sold its building for $5,900,000 less closing costs of $36,634. The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $401,743 in the Consolidated Statement of Operations during the year ended December 31, 2024.
In 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.
In 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.
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.
As of December 31, 2025, the remaining lease term was approximately twenty-two months. 11 On September 1, 2021, the Company completed the acquisition of Goody Tickets, LLC and TicketSmarter, LLC through TicketSmarter. Upon completion of this acquisition, the Company became responsible for the operating lease for TicketSmarter’s office space.
Upon completion of this acquisition, the Company became responsible for the operating lease for the TicketSmarter office space. The lease terms included monthly payments ranging from $7,211 to $7,364 and the lease was originally going to expire in December 2022.
The lease provided for monthly payments ranging from $7,211 to $7,364 and was originally scheduled to terminate in December 2022. Following the expiration of the original lease term, the Company continued to occupy the space on a month-to-month basis. The lease was formally terminated in September 2025.
Removed
On August 31, 2021, the Company completed the acquisition of another private medical billing company, through Nobility Healthcare. Upon completion of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space.
Added
On May 8, 2025, the Company entered into an operating lease with a third party for a warehouse and office used by the Entertainment Segment. The lease has a five-year term expiring in May 2030 and provides for base monthly rent of $16,035, subject to annual increases of 2.5%, with May 2025 rent prorated.
Removed
The lease was renewed in April 2023 with favorable terms and payments ranging from 7,436 to 8,877 thereafter, and with a termination date in March 2030. On September 1, 2021, the Company completed the acquisition of Goody Tickets, LLC and TicketSmarter, LLC, through TicketSmarter.
Added
The Company prepaid one year of rent, real estate taxes, and insurance totaling $247,105, which is applied to the first and final six months of the lease term, and also provided a $20,000 security deposit.
Removed
The Company signed a six-month extension through June 2023 and is currently on a month-to-month lease with plans to relocate the entertainment operating segment. On January 1, 2022, the Company completed the acquisition of another private medical billing company, through Nobility Healthcare. Upon completion of this acquisition, Nobility Healthcare became responsible for the operating lease for the seller’s office space.
Added
The lease is structured as a triple-net lease, under which the Company is responsible for all real estate taxes, insurance, utilities, and other operating costs associated with the premises; real estate taxes for the period from lease commencement through December 31, 2025 were approximately $3,748 per month and insurance costs were approximately $432 per month, both subject to annual adjustment.
Removed
The lease terms include monthly payments ranging from $4,233 to $4,626 and terminate in June 2025. 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 lease includes renewal options and an option to purchase the property after the 33rd month of the lease term. As of December 31, 2025, the remaining lease term was approximately 52 months.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

13 edited+9 added−3 removed9 unchanged
Biggest changeOur 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.
Biggest changeNo additional losses were recorded on this matter during the year ended December 31, 2025, and the Company’s net exposure remained zero as of December 31, 2025. The Company’s 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.
Item 3. Legal Proceedings. From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy to not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us.
Item 3. Legal Proceedings. From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy not to disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us.
On 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.
Culp McAuley, Inc. et al. On 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.
After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable.
After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damage or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable.
On December 5, 2022, the Court ordered that Culp McAuley show cause in writing by December 21, 2022, why the Court should not direct the Clerk to enter default against it. On December 22, 2022, the Court directed the Clerk to enter default against Culp McAuley.
On December 5, 2022, the Court ordered that Culp McAuley show cause in writing by December 21, 2022, why the Court should not direct the Clerk to enter default against it. On December 22, 2022, the Court directed the Clerk to enter default against Culp McAuley. On February 21, 2023, the Clerk entered default against Culp McAuley.
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.
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.
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.
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.
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.
The Company recorded a loss of $1,959,396 on this matter during the year ended December 31, 2024, which, together with losses recorded in prior years, reduced the Company’s cumulative net exposure to zero as of December 31, 2024.
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.
The lawsuit arises from the defendant’s alleged theft and misapplication of funds that were intended for the purchase of goods on behalf of the Company. The Company seeks monetary damages based on certain conduct by the defendant. On May 28, 2024, the defendant filed a motion to strike portions of the complaint and a motion for demurrer.
On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer. The Court further denied the defendant’s motion to strike in its entirety. A jury trial has been scheduled for October 19, 2026.
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. Discovery is ongoing. A jury trial has been scheduled for October 19, 2026. The Company is not able to provide an estimate of the likelihood of success at this time.
Item 4. Mine Safety Disclosures. Not applicable. 14 PART II
Mine Safety Disclosures. Not applicable. 12 PART II
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.
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. As of December 31, 2025, the Company holds an unsatisfied judgment of $3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally.
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.
The Company is currently engaged in settlement negotiations. The matter remains open. While certain legal proceedings described above remain ongoing, management believes, based on currently available information and the status of each proceeding, that the resolution of these matters will not have a material adverse effect on the Company’s operations, financial condition, or cash flows.
Removed
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 is currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover. The Company continues to explore for sources of assets as a possible source of collection from the judgment debtors.
Removed
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
The Company continues to explore available sources of assets from the judgment debtors; however, collection of the judgment remains uncertain and no assurance can be given that any amounts will be recovered.
Removed
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.
Added
As a result, actual results may vary significantly from the current estimate. Larry Roberts In March 2024, the Company filed a complaint against Larry Roberts in the Superior Court of the State of California, County of Orange, Case No. 30-2024-01385012-CU-FR-CJC.
Added
The matter remains open. Pharmaxx Medical, Inc. The Company filed a complaint against Pharmaxx Medical, Inc. in the Superior Court of the State of California, County of Riverside, Case No. CVSW2300198, alleging breach of contract arising from the failure to deliver pharmaceutical gloves.
Added
After the court struck the defendant’s answer, the Company submitted the default package to obtain a default judgment against the defendant. The default package remains pending with the court. First Insurance Funding Corp. — Johnson County Collection Case The Company is a defendant in a collection case filed in the District Court of Johnson County, Kansas limited actions department.
Added
This is a collection lawsuit claiming the Company owed money for insurance premium funding on a cancelled policy totaling $165,890.08. The Company disputes that it owes the money as they cancelled the insurance policy through their insurance broker. An answer was filed denying the claim. The matter remains open.
Added
Gregory Johnson — Kansas Department of Labor Gregory Johnson filed a claim with the State of Kansas, Wage and Hour Division, Claim No. 240591, seeking $30,000 for alleged severance pay. Mr. Johnson was laid off in a reduction in force and did not have a severance agreement. An answer denying the claim has been filed.
Added
A hearing was held on October 27, 2025 before an Administrative Law Judge, with the matter being dismissed in the Company’s favor. Kustom 440 — Former Consultant A former consultant has filed a claim against Kustom 440, Inc., a wholly owned subsidiary of the Company, seeking to compel payment under an alleged consulting agreement.
Added
The Company has evaluated its exposure related to these matters and has recorded appropriate amounts where losses were determined to be probable and estimable. However, litigation is inherently uncertain, and there can be no assurance that the final resolution of any matter will not result in expenses, liabilities, or damages in excess of amounts currently accrued or anticipated. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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.
Recent Sales of Unregistered Securities Except as previously reported by the Company on its Quarterly Reports on Form 10-Q or its Current Reports on Form 8-K, as applicable, we did not sell any securities during the period covered by this Annual Report on Form 10-K that were not registered under the Securities Act. Item 6. [Reserved].
Recent Sales of Unregistered Securities Except as previously reported by the Company on its Quarterly Reports on Form 10-Q or its Current Reports on Form 8-K, as applicable, we did not sell any securities during the period covered by this Annual Report on Form 10-K that were not registered under the Securities Act. 13 Item 6. [Reserved].
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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock (the “Common Stock”) trades on the Nasdaq Capital Market under the symbol “KUST”. Holders of Common Stock As of April 8, 2026, we had approximately 157 shareholders of record for our Common Stock.
Removed
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

102 edited+74 added−76 removed57 unchanged
Biggest changeYear ending December 31: 2025 $ 210,086 2026 210,925 2027 189,275 2028 100,863 2029 and thereafter 130,086 Total undiscounted minimum future lease payments 841,235 Imputed interest (122,726 ) Total operating lease liability $ 718,509 28 Debt obligations - We have the following outstanding debt as of December 31, 2024 which require future principal payments: December 31, 2024 Economic injury disaster loan (EIDL) $ 144,495 Commercial Extension of Credit- Entertainment Segment 100,000 Merchant Advances – Video Solutions Segment 1,922,750 Senior Secured Promissory Notes 3,600,000 Unamortized debt issuance costs (664,719 ) Debt obligations 5,102,526 Less: current maturities of debt obligations 4,961,443 Debt obligations, long-term $ 141,083 Debt obligations mature on an annual basis as follows as of December 31, 2024: December 31, 2024 2025 $ 4,961,443 2026 3,412 2027 3,542 2028 3,677 2029 and thereafter 130,452 Total $ 5,102,526 Litigation.
Biggest changeSee Note 15, Commitments and Contingencies , for additional details. 26 Debt obligations - We have the following outstanding debt related to continuing operations as of December 31, 2025, which requires future principal payments: December 31, 2025 Economic injury disaster loan (EIDL) $ 141,083 Unsecured Promissory note – Entertainment Segment 525,000 2025 Secured Notes 1,070,000 Commercial Extension of Credit- Entertainment Segment — Merchant Advances – Video Solutions Segment — Senior Secured Promissory Notes-Issued November 2024 — Total gross principal 1,736,083 Unamortized debt issuance costs (890,716 ) Debt obligations 845,367 Less: current maturities of debt obligations 707,826 Debt obligations, long-term $ 137,541 Debt obligations mature on an annual basis as follows as of December 31, 2025: Gross Principal Unamortized Discount Net Carrying Value 2026 $ 1,598,542 $ (890,716 ) $ 707,826 2027 3,677 3,677 2028 3,817 3,817 2029 3,963 3,963 2030 and thereafter 126,084 126,084 Total $ 1,736,083 $ (890,716 ) $ 845,367 The table above excludes the related party note payable to a TicketSmarter officer trust with a net carrying value of $400,110 as of December 31, 2025 ($0 current, $400,110 long-term).
Loss on Disposal of Intangible assets During the year ended December 31, 2024, the Company’s video solutions segment disposed of its personal protection product line which held various EPA licenses resulting in a loss on disposal of intangible assets $125,561.
During the year ended December 31, 2024, the Company’s video solutions segment disposed of its personal protection product line, which held various EPA licenses, resulting in a loss on disposal of intangible assets of $125,561.
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.
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 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 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, which is our cloud-based evidence management systems.
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.
This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations Current Trends and Recent Developments for the Company Segment Overview Video Solutions Operating Segment – Within our Video Solutions Segment, we supply technology-based products utilizing our portable digital video and audio recording capabilities for the law enforcement and security industries and for the commercial fleet and mass transit markets.
We have 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.
We have no recorded liability as of December 31, 2025 and December 31, 2024 representing uncertain tax positions. We have generated substantial deferred income tax assets related to our operations primarily from the charge to compensation expense taken for stock options, certain tax credit carryforwards and net operating loss carryforwards.
Our entertainment operating segment sells our products and services to customers in the following manner: ● Our entertainment operating segment generates product revenues from the sale of tickets directly to consumers for a particular event that the entertainment operating segment has previously purchased and held in inventory for ultimate resale to the end consumer.
Our Entertainment Segment sells our products and services to customers in the following manner: ● Our Entertainment Segment generates product revenues from the sale of tickets directly to consumers for a particular event that the Entertainment Segment has previously purchased and held in inventory for ultimate resale to the end consumer.
Goodwill and other intangible assets. When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed on the date of acquisition, which may include a significant amount of intangible assets such as customer relationships, software and content, as well as goodwill.
When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed on the date of acquisition, which may include a significant amount of intangible assets such as customer relationships, software and content, as well as goodwill.
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.
See Item 3, “Legal Proceedings,” of this Annual Report on Form 10-K for information on our litigation. 401 (k) Plan. The Company sponsors a 401(k) retirement savings plan for the benefit of its employees.
However, if the results of our qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then we perform a two-step quantitative impairment test. Evaluating the recoverability of goodwill requires judgments and assumptions regarding future trends and events.
However, if the results of our qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then we perform a quantitative impairment test. Evaluating the recoverability of goodwill requires judgments and assumptions regarding future trends and events.
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.
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, 2025 and December 31, 2024, we have fully reserved all of our deferred tax assets.
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 the full valuation allowance on net deferred tax assets as of December 31, 2025 and 2024 primarily because of the recurring operating losses. We have further determined to continue providing a full valuation reserve on our net deferred tax assets as of December 31, 2025.
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.
Our performance obligations consist of (i) products, (ii) professional services, and (iii) extended warranties. 28 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 model includes subjective input assumptions that can materially affect the fair value estimates. 34 Accounting for Income Taxes. Accounting for income taxes requires significant estimates and judgments on the part of management.
The model includes subjective input assumptions that can materially affect the fair value estimates. 32 Accounting for Income Taxes. Accounting for income taxes requires significant estimates and judgments on the part of management.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation. This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.
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.
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 warrant derivative liabilities; ● Stock-based Compensation Expense; and ● Accounting for Income Taxes. ● Discontinued Operations Revenue Recognition / Allowances for Doubtful Accounts.
We are a party to operating leases and license agreements that represent commitments for future payments (described in Note 15, “Commitments and Contingencies,” to our consolidated financial statements) and we have issued purchase orders in the ordinary course of business that represent commitments to future payments for goods and services.
We are a party to operating leases and license agreements that represent commitments for future payments (described in Note 14, Operating Lease, and Note 15, Commitments and Contingencies, to our consolidated financial statements) and we have issued purchase orders in the ordinary course of business that represent commitments to future payments for goods and services.
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. 27 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.
When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure.
We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure.
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 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 employees’ elective deferrals on the next 2% of their contributions. The Company made matching contributions totaling $80,083 and $144,589 for the years ended December 31, 2025 and 2024, respectively.
For our entertainment segment, our customers are mainly online visitors that pay at the time of the transaction, and we collect the service fees charged with the transaction. Thus, leading to minimal risk for uncollectible accounts, to which we then consider a specific reserve for bad debts based on their individual circumstances.
For our Entertainment Segment, our customers are mainly online visitors that pay at the time of the transaction, and we collect the service fees charged with the transaction. This leads to minimal risk for uncollectible accounts, and we consider a specific reserve for bad debts based on individual customer circumstances.
Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement. ● Repair parts and services for domestic and international customers are generally handled by our inside customer service employees.
Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement. ● Repair parts and services for domestic and international customers are generally handled by our inside customer service employees. Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer.
The decrease in general and administrative expenses in the year ended December 31, 2024 compared to the same period in 2023 is primarily attributable to a decrease in administrative salaries and reductions in headcount in order to right-size our expenses in this area with our revenues.
The decrease in general and administrative expenses in the year ended December 31, 2025 compared to the same period in 2024 is primarily attributable to a decrease in administrative salaries and reductions in headcount in order to right-size our expenses in this area with our revenues. Goodwill and intangible asset impairment charge.
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.
Change in Fair Value of Derivative Liabilities The change in fair value of the warrant derivative liabilities for the years ended December 31, 2025 and 2024, respectively totaled a gain of $3,331,616 during the year ended December 31, 2025 as compared to a loss of $1,240,407 during the year ended December 31, 2024.
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.
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.
Revenue is recognized for the shipment of products or delivery of service when all five of the following conditions are met: (i) Identify the contract with the customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; and (v) Recognize revenue when a performance obligation is satisfied.
Revenue is recognized for the shipment of products or delivery of service in accordance with ASC 606 by applying the following five-step model: (i) Identify the contract with the customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; and (v) Recognize revenue when a performance obligation is satisfied.
The Company recorded a reserve for excess and obsolete inventory in the video solutions segment of $2,037,252 and $4,355,666 and a reserve for the entertainment segment of $132,403 and $186,795 as of December 31, 2024 and 2023. The segment net revenues reported above represent sales to external customers. Segment gross profit represents net revenues less cost of revenues.
The Company recorded a reserve for excess and obsolete inventory in the Video Solutions Segment of $1,849,124 and $2,037,252 and a reserve for the Entertainment Segment of $69,817 and $132,403 as of December 31, 2025 and 2024. The segment net revenues reported above represent sales to external customers. Segment gross profit represents net revenues less cost of revenues.
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.
Cost of service revenues as a percentage of service revenues for the Video Solutions Segment decreased to approximately 32.1% for the year ended December 31, 2025 compared to approximately 33.3% for the year ended December 31, 2024.
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.
For the Years Ended December 31, 2025 and 2024 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, 2025 and 2024, represented as a percentage of total revenues for each respective year: Years Ended December 31, 2025 2024 Revenue 100 % 100 % Cost of revenue 90 % 77 % Gross profit 10 % 23 % Selling, general and administrative expenses: Research and development expense 4 % 10 % Selling, advertising and promotional expense 5 % 16 % General and administrative expense 61 % 77 % Goodwill and intangible asset impairment charge 18 % 4 % Total selling, general and administrative expenses 89 % 107 % Operating loss (79 )% (84 )% Change in fair value of derivative liabilities 24 % (9 )% Loss on disposal of intangible assets — % (1 )% Loss on litigation — % (14 )% Loss on extinguishment of debt — % (6 )% Gain on extinguishment of liabilities 16 % 7 % Gain on sale of property, plant and equipment — % 3 % Interest expense (8 )% (28 )% Interest income and other income, net 3 % 1 % Loss before income tax benefit from operations (43 )% (132 )% Income tax expense (benefit) — % — % Net loss from discontinued operations, net of tax (10 )% (28 )% Net loss (54 )% (160 )% Net loss attributable to common stockholders (49 )% (147 )% Net loss per share information: Basic $ (17.23 ) $ (33,488.74 ) Diluted $ (17.23 ) $ (33,488.74 ) 16 Revenues Revenues by Type and by Operating Segment Our operating segments generate two types of revenues: Product revenues primarily include 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.
Revenue Cycle Management Operating Segment – We entered the revenue cycle management business late in the second quarter of 2021 with the formation of our wholly owned subsidiary, Digital Ally Healthcare, Inc., and its majority-owned subsidiary Nobility Healthcare.
Revenue Cycle Management Segment (Discontinued Operations) - The Company entered the revenue cycle management business in the second quarter of 2021 through the formation of its wholly owned subsidiary, Digital Ally Healthcare, and its majority-owned subsidiary, Nobility Healthcare.
As a result of the sale the Company recorded a gain of $401,743 in the consolidated statement of operations during the year ended December 31, 2024. This amount was offset by a separate loss on sale of fixed assets of $41,661 for the year ended December 31, 2024.
This amount was offset by a separate loss on sale of fixed assets of $41,661 for the year ended December 31, 2024, resulting in a net gain of $360,082 included in the consolidated statement of operations.
We performed an impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when and as expected and a further decrease in our stock price.
During the third fiscal quarter of 2024, management determined that triggering events had occurred, including an additional decline in demand for services, prolonged economic uncertainty, the failure of a planned split-off transaction to occur when and as expected, and a further decrease in our stock price. As a result, we performed an interim impairment test as of September 30, 2024.
We performed an impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when and as expected and a further decrease in our stock price.
During the third fiscal quarter of 2024, management determined that triggering events had occurred, including an additional decline in demand for services, prolonged economic uncertainty, the failure of a planned split-off transaction to occur when and as expected, and a further decrease in our stock price. As a result, we performed an interim impairment test as of September 30, 2024.
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.
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. Corporate assets primarily consist of cash, property, plant and equipment, accounts receivable, inventories, and other assets.
This product revenue relates to the first Country Stampede music festival held by Kustom during 2024, as well as the resale of tickets purchased for live events, sporting events, concerts, and theatre, then sold through various platforms to customers.
These revenues primarily relate to the second Country Stampede music festival held by Kustom during 2025, as well as the resale of tickets purchased for live events, sporting events, concerts, and theatre events and sold through various platforms to customers.
Gain on Sale of Property, Plant and Equipment During the year ended December 31, 2024, the Company sold its building for $5,900,000 less closing costs of $36,634. The carrying amount of the building on the date of sale was $5,461,623.
Gain on Sale of Property, Plant and Equipment The Company reported a gain on sale of property, plant and equipment of $— and $360,082 during the years ended December 31, 2025 and 2024, respectively. During the year ended December 31, 2024, the Company sold its building for $5,900,000 less closing costs of $36,634.
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.
The Entertainment Segment generated $3,153,197 in product revenues for the year ended December 31, 2025, compared to $3,406,928 for the year ended December 31, 2024.
Service sales through TicketSmarter are driven largely in part to the usage of the TicketSmarter.com marketplace by buyers and sellers, in which the Company collects service fees for each transaction completed through this platform. We may discount our prices on specific orders based upon the size of the order, the specific customer and the competitive landscape.
Service sales through TicketSmarter, are driven largely in part to the usage of the TicketSmarter.com marketplace by buyers and sellers, in which the Company collects service fees for each transaction completed through this platform.
There was no similar transaction during the year ended December 31, 2024. 25 Gain on Extinguishment of Liabilities The Company recorded a gain on the extinguishment of liabilities for the year ended December 31, 2024 of $917,935, which reflects income related to the video solutions and entertainment segment’s ability to negotiate down payables and contract liabilities during the year ended December 31, 2024.
Gain on Extinguishment of Liabilities The Company recorded a gain on the extinguishment of liabilities for the year ended December 31, 2025 of $2,234,658, which reflects income related to the Video Solutions Segment’s and Entertainment Segment’s ability to negotiate down payables and contract liabilities during the year ended December 31, 2025. 23 The gain on extinguishment of liabilities was $917,935 for the year ended December 31, 2024, which reflects income related to the Video Solutions Segment’s and Entertainment Segment’s ability to negotiate down payables and contract liabilities during the year ended December 31, 2024, including a gain of $9,385 on the termination of its former headquarters lease.
During the year ended December 31, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible asset impairment charge on our consolidated statements of operations for the year ended December 31, 2024.
As a result of our December 31, 2025 annual impairment test, we concluded that the carrying amount of the Entertainment Segment’s equity exceeded its estimated fair value and recorded a non-cash goodwill impairment charge of $1,428,000, which is included in goodwill and intangible asset impairment charge on our consolidated statements of operations for the year ended December 31, 2025.
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.
Income Tax Benefit We recorded an income tax benefit of $0 for the years ended December 31, 2025 and 2024, respectively. The effective tax rate for both 2025 and 2024 varied from the expected statutory rate due to our continuing to provide a 100% valuation allowance on net deferred tax assets.
Determining an acquired intangible asset’s useful life also requires significant judgment and is based on evaluating a number of factors, including, but not limited to, the expected use of the asset, historical client retention rates, consumer awareness and trade name history, as well as any contractual provisions that could limit or extend an asset’s useful life.
Determining an acquired intangible asset’s useful life also requires significant judgment and is based on evaluating a number of factors, including, but not limited to, the expected use of the asset, historical client retention rates, consumer awareness and trade name history, as well as any contractual provisions that could limit or extend an asset’s useful life. 30 The Company’s goodwill is evaluated in accordance with FASB ASC Topic 350, which requires goodwill to be assessed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.
These services begin with the logistical matters of an event, including artist booking and research, ticketing, staging, on-site operations, vendor sourcing, and day of production. Our entertainment operating segment consists of entertainment services provided through TicketSmarter and its online platform, TicketSmarter.com.
These services include all aspects of event logistics, such as artist booking, ticketing, staging, vendor sourcing, on-site operations, and day-of-event production management. Our Entertainment Segment consists of entertainment services provided through TicketSmarter and its online platform, TicketSmarter.com.
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.
Our Entertainment 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.
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.
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.
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 product revenues as a percentage of total product revenues for the years ended December 31, 2025 and 2024 was approximately 146% and 109%, respectively.
Our video solutions segment revenue encompasses video recording products and services for our law enforcement and commercial customers and the sale of Shield disinfectant and personal protective products. This segment generates revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video and personal protective safety products and solutions.
Our Video Solutions Segment revenue encompasses sales of video recording products and related services for law enforcement and commercial customers, as well as sales of Shield™ disinfectant and personal protective products. This segment generates revenue through both product sales and subscription-based models that offer cloud storage, evidence management, and extended warranty solutions.
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.
These conditions, including recurring losses, cash used in operations, and uncertainty regarding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern.
During the year ended December 31, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations for the year ended December 31, 2024.
During the year ended December 31, 2025, we concluded that the carrying amounts of both trade names exceeded their estimated fair values and recorded non-cash impairment charges totaling $359,000, which are included in goodwill and intangible asset impairment charge on our consolidated statements of operations for the year ended December 31, 2025, consisting of $189,000 related to the TicketSmarter trade name and $170,000 related to the Country Stampede trade name.
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.
Loss on Litigation The Company recognized a loss on litigation of $0 and $1,959,396 during the years ended December 31, 2025 and 2024, respectively. This relates to the lawsuit with Culp McAuley, Inc. and primarily the collectability of the default judgment.
This loss was offset by a gain on disposal of certain personal seat licenses by the Company’s entertainment segment which resulted in a gain of $5,582 during the year ended December 31, 2024.
This loss was partially offset by a gain of $5,582 recognized by the Company’s entertainment segment related to the disposal of certain personal seat licenses during the same period.
Based upon our current operating forecast, we anticipate that we will need to restore positive operating cash flows and/or raise additional capital in the short-term to fund operations, meet our customary payment obligations and otherwise execute our business plan over the next 12 months.
Based on current operating forecasts, management expects that the Company will need to restore positive operating cash flows and/or obtain additional capital in the near term to fund operations, meet ongoing obligations, and execute its business plan over the next twelve months.
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.
The following table presents revenues by type and segment: Year Ended December 31, 2025 % Change 2024 Product revenues: Video solutions $ 1,184,079 (40.7 )% $ 1,997,389 Entertainment 3,153,197 (7.4 )% 3,406,928 Total product revenues 4,337,276 (19.7 )% 5,404,317 Service and other revenues: Video solutions 3,916,678 4.2 % 3,758,002 Entertainment 5,500,201 26.2 % 4,356,833 Total service and other revenues 9,416,879 16.0 % 8,114,835 Total revenues $ 13,754,155 1.7 % $ 13,519,152 Our Video Solutions 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.
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”.
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.” We reported net income (loss) attributable to noncontrolling interests of consolidated subsidiary of $(687,516) and $(1,871,578) for the years ended December 31, 2025 and 2024, respectively.
We are continuously in discussions to raise additional capital, which may include a variety of equity and debt instruments; however, there can be no assurance that our capital raising initiatives will be successful.
Management is actively engaged in discussions to raise additional capital, which may include equity and debt financing arrangements; however, there can be no assurance that such efforts will be successful.
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.
Nobility Healthcare completed its first acquisition in June 2021, when it acquired a private medical billing company, and subsequently completed additional acquisitions of private medical billing companies.
Specifically, the selected discount rates are intended to reflect the risk inherent in the projected future cash flows generated by the underlying acquired intangible assets.
Additionally, there are significant judgments inherent in discounted cash flows such as estimating the amount and timing of projected future cash flows, the selection of discount rates, hypothetical royalty rates and contributory asset capital charges. Specifically, the selected discount rates are intended to reflect the risk inherent in the projected future cash flows generated by the underlying acquired intangible assets.
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.
Gross profit by operating segment was as follows: Years Ended December 31, 2025 2024 Gross Profit: Video Solutions $ 2,317,851 $ 2,722,894 Entertainment (968,796 ) 401,124 Total Gross Profit $ 1,349,055 $ 3,124,018 The decrease in gross profit is commensurate with the decline in overall revenues and the increase in cost of revenue across both the Video Solutions Segment and Entertainment Segment for the year ended December 31, 2025.
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.
Accounts receivable and other receivables represented $3,702,264 of net working capital at December 31, 2025. Management intends to collect outstanding receivables on a timely basis and reduce overall receivable balances during 2026, which is expected to provide additional cash flow to support continuing operations. Inventory represented $2,330,492 of net working capital as of December 31, 2025.
From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy to not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us.
It is our policy not to disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us.
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.
Cost of service revenues as a percentage of service revenues for the entertainment operating segment increased to approximately 87.5% for the year ended December 31, 2025 compared to approximately 74.5% for the year ended December 31, 2024.
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%).
Nobility Healthcare was subsequently sold in January 2026. Net Loss Attributable to Common Stockholders As a result of the above, we reported a net loss attributable to common stockholders of $6,671,508 and $19,844,147 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $13,172,639 (66.4%).
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.
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, 2025 and 2024. Liquidity and Capital Resources Overall: Management’s Liquidity Plan. The Company has incurred net losses and negative cash flows from operating activities since inception.
We had approximately $159,280,000 of federal net operating loss carryforwards and $1,742,000 of research and development tax credit carryforwards as of December 31, 2024 available to offset future net taxable income. 26 Net Loss As a result of the above, we reported a net loss of $21,715,725 and $25,463,949 for the years ended December 31, 2024 and 2023, respectively, an improvement of $3,748,224 (15%).
We had approximately $168,405,000 of federal net operating loss carryforwards and $1,685,000 of research and development tax credit carryforwards as of December 31, 2025 available to offset future net taxable income. 24 Net Loss from continuing operations As a result of the above, we reported a net loss from continuing operations of $5,955,930 and $17,898,105 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $11,942,175 (66.7%).
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 sets forth the operating lease right-of-use assets and liabilities associated with continuing operations as of December 31, 2025: Assets: Operating lease right of use assets $ 1,022,416 Prepayment of rent $ 82,368 Total operating lease right of use asset $ 1,104,784 Liabilities: Operating lease obligations-current portion 180,900 Operating lease obligations-less current portion 841,516 Total operating lease obligations $ 1,022,416 Following are the minimum lease payments for each year and in total.
We determined that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of December 31, 2024, because of the overall net operating loss carryforwards available.
We determined that it was appropriate to maintain a full valuation allowance on our net deferred tax assets at December 31, 2025 and December 31, 2024, as the allowance was increased in each respective year to fully reserve all deferred tax assets based on our assessment of recoverability and continued operating losses.
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.
Basic and Diluted Income/(Loss) per Share The basic and diluted loss per share from continuing operations was $(15.38) and $(30,204.62) for the years ended December 31, 2025 and 2024, respectively.
In addition, we recorded a non-cash goodwill impairment charge of $307,000, representing a portion of the goodwill balance for the entertainment segment, which was included in goodwill and intangible asset impairment charge on our consolidated statements of operations for the year ended December 31, 2024.
Based on that interim test, we recorded a non-cash goodwill impairment charge of $307,000 related to the entertainment segment and a non-cash trademark impairment charge of $201,000 related to the entertainment segment, for total continuing operations impairment charges of $508,000 for the year ended December 31, 2024.
Service and other revenues by operating segment is as follows: Years ended December 31, 2024 2023 Service and Other Revenues: Video Solutions $ 3,758,002 $ 3,167,916 Revenue Cycle Management 6,131,650 6,713,678 Entertainment 4,356,833 9,018,805 Total Service and Other Revenues $ 14,246,485 $ 18,900,399 Service and other revenues for the years ended December 31, 2024 and 2023 were $14,246,485 and $18,900,399, respectively, a decrease of $4,653,914 (25%), due to the following factors: ● Cloud revenues generated by the video solutions operating segment were $2,557,400 and $1,994,066 for the years ended December 31, 2024 and 2023, respectively, an increase of $563,334 (28%).
Service and other revenues by operating segment is as follows: Years ended December 31, 2025 2024 Service and Other Revenues: Video Solutions $ 3,916,678 $ 3,758,002 Entertainment 5,500,201 4,356,833 Total Service and Other Revenues $ 9,416,879 $ 8,114,835 18 Service and other revenues for the years ended December 31, 2025 and 2024 were $9,416,879 and $8,114,835, respectively, representing an increase of $1,302,044, or 16.0%, driven by the following factors: ● Cloud revenues generated by the Video Solutions Segment were $2,578,179 and $2,557,400 for the years ended December 31, 2025 and 2024, respectively, representing an increase of $20,779 (0.8%).
Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, related to the goodwill carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of $307,000, related to the goodwill carrying balance for the entertainment segment, both of which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations for the year ended December 31, 2024.
An additional non-cash goodwill impairment charge of $4,322,000 related to the revenue cycle management segment was recorded within discontinued operations during the same period. No additional impairment was identified in the December 31, 2024 annual roll-forward assessment. We performed our annual goodwill and intangible asset impairment test as of December 31, 2025 on a full quantitative basis.
This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.
The income approach applied a fair value methodology to each reporting unit based on discounted cash flows, requiring significant judgments including estimation of future cash flows, long-term revenue growth rates, and determination of our weighted average cost of capital risk-adjusted to reflect the specific risk profile of each reporting unit.
Interest Expense We incurred interest expenses of $3,815,323 and $3,134,253 during the years ended December 31, 2024 and 2023, respectively. The increase is attributable to the amortization of debt discounts associated with the convertible debt, revolving loan agreements and merchant advances.
Interest Expense We incurred interest expense of $1,102,352 and $3,816,317 during the years ended December 31, 2025 and 2024, respectively, representing a decrease of $2,713,965 (71.1%). Interest expense primarily consists of stated interest and the amortization of debt discounts associated with convertible debt, revolving loan arrangements, and merchant advances.
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.
Cost of product revenues as a percentage of product revenues increased to approximately 153% for the year ended December 31, 2025 compared to approximately 121% for the year ended December 31, 2024.
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.
We do not believe that our Video Solutions Segment’s business is seasonal in nature, however; the Entertainment Segment experiences variability in revenues across quarters, with the Country Stampede music festival generating revenues in the second quarter and TicketSmarter platform activity driven by event scheduling throughout the year. 33 Item 7a. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.
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.
Cost of products sold by operating segment is as follows: Years Ended December 31, 2025 2024 Cost of Product Revenues: Video Solutions $ 1,523,613 $ 1,780,284 Entertainment 4,810,009 4,118,846 Total Cost of Product Revenues $ 6,333,622 $ 5,899,130 The decrease in Video Solutions Segment cost of product revenues to $1,523,613 for the year ended December 31, 2025 from $1,780,284 for the year ended December 31, 2024 was primarily attributable to lower product volumes and changes in inventory reserve activity, including reduced charges related to excess and obsolete inventory compared to the prior year.
The significant components of selling, general and administrative expenses are as follows: Year ended December 31, 2024 2023 Research and development expense $ 1,339,673 $ 2,618,746 Selling, advertising and promotional expense 2,144,494 7,137,529 General and administrative expense 12,376,705 18,246,762 Goodwill and intangible asset impairment charge 4,830,000 — Total $ 20,690,872 $ 28,003,037 23 Research and development expense.
The significant components of selling, general and administrative expenses are as follows: Year ended December 31, 2025 2024 Research and development expense $ 551,447 $ 1,339,673 Selling, advertising and promotional expense 721,690 2,120,965 General and administrative expense 8,424,672 10,538,306 Goodwill and intangible asset impairment charge 2,533,667 508,000 Total $ 12,231,476 $ 14,506,944 21 Research and development expense.
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.
Loss from continuing operations before Income Tax Benefit As a result of the above, we reported a net loss before income tax benefit of $5,955,930 and $17,898,105 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $11,942,175 (66.7%).
We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s carrying value at a 25% premium or greater. Based on our most recent impairment test, the video solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined to be impaired.
We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s carrying value at a 20% premium or greater.
Therefore, we performed an impairment test for our reporting units with remaining goodwill. The fair value of each reporting unit was estimated using a weighting of the income and market valuation approaches. The income approach applied a fair value methodology to each reporting unit based on discounted cash flows.
The fair value of each continuing reporting unit was estimated using a weighting of the income and market valuation approaches.
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.
Cost of product revenues as a percentage of product revenues for the video solutions segment increased to approximately 129% for the year ended December 31, 2025 from approximately 89% for the year ended December 31, 2024, reflecting the decline in product revenues during the period and the impact of fixed manufacturing and overhead costs.
Gross Profit Overall gross profit for the years ended December 31, 2024 and 2023 was $5,489,332 and $5,762,484, respectively, a decrease of $273,152 (5%).
Gross Profit Overall gross profit for the years ended December 31, 2025 and 2024 was $1,349,055 and $3,124,018, respectively, representing a decrease of $1,774,963, or 56.8%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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
Biggest changeItem 7a. Quantitative and Qualitative Disclosures About Market Risk 34 Item 8. Financial Statements and Supplementary Data 34 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 34 Item 9A Controls and Procedures 34 Item 9B. Other Information 34

Other KUST 10-K year-over-year comparisons